CHAPTER 1
The first thing you will notice about this book is that there is
only one chapter. I have done this for reasons of economy - both the readers
and mine: if there is only one chapter it will allow you to read it faster and
will be quicker for me to write it.
1) Definition of economics
Economics is about MONEY. Wrong! It is about PEOPLE and how they
react to MONEY. In all cases money is of all substances or essences the most
inanimate. Some people, but by no means all, do show some signs of animation
and so economics may be defined authoritatively as the relationship of PEOPLE
to MONEY. Not money to people.
Money can have no relationship with people. This is important to
remember and you can test my definition by a simple experiment. It requires you
to place two ten-dollar notes side by side in a fairly public place. It will
strike you immediately that neither note will make any effort to pick up the
other. This has never been known to occur although one economist I know has
lost quite a lot of money trying to disprove it.
What nearly always occurs is that some PERSON will pick up the
money. I say nearly always because on one occasion when I tried this
experiment a flock of the nuns of the Order of Poverty walked right past the
notes without so much as glancing at them.
This would seem to demonstrate that the laws of economics (there
are really no laws or economics only economic probabilities) are not
cast in stone as were those of Moses. Not all people will always act in the
same way and therefore whilst economics, for most practical purposes, obeys the
mechanistic theories of Newton, they act in some cases more like those of
Quantum Theory - neither waves not particles.
Consider this by way of example of this truth: it is believed as a
fundamental fact of economics that if you reduce interest rates you stimulate
the economy. This happens because money becomes cheaper and everyone is expected
to rush at a bargain. Yet paradoxically this did not happen as a remedy to the
problems of the depression when interest rates were in some cases almost
negative.
The banks, assisted by the government were close to paying
borrowers to borrow money in the hope of firing up the economy! The reason that
there were no takers was simple. After Uncle Billy has lost his life’s savings
when his hardware store went bust, and Aunt Betty-Jane’s inheritance
disappeared, and Billy’s dad killed himself when his stocks evaporated, and the
money for crippled little Jo-Anna’s callipers had disappeared along with the
Agricultural Bank for Farming Prosperity - and Aunt Betty-Jane thereafter
decided to invest all her remaining money in houses (public houses) and
......... and so on and on the sorry storey continued.
Well, the lesson to be learnt from this is that nothing would
induce such people to take any more chances with borrowed money and debt. In a
word (or three words): they lacked confidence. Confidence and perceptions are
to economics the same as they are to faith healers: neither can function without
them.
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