I know there must be reasons and this is a dumb question, but I’m a bit of an abstract thinker and have trouble grasping it from a big picture presepctive. Can someone break this down for me? Can’t we all just kind of agree to just kind of… Reset some numbers or something?
Sincerely,
I’ve never taken an economics class in my life
In: Economics
fundamentally: you can’t pause the value people actually place on things. if beanie baby trading were banned 20 years ago and legalized today, would you be willing to pay 2000 prices?
We can. The US paused the stock market after a big dip a couple of times recently and closed it after 9/11. France is pausing all rents and utilities bills. Italy is pausing mortgage payments. Jeremy Corbyn, Labour leader in the UK, is asking for the same.
So we can do it. It’s just that in the US our government is so corrupt that they can’t even pass paid sick leave. Capitalism will be the death of thousands and many wont even know why.
There’s better answers from others on this thread, but the simplest way I can think of it is… Someone has to lose. You need to eat, pay rent, or whatever. To do those things, you have to either pay (which means you need to be working, or your employer has to pay you to not work), or the provider of that good/service has to give it to you for free and pay their employees to provide it. That’s in the “real” economy.
Now the share market is different, and that gets “paused” all the time. They have automatic suspension trading when the losses get too big in any single session, and that’s been activated a couple of times. To achieve this would be disruptive, but I suppose the stock exchange or government may be able to shut the whole thing down for an extended period.
money is the answer to the underlying issue of scarcity of goods and services.
Since goods and services have a limited supply, we estimate their price with money, which describes the intersection between supply/demand.
If all goods and services were infinite in supply, it is possible that money wouldn’t exist at all.
I hope this helped!
>I’m a bit of an abstract thinker and have trouble grasping it from a big picture presepctive
How do you reconcile these two statements?
What would be the effect of freezing all mortgages, rent, utility bills, car payments and all non-essential jobs. No income for anyone except essential functions to survive. Free food for everyone as well. Would this work to allow 95% of ppl to stay home?
Great question, you should totally take an economics class, you’ll love it!
>You’re not wrong, the Federal Reserve Board (FED) exists for exactly this reason, to “pause” the economy.
>But the economy is made up of lots of people who may not all agree with what the FED thinks those people should be doing (spending) and so the FED has to convince those people to spend more by a series of levers that make spending seem more attractive than saving.
>Once more people are spending more stuff can be made, fueling economic PRODUCTIVITY which is a measure of the TANGIBLE amount of goods and services created.
>You may have also heard the terms SUPPLY and DEMAND thrown around a lot, it’s for good reason, for one, it helps us distinguish between economic problems that are as you say “man-made” and those which are caused by a decrease in economic productivity. The first of these we call a DEMAND-SIDE RECESSION, people are worried and spending less, the drop in demand causes supply to fall to meet demand. The second we call a SUPPLY-SIDE RECESSION, something has fundamentally damaged the ability of the economy to produce goods and services, causing unemployment and reduced spending.
>The FED has tools to gin-up consumer confidence and get people spending money, but there’s no way to manipulate the economy to fix a supply-side recession, other than to address the fundamental issue causing supply to be lower. In our case Coronavirus.
>As an example, the hardest hit regions in China and Italy are both Auto manufacturing hubs. Due to Coronavirus people can’t go to work and the things they would have created are counted against the economies productivity. Worse than that, there’s a whole domino effect as parts become unavailable manufacturing slows down around the globe where other plants are relying on the parts built in those Chinese and Italian plants.
>What you’ve hit on with your question is the distinction between economic measurements that are “man-made” and those which measure the TANGIBLE, how much stuff did we produce. The first of these we call the NOMINAL VALUE and measure it in money, the second we call REAL VALUE its units are barrels of oil, bushels of corn, and meals prepared and served.
Doing my best on two semesters of introductory economics here. Reddit please let me know if anything is incorrect or misleading.
pause no. Calculated stimulus in several forms happens. which is like free money to keep things going that they balance out later. Bailouts are essentially this kinda thing. Lowering interest lending rates of fed., injecting money into the market… Imho this should include micro loans for businesses and individuals, but so far the way we do it does not include the little guys accept in theory.
As long as people do not suddenly “pause” to need stuff, the economy is running for the better or worst. Problem is, we all need to eat at the very least.
Economy is a side consequence of the humans needs and the overal peaceful share of ressources, not because we decided to build a fun convoluted thing someday.
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