The first economist, this Adam Smith was an actual person, not some contemporary telejournalist’s pseudonym. His historic book, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), propounded the idea that competition acted as the “invisible hand,” serving to regulate the marketplace.

The first economist

COMMODITIES: Commodities fall into two categories: goods, which are tangible, and services, which are not. An easy way to remember this distinction: these days, goods are Chinese and services are American; they make textiles; we make lawyers. CONSUMPTION AND PRODUCTION: Consumption is what happens when you actually use commodities; production is what happens when you make them. EXTERNALITIES: Effects or consequences felt outside the closed world of production and consumption, things like pollution. Economists keep their own world tidy by labeling these messes “externalities” then banishing them.

MACROECONOMICS VS. MICROECONOMICS: Further evidence of the tendency of economists to see things in pairs. Here, “macro” is the side of economics that looks at the big picture, at such things as total output, total employment, and so on. “Micro” looks at the small picture, the way specific resources are used by firms or households or the way income is distributed in response to particular price changes or government policies. One problem economists don’t like to talk about is the difficulty they have in getting the two views to fit together well enough to have any practical application.

MARKET FAILURE: This is one of a number of terms that economists use to put down the real world. Here’s the way it works:<ul><li>When things don’t go the way economists want them to, based on the laissez-faire system (see above), the outcome is explained as the result of a “market failure.” That way, it’s not the economists’ fault-they had it right, it’s the market that got it wrong.</li></ul>

ECONOMETRICS: Yesterday’s high-level hustle. Econometrics used to mean studies that created models of the economy based on a combination of observation, statistics, and mathematical principles. In the Sixties, however, the term referred to a lucrative mini-industry whose models were formulated by computer and hired out to government and big business to help them predict future trends.

Government, in fact, soon became the biggest investor in econometrics models, spending millions to equip various agencies to come up with their own, usually conflicting, forecasts-this, despite the fact that the resulting predictions tended, throughout the Seventies, to have about the same record for accuracy as astrology. Today, econometrics models are still expensive and still often wrong, but they’re accepted.

FED: Known in financial circles as the Fed (and not to be confused with the feds), this government body, our central bank, wields enormous control over the nation’s purse strings. In fact, it’s said that the Fed’s chairman is the second most powerful man in Washington. He and his six colleagues, or governors of the Federal Reserve Board, direct the country’s monetary policy. Simply put, they can alter the amount of money (see “Money Supply”) and the cost of money (see “Interest Rates”), and thereby make or break the economy.

When the Fed tightens, interest rates rise and the economy slows down. When the Fed eases, interest rates fall and the economy picks up. Or so it used to be. The balancing act is so difficult, and the Fed so mistrusted, that its actions often have a perverse effect. So much for simplicity. Many swear that the Fed is the root of all economic evil. In his landmark work, A Monetary History of the United States, 1867-1960 (coauthored by Anna J. Schwartz), Milton Friedman placed blame for the Great Depression squarely on the Fed (for tightening too much).

MONEY SUPPLY: This is what the Fed is supposed to control but has a hard time doing. For decades, the Fed, and the people who make a living analyzing what money is doing, monitored the money supply because of the effect it was believed to have on the national economy. The Fed measures the money supply in three ways, reflecting three different levels of liquidity-or spendability - different types of money have.

By the Fed’s definition, the narrowest measure:<ol><li>M1, is restricted to the most liquid kind of money-the money you’ve actually got in your wallet (including traveler’s checks) and your checking account. </li><li>M2 includes M1 plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds. </li><li>M3 includes M2 plus large-denomination ($100,000 or more) time deposits, balances in institutional money funds, repurchase liabilities, and Eurodollars held by U.S. residents at foreign branches of U.S. banks, plus all banks in the United Kingdom and Canada.</li></ol>

Last time we looked, the M1 was around $1.2 trillion; the M2, $6 trillion; and the M3, $8.8 trillion. The Fed, by daily manipulation, can alter these numbers. If the Fed releases less money into the economy, interest rates rise, corporate America borrows and produces less, workers are laid off, and everyone’s spending is cut back. When the Fed pumps more money into the economy, the reverse happens. And if it moves too far in one direction or another, the Fed can create a depression (the result of too much tightening) or hyperinflation (the result of too much easing).

These are some insights regarding economics extracted from this book. Further more about other topics is yet to come.

A completely updated, revised edition of the classic, outfitted with a whole new arsenal of indispensable knowledge on global affairs, popular culture, economic trends, scientific principles, and modern arts. Here’s your chance to brush up on all those subjects you slept through in school, reacquaint yourself with all the facts you once knew (then promptly forgot), catch up on major developments in the world today, and become the Renaissance man or woman you always knew you could be! How do you tell the Balkans from the Caucasus? What’s the difference between fission and fusion? Whigs and Tories? Shiites and Sunnis? Deduction and induction? Why aren’t all Shakespearean comedies necessarily thigh-slappers? What are transcendental numbers and what are they good for? What really happened in Plato’s cave? Is postmodernism dead or just having a bad hair day? And for extra credit, when should you use the adjective continual and when should you use continuous? An Incomplete Education answers these and thousands of other questions with incomparable wit, style, and clarity. American Studies, Art History, Economics, Film, Literature, Music, Philosophy, Political Science, Psychology, Religion, Science, and World History: Here’s the bottom line on each of these major disciplines, distilled to its essence and served up with consummate flair. In this revised edition you’ll find a vitally expanded treatment of international issues, reflecting the seismic geopolitical upheavals of the past decade, from economic free-fall in South America to Central Africa’s world war, and from violent radicalization in the Muslim world to the crucial trade agreements that are defining globalization for the twenty-first century. And don’t forget to read the section "A Nervous American’s Guide to Living and Loving on Five Continents" before you answer a personal ad in the International Herald Tribune. As delightful as it is illuminating, An Incomplete Education packs ten thousand years of culture into a single superbly readable volume. This is a book to celebrate, to share, to give and receive, to pore over and browse through, and to return to again and again.

Interesting stuff 

An Incomplete Education

“This is a historical lesson of immense significance and should be kept in mind by anyone who thinks his refusal of Bitcoin means he doesn't have to deal with it. History shows it is not​ possible to insulate yourself from the consequences of others holding money that is harder than yours.”

How did it work? It was pretty simple: people just swapped things. It worked fine, except if you didn’t have something your neighbor needed. Once people figured out you could exchange universally valued objects for goods, everything changed.From there, we’ve gone from all kinds of currency to valuable metals, and now paper printed by governments. But since we ditched the “gold standard” of money and started relying only on easily manipulated paper money, we’ve seen a century of boom and bust and increasing debt.

The World Before Money

<ul><li>What makes good currency is that it is salable or easily sold. With the technology of smelting metals, early pre-Christian civilizations could make highly salable coins that were also extremely portable.</li><li>The preferred type of coin was gold.</li><li>When transportation and communications boomed from the 18th to the 20th centuries, nonphysical forms of payment like paper bills and checks became justified. The way they convinced people to trust these pieces of paper was by backing them with gold.</li><li>Britain led the way with this standard to back bills with gold, known as the “gold standard.”</li></ul>

What Makes Good Currency

A good’s salability across time refers to its ability to hold value into the future, allowing the holder to store wealth in it. For a good to be salable across time it has to be immune to deterioration.Similarly, with money, it was inevitable that one, or a few, goods would emerge as the main medium of exchange because the property of being exchanged easily matters the most. A medium of exchange is not acquired for its own properties, but for its salability.Monetary status is a spontaneously emergent product of human action, not a rational product of human design.

Salability

<ul><li>Money has come in all shapes and sizes throughout history, but there’s only ever been one truly sound system: money backed by gold.</li><li>The “gold standard” underwrote an age of prosperity and stability. That all changed in the early 20th century when European governments abandoned gold and fiscal prudence to fund their war efforts.</li><li>The world hasn’t been the same since, and we’ve endured decades of rising debt and boom-and-bust cycles.</li><li>Bitcoin, like gold, it’s a highly effective unit of exchange. But the digital currency will have to overcome some teething problems.</li></ul>

Money Backed By Gold

<ul>
<li>Different currencies were simply different weights of physical gold, and the exchange rate between one nation’s currency and the other was the simple conversion between different weight units, as straightforward as converting inches to centimeters.</li>
<li>In the same way metric and imperial units are just a way to measure the underlying length, national currencies were just a way to measure economic value as represented in the universal store of value, gold.</li>
<li>Each country’s money supply was determined by the natural working of the market system.</li>
</ul>

The Gold Standard

The fatal flaw of the gold standard was that settlement in physical gold was heavy, expensive, and insecure, which meant it had to rely on centralizing physical gold reserves in a few locations—banks and central banks—leaving them vulnerable to being taken over by governments.
Although gold was supposedly demonetized fully in 1971, central banks continued to hold significant gold reserves, and only disposed of them slowly, before returning to buying gold in the last decade.

The Flaw of The Gold Standard

Money whose supply is hard to increase is known as hard money (sound), while easy money is money whose supply is amenable to large increases (unsound).<ul><li>The easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased will destroy the wealth of those who used it as a store of value.</li><li>Money that is easy to produce is no money at all, and easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard‐earned wealth for sale in exchange for something easy to produce.</li></ul>

Hard Money, Easy Money

<ul>
<li>It protects value across time, which gives people a bigger incentive to think of their future, and lowers their time preference (this is what initiates the process of human civilization and allows for humans to cooperate, prosper, and live in peace.)</li>
<li>Sound money allows for trade to be based on a stable unit of measurement, facilitating ever‐larger markets, free from government control and coercion, and with free trade comes peace and prosperity.</li>
<li>A unit of account is essential for all forms of economic calculation and planning, and unsound money makes economic calculation unreliable.</li>
</ul>

The Importance of Sound Money

Time preference for money is an individual's preference for possession of a given amount of money now, rather than the same amount at some future time. The time preference for money is generally expressed by an interest rate. This rate will be positive even in the absence of any risk. The natural implication of this process is to reduce savings and increase borrowing.
Individuals will consume more of their income and borrow more against the future. This will not just have implications on their time preference in financial decisions; it will likely reflect on everything in their lives.

Time Preferences of Money

The 20 century’s binge on conspicuous consumption cannot be understood separately from the destruction of sound money and the outbreak of vilifying savings and deifying consumption as the key to economic prosperity.<ul><li>The reduced incentive to save is mirrored with an increased incentive to spend, and with interest rates regularly manipulated downwards and banks able to issue more credit than ever, lending stopped being restricted to investment but has moved on to consumption.</li><li>Credit cards and consumer loans allow individuals to borrow for the sake of consumption without even the pretense of perf<warningtag>orming investment in the future.</warningtag></li></ul>

Consumption Is Key

After the First World War, financial deficits forced European powers to drop the gold standard. They introduced fiat money, which was backed by decree instead of gold. This switch led to an age of unsound money where governments could intervene in the economy to stabilize the value of their currencies. 
Unsound money causes a myriad of problems, like recessions and debt. Interventions of governments distort markets and cause boom and bust cycles. The only solution would be to establish a new gold standard. This is where Bitcoin comes in.

The New Gold Standard

... because it is scarce, secure, and unique.
<ul>
<li>Bitcoin has a fixed supply— there will never be more than 21 million in existence. </li>
<li>They also have a stable supply because, like gold, bitcoins are mined.</li>
<li>Bitcoins are the only good defined by absolute scarcity, which makes them immune to manipulation. </li>
<li>It’s also incredibly secure. The public ledger, known as the blockchain, keeps a record of all recent transactions. Everyone can see it, and it is backed by every computer on the network, making it near-impossible to manipulate.</li>
<li>The best part is you don’t even need a central authority to oversee it.</li>
</ul>

Bitcoin Could Replace Money As We Know It

<ul>
<li>Bitcoin can thus be understood as a technology that converts electricity to truthful records through the expenditure of processing power. </li>
<li>Those who expend this electricity are rewarded with the bitcoin currency, and so they have a strong incentive to maintain its integrity. As a result of attaching a strong economic incentive for honesty, Bitcoin’s ledger has been practically incorruptible for the period of its operation so far.</li>
<li>By relying entirely on verification, Bitcoin dooms fraudulent transactions to failure and obviates the need for trust in anyone for transactions to be completed.</li>
</ul>

Verification > Trust

Bitcoin can be seen as the new emerging reserve currency for online transactions, where the online equivalent of banks will issue Bitcoin-backed tokens to users while keeping their hoard of Bitcoins in cold storage, with each individual being able to audit in real time the holdings of the intermediary, and with online verification and reputation systems able to verify that no inflation is taking place.This would allow an infinite number of transactions to be carried out online without having to pay the high transaction fees for on-chain transactions.

Bitcoin As a Reserve Currency

We know it is incredibly promising, but of course, there are challenges.
<ol>
<li>One of these is price volatility. This volatility is mostly due to demand, and because it’s so new, demand is highly variable. People wonder how it can be reliable if it fluctuates.</li>
<li>Bitcoin needs to grow. But eventually, Bitcoin would need to rely on centralized institutions to continue growing. Unfortunately, there doesn’t seem to be a viable way around this: the more transactions that happen, the more copies of the ledger need updating. All of this requires higher transaction fees and more processing power.</li>
</ol>

Bitcoin: The Challenges

A deep dive into the role money has played across history and how Bitcoin fits in.

A comprehensive and authoritative exploration of Bitcoin and its place in monetary history When a pseudonymous programmer introduced “a new electronic cash system that’s fully peer-to-peer, with no trusted third party” to a small online mailing list in 2008, very few people paid attention. Ten years later, and against all odds, this upstart autonomous decentralized software offers an unstoppable and globally accessible hard money alternative to modern central banks. The Bitcoin Standard analyzes the historical context to the rise of Bitcoin, the economic properties that have allowed it to grow quickly, and its likely economic, political, and social implications. While Bitcoin is an invention of the digital age, the problem it purports to solve is as old as human society itself: transferring value across time and space. Author Saifedean Ammous takes the reader on an engaging journey through the history of technologies performing the functions of money, from primitive systems of trading limestones and seashells, to metals, coins, the gold standard, and modern government debt. Exploring what gave these technologies their monetary role, and how most lost it, provides the reader with a good idea of what makes for sound money, and sets the stage for an economic discussion of its consequences for individual and societal future-orientation, capital accumulation, trade, peace, culture, and art. Compellingly, Ammous shows that it is no coincidence that the loftiest achievements of humanity have come in societies enjoying the benefits of sound monetary regimes, nor is it coincidental that monetary collapse has usually accompanied civilizational collapse. With this background in place, the book moves on to explain the operation of Bitcoin in a functional and intuitive way. Bitcoin is a decentralized, distributed piece of software that converts electricity and processing power into indisputably accurate records, thus allowing its users to utilize the Internet to perform the traditional functions of money without having to rely on, or trust, any authorities or infrastructure in the physical world. Bitcoin is thus best understood as the first successfully implemented form of digital cash and digital hard money. With an automated and perfectly predictable monetary policy, and the ability to perform final settlement of large sums across the world in a matter of minutes, Bitcoin’s real competitive edge might just be as a store of value and network for the final settlement of large payments―a digital form of gold with a built-in settlement infrastructure. Ammous’ firm grasp of the technological possibilities as well as the historical realities of monetary evolution provides for a fascinating exploration of the ramifications of voluntary free market money. As it challenges the most sacred of government monopolies, Bitcoin shifts the pendulum of sovereignty away from governments in favor of individuals, offering us the tantalizing possibility of a world where money is fully extricated from politics and unrestrained by borders. The final chapter of the book explores some of the most common questions surrounding Bitcoin: Is Bitcoin mining a waste of energy? Is Bitcoin for criminals? Who controls Bitcoin, and can they change it if they please? How can Bitcoin be killed? And what to make of all the thousands of Bitcoin knockoffs, and the many supposed applications of Bitcoin’s ‘block chain technology’? The Bitcoin Standard is the essential resource for a clear understanding of the rise of the Internet’s decentralized, apolitical, free-market alternative to national central banks.

Stashed ideas

The Bitcoin Standard

The goal of Satoshi Nakamoto's invention of Bitcoin was to enable two willing parties to transact directly without needing a trusted third party.   The reason is that modern banks have flaws and disadvantages to the consumer. Due to their centralized nature, they can be unreliable, vulnerable to security threats, charging fees and even biased. This is why cryptocurrencies will pave the way for a better banking and payments experience in the future.

Why cryptocurrencies exist

You entrust your money to banks, and in turn, they become gatekeepers of your finances. If you use mobile banking and their servers are down, you can't access your finances unless you go to the local ATM and withdraw cash. Cryptocurrencies never go out of service as they use automated systems and are always accessible.  Cryptocurrencies are bought through crypto exchange platforms and stored in safe and secure crypto-wallets. They are decentralized and operate very securely.

Unreliability of traditional centralized banks

Banks make over $15 billion a year in overdraft fees. But fees can take many other forms, including late penalties, returns, using an out-of-network ATM, money transfers, inactivity, international remittances fees, and customer support. Cryptocurrencies don't charge you so many fees for transactions. The most common fees for crypto transactions are called gas fees, a reward given to miners for entering transactions on the blockchain or executing the transactions.

Crazy banking fees

With centralized banks, large amounts of cash or international payments can take a week or more. Cryptocurrency transactions are quick and can handle more daily transactions than traditional banking systems. The financial service issuing officer can deliberately delay transactions or even freeze your assets. Thousands of people have their life savings frozen by banks and exchanges every month.

Transactions can take a long time

Bank transactions depend on account numbers and personal information, making them open to biases.  Cryptocurrencies don’t judge or profile you. The decentralized nature minimizes human interactions, which makes them free from biases.

Bank transactions and financial services are open to biases

Many platforms today share your data with third parties.  Centralized banks can share your personal and sensitive data, such as passport or ID information, residence address, SSN, and employment information with their affiliates or partners or third-party buyers,

Data collection

According to a survey by Accenture, banks suffer an average of 85 attempted serious cyber attacks a year, and one-third are successful. As a result, some people lose large sums of cash from their accounts or get scammed. The systems are also prone to fraud and especially money embezzlement. Crypto relies on a distributed network of computers all over the world. Crypto is more secure and reliable because it uses anonymous ID numbers in transactions and is tamper-resistant.

Security Issues

Banks make over $15 billion a year in overdraft fees according to the federal Consumer Financial Protection Bureau.

The Real Problem With Centralized Banks And Why Crypto Is Inevitable

The broad increase in the price of goods and services. This results in a decrease in customers' purchasing power. Customers buy less than what they were able to buy before. This increase is not limited to goods and services alone but also to the country's economy.

Inflation

When the cost of goods and services decreases and purchasing power increases meaning customers can buy more with less.This is caused by :• Increase in productivity of goods and services• A decrease in demand • A decrease in the supply of money and credit Although this might seem like a positive scenario it may also indicate a weakening economy.

Deflation

Inflation within the wage growth can stimulate demand, boosting productivity and increasing spending.However, when inflation surpasses wage growth it may indicate that the economy is in trouble. In a healthy economy, inflation normally ranges between two percentage points(<2%)

The Economy

When the customer demand for goods and services exceeds the supply in the market When there's an increase in the prices for raw materials and inputs for the final product on the side of the producer. Producers have to increase their prices so consumers have to pay more for the price increase.

Cause of Inflation

Consumers: lose purchasing power with the rise of prices of goods and services meaning they buy lessCompanies:Increase prices for goods and services as they lose buying power for the input material they require for finished products.

Consumers & Companies

This is how inflation is measured.• CPI measures the overall change in consumer prices based on a representative basket of goods and services over some time. • The CPI is the most widely used measure of inflation and deflation, closely followed by policymakers, financial markets, businesses, and consumers. (INVESTOPEDIA)

Customer Price Index(CPI)

Inflation in a nutshell : Credit to Karla Brown 

Inflation 

Inflation is the gradual loss of purchasing power over time, reflected in a broad rise in prices for goods and services. In other words, you can buy less today with the same amount of money as you could a while back. For example, in the 1970s, the average cup of coffee cost 25 cents. By 2019, it had climbed to $1.59.   Inflation isn't limited to price spikes for any single item or service. It refers to increases in prices across a sector such as retail and, ultimately, a country's economy.

Inflation in a healthy economy is typically in the range of two percentage points. Inflation can stimulate spending and encourage demand and productivity when it is within range. But when inflation surpasses wage growth, it can be a warning sign of a struggling economy.

A healthy economy

Households lose purchasing power when the prices increase for items such as food, utilities and gasoline. Companies lose purchasing power when prices increase for inputs used in production. In response, companies typically raise the prices of their products or services to offset inflation, meaning consumers absorb price increases.

How inflation affects consumers and companies

Statistical agencies measure inflation by determining the current value of a “basket” of various household goods and services. This is referred o as a price index.  Agencies compare the value of the index over one period to another, such as month-to-month for a monthly rate of inflation or year-to-year for an annual rate of inflation.

How inflation is measured

<ul><li>Demand-pull inflation occurs when the economy's demand for goods and services exceeds its ability to produce them.</li><li>Cost-push inflation occurs when the rising price of input goods and services increases the price of final goods and services.</li></ul>

The main causes of inflation

<ul><li>Post World War II, price controls, supply problems and extraordinary demand caused double-digit inflation.  It peaked at 20 percent in 1947 and subsided at the end of the decade. </li><li>The mid-1960s to the early 1980s saw some of the highest inflation rates, with a peak of 14.8 percent in 1980. In turn, interest rates jumped to nearly 20 percent. </li><li>In January 2022, inflation in the United States increased to 7.5 percent, its highest level since February 1982, due to soaring energy costs, labour mismatches, and supply disruptions. </li></ul>

Historical inflation

During inflation, companies usually pay more for input materials. To maintain gross margins, companies raise prices for consumers. However, if price increases are not executed carefully, companies can damage customer relationships, depress sales, and hurt margins.  But done right, recovering the cost of inflation on a case-by-case basis can strengthen relationships and overall margins.

How inflation affects pricing

<ol><li>Adjust discounting and promotions and revisit other aspects of sales inapplicable to the base price.</li><li>Develop the art and science of price change. Don’t make across-the-board price changes but tailor pricing actions.</li><li>Accelerate decision-making by establishing an inflation council that can act quickly on customer feedback.</li><li>Plan options beyond pricing to reduce costs.</li><li>Track execution relentlessly.</li></ol>

Five steps companies can take to adapt to inflation

Deflation occurs when the overall level of prices in an economy declines and the purchasing power increase. It can be driven by growth in productivity and the abundance of goods and services, a decrease in demand, or a decline in the supply of money and credit. Generally, moderate deflation enables consumers to purchase more with less money. But deflation can also signify a weakening economy and lead to recessions and depressions. In addition, during deflation, debt becomes more expensive.

An Incomplete Education

The Bitcoin Standard

The Real Problem With Centralized Banks And Why Crypto Is Inevitable

Inflation

What is inflation?

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