What are the essentials of understanding money/investing/economy? (credit, free market, investments)

[jco]

I thought I understood money, the economy, credit, etc. until just recently. I can hold my own when talking about each separate category, but the relationship between them all has my head spinning. What would you say are the most important things to understand. Awhile ago I adopted spend less, save more, don't borrow, but even that seems to be too simple now.

[Huckleberry3911948]

i assume you want the short form.
listen to radio dave ramsey like you life depended on it.

[StoneOne]

Shortest possible answer - the government makes a mess of it all!

The longer answer:

Read any news about what comes out of Warren Buffet's mouth. Read Ben Stein's columns on Yahoo. In fact, read the following four webpages every day:

CNNMoney.com
Yahoo Finance
Forbes.com
MSN Money

Read the Wall Street Journal and FT, especially FT. Read The Economist.

Pick a market and follow it with respect to other markets. For example, I like to follow the oil market. Find out about what's going on in other markets with respect to oil - currency markets, stock markets, whatever.

Take everything you read with a grain of salt. Sooner or later, you'll be able to sort out the good stuff from the baloney.

The big picture will start to come together, although never entirely. It's not come together entirely for anyone, ever.

[chuck22b]

I think a basic understanding of:

1) How free markets work, supply and demand (prices)
2) What constitutes the make up of GDP (economic growth)

GDP = consumption + investments + government spending + net exports

3) How does the government use both fiscal and monetary policy to influence growth

4) An understanding that the economy is based on the flow of capital between households, institutions, government, and exogenous groups (international).

5) and Basic accountancy: Assets = Liabilities + Shareholder's equity

Then, read the sources that StoneOne mentioned to form your own opinions and resulting actions.

Oh, and for investing.... a world view and ability to spot opportunities... politics... and short, mid, long-term trends. Cause investing... IS... essentially all about the future.

Oh, and one last thing.... forums like these.. to talk about issues, ideas, listen to the beat, so you can scrap preconceptions or strengthen your own ideas. Because sometimes you can get stuck within your own preconceptions until someone actually pokes you in the eye.

-chuck22b