How To Turn the Economy Back On

This has been a wild couple of weeks as the world is dealing with the Coronavirus Pandemic. The stock market has been down and back up again. There is a lot of volatility and uncertainty. Most countries around the world are on lockdown, and the world economy has come to a halt. We are going to be discussing a question that is on everyone’s mind. How do we turn the economy back on? WATCH NOW

Related Video Links:

• Who is the Father of Accounting? (Luca Pacioli) https://wolvesmainsite.wpengine.com/who-is-the-father-of-accounting-luca-pacioli/
• The SHOCKING History of Accounting https://wolvesmainsite.wpengine.com/the-shocking-history-of-accounting/
• How Accounting Systems Work (Bookkeeping) https://wolvesmainsite.wpengine.com/weekly-video-how-accounting-systems-work-bookkeeping/

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VIDEO SUMMARY

I believe that in difficult situations like this, it is often helpful to look at history. Because there is a lot of useful lessons we can learn from the past, and we have actually been in similar situations before. Not only that, we have a roadmap on how to get out of it.

We are going to go back 670 years into the past to a period called the Middle Ages. Specifically I want to discuss the Black Death. This was a pandemic that lasted five years from 1347 to 1351. This was a disease that started in China and moved up the trade routes into Europe. It killed roughly half the population of Europe.

Now let me be clear. Our current situation in the world is nowhere near as bad as it was during the Black Death. But it is helpful to draw similarities with today. Because 50 years after the Black Death, the Renaissance began. So Europe went from this very difficult period where there was no economic growth, to the Renaissance which is known as one of the greatest economic expansions in history. So here is the question: what were the conditions in place that enabled us to go from a worldwide pandemic to one of the greatest economic expansions?

When I look at this economic transition, there are three main things that stand out that enabled this huge expansion. I am going to go through each one.

1. Markets

The Middle Ages started with the fall of the Roman Empire. The Roman Empire was very good for the economy and trade throughout the known world. There was good roads, a common currency, and government standards that distributed best practices for things like growing crops. When the Roman Empire fell, the monetary system completely collapsed, wars broke out, crop yields fell, there was great famine and a lot of people died.

The world transitioned into the Middle Ages. And communities grew up around manors. These were isolated communities that were self-sufficient. And trade pretty much stopped, because there was no government to provide protection to travel between these communities. Commerce within these communities was done by barter, and currency did not come back until the Renaissance.

An interesting thing started to happen by the end of the Middle Ages which was the growth of fairs. We still celebrate this today with the Renaissance Fairs we have today. People would leave their isolated communities from all across Europe and meet at these fairs where they would trade for goods and services. This is the creation of a market. A market is whenever you get a group of people together, and you have easy access to information and everyone can see everyone else’s prices. This allows you to easily make purchase decisions which is impossible if everyone stays in their isolated communities. These fairs started global trade once again.

2. Entrepreneurs

The Renaissance started around 1400. This period saw use of paper money, cheques, joint-stock companies, and insurance. But more importantly, we saw during this period the birth of the entrepreneur (the small business owner). All these financial tools enabled people to go out and start companies, create jobs, and create wealth. We saw factories for cloth and silk, and funding for trade expeditions around the world.

3. Accountants

The Renaissance also saw the standardization of double entry bookkeeping. So we had financial markets, we had business owner’s creating value, but those two things alone are not enough. We needed someone to track everything and communicate it to the world. That is what accountants did. I have other videos on this channel about double entry bookkeeping and the Father of Accounting, Luca Pacioli, if you want to know more. This period of time is known as the birth of modern accounting. It was the ability to record and understand financial transactions that enabled the Renaissance economy to take off.

These are the three things that enabled the economic expansion of the Renaissance:

1. Markets
2. Entrepreneurs
3. Accountants

So what do we do with our situation today? I am asked a lot what governments should be doing right now. My response to that question is that I think you are missing the whole point. Do not worry about the government. Politicians are going to do whatever they do. Politicians can help the situation, but politicians do not grow the economy. Business owners do that. Government is not even on my list. During the Renaissance, there was no strong centralized government.

My message is to all the business leaders out there. It is not up to the politicians. It is up to you. My only recommendation to politicians is to listen to your business leaders. This is a group of people who have spent their entire lives figuring out how to make money. We know how to make money. Politicians do not even have to tell us what to do. We know what to do. Because all you need to turn the economy back on is strong markets, busy entrepreneurs, and accountants tracking everything.

Leave a comment down below letting me know what you think!

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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.