"Money, Money, Money Its a rich mans world ." --
Benny Andersson & Bjoern Ulvaeus

 

The Birth of Economics.

 

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So you want to understand economic?

Well understanding economics is really very simple, the operation however is a little more complex - about on a par with the weather.

Hanging

A few basic terms are helpfull. These are, in order of importance:

Money. - an exchange medium used within an economy.

Wealth - the collecton of money.

Economics - the process for the movement of wealth.

Assets - the consequence of converting money into another form.

Currency - the official type (fiat) of money used in a country.

 

The prime function on an economy is circulate money.

To move it though, first you have to create it.

Money is created using one or both of these processes

the consequences of  energy

the process of counterfeit.

Money established by using the consequences of energy will grow an economy, money established by counterfeit will destroy it.- We shall address the counterfeit aspect later.

NOTE1: Money, like energy, can be converted from one form to another however, unfortunatley for humans, unlike energy, being created, it can be distroyed.

It is the existence of both of these circumstances that provides the economy with the potential for increasing the amounts of money which can be circulated, accumulated and converted into assetts.

Planet Earth benefits from two consequences of energy.

  • The first was the creation of vast amounts of set resources in the formation of the planet; (iron ore; coal; oil and so on)

  • The second is the continued supply of energy from the sun providing for a continual growth in renewable resources (plants; animals; electricity; etc)

in 2015 the planet converted that year, energy into $73 trillion US dollars into currency. ($9,851 for each human alive on the planet)

NOTE2: Given that a great many recieved $0 (babies and children) and hundred of millions only got $365 a number of humans got more than thier share -

NOTE3: I need A Scientis to calculate how many DecaJoules of energy that is ?

Untill the 21st Century currency value was underpinned by an attached guarantee from the creator (No, not God!) of the issued medium.

Today it is underpinned by faith. Yes the same phenonma as that practiced by religious people in the existance of thier god/s.

But when was the first economy created? 

Well for that we need to travel back in human evolution to the period not long after the discovery by humans of the usefulness of fire.

In fact it may intuitively be argued that the adoption of the practice of using fire by humans was the catalyst for the development of economy forces.

Humans, as a species, lived then, as many species still do now, by drawing their immediate energy needs, as required, directly from their immediate environment.

Although some species on the planet have evolved to develop the capacity to gather and store, external to thier cell structure, energy for future use, no evidence exist, that I know off, that humans had developed that characteristic before they created fire.

Let's look at a scenario of how it might have happened

Let me introduce you to Mynah of the Swahieni clan.

Mynah was living somewhere in the continent we now know of as the Middle East. He had just completed a successful hunting trip, as he had done, thousands of times before. In the process of preparing meat protein, he had acquired for consumption, construct a small fire, and as usual, had formed a circle using rock in which he placed firewood.

The rocks were useful not only to support the prey above fire so that not too much heat would charred the flesh but also as insulation to hold fire energy in and direct the heat upwards instead of outwards.

Cooking meat not only makes the meat more edible but enhances it keeping capabilities. When the meat is fully cooked and dried it can remain safely edible for several days.

On this occasion Mynah had chosen large black rocks he found on the floor of nearby cave. What made them unusual was not just that they were black but they were uncharacteristically light compared to the rocks that Mynah normal users.

As was Mynah's usual practice, when cooking was complete he would then add additional wood to the fire to provide heat throughout most of the night thus taking the edge of the cool night-time temperatures.

The really unusual thing that happened this time was that the rocks around the fire are beginning to burn.  Mynah also notices that the rocks continue burning for several hours to liberate copious amounts of heat.

Mynah repeats the experiment a number of times and soon found that the black rocks have this magic capability of significantly enhancing the heating effect of a wood fire.

Mynah also noticed that the cave in which he found the magic black rocks has seams of this material along the walls and some of the roof which was easily remove by using his stone axe.

Mynah shares his findings with another member of his clan Kusteamer.

Mynah put on a demonstration (In Swahieni called 'mahkatheng') for Kusteamer who was suitably impressed.

Mynah agrees to provide Kusteamer with an armful of the black rocks in exchange for 10 wild chickens and thus in March 57,843 year BD

the conversion of resources to money;

the first economy; and

human induced climate change.

was born.

Mynah now has a store of protein for his family for at least two weeks but this meant keeping the animals alive until it was time for consumption. So to achieve this Mynah simply needed a chook pen.

Mynah neighbour, Banca had been catching wild chickens for years and had developed a 'vault', which is the Swahieni word for 'chook pen', made from branches of the Suhquar Tree in which he kept his chickens safe until it was time for his family to consume them. So he asked Banca to build him a big strong vault as Mynah anticipated a lot of chicken would soon be arriving.

Now Banca had an eye for a deal and he could see that Mynah had many more chickens than he could eat right now so Banca offered to look after Mynah chickens for him.  Mynah  could take the chickens from the vault as required as long as he told banker the day before a chicken was required.

Mynah  agreed and Banca expanded his vault to accommodated more than just the 10 plump wild chickens.

One of Banca friends Leenda had been recently unproductive with his daily hunts and Leenda family were now starving. Leenda, seeing the 10 big plump chickens in Banca vault asked if he could have one of Banca chickens to eat and Leenda would replace the chicken when hunting improved.

Now as I said Banca had an eye for a sweet deal and so agreed to give Leenda a chicken to eat provided that the next day Leenda went hunting and returned a wild chicken together with two eggs from the Innerast bird - and so, born that day, 'interest', 'chicken soup' and the path to derivatives and quantitative easing.

But I have jumped ahead.

As human's capacity to store resources, external to their organism, evolved, individuals were able to accumulate resources surplus to their immediate and even long-term needs.

This provided these individuals with the opportunity to 'invest' in the activities of other human.

Records indicate that this ‘loans’ system, was in existence at least 7000 year ago from which evolved the concept of' interest'.

Whether this concept of interest evolved as a consequence of the application of the greed gene, or as the prudential response to accommodate for the misfortune of unpaid or overly long loans, I guess we shall never know.

The next mutation of the ‘loan’ system I suspect evolved into the more aggressive and speculative form in which an organism with surplus resources would not just loan resources to another entity, but instead would 'invest' in their enterprize.

This arrangement would create potential for far greater returns than merely the 'interest' while the risk of loss in the loan/investment activity remained relatively the same for either option.

Again, records indicate this investment option had been developed by at least 1,200 years ago and today the ‘share market’ is it's modern descendent.

 

 

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