Yess I know I haven’t posted in a while…goodness!  So preoccupied with work and with this class at Harvard.  Can someone tell me how linear algebra applies to the study of economics?  I don’t think I’ll ever explain supply and demand through an orthonormal matrix.  

So here’s an update – I’d like you to navigate to discuss.roguelynn.com, maybe share some ideas and whatnot.  You’ll have to sign up but it’s cool.  

Also – the new book for the b-con book club is Paul Krugman’s “Return of Depression Economics and the Crisis of 2008.”  So far the first 30 pages or so are an easy read.  Right now I’m reading about the Latin American currency crises, specifically Mexico.  It’s kind of interesting how he reflects about the restrictions for foreign investors, how they discourage it.  I remember a few weeks ago there was an issue with Citibank’s presence in Mexico, and how the increase in government shares would be against Mexican foreign investment policies, having a foreign government hold more than 5% (?) of a company.  Clearly Citi broke that – I wonder how the bank and the government went about approaching the matter.  …I need to remember to look that up.

Hmm what ideas could I write about?  Any help out there?

I got this petite book for Christmas, requested out of curiosity - The Case Against the Fed.

My advice – don’t bother.

I’ve read the first 30 or 40 pages this morning, and one term comes to mind: ridiculous.  Let me make the point that it is geared towards people that do not know anything about banking.  The author takes that point of view in order to point out how inefficient and poorly managed the Federal Reserve is ran.  If you did not know much about banking, it would be easy to be sucked into this book.

It alarms me that the author dwells on counterfeit money, and then uses the act of counterfeiting money to compare to what the Treasury is doing on the Fed’s request – printing money.  The book says printing money is legal counterfeit. Um, alright.  Oxymoronic at first – just plain dumb when the thought actually sets in.  It speaks of inflation as a bad thing, that the current supply of money is optimum and no additional money is needed.  That price deflation, essentially, is positive. (Mind you – the author bases price deflation on purely technological advances.  Of course the TV I bought last year will be cheaper this year after new technology replaces it.  That is not price deflation).  

It’s one of the Fed’s tools – to control inflation.  But control inflation to be moderate and expected.  If we did not have inflation, the economy would not grow, would not evolve, would remain stagnant.  

The author fails to explain how counterfeiting (the illegal kind) is actually handled.  It is assumed that counterfeit money is not ever controlled.  It is said that the criminals make the money, and buy goods, making the supply of money artificially increase.  And that people down the chain of exchanging goods for the counterfeit money will lose purchasing power, not because the counterfeit money is detected and withdrawn from the people’s hands, but because at the beginning, the criminals were able to buy goods, artificially buying up the demand for the product, while the people later down the chain will have to pay more for that same product.  The author uses this image to poorly construct what goes on with inflation.

Right.

Has this person taken an econ class?  

Inflation is not the timing of money changing hands, where people at the end of the ladder lose out compared to the people who touch the money first.  Inflation is the increase of general prices of goods & services over time.  There isn’t a person that loses out because he or she is the last to receive a dollar in a chain of buying and selling goods/services.  It is where everyone will be paying more overtime for products or services that once were cheaper in the past.  The author uses the government fiscal spending as a poor example to illustrate the point again – that one aspect of fiscal spending is for government projects, then those projects are undertaken by contracts with private sector, where the direct families of those benefiting from the contracts are the ones that get the opportunity to spend the money first, and so the ladder continues down.  Supply & demand does not react that fast, where someone buying a product today will affect the price of it tomorrow.  It is plain not possible.  

At least I know which school I know not to go to for my PhD.

*shaking head in shame*