Anyone help me understand economics?

[RigaBalsam]

Aibu to ask about my understanding of money and economics and think a lot of people don't understand it?

Speaking to some people last week they think money works like a household budget and some even thought the gold standard was a thing and hadn't heard of fiat currency.

With all the news of the economy being damaged. I was hoping someone could explain if I am on the right track or not?

Looking at these principles

Fiat currency

1	Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;
2	Cannot be forced to default on debt denominated in its own currency;
3	Is only limited in its money creation and purchases by <a class="break-all" href="https://en.m.wikipedia.org/wiki/Inflation" rel="nofollow" target="_blank">inflation</a>, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at <a class="break-all" href="https://en.m.wikipedia.org/wiki/NAIBER" rel="nofollow" target="_blank">full employment</a>;
4	Can control <a class="break-all" href="https://en.m.wikipedia.org/wiki/Demand-pull_inflation" rel="nofollow" target="_blank">demand-pull inflation</a>[13] by taxation which remove excess money from circulation (although the political will to do so may not always exist);

So does this essentially mean?
The government can print money and they do? There is no such thing as ' tax payers money' as such and this is used as an emotive term? Tax on the other hand is used to control inflation. But the tax is very much a political view based on who should be taxed? ( income, goods, capital gains, the big companies, rich, land assetts)

So as long as we can control inflation (which zimbabwe didn't) we are a long way off this being an issue.

Does this mean the debt is essentially pointless too? Also used as emotion and justification for austerity. Do we need to pay it back? Looking at main stream money economics?

Also in 2008 the QE was given to the banks whereas this time its to the people so more oil running through the machine.

I am finding it all very complicated.

Can anyone help?

The trouble is that economics is mostly opinion.

Almost no economists predicted the 2008 crash.
In my opinion you are correct to say it doesn't work like some kind of household budget, but every time anything vaguely related to taxation and government spending appears on here (and elsewhere) up pop a load of Tory automata who start parroting stuff about balancing the books and leaving debt for our kids, and this is why we don't have a proper progressive approach.

AIBU really is not the place to ask this. I'd recommend buying some introduction to economics books if you want to learn.

Failing that, there's a wealth of free information on google and youtube.

Thanks have ordered some books and watching YouTube.

Its just that if this is the case? Why do people not know?

And is the ' leaving debt for our kids' just political spin etc.

Thanks both for replying though.

You are asking complicated questions there, so yes I'd start looking up economics and money textbooks. I got a simple one for my dc from Usborne, called money for beginners, if you don't mind that sound patronising. There's probably a 'for dummies' textbook somewhere.

Fiat currency basically means any currency that is not itself valuable; contrast gold coins. It only has worth because governments say so. It works as long as there is a system of public trust, fair representation of resources and work produced. My belief is that it is now a total failure, in a time where "honest day's work; honest day's pay" no longer applies. Certainly the idea that nations should be run as normal household budgets is nonsense when they (with banks) control the supply and value. National debt is therefore a somewhat dubious concept too, imo, however the current account of imports / exports is relatively simple.

Pelican published "Economics: the user's guide" by Ha-Joon Chang. I believe he's considered left-wing, but its' a good basic guide.

Can’t control inflation. So just by that QE and public debt will always be a problem. And inflation isn’t only problem you get from QE and high public debt.
I agree get a few economics text books and read them.
I studied economics for my MBA.

Why do people not know? Education I guess, and most people have never noticed or wondered about the phrase "I promise to pay the bearer the sum of" on banknotes. Nowadays, three or four decades of "work work work nor dare to shirk" culture with an extra layer of distance created by electronics. More and more separation from not only food creation, but other resources. It is a bit odd.

“Certainly the idea that nations should be run as normal household budgets is nonsense when they (with banks) control the supply and value.“

Nations control the supply of money/currency, but can not control the value. If they did, they’d be able to dictate how much their currency is worth compared to others nations currencies. They can’t. Nations have tried by deliberately devaluing currency or declared fixed exchange rates but that always ends badly.

I have found: The Ascent of Money: A Financial History of the World by Niall Ferguson to be quite good (though it is about 12 years old by now)

It would definitely give most people a shock to read this, and realise our money is essentially tied to nothing.

It is sad that people don't know this stuff, yet it is "hidden in plain sight", there are shortage of ways to get this info. But if people understood it there would be riot's!!

You're talking about international finances. I tend to look at internal affairs. That value can be controlled: usually is. Standards, laws, etc

All economies are interlinked. You can’t talk about any nation economy without considering impacts of import/export, currency exchange fluctuation, etc. Economics is more complex than calculating GDP.

That value can be controlled: usually is. Standards, laws, etc

Not sure what you mean. Yes face value can be controlled (ie. £5 is £5), but intrinsic value and buying power cannot be controlled.

Buying power for most is the result of wages - controllable - and supply / demand of resources. Nowadays it's more the result of control of land and specifically housing, which is the result of deliberate policy. Internal resources can be controlled. Look at how property developers allegedly control land resources to keep house prices high. It's possible, although not popular now, to fix prices for food, or have a centralised supply and ration system. I agree all economies are interlinked now. Unmoderated 'free trade' economies and globalisation have not just 'happened', it's the result of choices. There's always been a left-wing argument against it.

I'd love a "for dummies" explanation of supply-side and demand-side economics if anyone fancies giving me one. DH has tried several times (he has an Economics degree) but I just don't get it.

Philip Coggan (who writes a column in The Economist) just published this book which you might find interesting OP - it is very accessibly written ...

www.amazon.co.uk/More-000-Year-Rise-World-Economy/dp/1781258082?tag=mumsnetforu03-21

some even thought the gold standard was a thing and hadn't heard of fiat currency.

Is this the intellectual/economists equivalent of the MN stealth boast?

Well educated finance professional here, never heard the term fiat currency.

I did a degree in Economics and I hadn't heard the term Fiat Economy either!

Punto or 500?

@CrunchyNutNC

Punto or 500?

Hilarious! Maybe Google before trying to be funny.

Whatever the term I just think more people should be aware. I find it concerning. I tried researching before posting but asked for other's opinions thats all. As it is hard to fully understand.

Thanks all for the book recommendations and sensible discussion.

Sorry OP but 'help I've no idea what this means/have I understood correctly' is asking for opinions.

some even thought the gold standard was a thing and hadn't heard of fiat currency. is a bit condescending.

The government has relied especially on pushing the comparison to household budgets to get away with ideologically driven austerity.

A better comparison (although still very far from accurate) would be to a shop. With austerity, the government metaphorically sold the shop's building, got rid of all the staff and advertising and then wondered why there was no money coming in (i.e extremely slow economy). This was all backed up with lots of bullshit 'magic money tree' rhetoric because they know people wont take borrowing or investment into account.

some even thought the gold standard was a thing and hadn't heard of fiat currency. is a bit condescending.

Wasn't meant to be. It was more of a worry. One was actually my Dad who is actually quite clever and I love him very much. He thought the gold standard was how money worked. It was more surprise than condescending.

I think you can understand the concept OP, without knowing it's name IYSWIM.

I don't think many people think in terms of the household budget either tbh, I'm sure lots think the government essentially magics money out of the air, and they don't mean QE!

I'm sure lots think the government essentially magics money out of the air, and they don't mean QE!

Isn't adding zeros on a screen doing that? With the risk of inflation?
My books should arrive tomorrow so still learning.

Also the name I didn't know either but knew the principle.

Governments tend to be able to borrow as they are considered to be like the Lannisters. They always pay their debts.

The national debt is two trillion. It's an absurd number but it's only equivalent to the market value of Apple.

Fiat currency basically works on the basis that everyone treats that currency as currency. It's worth nothing as paper but everyone agrees that £5 is worth £5.

As for most economics, you can pretty much prove anything you want is correct if you shift the goalposts enough.