Economic Ignorance
Thursday, July 06, 2006 by simpleblob
Recently, someone forwarded the email to me, titled something like this -- "Save our country before it becomes a second Argentina." It refers to the economic collapse of Argentina, the country which money worth nothing.
Inside the email, the author had cited many examples how my country are acting just like Argentina before it collapsed. Most of it is about how we buy goods from foreign companies, or how foreigners are taking over many local companies.
One example is this --
"We should not buy things from Carrefour (French-owned?) because our local wealth will be transferred to foreigners and leave us with Nothing!"
"I myself buy all my stuff at local stores, even if they are more expensive, to support our country!"
Bullshit. This is sooo wrong on many levels...
the problem in question -- our money is flowing out to another country. Therefore we get poorer. We lose.
Now, the money is a paper. it's JUST a paper. What make it valuable is that we can buy something with it.
Ask yourself this, when we can buy the same thing at cheaper price, or buy more things at the same price, does it mean we get richer? And does it make our country richer?
In fact it does, in both questions. Because when another country can produces thing at a cheaper price -- ie. use resource more efficiently, both country will benefit from it.
I will try to explain it using example.
Japan and Ghana has never traded with each other before, but they're starting to. We will focus on 2 products which both countries currently produce -- Computer and Banana.
Japanese businessmen see that importing banana from Ghana to sell is much cheaper than buying from japanese banana farmers, so they imports a lot of it.
The result is many japanese can now buy more delicious and much cheaper banana. And the japanese farmers have to change to do something more profitable -- like planting rice.
On the other hand, Ghana businessmen also see that, Japanese computer are better and dirt cheap compare to its own country, so they start selling that instead.
You see what happen? in both countries, people are gettings better things at cheaper price, therefore better standard of living.
Whew... a little long read.
Inside the email, the author had cited many examples how my country are acting just like Argentina before it collapsed. Most of it is about how we buy goods from foreign companies, or how foreigners are taking over many local companies.
One example is this --
"We should not buy things from Carrefour (French-owned?) because our local wealth will be transferred to foreigners and leave us with Nothing!"
"I myself buy all my stuff at local stores, even if they are more expensive, to support our country!"
Bullshit. This is sooo wrong on many levels...
the problem in question -- our money is flowing out to another country. Therefore we get poorer. We lose.
Now, the money is a paper. it's JUST a paper. What make it valuable is that we can buy something with it.
Ask yourself this, when we can buy the same thing at cheaper price, or buy more things at the same price, does it mean we get richer? And does it make our country richer?
In fact it does, in both questions. Because when another country can produces thing at a cheaper price -- ie. use resource more efficiently, both country will benefit from it.
I will try to explain it using example.
Japan and Ghana has never traded with each other before, but they're starting to. We will focus on 2 products which both countries currently produce -- Computer and Banana.
Japanese businessmen see that importing banana from Ghana to sell is much cheaper than buying from japanese banana farmers, so they imports a lot of it.
The result is many japanese can now buy more delicious and much cheaper banana. And the japanese farmers have to change to do something more profitable -- like planting rice.
On the other hand, Ghana businessmen also see that, Japanese computer are better and dirt cheap compare to its own country, so they start selling that instead.
You see what happen? in both countries, people are gettings better things at cheaper price, therefore better standard of living.
Whew... a little long read.
I'm also the one who doesn't know much about economics
-__-"
Let me study about it first and then will comment your post later :P