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Scarcity
There only exists a finite amount of stuff, limited and costly
Opportunity cost
Profit lost when choosing something over something else
Demand induced
Too much demand
Supply induced
Not enough stuff
Structural induced
Not enough land
Commodity money
Values lies in use and tradable value (wheat, gold, etc)
Mintage
Stamped coins, universal, traded for commodities
Value of a coin
Precious metal and face value from the mint
Seigniorage
Difference between the face value and actual value
Gresham’s law
In a system with good and bad money, bad money will dominate because people want to hoard good money and spend bad money
Paper money
Least intrinsic value
Bimetallism
Fixed exchange rates of gold to other less precious metals, allowed for smaller trades, safer
Debasement
Gold coins getting clipped and becoming debased
Gresham’s law today
Our coins have little value, we have coins with high face value, we often use small bills
Bank of Canada
Responsible for printing our paper money and setting interest rates
Fiat currency
Issued by government central banks, not backed by gold, no intrinsic value
The Eurozone
Most used currency in the world
World currencies
Larger countries have the most currency in circulation
Resource specialization
Specializing to create different resources
Trade networks
A place to trade goods
Trading infrastructure
Ancient romans used ships, fur traders used canoes, royal road started silk road
Standards, laws, and regulations
Ports to collect duties, regulate trade
Mediums of trade
Gold, commodities, agreements
Pax romana
Roman empire build a massive trade network
Infrastructure
Trade routes began developing
The silk road
Silk was in high demand from china, china wanted glassware, spices
Silk road unpopular
Many places banned trade, people stole ideas
Silk road misconceptions
Only silk, trade made nations wealthy, whole road travelled
Mercantilism
Import and export controlled, most gold = most power
Venice mercantilism
Strong military, venice surrounded by water, ducat was strong
Banking and bookkeeping
Taxes and debt
Double entry
Allowed loans to be made
The age of discovery
Renaissance started because of wealth, competition to dominate
Portugal
Africa had lots of gold and trading ports started
Spanish empire
Spain and portugal colonized africa
Early colonization
Columbus convinced crown of benefits, indigenous people oppressed
Chinese trade
China banned foreign trade
Philip II
His reign brought back a lot of gold and silver
Spanish empire economy
They thought that gold was everything and mined so much that it caused inflation
England v.s spain
England sent people to steal spanish treasure
Habsburg wars
Spain was very involved and needed loans
English empire
Colonized north american and only britain could tade with them
Mercantilism
Export as much as possible, import as little as possible, colonies serve the mother country
Triangular trade
Slaves to NA, raw materials to england, textiles to Africa
Dutch dominance
Mastered trade and got very rich
What to do with money
Only improve mother country, build estates
Colbertism
The start of workshops becoming facories
War
Colonies v.s mother country
The seven years war
Frances loses a lot of colonies
Enlightenment
Discussing how to make things better after war, mercantilism was a problem
Physiocracy
Wealth is in agriculture and land development, landowners created wealth, merchants sterile
Individualism
Doing stuff for yourself, tax on land not transactions
Laissez Faire
Against mercantilism and government intervention
Natural laws of the market
Humans always act in self interest, competition, and supply and demand
American revolution
Boston tea party, liberty trees, against mercantilism and economic damage
French taxation
France didn’t have enough money so they started to tax the rich, but mostly taxed the poor
Climate and technology
Cold months led to better technology
