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Channel Stocks, Crypto & Exchange in the English language segment is an active participant. Currently, the community unites 34 971 subscribers, ranking 6 824 in the Economy & Finance category.
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Since its creation on невідомо, the project has demonstrated rapid growth, gathering an audience of 34 971 subscribers.
According to the latest data from 08 September, 2024, the channel demonstrates stable activity. Although there has been a change in the number of participants by 0 over the last 30 days and by 0 over the last 24 hours, overall reach remains high.
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The author describes the resource as a platform for expressing subjective opinions:
“📰 Know what you own, and know why you own it. 🤝
~ Peter Lynch | @Exchange”
Thanks to the high frequency of updates (latest data received on 09 September, 2024), the channel maintains relevance and a high level of publication reach. Analytics show that the audience actively interacts with content, making it an important point of influence in the Economy & Finance category.
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Posts Archive
🔵 WHAT ARE THE CHARACTERISTICS OF A COMMAND ECONOMY❓
▶️ Command economies are controlled from the top by government planners. In general, this includes:
1⃣ Public ownership of major industries.
2⃣ Government control of production levels and distribution quotas.
3⃣ Government control of prices and salaries.
▶️ Monopolies are common in command economies as they are considered necessary to meet the goals of the national economy.
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🔵 ARGUMENTS IN FAVOR OF COMMAND ECONOMIES
▶️ Proponents of command economies argue that they allocate resources to maximize social welfare, unlike in free-market economies, where this goal is secondary to maximizing private profit.
▶️ Command economies may have better control of employment levels than free-market economies. They can create jobs to put people to work when necessary, even in the absence of a legitimate need.
▶️ Lastly, command economies are seen as better able to take decisive, coordinated action in the face of a national emergency or crisis such as a war or natural disaster. Although, even market-based societies may curtail property rights and greatly expand the emergency powers of their central governments during such events, at least temporarily.
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🔵 ARGUMENTS AGAINST COMMAND ECONOMIES
▶️ Any capitalist would argue that command economies face at least two major problems: first is the incentive problem and second is an information vacuum among the central planners making all the decisions.
🟢 THE INCENTIVE PROBLEM
▶️ The incentive problem starts at the top. Policymakers, even in a command economy, are all too human. Political interest groups and the power struggles between them will dominate policymaking in a command economy even more than in capitalist economies because they are not constrained by market-based forms of discipline such as sovereign credit ratings or capital flight.
▶️ Wages are set centrally for workers, and profits are eliminated as an incentive for management. There is no apparent reason to produce excellence, improve efficiency, control costs, or contribute effort beyond the minimum required to avoid official sanction.
▶️ Getting ahead in a command economy requires pleasing the party bosses and having the right connections rather than maximizing shareholder value or meeting consumer demands. Corruption tends to be pervasive.
▶️ The incentive problem includes the issue known as the tragedy of the commons on a larger scale than is seen in capitalist societies. Resources that are commonly owned are effectively unowned. All of their users (or workers) lack any incentive to preserve them. Things such as housing developments, factories, and machinery wear out, break down, and fall apart rapidly in a command economy.
🟢 THE INFORMATION VACUUM
▶️ The problem of economic calculation in a command economy was first described by Austrian economists Ludwig von Mises and F. A. Hayek. Central planners must somehow calculate how much of every product and service should be produced and delivered.
▶️ In a free market system, this is determined in a decentralized manner through the interaction of supply and demand. Consumers shape demand by the products and services they buy or don't buy. Producers respond by creating more of the products and services that consumers demand.
▶️ Moreover, all of these factors are quantifiable. At every step of the supply chain, someone is keeping count of the number of avocados, pairs of blue jeans, and lug wrenches that are in demand out there.
▶️ In a command economy, central planners should, at least initially, have a grasp on the basic life-or-death needs of the population in terms of food, clothing, and shelter. But without the forces of supply and demand to guide them, they have no rational method to align the production and distribution of goods with consumer wants and preferences.
▶️ Over time, the incentive and economic calculation problems of a command economy mean that resources and capital goods are wasted, and the society is impoverished.
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🔵 UNDERSTANDING COMMAND ECONOMY
▶️ Cuba, North Korea, and the former Soviet Union all have command economies. China maintained a command economy until 1978 when it began its transition to a mixed economy that blends communist and capitalist elements.
▶️ Its current system has been described as a socialist market economy. The command economy, also known as a planned economy, requires that a nation's central government own and control the means of production.
▶️ Private ownership of land and capital is nonexistent or severely limited. Central planners set prices, control production levels, and limit or prohibit competition within the private sector. In a pure command economy, there is no private sector, as the central government owns or controls all business.
▶️ In a command economy, government officials set national economic priorities, including how and when to generate economic growth, how to allocate resources, and how to distribute the output. This often takes the form of a multi-year plan.
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🔵 WHAT IS A COMMAND ECONOMY❓
▶️ A command economy is a key aspect of a political system in which a central governmental authority dictates the levels of production that are permissible and the prices that may be charged for goods and services. Most industries are publicly owned.
▶️ The main alternative to a command economy is a free market system in which demand dictates production and prices.
▶️ The command economy is a component of a communist political system, while a free market system exists in capitalist societies.
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🔵 HOW DO YOU DEFINE AN ECONOMIC CYCLE❓
▶️ An economic cycle, which is also referred to as a business cycle, has four stages: expansion, peak, contraction, and trough. The average economic cycle in the U.S. has lasted roughly five and a half years since 1950, although these cycles can vary in length.
▶️ Factors that are used to indicate the stages in the economic cycle include gross domestic product, consumer spending, interest rates, and inflation.
▶️ The National Bureau of Economic Research is a leading source for indicating the length of a cycle, as measured from peak to peak or trough to trough.
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🔵 ANALYZING ECONOMIC CYCLES
▶️ Different schools of thought break down economic cycles in different ways.
🟢 MONETARISM
▶️ Monetarism is a school of thought that suggests that governments can achieve economic stability when they target their money supply's growth rate. It ties the economic cycle to the credit cycle. Changes in interest rates can reduce or induce economic activity by making borrowing by households, businesses, and the government more or less expensive.
▶️ Adding to the complexity of interpreting business cycles, famed economist and proto-monetarist Irving Fisher argued that there is no such thing as equilibrium. He argued that these cycles exist because the economy naturally shifts across a range of disequilibrium as producers constantly over or underinvest and over or underproduce as they try to match ever-changing consumer demands.
🟢 KEYNESIAN ECONOMICS
▶️ The Keynesian approach argues that changes in aggregate demand, spurred by inherent instability and volatility in investment demand, are responsible for generating cycles. For whatever reason, when business sentiment turns gloomy and investment slows, a self-fulfilling loop of economic malaise can result.
▶️ Less spending means less demand, which induces businesses to lay off workers and cut back even further. Unemployed workers mean less consumer spending and the whole economy sours, with no clear solution other than government intervention and economic stimulus, according to the Keynesians.
🟢 AUSTRIAN ECONOMISTS
▶️ These scholars argue that the manipulation of credit and interest rates by the central bank creates unsustainable distortions in the structure of relationships between industries and businesses which are corrected during a recession.
▶️ Whenever the central bank lowers rates below what the market would naturally determine, investment and business get skewed toward industries and production processes that benefit the most from low rates. But at the same time, the real saving necessary to finance these investments gets suppressed by the artificially low rates. Ultimately, the unsustainable investments go bust in a rash of business failures and declining asset prices that result in an economic downturn.
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🔵 MANAGING ECONOMIC CYCLES
▶️ Governments, financial institutions, and investors manage the course and effects of economic cycles differently. Governments often use fiscal policy. In order to end a recession, the government may use expansionary fiscal policy, which involves rapid deficit spending. It can also try contractionary fiscal policy by taxing and running a budget surplus to reduce aggregate spending to stop the economy from overheating during expansions.
▶️ Central banks may use monetary policy. When the cycle hits the downturn, a central bank can lower interest rates or implement expansionary monetary policy to boost spending and investment. During expansion, it can employ contractionary monetary policy by raising interest rates and slowing the flow of credit into the economy to reduce inflationary pressures and the need for a market correction.
▶️ During times of expansion, investors often find opportunities in the technology, capital goods, and basic energy sectors. When the economy contracts, investors may purchase companies that thrive during recessions such as utilities, financials, and health care.
▶️ Businesses that can track the relationship between their performance and business cycles over time can plan strategically to protect themselves from approaching downturns, and position themselves to take maximum advantage of economic expansions. For example, if your business follows the rest of the economy, warning signs of an impending recession may suggest you shouldn't expand. You may be better off building up your cash reserves.
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🔵 HOW THE ECONOMIC CYCLE WORKS❓
▶️ An economic cycle, which is also known as a business cycle, is the circular movement of an economy as it moves from expansion to contraction and back again. Economic expansion is characterized by growth. A contraction, on the other hand, sees it go through a recession, which involves a decline in economic activity that spreads out over at least a few months.
▶️ The economic cycle is characterized by four stages, which are also referred to as the business cycle.
🟢 These four stages are:
1⃣ EXPANSION: During expansion, the economy experiences relatively rapid growth, interest rates tend to be low, production increases, and inflationary pressures build.
2⃣ PEAK: The peak of a cycle is reached when growth hits its maximum rate. Peak growth typically creates some imbalances in the economy that need to be corrected.
3⃣ CONTRACTION: A correction occurs through a period of contraction when growth slows, employment falls, and prices stagnate.
4⃣ TROUGH: The trough of the cycle is reached when the economy hits a low point and growth begins to recover.
▶️ The recovery phase may sometimes be referred to by some as a fifth stage.
▶️ You can use a number of key metrics to determine where the economy is and where it's headed. For instance, an economy is often in the expansion phase when unemployment begins to drop and more people are fully employed. Similarly, people tend to prioritize and curb their spending when the economy contracts. That's because money and credit are harder to come by as lenders often tighten up their lending requirements.
▶️ As noted above, it's important for investors and corporations to understand how these cycles work and the risks they carry because they can have a big impact on investment performance. Investors may find it beneficial to reduce their exposure to certain sectors and vehicles when the economy starts to contract and vice versa. Business leaders may also take cues from the cycle to determine when and how they'll invest and whether they'll expand their companies.
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🔵 WHAT IS AN ECONOMIC CYCLE❓
▶️ The term economic cycle refers to the fluctuations of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, total employment, and consumer spending, can help to determine the current stage of the economic cycle. Understanding the economic cycle can help investors and businesses understand when to make investments and when to pull their money out, as it has a direct impact on everything from stocks and bonds, as well as profits and corporate earnings.
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