Original source: Tianya Forum's "To grasp the general economic trend and the password of personal wealth, you must understand money - the magic of modern money"
Original author: Shintaka
The full version of the original text as PDF (it may be hacked soon , it is recommended to save it first ): https://pan.quark.cn/s/20c917683d8f
Introduction
In the past few years, I have been studying money more. In addition to wanting to make money, I also want to understand money. Fast forward more than 10 years, and now I finally have some learning insights and slowly write them down to share with everyone.
Money comes with history. Thousands of years ago, or even tens of thousands of years ago, wherever humans lived and were active, there was money. For thousands of years, no matter what the form of money is, whether it is shells, feathers, cattle or sheep, or gold, silver, copper, iron, or now beautifully printed banknotes. . . Money is the main thread in planning the ups and downs of personal destiny, and writes the eternal theme of life's joys and sorrows.
During the Western Jin Dynasty in China (AD 266-316), there was a "hermit" Lu Bao who "regarded money as dirt" (it was said that he "lived in seclusion and did not serve as an official, and no one knew where he ended up", but he was actually recorded in the history books and his name went down in history). In the article "On the God of Money", the power and magic of money to influence personal destiny and even life and death are vividly described: "The body of money has the image of the universe. It is square inside and round outside. Its accumulation is like a mountain, and its shape is like a mountain. It flows like a river. There are times of movement and stillness, and there are knots in the movement. The market is easy and there is no risk of failure. It is difficult to break the elephant's life, and it is not short of the elephant's Tao, so it can last for a long time and is a sacred treasure in the world." "If you lose it, you will be poor and weak, but if you gain it, you will be prosperous." , “Where money is, danger can bring peace, and death can bring life.
Where money goes, it can make you cheap, live or kill you."
American writer Ayn Rand elevated the magic of money to the level of social operation.In Atlas Shrugged (1957), the most widely circulated novel after the Bible, she determined that “money is the core axis that constitutes the various operating mechanisms of society. The entire social political, economic, military , culture, art, history and other aspects actually revolve around money."
In Rand's theory that money is the axis of social operation, he emphasized the "social power" of money and believed that mankind's pursuit of money (wealth) throughout history has been the main line that controls the course of history. The driving force behind almost all historical events and historical processes is people's greed and unscrupulous struggle for wealth.
It is precisely because of the enduring history and legend that money has influenced and even dominated personal destiny for thousands of years that we have a vast sea of writings about money. But we also have too many misunderstandings and superficial understanding of money. The biggest misunderstanding is to confuse the money that determines an individual's destiny with the money that affects the operation and process of the economy. As a result, although there are many words, it is just rhetoric. It is precisely these misunderstandings and misleadings, especially the blind ignorance of the dynamics of the basis of money in economic operation and the corresponding role of money in influencing the economic process, that have led to misjudgments of the general economic trend and missed opportunities for the development and accumulation of personal wealth. .
The emergence and development of modern money have ruthlessly overturned the history of economic operation and wealth creation, and reopened a new economic form and path to wealth creation.
It is in this sense that if you understand, or at least don't misunderstand, modern money, you can not only understand why many modern economic theories and laws have been subverted by reality, but it is also essential to understand the real "Economics Common Sense You Must Know". The important thing is to "understand money to make money", to avoid being led astray by those "Macroeconomics" and "Microeconomics" enshrined in the temple of the academy to plan life, arrange daily livelihood, and invest in the future.Of course, if you want to guide the country and grasp the general trend of the social and economic process, understanding modern money is the stepping stone.
Now let me start talking about money.
Chapter 1 – Money is just money
In the vast sea of books and manuscripts on the "Origin of Money", the origin and functions of money have been described in detail, and there is no need to repeat them.
What I just want to emphasize is that for thousands of years before the Industrial Revolution in 1760, money, no matter what form it took, was just money, nothing more than a medium of exchange, nothing more than a label of wealth, and all other monetary functions were negligible.
Some people claim that "the world is a history of money." Since Pangu created the world, money has been able to influence the economic process of society and write historical legends, but it is an exaggeration.
Neil, professor of history and economics at Harvard University. In his widely circulated book "The Ascent of Money", Ferguson once listed many historical legends about money and finance, and also asserted that "behind every major historical phenomenon (in the world), there is a currency and financial relationship hidden behind it". "Financial Secrets"
The Renaissance marked a boom in art and architecture markets due to Italian merchant bankers' adoption of Eastern mathematics, known as Arabic numerals; the rise of the Dutch Republic, which laid the foundation for the first modern stock market based on the declining Habsburg Empire The success of As a result of stupid mistakes in currency and finance, the world's sixth richest country in the 1880s became an inflation-riddled and lifeless country in the 1980s. . .
But if you look closely at the growth rings, his examples are basically after the industrial revolution. Before this, money was just a medium of exchange and a symbol of wealth, and basically had no power to influence the economic process. Money really has nothing to do with the economy of the dynasty, that is, GDP. The extremely ironic historical fact is that the Western Jin Dynasty of the era in which Lu Bao advocated that money is everything was actually the shortest-lived dynasty in Chinese history. In less than 50 years, it became the first dynasty in Chinese history to be wiped out by foreigners.
When discussing the origin of currency, many attribute it to "increasing surplus products" and
"market prosperity", but before the industrial revolution, such judgments were inaccurate.
The emergence of money is, to a great extent, related to the exchange of "exchange of what is needed"
, rather than the pursuit of value realization through society's surplus products, because for
thousands of years before the industrial revolution, the economic form of human society was "survival" economy". The most basic characteristic of the subsistence economy is the “ short supply”
of products that meet human survival needs . From the perspective of the entire society, there are no or very few surplus products. In a survival-oriented society, the goal of most members of the society is to survive and to obtain products that meet their survival needs, mainly food, clothing, and housing. The purpose of subsistence-type social production is mainly to maintain simple reproduction, including the reproduction of labor force. Due to limited surplus products and self-sufficiency in production, the scale of social commodity exchange is insignificant. Market exchanges are mainly carried out by exchanging what is needed and by a few wealthy people to meet family non-survival needs and "luxury needs". A “survival economy” is based on an economy without growth. Before the industrial revolution, manpower was the most basic driving force for production, and agricultural production was the most important sector of the social economy.According to historians' estimates, China's grain yield per mu during the Spring and Autumn and Warring States Period (770 B.C. to 400 B.C.) was 95 kilograms. By 1800, China's grain yield per mu had only reached about 150 kilograms, after 2,570 long years. , the unit output of grain increased by only 58%, and the average annual growth rate was almost zero. During the same period, per capita grain production only increased from 640 kilograms to 780 kilograms, an increase of 21% in 2570.
These data show that in the long years before the industrial revolution, social productivity, with human power as the basic driving force, basically did not grow.
Productivity has stagnated, and historians' estimates of the world's per capita gross national product (GDP) provide strong evidence. According to the famous British economic history professor Angus. Madison, in the more than 1,700 years from the first year of AD to the start of the Industrial Revolution (1700), the world's per capita GDP index only increased from 467 to 615, an increase of only 31%. On average, world GDP per capita barely grew from AD 0 to mid-1700.
The root cause of the stagnant productivity is that the basis of human and animal power for production has not changed for thousands of years. Human working hours and labor capacity are facing insurmountable physiological limits.
At the same time, agriculture is restricted by the natural reproduction process. Under the premise that manpower cannot change nature, natural climate has become a key factor in determining agricultural production. The energy and materials it provides, such as light, heat, water, and air, determine the output of agricultural production.
Simply put, nature's sunshine, rain and dew restrict agricultural production.
Human beings, who rely on human power and iron and wood tools for production, are unable to fight against nature and can only submit.
"Depend on the sky to make a living" is the main theme.
The constraints of physiological limits and the capriciousness of nature and its ability to do as it pleases have destined human beings to have low production capacity and can only produce products beyond the basic needs of human survival.
In China, which was "agriculturally developed" at that time, the per capita grain output was about 700 kilograms. In addition to meeting the needs of survival, there was almost no surplus product.
In a subsistence economy characterized by self-sufficiency without surplus products, food and clothing and other survival-critical physical goods are king. Physical objects are the "real wealth" of society. Without the physical foundation, money, no matter what form it takes, is worthless. Therefore, money can become wealth and can lead to spirituality, all because money can be used to obtain food and clothing to survive. Clearly, in a survival economy, money is just money – a means of exchange, a symbol of wealth, and nothing else. Of course, there is basically no such thing as “finance”.
In the subsistence economy, physical objects are king. Without the physical foundation that maintains survival, any "crooked idea" of a dynasty trying to make money will eventually end up with money being "worthless".
In history, there are countless examples of money being worthless due to the dynasty's willfulness with money.
Going back further, we can go back to the first year of Tiansheng in the Northern Song Dynasty (AD 1023). At that time, the government took over the private "Jiaozi Pu" and began to issue notes called "Guan Jiaozi" under the auspices of the court. Like modern banknotes, "Guanjiaozi" is printed on paper with engraving, three-color overprinting, and also has passwords, patterns, seals and other imprints.
In order to ensure that "official pay" could become money accepted by society, the imperial court "set up a papermaking institute to eliminate the drawbacks of forgery." According to history, "Guanjiaozi" is the earliest banknote issued in the world. It is six to seven hundred years earlier than the issuance of banknotes in Western countries such as the United States (1692) and France (1716).
However, the Northern Song Dynasty relied on the convenience of presiding over and managing the issuance and circulation of "Guanjiaozi". In order to make up for the emptiness of the national treasury caused by successive years of war and to raise expenses for continued war, the court began to issue "Guanjiaozi" out of thin air. In just a few years, In the past ten years, the number of issuances has increased by more than 20 times, and the direct result has been the rapid depreciation of banknotes (Guanjiaozi).
Money was worthless, which contributed to the Northern Song Dynasty falling into an unprecedented political and economic crisis.
As a result, not only the "Guan Jiaozi" disappeared, but the Northern Song Dynasty also fell.
Many economic history studies attribute the disappearance of "Guanjiaozi" to the excessive issuance of banknotes by the imperial court. However, the excessive issuance of banknotes is only the catalyst for the demise of banknotes. The fundamental reason is that in a subsistence economy, only physical objects that sustain survival have "value". Physical objects serve as the basis for banknotes, and money is worthless.
Look closer, it’s Zimbabwe 10 years ago. And I was lucky enough to visit it in person and experience the reality that money is worthless.It was the early summer of 2008. I participated in a working group led by the African Development Bank and went to Zimbabwe to inspect a poverty alleviation project that had been implemented for two years. The project design is actually very simple. It is almost a complete copycat of China's "leading enterprise" model. We find a private enterprise that exports agricultural products, pair it with a few scientific and technical personnel for vegetable cultivation, and then let them go to impoverished areas hundreds of kilometers away. , organize small farmers to grow vegetables. The project provides farmers with free technology, seeds (vegetable seedlings) and fertilizers. When mature, they will be purchased by leading companies, packaged and "sold at a high price" for export to Europe.
The three of us arrived in Harare, the capital, before dinner. We checked into the hotel booked by the project. After a short rest, I went to a restaurant to have dinner. According to the hotel's rules, the buffet is priced in US dollars, and you can pay in US dollars or Zimbabwean dollars. No matter what you pay, the change will be in Zimbabwean dollars. A buffet was US$35, I paid US$100 and got back nearly 80 billion Zimbabwean dollars.
Looking at such big numbers, I can't help but feel a little wealthy.Because I was going to see the project on site, I got up early the next day to have breakfast. The buffet was 20 US dollars, but after paying 20 billion, the restaurant asked me to add 18 US dollars because the new exchange rate was 1 US dollar to 10 billion Zimbabwean dollars. Yuan. Seeing my hesitation, the restaurant manager said that if you don't pay immediately, the exchange rate will change later.
After breakfast, we started to drive along the long-disrepaired road. Not only was the road uneven, but there were many "checkpoints" along the way. Soldiers with loaded ammunition stopped all passing vehicles and rummaged through the boxes and boxes. Because we were accompanied by several government officials, it was smooth sailing and we were let through after showing our documents. Although there were not many vehicles passing by, the road conditions were very poor, and the journey of more than 200 kilometers took nearly 5 hours.
The project manager arranged for us to stop in a small town and said this was the only place where we could have lunch before arriving at the project site.I often go to Africa and know the local customs. Officials and consultants of international organizations who work in many African countries need to entertain accompanying government staff. It is said that firstly, they need to be grateful for their help and support, and secondly, it is a reasonable logic for high-paid employees to pay for low-paid employees.
According to my experience, meals in small towns are usually not expensive, generally no more than US$5 per person.
So, after parking the car, I took the initiative to lead everyone to find a restaurant.
Several main streets in the town are closed and deserted, like an abandoned lonely city.
After finally meeting someone to inquire about, we were told that all the restaurants in town were closed and the only place we could possibly buy food was a supermarket at the end of the main road. I searched along the road and found a supermarket. It had a large facade and was still half-open.
But when I entered the supermarket, the joy that was like discovering a source of water in the desert disappeared in an instant. The shelves of this supermarket with a space of several hundred square meters were all empty, with only about 10 bottles of "bottled water" placed on the shelf near the door. ”, and several bags of corn “popcorn.” The shop owner said that the two only items he had produced were his own.After filling our hunger with popcorn, we met the farmers participating in the project on an empty hillside a few kilometers away. The village leaders mobilized all the families participating in the project to come and complain about the "damage" caused to them by the project. , because the money paid by the project to acquire their products was worthless in a few days.
It is no accident that Zimbabwe’s money has become useless. Since Mugabe drove away the white farmers and divided the land equally, food production has plummeted. More than half of the food needs to be imported, resulting in a scarcity of products that meet basic needs, and the government believes that “money can help.” , trying to "turn the tide" by printing money, but the money turned into a piece of waste paper, worth less than a piece of toilet paper.
summary
In a subsistence economy with low productivity and no surplus products, money is only a means of exchange and a symbol of wealth. It must also be based on physical objects that meet survival needs. If the dynasty and government in charge of the manufacturing and printing of money dare to ignore the physical objects of money, Basically, if you "cut corners" and "act recklessly" with money, not only will the money return to zero, but the dynasty and the government will also be destroyed.
This is why there are not many kings in the subsistence economy who have dared to act recklessly with money (those who are too stupid are not counted).The role of money in the survival economy is also very limited, especially if it has nothing to do with GDP.
Therefore, in the long years of survival and economic development for millions of years, human society has experienced the splendor of Greek civilization, the glory of the Roman Empire, the unified hegemony of the Qin Dynasty, and the prosperity of the Tang and Song Dynasties. . .
However, human society always experiences cycles of prosperity and depression, and even changes of dynasties, from its initial starting point.On the ruins of years of war, a new dynasty is established, and usually the new dynasty will implement new policies; after a few years or more than ten years, the social economy, mainly agricultural production, gradually recovers; then, the economic aggregate, mainly food and agricultural products, gradually As the population grows, agricultural production continues to expand, commercial activities continue to increase, and the social economy gradually enters a period of prosperity.
However, as population growth, which is the basis of prosperity (basic productivity), increases in a geometric progression, and food production increases in an arithmetic progression, a huge gap will inevitably appear between the total social population and agricultural production capacity, which will cause poverty and famine. War and plague will come unexpectedly, and the population and production capacity will be rebalanced by reducing the population.
The drastic decrease in population, in turn, led to a shrinking of agricultural production and a sharp decrease in food production, which lasted for several years, eventually leading to socioeconomic depression, food shortages, and starvation. The depression lasted for years, decades, or even hundreds of years, and brought human society to its knees. Push back to its original starting point.In the tens of millions of years of human history before the Industrial Revolution, such depression-boom cycles occurred over and over again. For thousands of years, human beings have always been hovering at the starting point.
This further proves that in the survival economy, money is insignificant to the operation of the social economy, and finance is at most an embellishment. It is by no means as magical as modern currency and financial literature describe it.To put it bluntly, in a survival economy, there is no surplus product. It is impossible for the dynasty and the government to affect the economic operation by increasing currency issuance, and it is impossible to increase GDP by increasing currency issuance.
The original text is relatively long, so I will only share part of it here. If you are interested, you can check out the full PDF version of the original text (it may be criticized , so it is recommended to save it first ): https://pan.quark.cn/s/20c917683d8f