What is economic crisesis no reliable gauge of economic crisis. Measuring the economy is a task performed by the price, as well as temperature measurement is about the work of thermometric scales, distance measurement is the role of metrics and measures the time scale is done by seconds, minutes , time it wash so much time to calculate what is economic crises.
The price system is a system metric economy. what is economic crises is common to think about the price just as a way to express the relative value of goods and to supervise the exchange of this market. But price is a function more important for the dynamics of the economy, the paper seldom realized by economists and less by economic authorities. The price level is a measurement system of economic agents, for example, industry and banks, rely on to decide whether to invest in producing more goods to sell or disinvest and reduce their production. what is economic crises in economic agents, whether individuals, need reliable information from the system price to determine when it is time to expand or retract their production. This process is similar to using a thermometer scale to see if it is time to deliver drugs to cold or warm patients. For now, think about what is the size of the patient’s thermometer, the temperature gauge, is not reliable.
The basic theory behind the fact that the price system is the metric system is the economic theory of business cycles. A certain amount of goods of all kinds, including service and all that is manufactured for sale, seasonal created an economy and a certain amount of consumption is done by people. If production is less than consumption, real price rises. If production is higher than consumption, real prices fell. When consumption is higher than production, real price increases, and inflation is a real happening. When consumption is lower than production, falling real prices and real deflation happen. What then do the economic agents do in every situation? The economic agents to adjust their production to consumption, so that when they think the inflation they move to increase production and release of air when they saw decided to reduce production (if They are not not able to pay their bills in the future) .. So the market price system tells how to adjust the level of production in accordance with the level of consumption. It is a process of rotation, the business cycle, because the sound will alternate periods of economic expansion with a little mild recovery time, a change needed for good overall economic functions .
But what happens when the price system is not reliable? It is very simple to understand: The economic agent lose their parameters to decide whether it is time to invest or disinvest, and the entire economy in trouble. And as economic agents take decisions, they usually cut investment as the most careful steps and the domino effect of the reduction in investment flows. This is exactly what happens to the economic crisis of 2008-2009.
However, one big question remains? Why the price system becomes unreliable? And the answer is: the price of our system based on money by manipulating the government is always reliable, and time occurred when the market realizes that the nominal price is not the real price and that there are shortcomings in reliable economic information . Realization is usually started when some big players (think Fannie Mae, Freddie Mac, Lehman Brothers, etc.) if allowed to go bankrupt shows that the investment-disinvestment and bad decisions made poor decisions in the end because of the belief in the pricing information from a reliable system. In this situation the first signs of lack of investor confidence about the system price is the fall of stock prices after a rush to sell stocks. Clearly, economic agents do not have a price system in mind when they decided not to invest, sell shares and reduce production, but the cause of the background of their movement is the real price of the economy.
The biggest challenge is that many are now saying that the economic crisis shows the failure of free markets and the economy needs more government control. It really is a big mistake, though very sweet taste in the mouth of a politician. In fact, however, is that our pricing system is not reliable because the government manipulated.
For reliable price system is required based on the size of the price system is reliable. In the past we used the weight of gold and silver to achieve reliability. Today is the official currency used. To use the official currency will not be a problem if the money supply remained stable throughout the economy through money management. Business cycle will be in a sound and price inflation or deflation inflation and deflation a real real. But that does not happen in our world. Government is generally not considered the monetary base responsibilities. They manipulated the broad money supply by printing new money or by tweaking interest rates of government. The government finally manipulating the monetary base to finance their spending by printing money or borrowing money by using a higher interest rate. They will continue to change the monetary base and make the price variation is not due to variations in the real economy of production and consumption. To set the nominal price deflation or inflation is deflation or inflation fake fake and instead of providing reliable information about the state of the economy the price system of providing false information . For some time, the economic agents believe that the information is wrong and consequently make the wrong decisions about investment or disinvestment. But the day came when some big players out of business and the market realized that they are running blind. Of course most careful step then is to reduce investment and the economy could enter a depression.
Process for incredible price system is what is happening today in the global economy. The real lesson of the current economic crisis does not need more government intervention and regulation. Textbooks are not ‘let the government do to manipulate the price and continue to disrupt our economy. World leaders, Obama and his colleagues, was unable to meet to discuss the next canon to market rules. They should make a big mistake the true critics of government in creating the economic crisis and from that they can do themselves and persuade many countries to have a pricing system that is reliable and not manipulated. Lawmakers also passed a law prohibiting the manipulation of the money base. This seems to be the solution for the economic crisis and ways to save many people from poverty, hunger disease, and all the bad product of the global economic crisis. It is first necessary for leaders, specialists as well as the press to understand the source of logical from the economic crisis for their efforts strive to be effective.
Another solution, however, seems to express the price scale of measurement is more reliable than monetary scale.
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