Sunday, April 29, 2012

5 - Macroeconomics

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Macroeconomics - CrCo > .
Deflation .. 
24-3-22 Things I (Do) Worry About: Deflation || Peter Zeihan > .


1) Macroeconomics - the study of the entire economy as a whole rather than individual markets.

2) In general policy makers try to achieve three goals:
a. Keep the economy growing over time (gross domestic product - GDP)
b. Limit unemployment (unemployment rate)
c. Keep prices stable (inflation rate)

3) GDP is the value of all final goods and services produced within a country's border in a specific period of time, usually a year.
a. Transactions where nothing new was produced - don't count as GDP.
b. Also not including illegal activities.
c. Measured in dollars.
d. Nominal GDP is GDP not adjusted for inflation.
e. Real GDP is GDP adjusted for inflation.

4) Recession - when two successful quarters, or six months, show a decrease in real GDP. a. Depression - a severe recession.

5) Unemployment rate is calculated by taking the number of people that are unemployed and dividing by the number of people in the labor force, times 100.
a. Discouraged workers - unemployed people that were looking for work, but have given up.
b. There are three types of unemployment:
- frictional unemployment - the time period between jobs, when a worker is searching for, or transitioning from one job to another.
- structural unemployment - unemployment caused by lack of demand for a worker's specific type of labor.
- cyclical unemployment - unemployment due to recession.
c. Natural rate of unemployment - the lowest rate of unemployment that economy can sustain over a long period.

6) 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. Deflation - a decrease in general price level of goods and services.
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6 - Productivity and Growth

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Productivity and Growth - CrCo > .
22-2-4 How to Read the Jobs Report | WSJ > .


1. Why some countries have high GDP and others have low GDP (some countries are rich and other poor):
a. Lack of natural resources.
b. Corrupt governments.

2. GDP per capita(output per person) is used to tell how wealthy a country is.

3. Countries with high GDP/capita have far less infant mortality, poverty and preventable diseases.

4. Productivity and growth:
a. The more a worker produces, the more a worker can earn.
b. Economists argue that the main reason that some countries are rich is because of productiivty.
c. Higher value produce also the growth effect.
d. Productivity is key, but there are limits.

5. People in poor countries need food, water, plumbing, hospitals and medicine, and all of those things are needed to get better efficiency.

6. How much stuff is produced per person(can be called GDP)

7. Factors of production effect the efficiency:
a. Land
b. Workers
c. Capital( and also workers education, knowledge aka human capital)
d. Technology: The sum total of knowledge and information that society has acquired concerning the use of resources to produce goods and services. (Connectivity= productivity).

Increasing Productivity has resulted in increasing standards of living(globally and historically).
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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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