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Why Everyone Should Study Economics

April 5, 2010

The more I study, the more I am convinced that the one of the most important things for people to understand is money and economics.  I say this because it’s not only the cause of prosperity, but also that of wars and conflict.  Today I’ve been studying history and came across this (talking about World War II):

“Economics conditions were a third important cause of the outbreak of the war.  The huge reparations imposed upon the Germans, and the French occupation of much of Germany’s industrial heartland, helped, as we have seen, to retard Germany’s economic recovery and bring on the debilitating inflation of the 1920s.  The depression of the 1930s contributed to the coming of the war in several ways.  It intensified economic nationalism.  Baffled by problems of unemployment and business stagnation, governments resorted to high tariffs in an attempt to preserve the home market for their own producers.  The depression was also responsible for a marked increase in armaments production, which was seen as a means of reducing unemployment.  Despite the misgivings of some within the governments of Britain and France, Germany was allowed to rearm.  Armaments expansion, on a large scale, was first undertaken by Germany about 1935, with the result that unemployment was substantially reduced and business boomed.  Other nations followed the German example, not simply as a way of boosting their economies, but in response to Nazi military power.  The depression helped as well to produce a new wave of militant expansionism directed toward the conquest of neighboring territories as a means of solving economic problems.  Japan took the lead in 1931 with the invasion of Manchuria.  The decline of Japanese exports of raw silk and cotton cloth meant that the nation as a consequence was unable to pay for needed imports of coal, iron, and other minerals.  Japanese militarists were thus furnished with a convenient pretext for seizing Manchuria, where supplies of these commodities could then be purchased for Japanese currency.  Mussolini, in part to distract the Italians from the domestic problems brought on by economic depression, invaded and annexed Ethiopia in 1936.  Finally, the depression was primarily responsible for the triumph of Nazism, whose expansionist policies contributed directly to the outbreak of the war.”

Just look at that.  It’s glaring.  Economics is the key to understanding so much about life.  It’s not just about investing and earning money.  It literally runs the major events of history!

First off you see that if some system is imposed on people which is completely unfair, leaving people oppressed, you always get wars.   The indemnities imposed on Germany brought us Hitler and the Nazis.   When the good ol’ boys started carving up the nations after World War I, splitting up the “spoils”, that too got half the world pissed off.

Then we have international trade.  Nations start to trade with one another but then one of them starts to win, and domestic businesses start to go under, losing to their international competitors.  This then leads to unemployment and lost jobs, and when people lose their jobs and have no money to buy groceries and pay their bills, they get angry.  Tariff walls are thrown up, hoping to protect domestic businesses from foreigners to keep jobs alive.  But this causes big international corporations to lose substantial profits, and they start complaining to their leaders, “What are you going to do about it?”   International tensions build.

Then there’s the business trade cycle.  To this day, much of the business cycle remains a mystery.  But as we all know, it has its cycles, sometimes giving prosperity, and then other times dipping down leading to unemployment.   Then the Keynesian economists start telling governments to spend on war munitions in order to boost the economy.  Nations throughout the past century have followed this sort of advice and what do we get?  Let’s look at Nazi Germany.  Watch as the production of military armaments leads to a spiral of destruction.

The Germans were blamed for all the problems of World War I, and had to pay for all the damages sending their economy into a tailspin.  Huge taxes were imposed on the people and that money was shipped off to the victors of the first World War, to pay for damages.

So their people are broke and don’t know how they’re going to make it.  The high taxes run off businessmen who find it more profitable to do business elsewhere.  This leads to increasing unemployment and the government doesn’t know what to do.  Prior to the first World War they were the pride of the world.  They were on top of their game, leaders in science, politics, and philosophy.  Now those same people  find themselves incapable of even buying groceries to get them through the week.

Naturally everyone’s angry.  The people know they’re better than where they’re finding themselves, and they’d had enough.  The people press their leaders to do something.  But what could possibly be done in such a situation?  They’re already broke because of the high war indemnities imposed on them.  This leaves only one option.  They begin printing money and giving it out to people in the form of unemployment insurance.   It’s very unfortunate, but you can’t do things like this without serious economically destructive ramifications.  Next thing you know they’re rolling wheel-barrels of currency to buy a loaf of bread.  And the more money they print, the less incentive businessmen have to stay because their profits and savings are being destroyed, so unemployment only gets worse.

This unfair and unjust weight on Germany led the people to accept a radical leader like Hitler, who promised change.   Then they start producing tons of military armaments to get their economy out of their recession, and this scares all the other nations so they too start cranking out weapons.   And then the tension builds, everyone watching everyone else.  Everyone’s nervous.

With a stockpile of tanks, missiles, and other weapons, the greed sets in.  This happens by necessity.  Politicians tend to be greedy opportunists.  After all, why would someone like Mayor Bloomberg spend millions of dollars of his own personal money on his political campaign just to be a city mayor, if there wasn’t all sorts of inside deals being made making it worth his while?

Big business starts talking to these greedy opportunist politicians and the weapons are put to terrible use.  Countries start invading their neighbors to take their stuff.  Off goes Mussolini to take Ethiopia,  Japan takes Manchuria, and on and on.  The people go along with Mussolini because they too were in a depression.  Japan’s reasons were also economic.  They needed supplies.

Kaboom!  The whole world’s at war!  Everyone trying to protect their interests and take someone else’s stuff.

This isn’t a game.  I can’t stand that economic theory, saying you can boost your economy by government spending on military munitions.  Yeah, when a recession kicks in just go and start stockpiling tanks and building bombs.  See where it takes us!  Convert all your factories over and start making missiles and machine guns.  Even if it does help alleviate unemployment (and I don’t think it really does), look at what it leads to!   We can’t live like this.  We can’t.

Several months ago I was talking to a friend of mine from Scotland, and I was saying that we need a one world government.  He told me he wouldn’t want such a thing, unless it was his government running the show.   He’s like most people.  Nationalists.  Everyone’s attached to whatever nation they live in, unable to grasp these problems.

These cycles will continue to exist and will never be eradicated without a one world government.  International competitors will beat out domestic companies, leading to lost jobs and unemployment.  Nations will continue to have their individual armies, pointing their guns at one another.  Complex trade wars with tariffs and currency manipulation will continue to go on.

I could talk all day about how important economics is.

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