Economic Wisdom to Apply in Your Twenties

Chapter 13

Chapter 2 In your twenties, you have the wisdom to see the macro economy from the small things around you

An economist made an analogy like this: For example, when watching a movie in a movie theater, when one or two people stand up, it is equivalent to microeconomics, and the audience present has the final say; The macro-economy has changed. At this time, no one can control the situation of the audience. He can only find a way to adapt to this situation.At this time, only the big hand stretched out by the state can play a role.

Section 1 Personal wallets are inseparable from the country's "economy"

You may have heard such an economic fable:

In Utopia, there is chaos.The economy of the entire society was completely paralyzed, factories closed down, workers lost their jobs, many people became homeless, and the government was helpless.

At this moment, an economist made a proposal to the government: Hire 200 people to dig a very large earth pit.

In order to complete the project, these 200 people had to buy 200 shovels, so the factories that produced shovel handles, steel and shovels started, and the original workers of these factories were reemployed.Workers started to go to work, got wages, had money to eat and wear clothes, so clothing factories, food factories, and transportation departments also started operating.Two months later, the big hole was finally dug.Then the government hired another group of 200 people to fill the big pit again. At this time, another 200 shovels were needed... The depressed market slowly recovered. Gradually, the economy recovered, and the government paid for the pit digging through taxes. The bonds issued at that time, everything returned to normal, and people lived a happy life again...

This fable is actually an economic fable fabricated by the famous economist Keynes. In order to explain a profound truth: when the country's economy is in crisis, the country should shoulder its own responsibilities and should use macro-control to intervene in economic life. put the economy on the right track.

"Father of Economics" Adam Smith believes that in the development of modern market economy, there is an "invisible hand" that is spontaneously controlling the operation of market laws.And when this "invisible hand" failed, Keynes proposed that the government should act as the "visible hand" to carry out macro-control of the economy.

Macro-control is the state's regulation and control of the national economy, a necessary condition to ensure the coordinated development of social reproduction, and an important function of economic management in socialist countries.In my country, the main task of macro-control is to maintain the balance of the total economic output, curb inflation, promote the optimization of major economic structures, and achieve stable economic growth.

Then, how does the state regulate the economy of the whole society?

Fiscal policy is one of the means of government intervention.The task of traditional fiscal policy is to raise funds for various government expenditures, and achieving a balance of payments is the highest goal of fiscal policy. After the emergence of Keynesianism in the 20s, fiscal policy has undergone qualitative changes, and regulating the economy to achieve stability has become the main task of fiscal policy.

Fiscal policies mainly include encouraging consumption, expanding investment, and increasing exports; while another important tool of the government—monetary policy has more means, such as changes in exchange rates, changes in interest rates, and changes in currency issuance. , Issuing national debt, etc., will play a macro-control role in a country's economic trend.

Young people in their twenties may still feel that the country's macroeconomics are blunt and difficult to understand. They are not government decision-makers, and complex economic terms such as "fiscal policy" and "monetary policy" may not have much to do with them.

Is that so?
Such a view may have been recognized before the 20s, but since Keynes put forward the "visible hand", our perspective of analyzing and predicting economic problems has been completely subverted.In the past, we paid more attention to microeconomic issues, that is, the impact of individuals, families, and enterprises on the social economy, but now we pay more attention to macroeconomic issues.

You may have traded in stocks or at least paid attention to the stock market, then you must understand that in the stock market, we can't just stare at the stocks in our hands, but pay attention to the performance analysis of each stock, learn to read the announcements issued by companies and various information.At the same time, we should also learn to observe the general trend of the national economy and observe the impact of interest rates, exchange rates and currency issuance on the stock market.We will gradually know that when the macro-trend of the national economy is going down, no matter how good the performance of each stock is, it is impossible to have big good news, because each stock cannot escape the control of the general trend.As the saying goes, no matter how powerful Sun Wukong is, he will not be able to jump out of the palm of the Tathagata Buddha. The economic life of each of us must also be inseparable from the overall economic trend of the country.

An economist said: "For example, when watching a movie in a movie theater, when one or two people stand up, this is equivalent to microeconomics, and the audience present has the final say; It is the macro economy. At this time, no one can control the situation of the whole audience. He can only find a way to adapt to this situation. At this time, only the big hand of the country can play a role."

Wisdom Pieces: Three Indicators to Help You Understand Daily Economic Phenomena

1. CPI: Consumer Price Index (Consumer Price Index), which is an indicator of price changes that reflects the prices of products and services related to residents’ lives, and is usually used as an important indicator for observing inflation levels.

2.PPI: Producer Price Indexes is an index to measure the trend and degree of ex-factory price changes of industrial enterprises. It is an important economic indicator reflecting the price changes in the production field in a certain period. An important basis for national economic accounting.

3.GDP: Gross Domestic Product (Gross Domestic Product), refers to the total value added of various sectors of the national economy of a country or region within a certain period of time.This indicator is the most concerned economic statistics in macroeconomics, because it is considered to be the most important indicator to measure the development of the national economy.

(End of this chapter)