The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Wednesday, August 15, 2012

Economic Truths of Human Behavior

A lot of people base economic opinions on mathematical equations (2-1=1). For example, tax the rich. If we tax the rich more it will give us the money the government needs for it's budget. The problem is that economics is a social science. It envolves psychology of large groups of people and how they react to economic decisions. For example, if you tax the rich too much, they move and take their money somewhere else that doesn't tax them as much. So in this case, an increase of taxes would result in a loss of tax revenue (see Laffer Curve).

The following are Natural Laws of Human Behavior in Economics originally created by G. Edward Griffin, author of Creature From Jekyll Isle.
  1. Long-term price stability is possible only when the money supply is based upon the gold (or silver) supply without government interference.
  2. For a nation to enjoy economic prosperity and political tranquility, the monetary power of its politicians must be limited solely to the maintenance of honest weights and measures of precious metals.
  3. A nation that resorts to the use of fiat money has doomed itself to economic hardship and political disunity.
  4. Fractional money will always degenerate into fiat money. It is but fiat money in transition.
  5. When men are entrusted with the power to control the money supply, they will eventually use that power to confiscate the wealth of their neighbors.
Most of these laws are referring the monetary policy, which is one of the most prominent methods for economic interference. These laws are not all inclusive, but they are a good start. It makes the point that economic decisions cannot be made by equations and people cannot be expected to act like numerals.

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