Things you always wanted to know the answer to [Vol. 3]
Discussion
Dr Jekyll said:
StevieBee said:
So, where will the 'additional' income / money come from that enables an isolated country to experience economic growth?
If by income/money you mean wealth, from people providing goods and services and exchanging them. Just as on an isolated planet.If you mean cash, then print it. There is the economic activity to back it up.
If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
If one persons sells bread to five of them for £1 a loaf, then five people now have £9 each and the bread seller has £15...but the GDP is exactly the same; £100.
However....
If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
This means he can reduce the price of bread in his 'own' room. This enables someone else to save enough to go to another room to by some butter at 50p a block. He brings back ten blocks and sells to those in his room for a £1 a block, thus adding £5 to the GDP.
The 'planet' is not isolated economically. The economy constantly ebbs and flows around the world and is driven by the tangible things such as commodity, gold, oil and the intangible such as 'confidence and politics'. The amount of money available changes as more commodities create more thing that are then sold.
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
StevieBee said:
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
You are too focussed on the face value of some meaningless scraps of cloth.If you have a room with 10 people in it with each person having £10, and they all eat their note, what has really changed?
MissChief said:
Dr Jekyll said:
Why do people refer to WW2 lasting 5 years when (for the UK) it lasted 6? Do they ignore the bits before Dunkirk and after VE day?
https://en.wikipedia.org/wiki/Phoney_War shows that there were no major allied or German land actions until May 1940, despite technically being at war since September 1939.grumbledoak said:
StevieBee said:
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
You are too focussed on the face value of some meaningless scraps of cloth.If you have a room with 10 people in it with each person having £10, and they all eat their note, what has really changed?
StevieBee said:
Actually - that's a more concise way of conveying what I was getting at. Nothing changes! Hence, no economic growth, with our without the money.
Half right. The money doesn't matter. Let's try your example:
"If one persons sells bread to five of them for £1 a loaf, ... "
Why on Earth would he do that? If he waited two days he could charge £90 a loaf and watch the other nine kill each other to get the money! But even then, why would he sell?
Because the only thing of value in your room economy is the bread. And that's priceless.
The other nine need to come up with something to trade before they starve. Then you would have an economy.
It wouldn't be worth £100 - as we've established, your £100 is worthless. But it wouldn't need to be stagnant either - people could work out other things to trade for bread. Maybe they could conjure jam from the same place the baker got his flour! And then you would have a growing economy.
StevieBee said:
grumbledoak said:
StevieBee said:
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
You are too focussed on the face value of some meaningless scraps of cloth.If you have a room with 10 people in it with each person having £10, and they all eat their note, what has really changed?
Money just reflects the activity - it is not created by it. As activity goes up, so more money will be printed to service it.
There are trillions and trillions of dollars out there. Do you think the economic system started with those trillions of dollars, thousands of years ago?
We actually just made them up. Quite recently.
talksthetorque said:
Question 1 has to be can you feed your self as a nation I would have thought.
Which is an interesting question. There was a DEFRA discussion paper published back in 2008 which concluded amongst other things that in terms of pure calorific requirements that yes, the UK could in theory be self sufficient. You'd be eating a lot of wheat and potatoes though and not many bananas or oranges.Sufficient, yes. Interesting and balanced not so much.
There are other issues too. We import a lot of fertilisers, machinery and energy which the food supply chain needs, so we'd have to get that all sorted out. Not a job I would fancy much.
Smeeeeeg said:
Which is an interesting question. There was a DEFRA discussion paper published back in 2008 which concluded amongst other things that in terms of pure calorific requirements that yes, the UK could in theory be self sufficient. You'd be eating a lot of wheat and potatoes though and not many bananas or oranges.
Sufficient, yes. Interesting and balanced not so much.
There are other issues too. We import a lot of fertilisers, machinery and energy which the food supply chain needs, so we'd have to get that all sorted out. Not a job I would fancy much.
Funnily enough I was having this exact discussion with a varying group of farmers at the weekend. The consensus seemed to be roughly along the lines as you suggest.Sufficient, yes. Interesting and balanced not so much.
There are other issues too. We import a lot of fertilisers, machinery and energy which the food supply chain needs, so we'd have to get that all sorted out. Not a job I would fancy much.
Something I hadn't thought about came up in the conversation; that of increasing livestock herds / flocks whatever, to meet our now 'closed' island demand - something we'd absolutely need to do to replace the serious quantities that is / are currently being imported.
But here's the interesting point; everything we currently rear is spoken for within our existing food chain requirements, and in order to increase our net position we would be forced to limit supply to the food chain to allow an increase in breeding stock.
8 – 10 years seemed to be the thinking, with a lot of shortages in the early years.
Mind, we’d had a few by then.
tumble dryer said:
Smeeeeeg said:
Which is an interesting question. There was a DEFRA discussion paper published back in 2008 which concluded amongst other things that in terms of pure calorific requirements that yes, the UK could in theory be self sufficient. You'd be eating a lot of wheat and potatoes though and not many bananas or oranges.
Sufficient, yes. Interesting and balanced not so much.
There are other issues too. We import a lot of fertilisers, machinery and energy which the food supply chain needs, so we'd have to get that all sorted out. Not a job I would fancy much.
Funnily enough I was having this exact discussion with a varying group of farmers at the weekend. The consensus seemed to be roughly along the lines as you suggest.Sufficient, yes. Interesting and balanced not so much.
There are other issues too. We import a lot of fertilisers, machinery and energy which the food supply chain needs, so we'd have to get that all sorted out. Not a job I would fancy much.
Something I hadn't thought about came up in the conversation; that of increasing livestock herds / flocks whatever, to meet our now 'closed' island demand - something we'd absolutely need to do to replace the serious quantities that is / are currently being imported.
But here's the interesting point; everything we currently rear is spoken for within our existing food chain requirements, and in order to increase our net position we would be forced to limit supply to the food chain to allow an increase in breeding stock.
8 – 10 years seemed to be the thinking, with a lot of shortages in the early years.
Mind, we’d had a few by then.
and you'd have the occasional famine when there was a bad crop, like people used to, and some countries still do
StevieBee said:
The question I responded to originally was "could we successfully internally trade our way to greater wealth?"...in other words, could an isolated country grow economically.
If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
No, the GDP is zero, there is no economic activity.If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
SteveiBee said:
If one persons sells bread to five of them for £1 a loaf, then five people now have £9 each and the bread seller has £15...but the GDP is exactly the same; £100.
No, the GDP for the period is £5. It has grown.Stevibee said:
However....
If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
No, if the 'exports' were £10 then the GDP is now £15 including the original £5. Just as if more bread had been sold to someone in the same room.If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
Dr Jekyll said:
StevieBee said:
The question I responded to originally was "could we successfully internally trade our way to greater wealth?"...in other words, could an isolated country grow economically.
If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
No, the GDP is zero, there is no economic activity.If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
Dr Jekyll said:
SteveiBee said:
If one persons sells bread to five of them for £1 a loaf, then five people now have £9 each and the bread seller has £15...but the GDP is exactly the same; £100.
Dr Jekyll said:
No, the GDP for the period is £5. It has grown.
Dr Jekyll said:
Stevibee said:
However....
If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
No, if the 'exports' were £10 then the GDP is now £15 including the original £5. Just as if more bread had been sold to someone in the same room.If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
The bottom line is that unless a country trades internationally, then total wealth will not grow.
What can happen is that more of the money that is 'held' starts to get spent on stuff so more cash flows into to the economy and people get richer. But the consequence of this is that the law of supply and demand shows that prices will rise and over time, will nullify the value and benefit of the additional cash flowing into the economy and the cash stops flowing. The Government could print more money but unless this additional money is pegged to something, has the effect of devaluing the total amount available.
Of course, the flip side is that if a country becomes isolated but is able to happily sustain itself, then money becomes less important and the comparisons between different currencies and benchmarking its economy against other similar nations becomes a pointless exercise.
StevieBee,
Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
Edited by SpeckledJim on Wednesday 15th March 12:13
StevieBee said:
The question I responded to originally was "could we successfully internally trade our way to greater wealth?"...in other words, could an isolated country grow economically.
If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
If one persons sells bread to five of them for £1 a loaf, then five people now have £9 each and the bread seller has £15...but the GDP is exactly the same; £100.
However....
If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
This means he can reduce the price of bread in his 'own' room. This enables someone else to save enough to go to another room to by some butter at 50p a block. He brings back ten blocks and sells to those in his room for a £1 a block, thus adding £5 to the GDP.
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
You're confusing currency with wealth. The money in your pocket is something you were given in exchange for your labour. If were a Rolex, a ticket to a football game, a horse or a favour from a room full of hookers you were given it would still represent value.If you have a room with 10 people in it with each person having £10, then the economic value (or GDP if you like) of that room is £100.
If one persons sells bread to five of them for £1 a loaf, then five people now have £9 each and the bread seller has £15...but the GDP is exactly the same; £100.
However....
If the bread seller makes a double batch and takes the extra loaves to another room and sells those to the people in that room for £1 a loaf, he then comes back with £10 and thus increases the GDP of his room to £110. He does this for another 9 days and the GDP of his room is then £200
This means he can reduce the price of bread in his 'own' room. This enables someone else to save enough to go to another room to by some butter at 50p a block. He brings back ten blocks and sells to those in his room for a £1 a block, thus adding £5 to the GDP.
If the UK was completely isolated, we would get on kind of OK but we would never grow economically.
So if you want a burger, you can buy some mince, put it in your pan and spend your time making it and save money by using your own labour. You have a burger but its value is that of the material and your labour. You have not created value through trade.
Or you can offer a chef something of value in exchange (money/a football ticket) and he can make it better. Or you can go to a fast food place who can make it faster and cheaper than you- if you value the quality/speed you will give them something representing it's value to you which will be more than the value (to them) of their labour. Thus the transaction has created wealth.
Multiply that by a trillion and you have an economy, but in a country we have labour that we sell to other countries and populations which need to be kept in gainful employment creating value. The Soviets making yet another nuclear missile or tank they didn't need represented a waste of labour- a destruction of wealth. But so is making CityRovers.
In principle I can't think of why the Soviets or North Koreans had to be poor, if they trade amongst themselves they can create wealth. So I wonder if it's a population thing instead.
Edited by glazbagun on Wednesday 15th March 13:13
glazbagun said:
In principle I can't think of why the Soviets or North Koreans had to be poor, if they trade amongst themselves they can create wealth. So I wonder if it's a population thing instead.
I think the answer's in the question. Trade makes wealth. Soviet Russia and North Korea stifle and control trade, and in so doing limit the potential for wealth.glazbagun said:
In principle I can't think of why the Soviets or North Koreans had to be poor, if they trade amongst themselves they can create wealth. So I wonder if it's a population thing instead.
It's communism thing. Russia was a fast growing economy in the years leading up to WW1, and compare North and South Korea.P J O'Rourke used to joke that you could tell communism was bad because it even made Germans poor, but I think Korea is an even better example.
SpeckledJim said:
StevieBee,
Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
No it wasn't.Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
Edited by SpeckledJim on Wednesday 15th March 12:13
Money was created as a more convenient way to barter and trade. A small token worth 10 turnips is easier to use than ten turnips. But a small token alone is worth only what it is made of.
Money is a token of value linked to a physical commodity or guarantee. Let's use gold as an example.
If a country discovered a billion dollars worth of gold in the ground, that could be used to support an additional billion dollars of money being printed so the amount of money in the world increases by a billion dollars because there is access to a billion dollar's worth of gold that wasn't accessible before.
The economy is simply the flow of money from one place to another. With more people alive, there is more opportunity to discover more gold and more opportunity to sell them more tools to dig that gold out of the ground increasing their wealth and that of the shop they purchased to tools from, the company that made them, the suppliers of the raw materials and so on.
Earth has got richer because there are more people alive and our capability to extract minerals and convert this into 'money' is greater and more people spending more money creates a larger economy through which that money flows. You could argue that from the moment the world became habitable; it's total, potential financial value has remained the same - it's just that we've not always been able to convert the potential into spendable cash (or had the need to; money is a reasonably modern concept in this respect).
This of course is a highly simplistic description and doesn't take into account the vagaries of politics and banking systems.
In an economically isolated country, the same rules apply. It could discover $1billion dollars of gold and thus boost the amount of money in it's economy by $1billion so people become richer but as I mentioned earlier, prices are largely determined by people's willingness and ability to pay for something. Richer people will be better able and more willing to pay a higher price so the natural ebb and flow of economics is that will prices will rise eventually nullifying the additional wealth. It would be like everyone winning a million quid on lotto.
StevieBee said:
You could argue that from the moment the world became habitable; it's total, potential financial value has remained the same - it's just that we've not always been able to convert the potential into spendable cash (or had the need to; money is a reasonably modern concept in this respect).
But by that definition of wealth there can't be any increase in wealth anywhere ever. International trade or no international trade.If the billion dollars of discovered gold is worth that much because it's useful for something (EG plating electrical contacts), then the entire process of getting it from the bottom of the hole to the end user, mining, transport, sales, all constitutes creating wealth by any sensible definition of wealth. Even if you define wealth to include stuff that's at the bottom of a mine and no use to anyone it doesn't alter the fact that getting hold of it puts people in a better position irrespective of whether you regard them as wealthier.
Of course if it's worth a billion dollars just because it's used as currency, then finding it doesn't create wealth just an inflation problem. As the Spanish found when they raided South America. It's been compared to robbing a bank and stealing paying in slips.
StevieBee said:
SpeckledJim said:
StevieBee,
Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
No it wasn't.Where does money come from?
At some point it is just invented, isn't it. Just created, out of nowhere.
So why can a planet just invent money, but according to you a country cannot?
Earth has got richer and richer and richer, despite no inter-galactic trade. How would you explain that, and how is Earth any different to, say, Iceland, in this context?
Edited by SpeckledJim on Wednesday 15th March 12:13
Money was created as a more convenient way to barter and trade. A small token worth 10 turnips is easier to use than ten turnips. But a small token alone is worth only what it is made of.
Money is a token of value linked to a physical commodity or guarantee. Let's use gold as an example.
If a country discovered a billion dollars worth of gold in the ground, that could be used to support an additional billion dollars of money being printed so the amount of money in the world increases by a billion dollars because there is access to a billion dollar's worth of gold that wasn't accessible before.
The economy is simply the flow of money from one place to another. With more people alive, there is more opportunity to discover more gold and more opportunity to sell them more tools to dig that gold out of the ground increasing their wealth and that of the shop they purchased to tools from, the company that made them, the suppliers of the raw materials and so on.
Earth has got richer because there are more people alive and our capability to extract minerals and convert this into 'money' is greater and more people spending more money creates a larger economy through which that money flows. You could argue that from the moment the world became habitable; it's total, potential financial value has remained the same - it's just that we've not always been able to convert the potential into spendable cash (or had the need to; money is a reasonably modern concept in this respect).
This of course is a highly simplistic description and doesn't take into account the vagaries of politics and banking systems.
In an economically isolated country, the same rules apply. It could discover $1billion dollars of gold and thus boost the amount of money in it's economy by $1billion so people become richer but as I mentioned earlier, prices are largely determined by people's willingness and ability to pay for something. Richer people will be better able and more willing to pay a higher price so the natural ebb and flow of economics is that will prices will rise eventually nullifying the additional wealth. It would be like everyone winning a million quid on lotto.
The idea that there is gold or turnips behind it, and the paperwork is just easier to carry, is out of date.
This is an economically isolated planet. Getting richer and richer. How? Trade.
So if you isolate Iceland, but allow them to work, produce, and trade, then they'll get richer, to the limit of their technological and environmental constraints.
This static idea of your of 4 blokes in a room with a tenner each is a false premise. Instead imagine a butcher, baker, miner and teacher in a village - when they all specialise, and thus overproduce in comparison to their needs, then they all enrich each other.
Finding a load of gold is a red herring, because gold is only worth anything because we've decided it is.
Just like a tenner is only worth anything for as long as we agree that it is.
SpeckledJim said:
Money IS just invented.
The idea that there is gold or turnips behind it, and the paperwork is just easier to carry, is out of date.
This is an economically isolated planet. Getting richer and richer. How? Trade.
So if you isolate Iceland, but allow them to work, produce, and trade, then they'll get richer, to the limit of their technological and environmental constraints.
This static idea of your of 4 blokes in a room with a tenner each is a false premise. Instead imagine a butcher, baker, miner and teacher in a village - when they all specialise, and thus overproduce in comparison to their needs, then they all enrich each other.
Finding a load of gold is a red herring, because gold is only worth anything because we've decided it is.
Just like a tenner is only worth anything for as long as we agree that it is.
I don't disagree. The concept of money is rooted in it being pegged to a defined, tangible commodity but you are right, it's far more abstract today and some economists would argue that this is the root of all economic problems....but others would argue it's not. Take your pick!The idea that there is gold or turnips behind it, and the paperwork is just easier to carry, is out of date.
This is an economically isolated planet. Getting richer and richer. How? Trade.
So if you isolate Iceland, but allow them to work, produce, and trade, then they'll get richer, to the limit of their technological and environmental constraints.
This static idea of your of 4 blokes in a room with a tenner each is a false premise. Instead imagine a butcher, baker, miner and teacher in a village - when they all specialise, and thus overproduce in comparison to their needs, then they all enrich each other.
Finding a load of gold is a red herring, because gold is only worth anything because we've decided it is.
Just like a tenner is only worth anything for as long as we agree that it is.
Your Iceland point underpins my point though in that eventually a limit will be reached where it exhausts all ability to increase the money it makes for itself without trading externally.
StevieBee said:
IYour Iceland point underpins my point though in that eventually a limit will be reached where it exhausts all ability to increase the money it makes for itself without trading externally.
But your original point was that trade within a country could not increase wealth at all.Gassing Station | The Lounge | Top of Page | What's New | My Stuff