Economy 101
Day 789, 10:23
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Published in Switzerland 
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by
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by Eleriel
A mes lecteurs Francophones: Je suis sincèrement désolé mais je n'ai pas le temps de traduire la. Faites un effort, j'essaierais de traduire plus tard ce soir ou demain.
Good Morning eSwitzerland !
Today I thought we could talk a bit about economics, taxes, and why they are important to everyone. This will also help to explain why the Shaolin's tax reductions are harming the state, and by harming the state are harming you.
I think we can all agree on a few facts. We all want a Training war we can fight in. We want our country to be able to defend itself. We want our country to be able to help its poorer citizens when in need. We all want these things. But in order to have these things, a state needs gold.
So how does a state make gold? Well there are several ways, but by far the largest source of income for governments in eRep is selling currency. The second largest is donations.
How does this affect us, and why? Well, lets take these 2 revenue sources 1 by 1. When it comes to donations, they are hard to predict, hard to keep track of, and unreliable. One day someone may give 200g, and then we might not see any donations for the next few months. While donations are always a welcome bonus, they remain a bonus that should not be relied on for long term goals.
Now, lets move on to the selling of currency. How does it work ? Well the state collects money through taxes, and then sells it via the Money Market. As I'm sure most of you are aware, there is in economics a simple principle of Supply and Demand. If there is too much supply and not enough demand, prices go down. If there is too much demand and not enough supply, prices go up. Currency is also affected by this. Except currency has to be kept at a constant value in order to promote stability in income. This is especially true in eRepublik. So, the theory of this is that we must take out money from the system (taxes) and then sell it back into the system (monetary market) to make gold and pay for things such as Training Wars. This voids the Shaolin argument that we should sell 100k CHF in our bank, as they are needed there to not flood the market and reduce the value of the CHF. If we sell CHF without getting any, we are increasing the supply, without an increase in demand, and according to economics reducing the value.
So now let us talk about taxes. Too low taxes (like the Shaolin seem to think are amazing) drastically reduce the income the state has, and therefore drastically reduces what the state can provide for you. Too high taxes are also bad, because they reduce the consumption ability of individual citizens. So what is a middle ground? Well that is hard to say, every country is different. The US has 20% income tax for example. Spain has 5%. The truth is that every country must find its own balance. But what you must understand is that with the current system our Shaolin PTO'ers are trying to push through everyone will loose out. The State will no longer be able to make money, and in turn the state will no longer be able to provide the essentials for its citizens.
What the Shaolins say is that this reduction of taxes increases our competitiveness on the world black market. This is partly true on a very short term basis and in a very cyclical way. If we have the cheapest products, people will buy from us, BUT with the reduction of stock, prices will go up and people will buy somewhere else. So this means that it is ONLY a way of reducing stock, and can only benefit the owners of companies in such sectors. As this income will not be long term or stable, it will be hard for company owners to increase salaries. With the black market you have to be the cheapest in the world in order to sell. To be the cheapest in the world you need low salaries. Low salaries are bad for workers because they cannot consume as much.
So basically salaries will remain low, and people will buy from us because it costs less to produce in Switzerland. In Real Life this is a phenomenon called Social Dumping. This is when countries intentionally reduce their living standards or their salaries to attract foreign investment. While this generally leads to a better situation for company owners, the normal citizen will greatly suffer from this.
I hope this is helpful for those of you wondering about the economy.
For those of you who are curious as to what a rational argument about the eocnomy with irrational people looks like, read the comments on THIS article and be enlightened
Eleriel,
President of eSwitzerland
501 !!
Good Morning eSwitzerland !
Today I thought we could talk a bit about economics, taxes, and why they are important to everyone. This will also help to explain why the Shaolin's tax reductions are harming the state, and by harming the state are harming you.
I think we can all agree on a few facts. We all want a Training war we can fight in. We want our country to be able to defend itself. We want our country to be able to help its poorer citizens when in need. We all want these things. But in order to have these things, a state needs gold.
So how does a state make gold? Well there are several ways, but by far the largest source of income for governments in eRep is selling currency. The second largest is donations.
How does this affect us, and why? Well, lets take these 2 revenue sources 1 by 1. When it comes to donations, they are hard to predict, hard to keep track of, and unreliable. One day someone may give 200g, and then we might not see any donations for the next few months. While donations are always a welcome bonus, they remain a bonus that should not be relied on for long term goals.
Now, lets move on to the selling of currency. How does it work ? Well the state collects money through taxes, and then sells it via the Money Market. As I'm sure most of you are aware, there is in economics a simple principle of Supply and Demand. If there is too much supply and not enough demand, prices go down. If there is too much demand and not enough supply, prices go up. Currency is also affected by this. Except currency has to be kept at a constant value in order to promote stability in income. This is especially true in eRepublik. So, the theory of this is that we must take out money from the system (taxes) and then sell it back into the system (monetary market) to make gold and pay for things such as Training Wars. This voids the Shaolin argument that we should sell 100k CHF in our bank, as they are needed there to not flood the market and reduce the value of the CHF. If we sell CHF without getting any, we are increasing the supply, without an increase in demand, and according to economics reducing the value.
So now let us talk about taxes. Too low taxes (like the Shaolin seem to think are amazing) drastically reduce the income the state has, and therefore drastically reduces what the state can provide for you. Too high taxes are also bad, because they reduce the consumption ability of individual citizens. So what is a middle ground? Well that is hard to say, every country is different. The US has 20% income tax for example. Spain has 5%. The truth is that every country must find its own balance. But what you must understand is that with the current system our Shaolin PTO'ers are trying to push through everyone will loose out. The State will no longer be able to make money, and in turn the state will no longer be able to provide the essentials for its citizens.
What the Shaolins say is that this reduction of taxes increases our competitiveness on the world black market. This is partly true on a very short term basis and in a very cyclical way. If we have the cheapest products, people will buy from us, BUT with the reduction of stock, prices will go up and people will buy somewhere else. So this means that it is ONLY a way of reducing stock, and can only benefit the owners of companies in such sectors. As this income will not be long term or stable, it will be hard for company owners to increase salaries. With the black market you have to be the cheapest in the world in order to sell. To be the cheapest in the world you need low salaries. Low salaries are bad for workers because they cannot consume as much.
So basically salaries will remain low, and people will buy from us because it costs less to produce in Switzerland. In Real Life this is a phenomenon called Social Dumping. This is when countries intentionally reduce their living standards or their salaries to attract foreign investment. While this generally leads to a better situation for company owners, the normal citizen will greatly suffer from this.
I hope this is helpful for those of you wondering about the economy.
For those of you who are curious as to what a rational argument about the eocnomy with irrational people looks like, read the comments on THIS article and be enlightened
🙂
Eleriel,
President of eSwitzerland
501 !!
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Comments
Good article. Unfortunately, I think that trying to implement simple logic to the Shaolin is mission impossible...
Makes sense.
LOL, no comment. I have already said everything. As a representative of the leading party of Switzerland I reject attempts to stifle our economy again. Shame for the SLP.
And again-your first mistake was here: "With the black market you have to be the cheapest in the world in order to sell"
You don't need to be cheapest. You need to be cheap. And this is nowadays true for eSwiss goods
Also, nowadays we have supply/demand problems in some sectors of production. Simply talking-we produce more than we need. That's why prices is low. But we can fix this problem if we increase demand. BM demand in this case will be very useful. Many countries have 99% import tax and actually prefer to buy some goods on BM and it is normal. Why don't we use this opportunity? If we will increase demand-our prices will go up-all as you said. And it will be fixed on some level which actually will be higher than nowadays prices. And salaries for our workers also will be increased-because every manager on growing market want to produce more and can pay more. So you are not right in your logic
Explain the relationship of low taxes and Russia. With the way that the embargo because of the war.
Look at Switzerland two months ago and look at Switzerland now. Great work Eleriel!
Very good article!!!
You can try and explain it 1000 times, the Shaolins will never get it.
They get it very well, but they will keep pushing thir false propaganda whatever we say.
However, if we do not respond, or respond only with the same trolling they do, real eSwiss citizens will never be informed about what's really going on.
So itS pretty much important to talk about taxes, fundig of the state, and of course about the hostile russian take-over group, the Shaolin thieves.