So, what is this blog all about? Quite simply, it will be aimed at exploring issues in as scientific a manner as possible to spark stimulating conversations and creating new connections and perhaps most importantly, to help me learn. Now, I know the subheader at the top of the page mentions policy commentary, and that… Continue reading What’s This Blog All About?
(image via imgflip) I often run across people who just completely dismiss mainstream media (MSM) as being completely unreliable. There is some merit to this perspective, but I think a better understanding of markets might help you get better results from your media sources. Let me explain. "What do you mean I sunk your Battleship?"Image… Continue reading On the Reliability of the “MSM”
(image via Fundamental Stocks) Well, inflation involves a currency losing value. So, in one sense, inflation is bad for any security denominated in that currency because the buying power of that amount of money decreases. In regards to why some stocks react very negatively to inflation news, this has more to do with expected interest rates.… Continue reading Why is inflation bad for stocks?
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?
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
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?
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?
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”?
(image via The Democracy Labs) One idea is to reform corporate governance away from focusing narrowly on shareholder interests and instead take into account the interests of broader stakeholders. As defined here, stakeholders are “any third party that has some level of dependence upon the corporation” and can include employees, customers, suppliers, and the larger… Continue reading What Do You Think Is the Best Way to Improve Corporate Behavior So as to Prevent Things Like the Opioid Crisis?
(image via the Federal Reserve Economic Data) Someone on Quora asked if index/passive funds are the new subprime CDOs, perhaps implying that there could be an index fund asset bubble. My answer? Absolutely not. CDOs (collateralized debt obligation) are rather opaque, whereas index funds are much more transparent, particularly exchange-traded funds (ETFs). (image via MoneyControl)… Continue reading Are Index / Passive Funds the New Subprime CDOs?