art of managing your money

1927-1933 Chart of Pompous Prognosticators

2008-10-15T10:05:00.000-07:00

Chart locations are an approximate indication only

1. "We will not have any more crashes in our time."
- John Maynard Keynes in 1927

2. "I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. "No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
- Calvin Coolidge December 4, 1928

4. "There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5. "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"This crash is not going to have much effect on business."
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

"Buying of sound, seasoned issues now will not be regretted"
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929

7. "The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

"Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929

"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
- Business Week, November 2, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929

8. "... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929

"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929

"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. "I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929

"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929

10. "For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930

11. "...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930

12. "There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930

13. "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"... the outlook continues favorable..."
- HES Mar 29, 1930

14. "... the outlook is favorable..."
- HES Apr 19, 1930

15. "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930

"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930

"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930

17. "... the present depression has about spent its force..."
- HES, Aug 30, 1930

18. "We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930

19. "Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931

20. "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933

Karl Marx and the world financial crisis

2008-09-15T11:42:00.000-07:00

WASHINGTON (Reuters) - Capitalism as we used to know it is on its deathbed. And those who predicted that the old brand, the unfettered, American-promoted system, was a danger to the world, are being vindicated. They include Karl Marx, whose thinking on banks seems oddly contemporary these days.
The credit crisis that began in August last year and turned into near-catastrophe this month is not over, despite the hundreds of billions of dollars that governments are spending to save banks in the United States and Europe from collapse and thereby prevent a global depression. But there is an emerging consensus that capitalism needs a 21st century overhaul, not just emergency rescues, to save it from itself.
When that will happen is not clear. "What we are seeing right now looks like a very slow train wreck," says James Boughton, the historian of the International Monetary Fund, or IMF.
British Prime Minister Gordon Brown has suggested an international meeting on the pattern of the 1944 Bretton Woods conference that resulted in the post-World War II financial order and created the IMF and the World Bank. That system was dominated by Washington.
The United States, from where the credit crisis spread like a virulent epidemic, is not likely to play as large a role in whatever new "financial architecture" world leaders construct. As Peer Steinbrueck, the German finance minister, put it: "One thing seems probable ... The U.S. will lose its status as the superpower of the global financial system."
"The world is at risk of losing its anchor ... the United States," U.S. financial strategist David Smick writes in his just-published book on financial globalization, The World is Curved: Hidden Dangers to the World Economy.
The opening chapter is darkly entitled The End of the World. Smick said in an interview he thought a global depression was still possible despite the steps taken by the United States and Europe to restore confidence.
Those measures included buying stakes in major banks - in effect partial nationalization - and would make Marx smile if he could rise from his grave. In the Communist Manifesto he and his collaborator Friedrich Engels published in 1848, Marx listed government control of capital as one of the ten essential steps on the road to communism. Step five: "Centralization of credit in the hands of the state ..."
There are not many Marxists left in the industrialized world and not even the most fervent expect the revival of an ideology that failed so dismally in the Soviet Union.
MOMENTOUS BREAK
But as far as the United States is concerned, the events of the past few weeks represent a momentous break with decades of a free market philosophy that abhorred government intervention in (and regulation of) financial markets.
"There is little question that making the government a major investor in American banks raises thorny questions ... about the role of the public sector in private markets," Sen. Charles Schumer, a member of the Senate finance and banking committees, wrote in the Wall Street Journal the day the government announced it was planning to take equity stakes worth up to $250 billion in American banks.
It will take time for questions about the public sector in private markets to be answered. But it looks likely that some things will never be quite the same, no matter who wins the presidential election on November 4. For one, the control center of the financial market has already begun shifting from New York to Washington.
The "big government" that free marketeers identified as something evil is almost certain to make a comeback, although spending on America's crumbling infrastructure, its inefficient health care system, and environmental programs will be limited by the Everest-sized public debt. The U.S. national debt has increased by an average of $3.34 billion a day over the past year and now stands at more than $10 trillion.
Both in the United States and in Europe, officials have stressed that government intervention in the banks will be temporary but whether they will be able to stuff that genie back into the bottle remains to be seen. And "temporary" has not been defined.
"We will not stand down until we have achieved our goal of repairing and reforming our financial system and thereby restoring prosperity to our economy," said Ben Bernanke, the chairman of the Federal Reserve.
Amid the gloom and anxiety of the worst financial crisis since the Great Depression, which started in the United States in 1929 and then spread to the rest of the world, there are hopes that Capitalism 2.0 (if it ever comes about) will result in a more equal society. "There is a tremendous opportunity now to narrow the income gap," says Sam Pizzigati of the Institute for Policy Studies, a Washington think tank.
That gap resembles the top-to-bottom income distribution just before the Great Depression, according to the Washington Center on Budget and Policy Priorities. Then as now, the top 1 percent of households accounted for around one fifth of the national income. In 1980, their share was 8 percent.
History shows that deep financial crises have helped spur public policy reforms and those pending include legislation that would make it easier for American workers to join labor unions. At present, 7.5 percent of private sector workers are union members, the lowest percentage in the industrialized world.
U.S. unions say they are close to reaching a goal of collecting, by election day, one million signatures supporting the legislation. If passed, it would be part of what some have already started calling the new world financial order.
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LET ME GET THIS STRAIGHT
The crooks on Wall Street game us into oblivion, and rob us blind. The tax payers bail Wall Street out. And this will restore confidence!!!!??? You've got to be freagin kidding me!!! The ONLY thing that Congress should be discussing at this point is; WHO THE HELL IS GOING TO JAIL....AND WHEN THE JAIL TERMS WILL BEGIN!!! This is an F-ing JOKE....A JOKE!!
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Structurally Changing Economy

2008-09-02T08:34:00.000-07:00

September 02, 2008
Few off Wall Street are paying attention, but, there are fundamental structural changes taking place in our economy, that are going to require new economic models, metrics, and updated economics education if anyone is going to manage the economy well for Americans. The consumer backbone of our economy is yielding to exports and business consumption, even as the consumer’s role in products and services shrinks.
This dual economy referred to in the above link, is just an overview. Poverty is rising across America as American schools and State education budgets are increasingly forced to cut back spending on education. Additionally, in many regions of the country, the number of students qualifying for free or reduced fee school meals is rising dramatically. The Census Bureau's American Community Survey, reports 38 million Americans living below federal income standard defining poverty in the last 12 months and rising. That number will surely rise even higher for the 2008 year.
Even if unemployment were not rising, which it is, millions of Americans are poorer each year due to rising inflation of food, energy, transportation, health care, and education costs at a time when wages have failed for decades to keep pace for millions of American workers. The one bright spot would be the falling cost of housing, but, credit to buy lower cost housing continues to become an ever greater hurdle for Americans. Credit is very tight for American consumers, but, very available for American assets to be purchased by foreign investors.
America is being bought at an incredible rate by foreign investors. The Carlyle Group is a case in point. But, the risk of buying American assets is also going up as investors get ever more nervous about our economy and the growing debt carried by federal and state governments. More than half of all American states are now in the red with their state budgets.
The buying up of American real estate and businesses and toll roads and a host of other profit producing assets by foreign investors with the money to lend, has a number of potential short term upside benefits in shoring up American businesses needing to sell, and long term downside risks. The rest of the world is little different than America when it comes to the mingling of the wealthy capital owners and politicians in government. And as we have witnessed here in America, when government gets too chummy with wealthy business interests, many negative things can happen to markets, consumers, and the wage earners.
The more America relies upon foreign capital to salvage itself and borrow from, the less autonomy and independence we have in making decisions for ourselves and in our own best interests. As millions of credit card customers with interest rates as high as 32% know, when you are in debt, you don't get to dictate the terms. The same will be true of America if the wholesale auction of American bankrupt business and ventures and infrastructure and real estate is not halted and pretty darn quick. It is easy to see why those in financial trouble, whether they be corporate or individual, would sell to whomever was making an offer of rescue. But, in the long run, at this expanding rate of sale of American assets, American independence and autonomy are being sold too without hardly anyone being aware of it.
A few on Wall Street are talking about the potential for a global economic depression in the future as a direct result of the ever widening wealth gap in all the major and upcoming economies in the world and a potential default of a major debtor like the United States. Just as a few folks were warning us back in 2006 about what was coming as a result of the housing markets and lack of mortgage product regulations and oversight. Seems far fetched when only a few people with good minds and education discuss calamitous potential outcomes, and so they are largely ignored until the reality sets in, which is of course, too late to take corrective action.
And then there is consumer debt also making coming into investor's risk assessments. Though the consumer contribution to gross domestic product is shrinking, it still accounts for more than 60% of all economic activity. If the consumers continue to default on mortgages, and file bankruptcy due to medical expenses far beyond their ability to pay, at an increasing rate, and wages continue to undermine consumption spending at the same time credit card companies increasingly pull back credit from consumers while raising their interest rates toward 32%, the consumer base of the American economy could unravel. And if it does, there will be little warning for most Americans.
Health care is about to become the fastest growing sector in our economy as the baby boomers retire and live many years longer with longer term medical care needs. Yet, despite this fact, nursing shortages and medical technicians and even doctors in some specialties, continue to act as an anchor on that ship going forward. If these manpower shortages are not addressed, the malpractice rates will rise dramatically, and so will health care costs, even faster than they currently are, bankrupting ever more millions of Americans as the years unfold.
Ironically, American corporations and business are doing OK in this environment. Growth for American manufacturers was flat in the last quarter, which means they are holding their own despite the serious contraction in our economy on other fronts. Largely this was a result of a strong export market.
As American businesses focus increasingly on the expanding middle classes of other nation's and their insatiable demand for middle class products and especially services, American companies will increasingly provide employment in foreign markets, and provide nation's consumers with more products produced in foreign nations and serviced by employees in those foreign markets. In other words, the American worker and consumer are likely to become less relevant to American business health and wealth.
The same naysayers who argued the current mortgage financial crisis and credit crunch could not possibly happen when I wrote about its coming, in 2006, will no doubt now try to argue that this is a short lived situation and all will be well next year. But, as then, these naysayers speak without comprehension of the changes in the fundamental structure and foundation of our economy which are taking place at this very moment.
American wages must go lower. That is because Americans are now competing with labor at half or less the cost in places like China, India, and Malaysia. It is because we are paying foreigners directly for daily consumables like oil, which amounts to a net transfer of more than a half trillion dollars overseas each and every year. Nearly 3/4 of a trillion dollars in the last fiscal year. That money is not returning to the United States to be circulated amongst workers and consumers. It is a net transfer of wealth from America to foreign nations as T. Boone Pickens rightly points out in his commercials to sell America on increasing his profits through government investments in his alternative energy industries and stocks.
And as American wages go lower, the quality of life and the opportunities available to Americans will diminish for growing numbers of citizens and their children. We have passed the point of being able to prevent this. Our task going forward to is minimize the damage and slow the rate at which American's lives are diminished financially and in terms of opportunities for our children.
These issues bear directly on who voters elect to Congress and to the White House this November. For those we elect will either be ignorant of what is happening and what is coming, or they will they address these issues and work to minimize the consequences. The thing I cannot shake from my mind is this. It is these politicians currently in office by and large, who have brought us to this point. It would be the gravest of decisions by American voters to choose to send these same politicians back to government to perform as they have up until now.
America absolutely needs a dramatic change in leadership in government. We need leadership who gets it, and understands what we are facing here. If those we send to elected office this November believe our economy is fundamentally sound and will bounce back largely on its own, they will not tackle and work to minimize the negative consequences that will befall 10's of millions more of Americans in coming years.
Sending the same politicians who either didn't understand what was happening, and likely still don't, or who didn't care since they were wealthy and the wealthy will do alright regardless, or were never educated and intelligent enough to grasp economics in the first place, is the worst possible thing Americans could do themselves and their children's future. Voting for change, means voting some new representative in office, and putting the old politicians on notice that they are next if things don't improve by their next reelection campaign.

Stock market

2008-08-18T13:33:00.000-07:00

Investment strategies
One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.
Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).

The stock market, individual investors, and financial risk
Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtalking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st.

Irrational behavior
Sometimes the market tends to react irrationally to economic news, even if that news has no real effect on the technical value of securities itself. Therefore, the stock market can be swayed tremendously in either direction by press releases, rumors, euphoria and mass panic.
Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market difficult to predict.

Crashes
A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic. Often, stock market crashes end up with speculative economic bubbles.
There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000. But those stock market crashes did not begin in 1929, or 1987. They actually started years or months before the crash really hit hard.
One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, Canada lost 22.5%, Hong Kong lost 45.8% and Great Britain lost 26.4%. Names “Black Monday” and “Black Tuesday” are also used for October 28-29,1929, which followed Terrible Thursday – starting day of the stock market crash in 1929. The crash in 1987 raised some mysticism – main news or events did not predict the catastrophe and visible reasons for the collapse were not identified. This event had put many important assumptions, of modern economics, under uncertainty, namely, the theory of rational conduct of human being, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange's computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

Economic Basics: Introduction

2008-08-03T12:14:00.000-07:00

I know, it will sound too simple and naive, but it is true, in order for any person to know what to do with they money they need to know basics of economy. Like in any other craft you have to study basics first and then you can study more complex parts of the subject. Most people make biggest mistakes when they start trading stocks, for example, without knowing basic principles of economy. They think, if they follow and study stock market they will be successful investors. This is absolutely wrong approach. Because economy is like living organism and like any organism, in it, every thing is interdependent. Without fully understanding all parts of economics and how they work together, one can’t succeed in any field of it.
Recent examples of people getting in one field of economy without knowledge of fundamentals are:
1. Mortgage/Real Estate markets collapse
2. Stock market bubble of 1995-2000

Most of the people who lost money or property in those to crisis were economically illiterate. And they were used by professionals to make money of them. This is also part of economics; any body in any way possible can make money, as long as they are not breaking the law. Don’t believe in good financial advisers or some kind of ethics or simple decency. There are none of that in free market economy. Every body out to make money and there are thousands ways to do it. Every thing else is just simple or sophisticated ways to get to your money. Depending on the level of how smart you are.
So, take time and study economy fundamentally. Only then deep understanding, of stock market, real estate market and mechanisms of economy will come to you.

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Economy
An economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area.

A given economy is the end result of a process that involves its technological evolution, civilization's history and social organization, as well as its geography, resource endowment, and ecology, among other factors. These factors give context, content, and set the conditions and parameters in which an economy functions.

Economic sectors
The economy includes several sectors (also called industries), that evolved in successive phases.
• The ancient economy was mainly based on subsistence farming.
• The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries.
• In the economies of modern consumer societies there is a growing part played by services, finance, and technology -- the (knowledge economy).
In modern economies, there are four main sectors of economic activity:
• Primary sector: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
• Secondary sector: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
• Tertiary sector: Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
• Quaternary sector: Involves the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper.) Note that education is sometimes included in this sector.
Modern History of Economy

Early modern times
The European captures became branches of the European states, the so-called colonies. The rising nation-states Spain, Portugal, France, Great Britain and the Netherlands tried to control the trade through custom duties and taxes in order to protect their national economy. The so-called mercantilism (from mercator, lat.: merchant) was a first approach to intermediate between private wealth and public interest. The secularization in Europe allowed states to use the immense property of the church for the development of towns. The influence of the nobles decreased. The first Secretaries of State for economy started their work. Bankers like Amschel Mayer Rothschild (1773-1855) started to finance national projects such as wars and infrastructure. Economy from then on meant national economy as a topic for the economic activities of the citizens of a state.

The industrial revolution
The first economist in the true meaning of the word was the Scotsman Adam Smith (1723-1790). He defined the elements of a national economy: products are offered at a natural price generated by the use of competition - supply and demand - and the division of labour. He maintained that the basic motive for free trade is human self interest. The so-called self interest hypothesis became the anthropological basis for economics. Thomas Malthus (1766-1834) transferred the idea of supply and demand to the problem of overpopulation. The United States of America became the place where millions of expatriates from all European countries were searching for free economic evolvement. In Europe wild capitalism started to replace the system of mercantilism (today: protectionism) and led to economic growth. The period today is called industrial revolution because the system of production and division of labour enabled the mass production of goods.

Capitalism and communism
Starting in England, simultaneous related processes of mechanization, and the enclosures of the commons, led to increases in wealth for the controllers of capital, and mass poverty, starvation, urbanization and pauperization for much of the population. This led some, such as Karl Marx (1818-1883) and the German industrialist and philosopher Friedrich Engels, (1820-1895) to describe economy as the "system of capitalism". The exploitation of labour and nature by the capitalist is creating a surplus value. The capital will accumulate itself and finally destroy the competition. Therefore the system of communism should liberate the economy from the reign of capital. The first centrally planned economy was established after the Russian Revolution of 1917 by Lenin. Other states launched social security systems in order to minimize the effects of uncontrolled capitalism, called Manchester capitalism.

After World War II
After the chaos of two World Wars and the devastating Great Depression, policymakers searched for new ways of controlling the course of the economy. This was explored and discussed by Friedrich August von Hayek (1899-1992) and Milton Friedman (1912-2006) who pleaded for a global free trade and are supposed to be the fathers of the so called neoliberalism. However, the prevailing view was that held by John Maynard Keynes (1883-1946), who argued for a stronger control of the markets by the state. The theory that the state could alleviate economic problems and instigate economic growth through state manipulation of aggregate demand is called Keynesianism. In the late 1950s the economic growth in America and Europe—often called Wirtschaftswunder (ger.: economic miracle)—brought up a new form of economy: consumption. In 1958 John Kenneth Galbraith (1908-2006) was the first to speak of an affluent society. In most of the countries the economic system is called a social market economy.

Postmodern economy
What economist Robert Reich terms, "the not quite golden age" (WW II to the mid-1970s) gave way to the current global economy, or supercapitalism. This economic revolution took place in tandem with a radical transformation of Western cultures, and the growth of oligarchical/plutocratic tendencies within the polities of Western democracies. Together the political, economic and cultural developments in the Western World since c. 1963 constitute what Robert Struble has called "the postmodernist revolution."
Joseph E. Stiglitz has defined economy to be a global public good. Economists like Peter Barnes and Alexander Dill are reclaiming the commons and providing definitions that embrace new phenomena like freeware. Game theorists such as Ernst Fehr and Klaus M. Schmidt are contradicting the notion of omnipresent economic self-interest. Under the gift economy extensive grassroot movements have arisen; also the credit programs of Nobel laureate Muhammed Yunus. In 2006 the World Bank started issuing its Wealth of Nations Report, tracking social and human capital.
Technocracy Incorporated proposes a non-monetary economic system based on Energy Accounting, for a science based social design. This non political governmental system based on Thermoeconomics, uses energy accounting in a Non-market economics method based on science principles.

Basic Economic measures
There are number of ways to measure economic activity of a nation. These methods of measuring economic activity include:
• Consumer spending
• Exchange Rate
• Gross domestic product
• GDP per capita
• GNP
• Interest Rate
• National Debt
• Rate of Inflation
• Unemployment
• Balance of Trade

Capitalism
Capitalism in its narrowest sense is simply private ownership of capital. Capitalism, the economic system, is the system in which the means of production are owned by private persons, and operated for profit and where investments, distribution, income, production and pricing of goods and services are predominantly determined through the operation of a free market. Capitalism is usually considered to involve the right of individuals and corporations to trade, using money, in goods, services (including finance), labor and land. Ideally, capitalist systems are governed by the free price system set by the law of supply and demand rather than government regulation, though this does not exclude government defining and enforcing the basic rules of the market. Classic unrestrained capitalism is currently confined to theory, as "all of the capitalistic societies of the West have mixed economies that temper capitalism" with interventionist government regulation and social programs.
Capitalist economic practices became institutionalized in the United Kingdom between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world, and early forms of merchant capitalism flourished during the Middle Ages. Capitalism has been dominant in the Western world since the end of feudalism. From Britain it gradually spread throughout Europe, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world.
The concept of capitalism has limited analytic value, given the great variety of historical cases over which it is applied, varying in time, geography, politics and culture, and some feel that the term "mixed economies" more precisely describes most contemporary economies. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration of economic power and wealth, and methods of capital accumulation. During the last century capitalism has been contrasted with centrally planned economies, such as Marxian economies.