I have been hooked about discussing every nook and cranny relating to business and economy for a while now.
The first crucial step that mankind take is forming a community with a leader. With a governor, humans were, are, and will be able to reduce their desire to fight each other about every difference. Having a figurehead also takes the burden of urgent decision making from the whole group to only one person. This concept also applies to the economic perspective. If every person has to deal with the economy on its own, the wheel of the economy will stop.
By default, governments have the power to influence the market to keep it stable. This idea had already been studied by most people in high school. The majority knows it as the fiscal policy. Fiscal policy deals with economic issues by changing spendings or adjusting taxes. By doing so, governments can slow down the economy if it is too fast or stimulate it when it slows down. Surprisingly, many people confused this with the more direct monetary policy.
Instead of the government, monetary policy is the decision made by central banks. A central bank could issue policies that impact how money fluctuates in a nation. For example, the interest rate can be increased to persuade people to save their money to the bank. Or they can also decrease the government's owned stocks in the market to invite less cash to the inventory. Based on that, fiscal and monetary policy has an endless cycle of taking and giving.
Fiscal Policy Is a Crucial Tool
The market is the true governor of our lives. When the economy and economy is stable, the suicide rates, domestic violence, and criminality rate are minimal. Even if an individual doesn’t want wealth for himself, he should like others to be wealthy. Otherwise, the effect is much more rampant than not having money to buy a new car for his mother. Hence, it makes sense that there should be a way for the government to manage the economy so people won’t fight each other.
“It’s a recession when your neighbor loses his job; it’s a depression when you lose your own.”
— Harry Truman
In general, there are two ways for the government to influence the economy: adjusting taxes and changing the spending. By utilizing these two policies, the authority will be able to change how it is, where to go, and who is prioritized on an economic scale. So, taking the wrong step when making a fiscal policy will interrupt other sectors too. If people don’t have money or have too much money, there will be a problem regarding productions that will eventually damage the output. In that case, no outturn means no input or no job.
Following this, it is a necessity to have an expert in fiscal decision making. If an ordinary person tries to handle this matter, the result will most likely be catastrophic. This government’s power may be scary for ordinary people. But most governments have a solution to prevent an economic mislead happening, and how to handle them if somehow the effect is not as intended as they thought.
The Many Different Stances
In the past, every economist believed that an economy is uncontrollable. This laissez-faire approach also holds a significant rational backing to support it. With this method, the economy must not be influenced by the governments because it will only result in an unintended purpose at best. To illustrate, the rise of unemployment because of the bursting economic bubble will cause the public to get a job even though the pay is lower than their previous work. Thus, this old concept is also true to some extend.
After the great depression, the Keynesian economic point of view rose in popularity. This concept taught that economy would fix itself in the long run, but correct government policies will make it faster to achieve. This breakthrough had solved many problems in the past, such as the post-war economy distraught in Japan. But the 2008 house price crisis in the USA had been argued to be a failure for the Keynesian economists. There is no definite answer, but experts agreed that the effect would be far worse if not backed by fiscal policy.
Like everything else, economic have different points of view. Some are abandoned because irrelevant, and some are used still used to this day. There is no definite answer to profit-making problems because the requirement of every economic theory is ceteris paribus. And ceteris paribus almost doesn't exist outside the graphs and the books. But it doesn't mean that we can't have its benefit when implemented in the real world.
Complex but Not Fishy
To gauge how intricate something is, people can trace their origin. While every field of study is complicated in its way, it will have a higher chance of being simple if it’s older. For example, classical physics is considered more straightforward for typical people to study than quantum physics. This notion could also explain how intricate fiscal policy is. Based on history, this study became popular only after the great depression. Therefore, it is arguable that this field is more demanding than the classical economy.
Fiscal policy may answer conspiracy theory that has been popular for a while. From an economic perspective, money can multiply by an infinite number of times as long as there are at least three individuals. For instance, John received 500$ from the banks, which he spends 250$ on buying clothes. After that, John's seller purchases vegetables that cost 100$. In the end, the value of 500$ is more than that because of having been handled many times. This illustration shows how complex fiscal is.
Besides, the idea of one person dictating the entire world is ridiculous. By standard, money was, is, and will be a complicated device to control. The government can give its people a stimulus to suggest people improve the economy. But suggesting is not the same as commanding. If people do not want to improve themselves, every fiscal policy will not receive success.
“The main thing that I learned about conspiracy theory, is that conspiracy theorists believe in a conspiracy because that is more comforting. The truth of the world is that it is actually chaotic. The truth is that it is not The Iluminati, or The Jewish Banking Conspiracy, or the Gray Alien Theory.
The truth is far more frightening - Nobody is in control."
— Alan Moore
Net Isn't the Same as String
The economy is a vast subject to discuss. There are tons of variables that need to align together to reach their goal. If a government wants to move forward, its people will also need to show effort together with their leader. Hence, it is almost impossible for a group to 'pull' the string because of the complexity of the economy. In summary, the financial system is a spider's web. It could only be changed when many lines are moved and not just one.