Easy Economics E-Book

Leonard Wolfe

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 151

Veröffentlichungsjahr: 2011

Beschreibung

Let's face it, economics can be boring...but we all need a decent understanding of the basics if we want to survive in these difficult and uncertain times. Let's make it more interesting. Easy Economics isn't packed with reams of text or stacks of numbers, this book is visual and engaging. The book aims to bring you up to speed, in a way that entertains while it informs, through a collection of many of the most frequently asked questions--plus some you probably haven't thought of--on the subject of economics. The topics range from: * The difference between Debt and Deficit * Causes and cures of recessions * The Financial Crisis of 2007-2009 explained * Is globalization good or bad? * How fiscal and monetary policies differ * Bubbles and Busts Unlike so many other books on the subject, it explains through a Q & A format with entertaining and informative illustration, providing material that many people ordinarily find uninviting and even intimidating in an easy-to-digest, appealing way.

Leseprobe

Contents

What this Book is About

Acknowledgments

Chapter 1: Money

Introduction

What happened before there was money?

When did barter become popular?

Isn’t barter an awkward way to trade?

How did traders get around that complication?

When did coins appear?

Who decides what money is?

When did paper money begin?

What did early Americans use for money?

How did we get to the dollar bill?

If it isn’t backed by gold, what makes the dollar mighty?

When did checking accounts start?

Why did electronic money catch on?

Will paper money disappear?

Whatever happened to barter?

Chapter 2: Booms & Busts

Introduction

What do the experts mean when they say the economy is doing well or is doing poorly?

What makes up the GDP?

What makes the GDP grow?

When is the economy booming?

Why is overheating bad?

What’s productivity?

How does an overheated economy cool down?

Is that what causes a recession?

What is deflation?

How do you end a recession?

How long can a bust last?

Chapter 3: Taxing & Spending

Introduction

What is fiscal policy?

Who controls tax policy?

Where do taxes come from?

How come the rich get away without paying taxes?

What’s a flat tax?

What’s a consumption tax?

Who decides how to spend the money?

How can government spending increase GDP and employment?

Does it work?

Can government cut taxes to speed up the economy?

Can government increase taxes to slow down the economy?

What’s the bottom line? Are government spending and taxing good ways to fix a troubled economy?

Chapter 4: Getting into Debt

Introduction

What’s the difference between deficit and debt?

How can the U.S. spend more money than it takes in?

Should the government ever borrow?

When is borrowing wrong?

How much debt is too much?

How long can the U.S. get away with this?

Do we need a balanced budget amendment to the Constitution?

So how do we get out of this mess?

What are entitlements?

So will Social Security be eliminated?

Chapter 5: The Fed

Introduction

If the Federal Reserve can’t prevent bank failures, who needs it?

So what does the Fed do?

What’s monetary policy?

Why not just make as much money available as people want?

How does the Fed set monetary policy?

How does the Fed increase and decrease the amount of money available in the economy?

Where does the Fed get the money to buy bonds?

So the Fed doesn’t print money?

How does the Fed destroy money?

But where does it go?

How does the Fed’s buying bonds on Wall Street increase the amount of money in the pockets of ordinary consumers and businesses?

Does the Fed’s selling government bonds on Wall Street decrease the amount of money in the pockets of ordinary consumers and businesses?

How does the Fed influence interest rates?

What’s the Fed funds rate?

Does the Fed have any control over rates on longer loans, such as car loans and mortgages?

Chapter 6: High-Flying Finance

Introduction

Who were the first financiers?

How did Wall Street and big-time finance get started?

How do big companies finance themselves today?

How do new high-tech companies get financed?

What caused the financial crisis of 2007–2009?

What is leverage?

How do you “short” a stock?

What are hedge funds?

What are private equity funds?

What are derivatives?

Why do derivatives have a bad name?

What’s a speculative bubble?

Chapter 7: Globalization

Introduction

What is globalization?

Can Americans own and operate companies overseas?

What are financial and capital flows?

Is globalization good or bad?

How does trade affect inflation?

What is the balance of trade?

Must a country be in balance with every trading partner?

What happens when a country runs a trade deficit?

What is the balance of payments?

Is it bad for a country when its currency is cheap?

Do countries manipulate their currencies to keep them cheap?

What does the World Trade Organization do?

What’s the World Bank?

What’s the International Monetary Fund?

What is the G-20?

What is the World Economic Forum?

Ripples and Waves

Key Words and Phrases

Index

Copyright © 2012 by Leonard Wolfe. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN: 978-1-118-11806-1 (pbk); ISBN 978-1-118-21899-0 (ebk); ISBN 978-1-118-21900-3 (ebk); ISBN 978-1-118-21901-0 (ebk)

WHAT THIS BOOK IS ABOUT

Given that you were drawn to this book, chances are you are bright, educated, and intellectually curious. And like most bright, educated people you probably know very little about economics.

Unfortunately, few of us have much of a grip on economics, even when we are well-informed on other matters. But economic literacy is vital to making sense of the world we live in. We have witnessed bewildering turmoil in the economy and the deepest economic decline since the 1930s. We have been introduced to gobbledygook terms like collateralized debt obligations and credit default swaps. We have been confounded by subprime mortgage defaults, too-big-to-fail financial institutions, toxic assets, and economic collapse in countries we never paid much attention to before. A “haircut” is no longer just something you get at the barbershop, but also a loss on a bad loan.

This book aims to bring you up to speed, in a way that entertains while it informs. Don’t let the cartoons fool you into thinking this book is frivolous. The information is solid. We’ve collected many of the most frequently asked questions—plus some you haven’t thought of—on the subject of economics. Our topics range from the beginnings of money, to what makes economies grow, to whether Social Security will survive, to the benefits and costs of globalization. No question, in our view, is too dumb to ask and no answer should be too hard to understand. We’ve tried to provide answers that are as untechnical and jargon-free as possible without shortchanging you or insulting your intelligence.

Reading this book won’t make you a candidate for a Nobel Prize, but it will make you more comfortable with many of the ideas that underlie today’s important economic issues.

Lee Smith served as a senior writer and member of the Board of Editors of Fortune for 20 years and was its Bureau Chief both in Washington and in Tokyo, where his articles won citations for excellence from the Overseas Press Club of America. Prior to Fortune, he was a state capital correspondent for the Associated Press and a staff writer for Newsweek. Other publications for which he has written include Time and U.S. News & World Report.

Roy Doty is an internationally renowned illustrator whose work has appeared in the New York Times, Fortune, Newsweek, BusinessWeek, Sports Illustrated, and Golf Digest. He has written or co-authored 29 books, illustrated more than 160, and produced advertising and promotional work for many corporations in the United States and abroad. He has been named “Illustrator of the Year” six times by the National Cartoonist Society, and at its 2011 annual convention he received the Gold Key award and was inducted into the Cartoon Hall of Fame, becoming only the 13th member to be so honored in 65 years.

Leonard Wolfe spent more than 20 years at Time Inc. as an art director. He designed many of Time-Life Books’ most successful series, was Associate Art Director of Fortune, founding art director of Time Inc.’s science magazine Discover, and Promotion Art Director of Time magazine. Following his career at Time Inc., he founded a corporate communications company that produced annual reports and corporate literature for Perrier, GE, Time Warner, ExxonMobil, Reader’s Digest, BusinessWeek, and the Wall Street Journal, among many others.

Richard Warner has led a distinguished career as an art director and educator. He was Art Director of Sports Illustrated following his early years as a professor of design at Southern Methodist University. Most recently, he has been involved in corporate design, producing editorial and promotion materials for GE, ExxonMobil, Time Inc., GM, and BestFoods.

Stephen Buckles has enjoyed a distinguished career as a university professor, author, and leader of many respected professional organizations. A specialist in economics education, he has received numerous awards for his contributions to that field. He has been a board member of the Journal of Economics Education, economics editor of the Business Journal, President of the National Council on Economic Education, and Chair of the Individual Investors Advisory Committee of the New York Stock Exchange. He currently teaches economics at Vanderbilt University.

Barry Meinerth served as a Senior Vice President at Time Inc., responsible for printing and fulfillment of the company’s books and magazines throughout the world. Prior to that, he was Business Manager of both Time International and Discover magazines, Circulation Director of Time International, and Production Director of Fortune.

ACKNOWLEDGMENTS

Creating this book has been both a pleasure and an education in itself. And like any other worthwhile project, it has required the skill, talent, and experience of a number of dedicated individuals who saw the book's promise from the very beginning and were willing to devote many hours to making it the informative, inviting, and entertaining book it has become.

It began with a core staff of former colleagues from Time Inc. and soon grew to include other accomplished members with equally impressive backgrounds. Together they brought a combined wealth of experience, knowledge, and talent to create a unique view of a subject that for many has often seemed a formidable and intimidating one.

Credit belongs to a long list of people, but foremost among them are Roy Doty, Lee Smith, Stephen Buckles, and Richard Warner.

Roy has always managed to take complicated issues and ideas, condense their messages, and present them in a charming and delightful way, and he has done so here with cartoons that both inform and entertain.

Lee's ability to write clearly, concisely, and with an easygoing style makes even the most arcane subject matter come alive in the most interesting way imaginable. Steve's impressive background in economics education has proven invaluable, and the wealth of knowledge that he has brought to the book makes it one whose substance and content one can count on with confidence.

Richard's elegant format design sets the stage for the beautiful visual presentation that is apparent with each turn of the page.

Thanks, too, to Barry Meinerth, whose business acumen has been invaluable. To Marisa Gentile Raffio, whose unruffled professional manner under sometimes trying conditions made the production of the book far easier than it might have been and who has been a pleasure to work with. And to Ruth Wolfe, whose talent and experience in copyediting and proofreading played an important part in assuring the book's conciseness and clarity.

Special thanks, too, to Caroline Gallagher Donnelly, who was involved in the book’s early planning and development. And additional thanks to former colleagues at Fortune, William Rukeyser and Al Ehrbar, as well as to Michele Kalishman, Socrates Nicholas, Greg Rogers, Steve Rogers, and others too many to mention here.

To all of you, thanks for an exceptional job well done.

Leonard Wolfe

Chapter 1

Money

It’s fairy dust, but because we believe in it, it works

INTRODUCTION

Money sometimes seems to be what economics is all about. It’s what we work to get and what we pay out to survive. It’s what makes the world go around, pretty much the way Joel Grey sings it in his cynical, yet joyful number in the musical Cabaret. But look at it again. You can’t eat it, drive it, or wear it. Stripped of its mystique, money is just a convenient way of exchanging goods and services, big or small, banal or exotic. Today’s paper money and electronic money exist only because we believe in them. To make another theatrical allusion, money is like Peter Pan’s Tinker Bell, who is kept alive only because the audience believes in her. We believe in money—oh, yes we do. We believe that crumpled piece of paper with $5 on it can actually be exchanged for something to eat. Even more remarkably, we accept the fact that after a hard week’s work, we are going to be paid with nothing but a bunch of electrons sent to the bank. Money is based on faith, but because all of us, or almost all of us, keep the faith, money works. How did we get this way?

What happened before there was money?

In early societies where people lived by hunting and gathering, they probably shared goods and services without any immediate payback. The hunters who dragged home a water buffalo didn’t demand a load of firewood right away. They knew the family or tribe would keep them warm. But barter certainly came into practice early on, especially as villages got larger and people had to deal with those who weren’t family. Through most of history, barter has been a simple and obvious way of trading goods, even with strangers, almost as natural as language. Five-year-old children without instructions from their parents know how to trade a toy truck for a toy train. As they get older, children can make sophisticated judgments about markets. “I know from what I’ve seen that around here, one Derek Jeter baseball card is worth two Albert Pujols,” one eight-year-old can confidently tell another.

When did barter become popular?

The history of bartering as a widespread practice goes back to 6000 b.c. in the Middle East, among the tribes in what was then Mesopotamia. The practice spread to the Phoenicians, who lived along the Mediterranean coast in what is today Lebanon and Syria. Beginning about 1200 b.c., the Phoenicians became the Mediterranean’s great traders, carrying wine, cedar logs, perfumes, dyes, and spices among ports from Egypt to the Iberian peninsula. Barter worked just about anywhere, in local trade as well as international. European swineherds could successfully trade pigs for wheat; cattlemen could swap for horses. Salt was so valuable in the Roman Empire that soldiers would accept it as barter for their military service.

Isn’t barter an awkward way to trade?

It certainly has its limitations. Perhaps you had a horse that you were eager to trade for a cow. But the owner of the cow didn’t want a horse; he wanted wheat. So you had to hunt down a wheat farmer who needed a horse. You traded with him and took the wheat to the cow owner, who was then satisfied. That was time consuming. Also, you might be able to trade off one horse that way, but suppose that you had a team of horses that you wanted to get rid of and there were no immediate buyers.

How did traders get around that complication?

One way was to use storehouses. If a farmer had more livestock and grain on hand than he could pass along immediately, he could give it to the keeper of a storehouse. The keeper would hand him receipts, and he could later present the receipts and get his livestock and grain back. Or, he could give those receipts to someone else in exchange for, say, a house or a team of horses or whatever. And that was one of the beginnings of money. A piece of paper, in this case a warehouse receipt, could be used in exchange for something of real value, a house. That was one of the origins of money.

When did coins appear?