Small Island Economy-The Story of Fish, Dollar and Economy

Original title: How does an economy grow and why does it collapse?

Author's background:

Peter D schiff, a senior Wall Street prophet, is a staunch supporter of Austrian school. Especially good at accurately predicting the performance of the stock market, commodities, gold and the US dollar. Peter Schiff, president of EuroPacific Capital Company, became a star public figure because of his accurate prediction of the 2008 financial crisis. Works such as "The Dollar Crash" and "The Way to Invest in a Bear Market".

The marginal utility axiology and distribution theory of Austrian school of economics are directly opposed to Marx's labor axiology and surplus value theory. Its main arguments are: value is subjective, and it is the importance of things satisfying people's desires; The reason of value is utility plus scarcity; The value depends only on the marginal utility, and has nothing to do with socially necessary labor; Value comes from the field of consumption. It is not the means of production that transfer its value to its products, but the value of the products that endow its means of production with value. The income of capital and land, or the reward of their respective utility, or the different valuation of present goods and future goods have nothing to do with the exploitation of labor. In short, the Austrian school completely denies the decisive role of labor in value creation.

For example, for people by the river, it doesn't matter if they pour it out. At this time, this glass of water has only utility and no value; But for desert travelers, the last glass of water left in the kettle is very valuable, because it is like getting a piece of jade from a spring. Without it, you will be too thirsty. Or, as Meng Le pointed out, whether a diamond is discovered by accident or mined in a diamond mine with 1000 days' labor has nothing to do with the value of the diamond. The Austrian school admits that this is subjective value, and thinks that the value in economics should only refer to this subjective value, and the market price is nothing more than an evaluation based on this subjective value.

(So in Island Economics, Peter thinks that the American economy did not collapse because people's confidence in the dollar did not collapse. Once people subjectively think that the dollar is worthless, the American economy will collapse instantly; Secondly, Peter believes that the real economy is the foundation of vigorous economic development, and the service industries such as real estate and Internet do not promote economic development. The economy is not driven by consumption, and the entire American economy is based on consumption. In addition, Peter has a strong sense of crisis about China, and thinks that even if the US dollar collapses in the future, China will develop well, while the United States will rapidly weaken. )

Write in front

Island Economics is an introductory book on economics, which uses fables to explain how the economy came into being and how it collapsed. In the preface, the author laughs that island economics = economic principle+introduction to economics+wealth of nations. If you are a beginner in economics, this book is very suitable for enlightenment.

The book also takes the typical economic events in American economic history as the prototype of the story, which makes the economic content close to reality and easier for ordinary people to understand. I have always believed that simplifying complicated things is great wisdom.

Read the catalogue series without reading.

main body

Once upon a time, there was an island. There are three people on the island. They live by eating fish. Everyone needs to eat a fish every day and can only catch one. So the three of them can only fish every day to survive, and they can't do anything else. Suddenly one day A decided to make a fishing net to improve efficiency, so A was hungry one day (sacrificed) and created a fishing net (capital). The next day, A can catch two fish a day with a fishing net (to improve production efficiency), so that A can spare a day without fishing.

There are several ways to deal with excess fish a:

1, catch more fish every day (save)

2. Eat the excess fish directly (eat)

But these treatments don't look particularly good: there are no banks and public security at this time, and the serious gap between the rich and the poor caused by savings may cause BC's malice. If you eat too much fish, your life will be the same as before except fishing.

At this time, B and C saw that A had succeeded and wanted fishing nets. A has the following options:

1. Lend them a fishing net (I sacrificed my hunger before and didn't get sponsorship, which made me reluctant to this plan, and the fishing net may be damaged).

2. Let them make their own fishing nets (B and C mean they don't want to go hungry and are afraid of failure)

3. Make your own fishing net and sell it to them (you need to pay your own labor)

4. Lend them fish so that they won't be hungry when they make fishing nets (but 1: 1 Lending them also makes A feel uneasy about his previous sacrifice, and if he doesn't work, he will lose two fish out of thin air)

Lend the fish to them, and B and C promise that if the fishing net is completed, one person will give him two fish back (the investment will make two fish out of thin air, and at the same time, the fishing quantity of the whole island will increase synchronously, so everyone has more time to create other values, and of course there is the risk that BC will lose two fish if the fishing net is not completed).

Before A made a choice, B and C saw the life A enjoyed and applied for a consumer loan. They promised to return the fish to A in the future. A lent money to B and C for humanitarian reasons, so B and C began to enjoy their holidays like A, but when it came time to pay back the money, B and C could only catch one fish a day (the production efficiency did not improve), and they could only endure hunger for one day and pay back the money with the fish they caught (the quality of life declined). After discovering this situation, A refused to give loans to B and C, and later fell ill due to the decline in the quality of life of B and C. A just made emergency loans to B and C with the money that he didn't lend them before, and then paid them back when they were better. Although it may be impossible to repay the money, if you can't get a loan, you may die (the island's productivity disappears).

Later, ABC agreed to adopt Scheme 5, and BC's fishing net was successfully manufactured (creating more capital and improving productivity). Now there is more time in BC, so they began to make better-looking clothes, enrich their cooking skills and build houses, and their lives became better.

A thinks the efficiency of fishing can be higher, so he proposes to build a large fishing device to automate the industrialization of fishing. But A can't do this alone, so A and BC join hands to invest in this industry that may fail but has great prospects. Finally, they succeeded. They can automatically get a lot of fish every day, and the maintenance cost is very low. Agricultural Bank of China was basically liberated from fishery and began to develop other industries. B invented surfing as an entertainment, C began to make clothes, and A began to build canoes and trolleys to solve traffic problems. After the development of agricultural society, the productive forces have been greatly liberated, and the material and cultural life of human beings has been greatly enriched.

People on other islands heard about the island's prosperity and immigrated to the island one after another (productivity was further improved). People have different things. At first, people traded through barter. However, the tailor wants a haircut and the barber doesn't want clothes. Barbers want to eat a delicious meal, so people urgently need a circulating object that can measure the value of everything and exchange it at any time, so fish has become their choice. All goods are traded with fish (Ben.

Gradually, some people found that if they go fishing, they can only catch seven fish a day, but they are good at making tables and chairs, and they can exchange tables and chairs for eight fish, so they make a profit 1, and the division of labor begins to appear. Later, I found that working for others was more stable than working alone, so employment appeared.

A new resident of the island, C, makes money by canoeing, but the cost of canoeing is very high, and he needs 10 fish, which only the rich people on the island can afford. Later, by optimizing the manufacturing tools, C improved the efficiency of canoeing and reduced the cost. Only five fish were needed to finish canoeing, so the price of canoeing began to decrease, and ordinary residents on the island could afford canoeing. More people buy canoes, and C earns more than before, which makes the life of the island residents much better. The notable feature of deflation is the decline in prices. There are two possibilities for the price to fall. One is that the efficiency of scientific and technological progress is improved, the cost is reduced and the price is reduced; The other is that people continue to be bearish on the future price of goods and are unwilling to consume. After prices fall, some people will choose to save if they think that prices will continue to fall, because the future is more valuable; Others stimulated their consumption because of the low price. They felt that prices would not continue to fall in the future, so they began to buy. After the general price falls, it will rise again because the low price stimulates consumption. The price decline in the case is due to the improvement of the efficiency of scientific and technological progress, which leads to a short decline time. After all, scientific and technological progress can't cut the cost by half in one day. As long as people still have demand for goods, they won't refuse to buy them. If the price has dropped to a reasonable level, people still refuse to buy it. At this time, the bank has a lot of savings to invest, as long as people or people need to spend, but the goods do not meet the demand. In fact, the production efficiency of all consumer goods on the market will only increase. Theoretically, the prices of these consumer goods should be lower and lower, but in reality, the opposite is true. )

As people's production efficiency is getting higher and higher, there are more and more fish. It's really dangerous for people to keep fish at home. We should guard against fish thieves at all times. People don't have so much time and energy to judge whether a project is suitable for investment, whether it will lose money or make money. As a result, resident D found business opportunities. He built a storage room with the strongest stone and hired strong guards to protect it. At first, he charged the islanders a storage fee. Later, he found that his income was very limited and his appeal to islanders was limited. D has a very strong investment vision, so he directly agreed to pay an interest to all islanders who come to store fish, borrow and invest with islanders' money, and the investment income is used to pay interest and employment expenses, and the rest is his own income. (savings are born! The bank was born! )

D. In order to maintain the healthy operation of your bank, on the one hand, it is necessary to strictly review the loan projects, and raise the loan interest rate or disapprove the unqualified loan projects; On the other hand, in order to ensure sufficient investment funds and encourage people to make long-term savings, the longer people save, the higher the interest will be set. This interest rate is also affected by the unpredictable market. Sometimes, when there are a lot of fish in stock and there is no shortage of fish, D will reduce the savings rate, curb savings, and at the same time lower the loan interest rate to encourage people to borrow; Sometimes there are few fish, and D will stimulate savings by raising the interest rate of savings, while raising the interest rate of loans to curb loans.

Those projects with uncertain future selected by D are attracted by E E, and the high risk of failure is compensated by raising the loan interest rate. Some of these projects have succeeded and some have failed. Some people who are willing to take risks follow E's investment.

People lived a happy life until one year, when there was a rare drought on the island. At the earliest time, people lived by the river and used the water directly. When the drought comes, people have no water available, which has caused very serious consequences. After the drought. Resident F decided to build a tap water system to collect rainwater in good weather to prevent water from being available in the future, and at the same time automatically deliver fresh water to all households. After the completion of the tap water system, the places far away from the water source have also been developed, and the people have reduced the previous processes of carrying water, freed up more time and improved the production efficiency again. (Infrastructure begins to develop)

On the west side of the island, there is a smaller island. The inhabitants of this island are good at playing drums. On the south side of the island, there is another island. There are many plant materials for making sunscreen products on this island. The two islands needed each other's things, so they began to exchange what they needed. International trade began to appear, which is actually similar to the trade between individuals, exchanging what they don't have for what others don't have at the same time.

At first, when there was only ABC on the island, they were mostly peaceful. However, with more and more people, there are more and more contradictions and frictions between people, and even fish thief gangs have appeared. Residents of other islands sometimes come to plunder the resources on the island, making people's lives difficult, and it is urgent to organize to deal with contradictions and maintain public order on the island. So they elected respected leaders as guardians, guardians upheld justice, hired strong islanders to maintain public order (the government was born), and people were willing to pay a certain fee (taxes) to get a safer living environment. In order to prevent leaders from fooling around, people have formulated relevant rules (constitutions), detailing what rights and obligations leaders have and how the state's money should be spent. At the same time, judges were elected to safeguard the validity of the Constitution and supervise the leaders to abide by the constitutional rules.

In this way, the island continued to prosper.

Later, the government became more and more powerful and more people wanted to be leaders. To be leaders, we must find ways to get people to vote for us. Another serious natural disaster happened. Islander g found his opportunity, so he assured the voters that he would give relief and compensation to the affected areas, so the people voted for him. But in fact, the government simply doesn't have enough fish for disaster relief. In order to keep his position, G thought of a way to issue fish coupons (US dollars) instead of fish. People can change them into fish at any time. Fish coupons are light, easy to carry and have no fishy smell. Soon, then G began to print fish coupons, far exceeding the bank's reserve of fish coupons. Some people object that if islanders find that their fish coupons can't be exchanged at all, they will withdraw their deposits and we will go out of business. But G ignored it and killed everyone who turned against him.

To solve the problem of fish

In order to please the people, the government began to print more money without limit. Later, the islanders found that prices were getting more and more expensive, so they began to stop saving and spend desperately. There are fewer and fewer fish in the bank, the value of the dollar is getting lower and lower, and the government has no money to invest in projects. The whole economy is on the verge of collapse.

At that time, there was an island in the distance called Nakajima (China). The leader of this island holds absolute power, and most of the fish worked by the islanders should be given to the leader, leaving only a small part for himself. Seeing the prosperity of Dollar Island, China Island found that their prosperity was largely due to the freely convertible currency of Dollar, so they brought a lot of fish in exchange for dollars. For this island, the fish on China Island is a godsend opportunity for survival.

So there are fish on the island, and the islanders' dollars can be exchanged for normal fish, and the price drops, and the islanders live a happy life again. Fish from Nakajima kept pouring into the island, and the island began to pay attention to the development of entertainment services, such as surfing and opera, and thought that low-level jobs such as fishing and manufacturing should be outsourced to people from Nakajima, and their costs were lower.

But after all, all the fish on the island come from Nakajima. If Nakajima asks the island to exchange dollars for fish, there will be no fish to exchange. Poor islanders who like to save money spend a lot of time working hard, believing that they have enough money to enjoy life when they are old.

There is also a small drum island in the distance. Their leader thought the dollar was a scam, so he took a lot of dollars to the bank on the island to exchange fish. The bank can't let the islanders know that the bank's fish is not enough for dollars. He can only change to Xiaogu Island until it can't be loaded. An emergency meeting was held on the island and it was decided to close the dollar-for-fish window.

The island's economy was hit, and the value of the US dollar once fell. However, because the dollar has been with us for a long time, and the island is a prosperous country, the dollar is allowed to be the main currency to buy goods on the island, so the value of the dollar tends to be stable after a period of time, and another crisis on the island has finally been solved. Even if the island continues to make noise, it will not have much impact on the island economy.

With the continuous improvement of the island's economic level, people's requirements for life are also constantly improving. The shack where they once lived can no longer meet the needs of the islanders. Businessmen saw business opportunities and began to build all kinds of high-quality shacks. However, the price of shacks is not low, and few people can afford it. Many people have saved money for many years to buy shacks at one time. Later, banks began to provide shack loans to people with good reputation. As long as they pay a part of the down payment, they can live in shacks in advance.

However, a small number of islanders meet the requirements. In the 56th leader election, Islander H seized this opportunity to tell voters that if he was elected, most people could borrow money to buy a house. There is no doubt that H won the leadership opportunity, so H established two semi-official lending institutions to lend money to ordinary islanders at low threshold and low interest rate, while those who have the money to lend have invested a lot of principal out of trust in the government. As the threshold for obtaining loans is getting lower and lower, the price of shacks is gradually increasing, and shacks have become the most popular investment method besides accommodation consumption. Islanders began to scramble to buy shacks, and instantly gained huge wealth through reselling, so the shack market became more popular.

Later, an islander came up with a "small for big" loan method. You can borrow more money with the shack you haven't paid back, and the shack market bubble began.

Until one day, there was a shack project with a sea view of the crater. After huge investment, it can't be sold, and the project failed, which aroused people's vigilance. People began to examine whether the shack lenders in their hands have enough repayment ability, and the result is naturally not. A large number of shacks began to be sold and the bubble burst.

Kojima borrowed more than 654.38 million fish from Zhongdao County to tide over the crisis. Later, someone in Nakajima suggested to the leaders that we don't need to sell the goods to Kojima, but we can totally consume and produce them ourselves. So the leaders of Nakajima began to stop shipping fish to the island. They entered the island with their hoarded dollars and bought everything they could buy back for Nakajima.

Without the support of Nakajima, the island has only the service industry, and there is no basic manufacturing and construction industry, which will soon enter a period of collapse.