Inflation

Of the prices,to ensure increase to some extent as slowly and predictable,maybe these are the most important task of them who managing economy.But,the inflation has a bad tendency of getting uncontrolled.

               Inflation Levels Generally,inflation explained as a annual rate.So, 3% inflation rate, indicates that the prices in the economy are 3% higher than 12 months ago.

              Inflation, which is a fairly explanatory part of economic statistics,it gives knowledge about economy's health to us.If it very high,the economy may fall into inflation,so prices increase exponentially,also hyper-inflation can even happen.The difference between the two,it depends on the size of the price dimension.During the effect of Hyper-inflation in 1920s Germany and 21th century's first decade in Zimbabwe,at least 50% per month,most of the time was increasing more.While the gyper-inflation ceiled in 1923,in Weimar Germany there was printed banknotes from the value of 100 trillion marks.Even relatively low inflation rates of around 20% can be quite devastating.If the inflation come true,with a weak economy growth and recession at the same time,the situation may be quite bad.Stagflation is called when stagnant economic growth and high inflation are experienced at the same time.

              Causes and Results Inflation says to us about both social and economic status a something. We can understand how much the living expenditure of the country is compared with the increase of the income of the dwellings.If the inflation,getting increase more than families incomes,it means life standard is getting decreased:People can not buy as much as the old.But salaries,increase faster than inflation,when people spend,it means remain more than in their pockets,this indicating that the standard of living has increased.

               The salaries of employees are raised when the whole economy is growing rapidly,this mean spending more money on goods and services.Likewise, when the economy slows down, demand slows down, prices fall, or at least slower.

            The product prices doesn't only be affected from demand,also it does be affected the amount of money people have access to.When money supply increases,the same amount means that there will be a larger amount of money in the pursuit of the goods,this raises prices.

            Is there always inflation?  Whether the prices should always increase or not, the possibility of staying constant is also one of the frequently asked questions.In the past, prices have been seen to stop.In theory,inflastion doesn't necessary element for the economy to continueAlthough,during the last century,politicians has supported a little bit inflation at many kind of causes.

              Firstly,inflation,forces to people spending instead of saving; because the money in their pockets is losing value.This behavior is important for modern capitalist economies because in the long run companies encourage investing in new technologies.On the other hand,inflation erodes on debt.This one esspecially the debtor governments,to support inflation increasing,and like this way forces to devalue their debts.At the same time,generally inflation levels look like usury rates.People get used to positive(+) usury rates not negative(-) usury rates.In the past, there are a few examples in which the banks give debt to people and take money from of the people saving and to make debit them.In times of crisis,It is important to direct people to spend instead of saving.

             Finally,people are accustomed to increasing salary increases.It is the natura of human;they try to devolop themselves and at anytime don't take any salary rise-even though the prices at the stores were fixed at that time-,it is a difficult situation to accept.

           Inflation Spiral At the situation named as Prices Inflation Spiral may increase exponentially. As inflation increases,workers become unhappy because the standard of living falls.They want higher salary,if they succeed in raising their salaries,when they spend the extra money too, store owners will start to prices make higher.This situation make inflation increase,workers will want salary rising again.

          The problem in inflation and deflation,it is the ,can drag economies permanent instability.When people lost their trust to price ups and downs,it can stop savings and investments,so normal life can be interrupted.Therefore,governments and banks try to hold the price increases as in expected rates.If it succeed,as Ronald Reagan said ''The People expect an unpleasant experience.''

Different Inflation Measures

Consumer Price Index

Retail Price Index

Gross Domestic Product Deflator

Producer Prive Index

Other Indexes

Main Message

Allow the prices to increase slowly.

Read More

Money

Economy doesn't only interested in with money,but money make each person an Economist. Instead of giving someone something for free,the moment we want money from it,you will have seen her/his invisible face.

          Behavioral economist Dan Ariely to prove it made an experiment.Dan offered to students one-cent Starbucks candy.The students took four candies average.After that Dan discreased the prices to zero.In traditional Economy, there is a thought that the demand will increase because the price is low(please check),but in this experiment it is not.Almost no student can get more than one candy.

          The world revolves around money. Money,in an Economy is a basic elements. If there was no money we had to make a trade.So we exchanged goods and services.Money,making easy the exchange before getting complex.

          In countries which nations lost their money faith(maybe because of hyper-inflation),in like this countries generally useful economic system is exchange(bartering/barter).At the end of the 1980's,while the Soviet Union broke down,people started using cigarettes as a currency.But the exchange economy systems are quite inefficient.

          The money,using for exchange as well as it has two different task too.Firstly,it is an account unit.So,a value is a criterion that helps us to assess.Secondly,it is a value depot.So,do not lose value in time.But today these are the topic of discussion.

          Money Types-It is possible to distinguish two categories of money:

Commodity Money Although it is not really a form of money,there is a real value.Maybe more obvious example is gold.Any other Commodity moneys,alcohol,cigarettes,drags...

Fiat Money This,hasn't gotten any value.In modern and devoloped countries this system is useful.Treasury Ministry of USA and the Central Bank,they print US dollar banknotes.In fact paper money,can exchange with commodity money.Technically,citizens could demand a certain amount of gold against dollar banknotes.But since 15 Aug. 1971, with The USA President Nixon's decision put an end to this change and thus the dollar has become completely legal money.Stability of legal money,with the people's faith to countries legal system,based on the government's economic credibility.

             To measuring money, One of the important way of an economy's health identify,in the related economy to calculate the flow of money.While people's money increased,they feel that they rich and they spend a lot.For the respond to increasing demand in businesses, they demand more raw materials and they increase the production.This,increase share prices and economy growth.

               The Central Banks count money in different ways.The most popular is -The USA Central Bank- M1 is the name given.The M1 Method,beside banks with the money in circulation,it measures the amount of money people have in their checking bank accounts.In other words,M1 determines the amount of money that people have access to.There is wider money counting sytems too: M2, like deposit accounts,less accessible,so less liquid assets; M3,Such as long-term savings and money market funding measures financial instruments that replace money.For why,the British Central Bank gave the name M4 instead of M3.

              At the head of Millenium,in circulation there was $ 580 billion;$ 599 billion was in bank accounts where people could immediately withdraw.If you divide this amount into the adult American Population(220 million) you get a figure almost of $ 2,850.This,it's more than the money in the pocket of most people.The reason why this figure is so high is due to the fact that most of the money is in overseas countries.

             Money doesn't only a barter tool.It is too much than in circulation money stock and money in bank accounts.It's a kind structure of thought.The banknotes in our pockets and coins value,above them is more than the writing.Between banks money transfers,real value is more little.Because of this money should support with confidence.Both we need to believe that it is the money of the person who pays and that the government will prevent the money from losing value.

Liquidity

               Liquidity,an entity's-for example ''a house''- to money or it is a kind of measure how easily you can turn to other values that can be used as money.For example, the big company's share certificates are quite liquid; it is easy sellable because it can easy find receiver.The houses aren't quite liquid beacuse they can't find receiver easily.Businesses,with the Liquidation Sales,they try to exchange their goods to cash.

Read More

Adam Smith:The Invisible Hand

Gordon Gekko, the villain of 1980's classic movie Wall Street,said ''greed is reasonable'' and he justified all community's fears about the financiers.Disgraceful money ambition,in the brutal World of Manhattan it is not something to be ashamed of anymore;like striped shirt red trousers hanger,it should be wear proudly..

            The film shocked everyone ends of the 20th century,but think about how people would respond such a declaration two centuries ago.At that time intellectual life was under the control of the church and it was considered almost insulting to describe people as "economic animals".And now Adam Smith's the idea of ''Invisible Hand'',you can think how people respond it in 18th century more or less.Even so,Smith's book has reached to commercial success and it has been finished at first edition;it is still on classics.The Individual interest is short name of ''The Invisible Hand'' and the law of supply-demand and it explains how these two factors are beneficial for society.The simple idea behind it is:It is not wrong for people to act in their own interests.In a liberal market,to act in their own interests of people,total actions,it does benefit all society and it make rich all.

            Smith,classic work of 1776 him '' The Wealth of Nations '' it has been used that phrases three times.But the important paragraphs of work,it has been emphasized importance of ''The Invisible Hand'':

[Every individual] neither intends to protect the public interest nor knows how much s/he can protect it.While managing this [her/his own] business by the method that will reach the maximum value,s/he works only for his/her own benefit,and like in many other subjects,in this,too,and invisible hand makes him/her a part of the work s/he has never intended to do...By affording advantage for his/her own, most of the time,s/he can protect the benefit of society more effectively than the time that s/he has intended to protect it. I've not seen so far that the people acting as if they were trading in the public interest help. 

References Adam Smith,The Wealth of Nations, Chapter II - Of Restraints upon Importation from Foreign Countries of such Goods as can be Produced at Home  
         
              This idea,of free market,the reason of development in complex modern societies,it helps to understand that it is so important.

              The course to be taken from ''Invisible Hands''  Let's examine an inventor:Thomas Edison. Thomas has invented a new bulb;more effective from at markets,long-lasting and bright.Thomas had made it for his own interests.;being rich,also maybe hoping to be famous.The related emerged product will be useful for society;it will creat employment both for bulb producers and for it will brighten demanders life.If there was no demand for bulbs,nobody wouldn't pay to Thomas and so invisible hand would have punished him for falling into such a mistake.

             Similary,others who see Thomas's job and earn money will also try to make more money from him by designing a better bright bulb.They will start to being rich.But the invisible hand never sleep.At this time Thomas will try to reduce prices and will try to sell more than opponents.

             Thomas,at every stage of the process,act for his own interests,doesn't think of society's interests,but unexpectedly the result benefit to all.

            Smith specifies that the "invisible hand" is a condition in which we can not operate.One of these,as known ''public property tragedy'' impasse.A related source of- for instance everyone who grazing animals on lands - ,it creates the being limited problem.People,even if their actions are against their neighbors,they continue to using green areas.

           The limits of free market In the past decade,the invisible hands doesnt support a related political perspective in fact.In the past decade,the invisible hands does not support a certain political perspective in fact.It is an optimistic theory [please check Micro and Macro],but it goes against the ideas of those who think that the economy should be best managed from the top, or that the government should decide what to produce.

           The invisile hand, beside governments and managments,underlines that individuals must decide what is produced and consumed.But,there is important conditions;Smith,makes a distinction with between in individuals own interests and selfish greed.The laws and regulations that protect us from injustice as a being consumers are our own interests.These are,contain property rights,patents and copyrights and workers' rights.The Invisible Hand should support with laws.

``Main MESSAGE
The benefit of the individual is the benefit of the community.

Read More

Karl Marx:Principle of Infinite Capital Accumulation

In 1867 Marx,after half a year of published Ricardo's ''Principles' ,when he published Capital's 1st volume,economic and social truths has deeply changed:The question is whether agriculture will now feed an increasing population or the question of whether the price of the soil will increase or not,rather it became a matter of understanding the dynamics of industrial capitalism as a whole.

            The most stunning fact of this period,is the misery of the industrial proletariat.Despite growing in the economy at the same time, due to migration from rural to urban, which is caused by the increase in population and agricultural productivity,workers began to accumulate in slums in cities.Prices were low,working times were long.A new urban misery,is visible,more shocking and from some angles,was more miserable than, which was common in Ancient Regime.Inspired by the timid arrangement of 1841 Le Tableau de L'état physique et moral des ouvriers employés dans les manufactures (The Table of the Physical and Moral Status of Workers in Manufactures)  published by Dr.Villerme in France and in England.Depicting the same terrible truth which published by Engels in 1845 Die Lage der arbeitenden Klasse in England(The status of the working class in England) too.

             In fact,the historical truths that we have today,however when we came in the second period of to19th century,it showed to us there is a evident increase purchasing power.From 1800-1810 years to 1850-1860 years,the salaries of workers remained very low.Like France that we can see it in England to,long recession in wages, in this period with became remarkable with the gain speed of economic growth.In every case the labor factor is stagnant in income,increase in capital and industrial profits-in 1840-1850 time period- it is a fact that everyone is aware of.The first Socialist and Communist emergence of movements took place in this context.The basic question asked is fairly simple:After half a century of growth,if the living conditions of the masses are still miserable and beside prohibition of 8 years old children working in factories,if there is nothing the development of in industry,all these techniques progress,all these labor, all these migrantions. What does it do? It is clear that the current economic and political system has gone bankrupt.Everyone wondering the other question:What can we say such a system that in long-term?

               Marx knew the answer.In 1848,on the eve of the ''Spring of People'' , to begin with ''A ghost wanders in Europe,the ghost of communism.''  effective and short text, Das Kommunistischen Manifest (Communist Manifesto) was published.This text,ending with the revolutionary vision that was famous as the beginning:so the development of the modern industry,based on the fact that the bourgeoisie produces its products and products based on property acquired.It takes away from the bourgeoisie.The bourgeoisie brings its own end to everything first.The victory of the proletariat in its end was equally inevitable.

           Over the next twenty years,Marx will justify this result,he will establish the capitalism and its collapse with making a scientific analysis,he really spent his time to write voluminous analysis.His work couldn't reach to comlete: 1st-Volume of Capital's was published in 1867,however Marx couldn't complete the other two following volumes,he was died in 1883.Engels-his friend- published these two volumes after his death, bringing together the sometimes inexplicable parts of manuscripts left behind Marx.

         Like Ricardo, Marx established his own works on the analysis of capitalist system own logic contradictions too.At the same time (The Secret Hand of Adam Smith,Each supply creates its own demand of Jean-Baptiste Say.....in line with the law,the market regulate itself.) Without offering bourgeois economists and real scientific work on economic processes only that the workers think they deserve to criticize the misery,aimed to stand in a different place than the utopians.To summarize it,Marx based on the model Ricardo has developed on the price of the capital and on the principle of scarcity,at first Marx said capital doesn't based on soil,it does industrial and in a world where the principle could accumulate indefinitely, he further advance it with an analysis of the dynamics of the stock.As a result,his results,we can named as ''Infinite Accumulation Principle'' The capital has a relentless tendency to accumulate without accepting any natural limits and to concentrate in the hands of very few people.It was the starting point of Marx's foresight of doomsday at the end of capitalism:Either the capital's return rate will tend to decrease(it stops the accumulation process or between in owner of capital it could lead to a violent conflict) or the share of the national capital will increase unlimitedly(all the workers in the world will unite and rebel in the end.) Reaching a socio-economic or political balance did not seem possible in both cases.

             At the end of the 19th century the prices started to increase:Stubbornly,The inequality remained on same degree,but from some angles to The World War 1 it was increased,improvement in purchasing power was spreaded to everyone,this one changed that status from radical.No doubt communist revolution was happened,however from the most undeveloped country of europe;Russia, where the industrial revolution has barely begunLike before from self authors, Marx had also overlooked the possibility that the technical progress was continuous and that the productivity increased steadily too; in the increases in productivity,the accumulation of capital and  processes of condensation, it is a power which will be able to balanced it to certain degree.Marx,owned estimates do not have statistical data to make it more accurate.It was probably the victim of finalizing the results in 1848, before they entered research that could confirm them.Clearly,Marx was writing in a great political environment.Which in many cases led to him,difficult to avoid or shortcut results.It is precisely from this point that the theoretical discourse as far as possible is based on complete historical sources;but it can not be said that Marx did this to the extent possible.

           Despite all this,we will see that Marxist analysis makes correct determinations in many respects.Marx started with a real question and tried to find an answer with the possibilities:The Infinite Accumulation Principle put forward by Marx is also important not only in the 19th century
it also important for analyzing of the present 21st century too.If the increase in population and productivity is low, then the accumulated wealth is also of considerable importance,it destroys social stability when if this accumulation becomes excessive.In other words, a weak growth, fails to properly balance the Marxist infinite accumulation principle: the resulting outcome is a balance that will not be outdone, even if it is not like the doomsday as Marx predicted.Accumulation stops at one point, but it may be at an excessively high or at destabilizing point.We will see that the strong increase in the total value of the special wealth, measured as the national income since the 1970-1980 period, in all of the rich countries, especially in Europe and Japan, directly reflects this rationale.

FROM

http://www.izlevideo.net/marx-ve-sermaye-965382.html#Download

Read More

David Ricardo:The Scarcity Principle

From past to present, from the beginning to the end of the 18th century and 19th century, perspectives of economic and social transformations are objectively impressive. From the witness's perspective,, we need to understand that it is traumatic too. In fact, The vast majority of the observers of the time were relatively pessimistic about the sharing of wealth and the long-term evolution of the social structure. This situation, no doubt the most impressive two economists of the 19th century and of a small social group - According to Ricardo they're landowners, According to Marx they're industrial capitalists- to be valid for Ricardo and Marx who foresee that production and income will inevitably take on a growing share.

            In 1817 On the Principles of Political Economy and Taxation; be referred to as ''principles'', The real problem of Ricardo, who published his work, it was the price of soil and the rent of soil changed in long run. There was no statistical source that he could use his hand. However, it didn't prevent him from recognizing Capitalism closely during his lifetime. He grew up in a Portuguese, Jewish family. It seems like he hasn't got any political prejudice. He had been affected by Malthus's model but he developed it. Mostly he was interested in that logical contradiction: When production and population began to increase, the soil was getting much more scarce compared to other commodities. The law of supply and demand indicates that land prices and rents paid to landowners would increase regularly. Over time, the share of landowners in national income will gradually decrease, which will distort the social balance. According to Ricardo, there was only one solution, the taxes on soil rents were to be increased regularly.

             We will see that this wasn't right: The soil has been at high levels for a long time, however as the weight of agriculture in the national income continues to decrease, the values of the soil field, compared to other forms of wealth, has fallen terribly. Ricardo wrote in 1810, It was certainly not possible to predict the technical progress and industrial growth that would be of great importance for the rest of the century. Ricardo couldn't imagine a world in which humanity completely gets rid of the pressure on food and agriculture.

           The forecast of the price of soil was still interesting: '' The Scarcity Theory  '', That is mean it has the potential for too much growth of certain prices over a long time. This could have distorted the entire balance of society. A system of price, like organising millions of individuals' activities, has an important role. The problem is, that this system is not provided either a limit or a morality.

          We will make a big mistake if we ignore the importance of this theory while analyzing the global sharing of wealth in the 21st century. Instead of farmland in Ricardo's model, real estate prices in major capitals or putting oil prices, it is enough to convince us. In both cases, the observed trend from the 1970-2010 period or when we look at how the extension of 2010-2100 can be shaped, in the countries themselves and international, Ricardo's model evocation of disaster, significant economic, social and political imbalances, that we can see obviously.

           Actually, in the economy, there is a fairly simple mechanism that this process can balance: The mechanism of Supply and Demand. If a supply of goods is insufficient and if the price is too high, the demand for these goods will decrease, which will cause to make prices down. In other words, if the real estates and oil prices increase,  to make it up for this situation, we should ride a bike or live in a small town, it will suffice. But it can not only be difficult but it can take decades to build such a scheme, during which time real estate and petrol owners will have a very large credit accumulation relative to the rest of the population and they will be able to buy anything that can be bought, including rural areas and bicycles they may have bought it. As usual, we can't think that it will exactly happen.

         But for now,The Mechanism of Supply and Demand, in connection with major changes in certain relative prices, is enough to say that inequality in the distribution of wealth cannot be eliminated from being large-scale and permanent. It is the main point of Ricardo's Scarcity Principle.

     

Read More

Micro and Macro

Economy occours with two topics.First one,it is a technical expertise who examines how people make decisions about 'how and why.' Second one,how to government ensure the growth ,how to combat with inflation,how to provide financing and how to hold the unemployment at a certain level, they all  working to understand with a more general approach.We need to know diffrences in Microeconomic and Macroeconomic to understand the Economy.
     
          Macro or Micro? Distinction between in these two approaches is the heart of the Economy.For solid economists these both are completely diffrenet working branch.So much so that,throughout their careers,the economist, who concentrates on only one of them,they will never think lag from anything.

          What is the diffrences? In ancient Greek, 'The microeconomic term comes from ''Micros'',which means ''small'',It examines how to decided houses and businesses and how to interaction wit markets.

          The macroeconomic term comes from ''Macros'', which means "big" and it examines how all economy goes. Although , the strong growth of the country a macro economist will be interested in mostly with issues such as low inflation or the reasons for increased inequality.

         What are the basics of separation? Towards the mid-20th century there was no seperation.A Economist was only an Economist.Those who focused on the large scale described themselves as monetaryist economists; and those who focused on small scale were defined as price theorists.In fact most Economists were thinking in small scale.John Maynard Keynes came out and changed all perceptions in this subject.At its core, he created macroeconomics, highlighting the role of the state, both at domestically and internationally.

          Microeconomics has become a huge work branch in itself.This branch,focuses on how to 'supply and demand interacts' in various situations.It analyzes to how people give reactions to taxes,arrangements,price and pleasue changes.However,it does not obtain results how it will affect all economy.The last one is interest of Macro Economist.Surely,these both associated with one but the separation point,The Micro focus on a single market that is independent of other markets,The Macro focus on all the markets.This means, Macro Economists,about an economy behavior,can give hypothesis in more general.Among these hypotheses, there are also controversial ideas like it will reach at supply and demand balance in the long run.

           In macroeconomic,there aren't many school but there are many branches for which microeconomists can concentrate.Which called as 'applied economics' has many branches: investigating changes in employment and labor market;public finance experts investigating government accounts;commodity,income group or business tax comparators;Agricultural experts or customs tax experts;salary experts, etc...

           Microeconomic,is based on more statistics than macroeconomic.Microeconomists examine how supply and demand will respond to certain changes with complex computer models.

^^Essence of idea

• Micro for Businesses
• Macro for Countries

Read More

Supply and Demand

The law of supply and demand always lies at the heart of the economy and at the deepest level of human relations.All these things determine the interaction of these two powers,prices of products at stores,a profit of company and while one family becomes rich the other one becomes poor.

           The law of supply and demand,why supermarkets sells high quality whiskey, according to ordinary brand of whiskey so expensive, computer companies's,for only changed colors of notebooks,explains why extra money is demanded.Like some basic equations in Math and Physics, the relation of between in supply and demand it can be seen in every field.

           This law,it is everywhere up to the in Ecuador,Otavalo's crowded streets, in New York,Wall Street's wide streets.Beside some superficial differeneces, there is too many farmers in South America,those in Manhattan they are Financier- for Radical Economists for these two places it is almost identical.If you look a little closer you will see why it is the identical:They are both big market.Otavalo,Latin America's the most biggest and the most famous marketplace; Wall Street is harbouring New York Stock Exchange place.Both of in, people buy and sell somethings.

           Whether it is the market stand where the products are physically sold,whether the virtual market,most of the made up of trade on computer networks like Wall Street, markets , it put together buyer and seller.The price is intersection of supply and demand point too.These there innocent-seen fact,it says much things to us about society and it creates the Basic Marketing Economy.

           Demand,it expresses people's quantity of product or service to be willing to buy a certain price from seller.As the price increases,it wants to take fewer people ,it will continue until it refused.Supply in the same way,it expresses a seller's quantity of product or service to be willing to sell a certain price.The price how low,the seller wants to sell so little goods,because they spent a certain money and time.

          Price,is a sign that supply and demand for a good is rising or falling.The secret of the economy is not very secret, in fact, prices are never fully balanced.All year Rose prices are always rise and fall:When it is passed from summer to winter,Florists will must bring roses from farther away;rose's supply falls,prices rises.At the same time we can give and example like Valentine's Day.Economists describe this situation as ''Seasonality.'' Some of Economists beyond this fluctuation, they try to find balance price.

           In some prices,we can find importants results about people.A few years ago,computer producer Apple,they drove Macbook notebooks to the market.Macbooks were produced in two different colors and black one was more expensive than white.Although, other systematic hardwares same, if someone want to buy the black one,they have to pay $ 200 more.Although, sales were succesfull.Could not be sold if there was not enough demand.

          Elasticity,sometime it takes time to respond into supply and demand prices changes.A Mobile Phone Company,when they increase call tariffs,Subscribers start calling less often or change the company.In Economy we call it as price elasticity of demand.So demand,it changes with in price changes.In some cases, there is a delay in response to cost increase - in this situation there is no price elasticity of demand or inelastic.For instance,when oil prices rise,consumers could not found alternative to buy oil.Some of the consumers started to use public transport.That kind of alternatives, in which cheap alternatives are preferred rather than expensive products,it is defined as substitution effect.

        We can say same things to Demand too.It is possible for Demand Elasticity.As the demand for products decreases,workers are cut off from work or the company ceases to invests.

Read More