How does the economy work?
What is money
- It is everything that is used to carry out exchanges. Money has had / has various forms in society. Historically it has evolved:
- Merchandise money Metallic money Paper money Plastic money Virtual money
What is money for?
According to a leading economist - JM Keynes - money is required for the following reasons:
- Reason for Transaction: we require the money to buy the goods or services needed every day. Reasons Caution: To prevent events –in health, education, housing…). Reasons Speculation: To get more money -speculative investment-.
The Cost of Money?
- The cost of money is the so-called interest rate.
- Simple interest rate Compound interest rate
- Current / nominal interest rate Real interest rate
How do you get the money?
- The main source of obtaining money is work (physical work / intellectual work) Work is any activity / effort carried out by a person to obtain a good or a service Work based on the application of increasingly complex knowledge it allows individually and collectively the accumulation of wealth.
What is an investment?
- Expenditure by companies and the public sector on capital goods (used for the future production of new goods and services), such as machinery, industrial buildings, infrastructures, etc. It also includes the purchase of homes by families, it is the application of economic resources. In the stock market sense, it means buying shares or securities to receive an income, to make a profit by gradually increasing prices, or to achieve both purposes. The World Bank defines it as the disbursements made by individuals, companies or governments to accumulate capital.
What are the types / methods of investment?
Real market:
- Company: production of goods or services (primary, industrial or manufacturing sector, services). Real estate take into account human needs.
Formal financial markets
- Capital market Includes the commercialization of financial assets in the medium and long term (more than one year). Example: issuance of 10-year bonds by Codensa. Stock market In it the shares of companies are traded. Here is what we mean by Stock Market. Example: trading on the stock exchange of Ecopetrol's shares. Money market In it, short-term financial assets (less than a year) are traded. Example: TES Treasury Securities, corporate bonds, deposits. Market of merchandises (commodities) Market where raw materials are traded. Example: the commercialization of gold or wheat. Banking market Loans and the like that banks make. In the event that once granted they are traded on the market, they can be considered as belonging to the capital market. Example:mortgage loan granted by a bank to an individual. Derivatives market In it, financial assets are traded whose prices are derived from the price of other assets that are listed on any of the above markets. Example: financial futures and options.
Informal markets
• Lending money vs. usury
• The danger of pyramids and chains
Basic concepts
- Asset Stock Stock Exchange Bonds Term Deposit Certificate, CDT Hedge (se) DemandMoneyDTFInvestment / InvestorFinancial marketCapital marketReal estate marketOfferLiabilityPositionRiskInterest rate
Practical tips
- Diversifying the "investment portfolio" minimizes risk. We have to put money to work for us and not work for money. Money is a means, not an end. It's not all money. Life project. In the business world, patience and method are good advisers. Success should not be measured by the amount of money you have. "Silver calls silver." The harvest depends on what is sown. The profitability of spiritual values ….. !!!!. To associate "unity is strength". Eg Sociedades ltda, SA, limited partnerships, cooperatives, foundations, NGOs. You always have to measure the risk. Teach your children the value of money. Biblical quotes: (the Bible is also a source of economic and financial knowledge)
“So you should have given my money to the bankers, and thus, when I returned, I would have collected my money with interest. So take his talent from him and give it to the one who has the ten talents. For to everyone who has, more will be given and will have an excess; but from the one who does not have, even what he has will be taken from him. " Parable of the talents, Matthew 25: 14-30
"Do this Pharaoh: Put officials in charge of the country who collect a fifth of the produce of the land of Egypt during the seven years of plenty." Gen 41:34
