Sunday, April 29, 2012

7 - Inflation and Bubbles and Tulips

.Inflation and Bubbles and Tulips - CrCo > .
22-10-28 How China Is Helping to Reduce Inflation - Patrick Boyle > .
22-1-15 Why Turkey Is Not Fixing It's Hyperinflation Problem - EcEx > .
skip Responds ad > . timestamps:
0:00​ - introduction
1:57 - is the US like Weimar?
13:07​ - when is hyperinflation unstoppable?
18:50 - is the US special?
20:27 - how to protect yourself
1961-2021 Highest National Inflation Rate > .


1) Purchasing power - the amount of physical goods and services that can be bought by a given amount of money.
a. Consumer price index (CPI) - a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.
b. "Real" means that prices from the past has been adjusted for inflation. Nominal means a price from the past that hasn't been adjusted for inflation. So the highest "nominal" box office receipts list is quite different.
c. Since we have to keep the market basket constant over time, a traditional CPI won't adjust for either new products or increases in product quality.

2) Inflation - an increase in a currency supply relative to the number of people using it, resulting in rising prices of goods and services over time.
a. Demand pull inflation - too much money chasing too few goods.

3) Bubbles - a market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset.
a. Speculation - trading a financial instrument involving high risk, in expectation of significant returns.
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8 - Fiscal Policy and Stimulus

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Fiscal Policy and Stimulus - CrCo > .
Debt ..

Supply and Demand ↠

1) Recessionary gap - a situation wherein the real GDP is lower than potential GDP at the full employment level.
2) Inflationary gap - the amount by which the actual gross domestic product (GDP) exceeds potential full-employment GDP.
3) Macroeconomics - the study of the entire economy as a whole rather than individual markets.
4) Fiscal policy - the way a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
a. Expansionary Fiscal Policy - stimulates the economy during or anticipation of a business-cycle contraction.
b. Contractionary Fiscal Policy - enacted by a government to reduce the money supply and ultimately the spending in a country.
c. Classical theories assumed that the economy will fix itself in a long run, and that government intervention will, at best, lead to unintended consequences and, at worst, cause massive inflation and debt.
5) Deficit spending - the government spends more money than it collects in tax revenue.
a. Crowding out - where increased public sector spending replaces, or drives down, private sector spending.
b. Keynesian economists maintain that crowding out is only a problem if economy operates at full capacity, where all workers are employed and we're producing as much as we can.
6) Austerity - raising taxes and cutting government spending to reduce debt. In crisis of 2008 was main policy of EU, which led to worse results than deficit spending policy in US.
7) Multiplier effect - the initial increase in government spending of 100$ might turn out to be 175$ worth of actual spending in the economy.
a. When the economy is booming, multiplier is close to 1x.
b. When economy is in recession, the multiplier is around 2x.
c. Spending on infrastructure, and aid to state & local governments , also seems to have fairly high multiplier, about 1.5. But general cuts to payroll and income taxes seems to have a multiplier of about 1:. If the government cuts 100$ in taxes, the economy is going to grow by about 100$.
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9 - Deficits & Debts

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Deficits & Debts - CrCo > .

Debt ..

1) Budget deficit - the amount by which a government's spending exceeds it's income over a particular period of time.
a. Debt - the accumulation of budget deficits.
b. In the same way our GDP grows every year, due to population growth and productivity increases. And our ability to sustain debt grows along with our income.
2) "Default"- the investors who loaned the government money lose billions and the government loses all credibility, and it causes massive recession.
3) Debt ceiling - limit on the amount of national debt that can be issued by US Treasury.

The bulk of the Can't Go Broke video uses the United States as an example, but generally you can apply these ideas to any country that issues its own sovereign currency, like the UK, Japan, etc.

Another thing to note is that Japan has an even bigger national debt than the U.S. when you compare their debt-to-GDP ratios. The debt number used at the beginning of the video ($28 trillion) is the gross national debt of the United States. Some economists prefer to focus on a different, slightly smaller number, called the “public debt.” That number takes the overall debt and subtracts from it any intergovernmental debt — in other words, debt owned by different parts of the U.S. government.

With the deadline to file tax returns coming up in the U.S., one of the things we found most interesting is that taxes don’t need to be collected first before a government spends; it flips our whole understanding of why we are taxed and what the limitations to government investment could be.
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10 - Monetary Policy, Federal Reserve

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What's all the Yellen About? Monetary Policy and the Federal Reserve: CrCo > .2017 Who Controls All of Our Money? - Fusion > .
2020 How is Money Created? – Everything We Need to Know - Fusion > .
Deflation .. 


1) The Federal Reserve is the central bank of US. Europe has the European Central Bank.
a. Most Central Banks have two jobs:
- they regulate and oversee the nation's commercial banks by making sure that banks have enough money in reserve to avoid bank runs.
- they conduct monetary policy which is increasing or decreasing the money supply to speed up or slow down the overall economy.
2) Interest rate - the price of borrowing money.
a. When interest rates are low, borrowers will find it easier to pay back loans so they will borrow more and spend more. When interest rates are high, borrowers borrow less and spend less.
b. Expansionary monetary policy - when central bank wants to speed up the economy, it will increase the money supply, which will decrease interest rates and lead to more borrowing and spending.
c. Contractionary monetary policy - when central bank wants to slow down the economy, they decrease the money supply. Less money available will increase interest rates and decrease borrowing and spending.
3) Liquid assets - an asset that can be converted into cash quickly and with minimal impact to the price received.
4) Open market operations - this is when the federal reserve buys or sells short term government bonds.
5) Quantitative easing (Q.E.) - when central banks buy longer term assets from banks.
6) Monetary policy - changing money supply to speed up or slow down economy.

https://www.khanacademy.org/economics... .

https://www.investopedia.com/terms/s/... . 

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11 - Money and Finance

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Money and Finance: CrCo > .
Debt ..

Europe - Medieval Banking & Money Creation ➼

1) Money serves three main purposes:
- Medium of exchange. It is generally accepted for payment for goods and services.
- Store of value. Money can be stored.
- Unit of account. Money is standardized metric that helps us measure value of things.
2) Financial system.
a. Lenders
b. Borrowers
c. Governments
d. Capital - the machinery, tools and factories owned by a business and used in production.
e. Financial system is a network of institutions, markets and contracts that brings lenders and borrowers together.
f. Debt - if you get a loan from the bank, you are obligated to pay back the amount you borrowed plus the amount of interest.
g. Equity - the difference between the value of the assets/ interest and the cost of liabilities of something owned.
h. Financial instrument - a tradeable asset of any kind.
i. Financial institution - an establishment that conducts financial transactions such as investments, loans and deposits.
j. Financial markets with instruments like stocks and bonds, allow borrowers to crowdsource the money they need to borrow. They raise their capital from lots of investors, and spread the risk around.
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