Review of The Cold War: A World History

(image via goodreads) Odd Arne Westad's The Cold War is simply a must-read for anyone who wants a better understanding of the world today. Despite having lived through the Cold War -- and as someone who probably pays closer attention to current events, world politics, and history than your average American -- there was a… Continue reading Review of The Cold War: A World History

How I define Conservativism and Liberalism

https://www.youtube.com/watch?v=we-L7w1K5Zo "Boo! Different political party!" You may have noticed how political debates in the U.S. these days tend to be two sides shouting and hurling insults at each other. Do you want to do something about it? Well, the first step is to be able to understand what you believe and why. If your only… Continue reading How I define Conservativism and Liberalism

Why Does the Fed Have a 2% Inflation Target?

The 2% level is rather arbitrary, but the basic idea is to set a small positive number because it is a lot easier for central banks to fight inflation (a rising price level) than for them to fight deflation (falling prices). The reason is simple: to fight inflation, it can slow spending by raising interest… Continue reading Why Does the Fed Have a 2% Inflation Target?

The Causes of the Financial Crisis

As I see it, the main cause was systemic, namely the securitization of mortgages (e.g., CDOs). This means mortgages being repackaged by lenders and resold to other investors who wanted the income from the monthly payments. This was first done in 1970 by the Government National Mortgage Association (GNMA or Ginnie Mae), but securitization didn’t really start taking… Continue reading The Causes of the Financial Crisis

Why Can’t Economics Accurately Predict the Timings of Recessions?

It boils down to two main reasons: The problem is extremely difficult.The field of macroeconomics has been corrupted by politics. Regarding the first problem, it’s an issue of complexity. Just like molecules do not act like sums of atoms (and thus chemistry bears little resemblance to physics), humans do not act like sums of organs,… Continue reading Why Can’t Economics Accurately Predict the Timings of Recessions?

Is Paying My Mortgage Off Earlier the Best Financial Decision I Can Currently Make?

It depends. If you have credit card debt, paying that off is the best. Other debt would need to be compared to your mortgage debt based on interest rates, whether they adjust (and if so, where you think interest rates may go throughout its life), whether they have a balloon payment, tax deductibility, flexibility of… Continue reading Is Paying My Mortgage Off Earlier the Best Financial Decision I Can Currently Make?

Why Did the Fed Lower Interest Rates If the U.S. Economy Is Doing Well?

There are three prevailing theories: 1) insurance 2) political pressure 3) market pressure. Regarding the first theory, Fed chair Jerome Powell may be trying to pull off what Greenspan did in 1995 and 1998. Powell has characterized both the rate cut in July and the most recent one in September as “insurance.” What he means… Continue reading Why Did the Fed Lower Interest Rates If the U.S. Economy Is Doing Well?

What Does It Mean When “The Monetary Authority Is Financing the Fiscal Authority”?

The fiscal authority is Congress (along with the president), which passes budgets regarding federal taxation and expenditures. In economics, these types of actions are called fiscal policy, which means Congress is the fiscal authority. Tax cuts and increased spending can stimulate an economy to fight unemployment, and the opposite actions can cool it down to… Continue reading What Does It Mean When “The Monetary Authority Is Financing the Fiscal Authority”?