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Archive for the ‘Economics’ Category

The Economics of Trust

Wednesday, October 28th, 2009

In our world today, the trading system is based mainly on fiat money. Fiat money means that the currencies in dollar notes are declared to be legal tender by governments. For example a Singapore ten dollar note means that the Singapore government accepts a $10 payment for goods and services within Singapore. This same $10 bill can also be used to pay off $10 worth of debt incurred in Singapore. Therefore all the dollar bills of the respective countries are always imprinted with the country stamp as a watermark. This watermark serves as a form of trust that a dollar bill is legal tender by that country. This is the reason why when the exact same dollar bill that does not have the watermark is considered to be counterfeit.

During the period of barter trading, when a person decides to trade his wheat for another person’s meat, the wheat trader trusts that he will get the meat that he wants. The issue of trust is even more relevant for fiat money. People only use money to invest or buy something provided that they trust the product or service to a certain degree. Why there is a trust is really because there is a provision of value.

The currency that we use is worth a value because the government of that country will honor its value of use. When the Japanese left Singapore after World War 2, the banana notes in circulation became worthless because the Japanese will not honor the banana notes’ value of use for trade in Singapore. When a company does not pay up its debts on time, it is an act of distrust. When debts accumulate, the company will eventually go bankrupt. It is similar in other circumstances as well. When the employee embezzles, he will be terminated immediately even though that employee may be a talented person who is capable of generating huge sales for the company. Without trust, money created and earned will soon be destroyed.

The currency that we use is worth a value because the government of that country will honor its value of use. When the Japanese left Singapore after World War 2, the banana notes in circulation became worthless because the Japanese will not honor the banana notes’ value of use for trade in Singapore. When a company does not pay up its debts on time, it is an act of distrust. When debts accumulate, the company will eventually go bankrupt. It is similar in other circumstances as well. When the employee embezzles, he will be terminated immediately even though that employee may be a talented person who is capable of generating huge sales for the company. Without trust, money created and earned will soon be destroyed.

The World Of Economics

Friday, August 7th, 2009

The subject of economics is one of the most important, but it is also one of the least understood. It has been said that getting a roomful of economists to agree on anything is an exercise in futility, and this has led many people to assume that the world of economics is too difficult for the lay person to understand.

While the world of economics can be intimidating and difficult to understand, simple economics as it applies to real people is quite a bit more straightforward. After all, when you set a family budget for the month, you are engaging in economics. When you shop around for the best price on that plasma TV or laptop computer, you are engaging in economics. When you study the stock market to choose the best mutual fund, you are using economics to guide your decision making.

Fortunately for all of us, it is not necessary to hold a masters degree in economics in order to make sound economic decisions. A careful study of the market around you and a good understanding of the business world you are in can be your guide when it comes to economics. Starting with a business you know can be a good way to make sound economic and investment decisions, and a great way to start building your financial future.

Learning how to save and invest has always been important, but it is perhaps more important today than ever before. There is no doubt that the economic landscape has been changing, Those traditional defined benefit pension plans that protected our parents are fast disappearing, and today every worker needs to have a good understanding of economics and the stock market in order to effectively invest his or her 401(k) to save for retirement. It is important to begin a comprehensive economics savings plan as soon as possible, since time can help savings grow and accumulate for the future.

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