First of all, we must understand "What is money ?"
Money in our present day system is neither gold, nor silver, .... (though money may buy gold, silver), but just a debit or credit entry in the Book-keeping system of banks.
Let us take an example, say, country A believes in Macro-economic Theory, and increases its "money supply". In other words, it allows its citizen to borrow money easily (either lower the interest rate, or lend huge money to property-mortgages/shares ...) Furthermore, suppose the citizens spend the money wildly - buying expensive goods from abroad (i.e. import greatly exceeds export).
Then what will become of the book-keeping system ? Banks in country A will owe foreign banks huge money. (i.e. Banks in country A have lot of creditors, and they are banks from abroad.)
If the foreign banks lose confidence in banks in country A, they will ask IMF (International Monetary Fund, which helps in "adverse balance of payments between countries") to intervene. IMF will lend money to banks in country A to pay their creditors, the foreign banks.
This is what exactly happened in Philippines, in Thailand, in Korea, in Indonesia, in countries in South America, .... They all believed the text-books on Macro economy theory and increased money supply wildly.
No country can increase its wealth just by increasing money supply. When foreign banks lose confidence in you, they will not lend money to you at low interest, they will charge high interests, and all who borrow - merchants, manufacturers, ordinary people who borrowed for their houses, ... will pay this high interest rate. Korea once paid 25% interest after IMF stepped in. Also Philippines paid high interest. Few manufacturers can survive this high interest. Debtor is at the mercy of creditor.
One side effect of this wild money supply is "Fierce Competition". When interest rate is low, and borrowing is easy, people would borrow a lot to build factories and produce huge amount of goods, fiercely competing one against another, depressing the price (in economic terms, "the marginal profit is very low"). And when the manufacturers could not earn enough profit, they either cut staff or go bust, and banks suffer huge bad-debts. (See how many PC manufacturers disappeared in these 20 years, see how airlines who borrowed to expand fleet fare after September 11 (air fare has been low due to competition, lowing the marginal profit). Also, I have seen Quartz clock selling for only HK$ 10 in Hong Kong).
Easy lending also prompts people to speculate in houses, in stocks, thus losing huge money to those Fund Managers who specialize in preying upon greedy people. And banks who lend to people speculating in stocks/shares suffer bad-debts too.
This lesson shows that a country cannot spend more than it earns. Wealth is not created by increasing money supply.
When I was young, I was taught,
Earn $100, spend $99 => Happiness
Earn $100, spend $101 => Sorrow
This is true on a personal level, this is also true for a country.
Therefore a country should try those policies that enable its citizen earn more. Only when the total population earns more than it spends, would there be real prosperity, and not bubble prosperity.
People usually think they can control everything, and GOD does not exist. They adopted policies from Macro Economic Theory, but those policies may produce unexpected side effects that none can handle, e.g. Global Warming - huge rainfall, volatile climate, extreme flood in one place, extreme drought in another.
For Christians, we do not believe in Macro Economic Policy, we believe in LORD's word,
KEEP THE LAW => BLESSING
BREAK THE LAW => CURSE
LORD's political system is described in Old Testament, Exodus to Deuteronomy. Its main pillars are :
- Country-wide Moral Education. All people are taught Law of GOD and His Commandments.
- Free justice - no court fees nor lawyer fees, and justice is open trial attended by all people, administered by Priests (or any other persons, even elders may do), and can settle disputes within minutes.
- One tribe out of the twelve tribes of Israel (in Moses case, it was the tribe of Levite) was responsible for the above two tasks, and they got paid from voluntary donation, 1/10 of people's income.
Law in GOD's Laws is based on Principles of Justice, rather than upon "case laws" nor man-made ordinances. Moreover LORD taught us not to add to, nor take away from His Laws.
Do not despise this simple system. Which system would you want to live under? The present day system inherited from the Romans ? or LORD's system ? Which system enables you to produce more ?
Hong Kong has an area of 410 square miles ( = 20 miles x 20.5 miles ), and its population increased from 600,000 in 1944 to 6,700,000 in 2001, mostly illegal refugees from China. How could it have coped ? Mainly due to its "Laissez-faire policy" and low/simple taxation. (Click to see my essay [How Hong Kong handled refugee problems]).
Many countries have spare land, if only the politicians there could be far-sighted, and set apart areas for LORD's political system to flourish there, I think they can solve their economic problems. Moreover, they can solve the world's refugee problem (many people live in refugee camps, doing no productive work ! nor can they buy goods produced by industrialized countries.)
Many countries learned from Hong Kong, and set up special economic zones, and they did succeed in those projects. I am sure, if they set up special LORD's zone, they can succeed too.
Wu Siu Yan
19th October, 2001