Let’s imagine an early settlement of humans shortly after the Agricultural Revolution. With a steady source of food, the humans have diversified their professions to begin creating all sorts of things. Let’s say that this settlement has wide, rolling hills perfect for sheep herding. The sheep allow the herders to trade cotton to the sewers who in turn trade their cloth to others within the settlement. If this settlement happens to naturally have a lot of land conducive to raising sheep, it might be lacking in land yielding other resources.
As communication spreads and our settlement is made aware of other resources, the government will decide to trade away their most abundant resource, called exports, in exchange for new goods, called imports. In this case, the sheep would be our settlement’s export while the new resources are imports.
Imports can even allow for new exports. If our settlement imports dyes, we could combine those with our cloth to export tapestries. Buyers will pay extra for the additional goods and labor involved.
The word economy describes all of the trades between everyone within a settlement and between multiple settlements. Of course, there are plenty of distinctions and special nuances to economics but the overall concept remains the same, and it doesn’t only have to do with governments. A business has an economy based on the amount of money allocated to each sector of the business vs. how much the business makes from income. You have an economy based on how much money you spend per month vs. how much you make in a month.
Regardless of the size of an economy, the goal is still the same: make more money than you spend. As societies morphed into empires, the economies would dictate the professions of colonists loyal to (or conquered by) the empire. They would be assigned to harvest whatever natural resources were present. Resources could be traded within a economic environment called a market with each industry referring to a type of resource. The important markets of a few past empires still have a very large influence on the industries around the world today.
As money became more prevalent, we started to make more money to keep up with all of the trading being done by humans on small and large scales. Eventually, there would be too much money to keep up with so a new industry formed to fulfill the niche. This industry would watch over the money until the rightful owner needed it, we call them banks.
Let’s fast forward a bit to the Industrial Revolution and the rapid growth of new businesses. A new style of market emerged called capitalism that allowed you to earn your money by working. Now everyone possessed some amount of valuable money that they would store in a bank. The bankers now had an opportunity to temporarily use that money to invest in budding businesses.
If the bankers were successful with their investment, they could replace the borrowed money easily and keep the earnings for themselves. However, there is absolutely no way to predict the future regardless of the amount of statistics a banker cites in his prediction. If that banker’s predictions are wrong, it is someone else’s money that is being gambled and lost.
This is not the space to determine whether it was good or bad for bankers to invest huge amounts of other people’s money in businesses. It happened for better or worse. The bright side is that a large investment from a bank could surge a business further than any individual contribution could. The other side is that a few people’s predictions decide which businesses thrive and which ones die. The whole thing is based on a few investors and their predictions on which way the scales of the world will tilt, and they aren’t even playing fair!
Take gas prices for example, the cost of gasoline rarely reflects the price we paid to obtain it. Rather, the price we pay represents the expected price of gasoline in the future. This is the work of a few people’s predictions and it is entirely made up.
We’ve created a system in which a few people have the ability to manipulate money that they don’t own in order to make their own money. There is a reason the economy seems to go in cycles: it’s because the predictions of the few people will eventually be wrong. When they are, it is the people who suffer, not the investors. If it happened on a smaller scale, most of us would call it theft but because the banks have so much power, the laws that have been put in place have little effect to stop this large-scale crime.
Our current economic system is unsustainable but remember that an economy includes all transactions made between people and businesses. Money is just the unit being traded. We must look back at how an economy formed and changed to understand how to read it. If you follow the money, you will find the truth. The powerful few cannot hide from their actions when it comes down to it because we have the information and that’s the real power.