Ask an Economist (Post #1005 and counting)

[gallego]

What's a good and simple book/site to learn more about this stuff? I know up to intermediate college micro/macro economics with calculus but I don't know a lot about this whole investing, banking, dividends, shareholders, write-offs whatnot.

 

[JerichoHill]

Jeff Sachs style basically?

I don't like him very much, can't you tell?

 

[gallego]

I don't like him very much, can't you tell?

But isn't he all about micro-projects and building physical capital like you were describing?

 

[Elta]

What is the ultimate source of information when it comes to how much money the federal government gets and from where every year and where it goes?

 

[EconomistBR]

And now for the really bad news:
http://news.yahoo.com/s/ap/20080116/ap_on_bi_go_ec_fi/economy;_ylt=AjEi49aSGgcCB4Sy0whQwlSs0NUE
"Consumer prices rose by 4.1 percent for all of 2007, up sharply from a 2.5 percent increase in 2006, the Labor Department said Wednesday."

This means that the FED doesn't have much room to cut the interest rates sadly.

 

[JerichoHill]

But isn't he all about micro-projects and building physical capital like you were describing?

No, he most definitely isn't. At least, that's the impression I got reading his book "The End of Poverty". Heck, the title is a lie! He does speak about micro-projects, but he views them as something a large organization can provide. I don't buy that.

 

[JerichoHill]

What is the ultimate source of information when it comes to how much money the federal government gets and from where every year and where it goes?

General Accounting Office

 

[JerichoHill]

And now for the really bad news:
http://news.yahoo.com/s/ap/20080116/ap_on_bi_go_ec_fi/economy;_ylt=AjEi49aSGgcCB4Sy0whQwlSs0NUE
"Consumer prices rose by 4.1 percent for all of 2007, up sharply from a 2.5 percent increase in 2006, the Labor Department said Wednesday."

This means that the FED doesn't have much room to cut the interest rates sadly.

Ah, and I just got my COLA...4.59% (In the US Government, one gets two raises a year...one is a cost of living adjustment and the other is an actual raise

 

[gallego]

No, he most definitely isn't. At least, that's the impression I got reading his book "The End of Poverty". Heck, the title is a lie! He does speak about micro-projects, but he views them as something a large organization can provide. I don't buy that.

Ah, ok. I had the impression that he was advocating micro-projects directly related to physical capital, e.g. supplying mosquito nets, power generators, etc. to small villages and working on the small scale like that as opposed to throwing billions of dollars at programs that are more macro-level. But that's just based on some articles and interviews and stuff; I'll have to check out the book.

 

[JerichoHill]

I remember there being some micro-examples in his book.

But he also advocates having the us raise its foreign aid for .1 4 of its budget to .7 of the budget. I dont think he recommends on what to cut though, and that's kind of a problem for his outlook.

 

[Mulholland]

So has bush lost the plot altogether with his plan to spur growth with yet another tax cut? Shouldn't spending be reigned in first before even mentioning another tax cut? Or is this simply political posturing to make the democrats look like bad guys if/when the refuse the bill in the house?

 

[Norseone]

So has bush lost the plot altogether with his plan to spur growth with yet another tax cut? Shouldn't spending be reigned in first before even mentioning another tax cut? Or is this simply political posturing to make the democrats look like bad guys if/when the refuse the bill in the house?

His theory is if you cut taxes and give people more money they will spend more...which will prop up the economy (artificially if you ask me). He is scared of a recession

 

[JerichoHill]

So has bush lost the plot altogether with his plan to spur growth with yet another tax cut? Shouldn't spending be reigned in first before even mentioning another tax cut? Or is this simply political posturing to make the democrats look like bad guys if/when the refuse the bill in the house?

Politicians feel they have to do something PR-wise in bad times even though the time to do something was probably quite some time ago. That way they can say "I did something!" and most of the public will buy it.

The time for something to be done was 2006.

 

[Godwynn]

Here is something we haven't heard much about.

Bond insurers. I know they are in trouble right now, what are the economic effects if MBIA, AMBAC, and ACA Holdings go under?

Will billions of dollars worth of bonds become worthless? The Economist's story was a bit above my head, but they said bond insurance in the United States totals $2.4 Trillion.

 

[Mulholland]

Hey Jericho. I thought you might find this interesting, but your blog(I think) got indirectly dugg through digg.com.

http://zenhabits.net/2008/01/so-i-quit-my-day-job-holy-cow-i-took-the-plunge/
If you scroll down a bit this guy says he was inspired by Get Rich Slowly. If this is true...well, congratulations.

 

[Elrohir]

It seems the Fed has cut interest rates by three quarters of a point. Is this as bad as I think it is, or is there something I'm not seeing here?

 

[gallego]

"Overseas Investors Buy Aggressively in the U.S."

At the center of concern is the growing influence of sovereign wealth funds, which invested $21.5 billion in American companies last year, according to Thomson. Analysts say they could skew markets by investing to improve the fortunes of their national companies or to pursue political goals.

“This is a phenomenon that could be called the growth of state capitalism as opposed to market capitalism,” said Jeffrey E. Garten, a trade expert at the Yale School of Management. “The United States has not ever been on the receiving end of this before.”

Perhaps emblematic of national ambivalence, in an appearance on CNBC last week, the voluble market analyst Jim Cramer spoke in menacing terms about the growing role of state investment funds from the Middle East and China.

“Do we want the communists to own the banks, or the terrorists?” Mr. Cramer asked. “I’ll take any of it, I guess, because we’re so desperate.”

Is this as bad as people say it is? What is the worst that could happen if there is a lot of foreign ownership in the American economy?

http://www.nytimes.com/2008/01/20/business/20invest.html?pagewanted=2&sq=foreigners buy &scp=2

 

[EconomistBR]

Nothing bad can happen if there is a lot of foreign ownership. IMO both Jeffrey E. Garten and Jim Cramer are being alarmists and nationalists.

Until proven contrary sovereign wealth funds are simply legitimate funds trying to obtain greater returns on their investmens. Nothing wrong there.

And it is this large influx of foreign investment that is financing this huge trade deficits. So the US has no option but to sell off assets.

 

[EconomistBR]

It seems the Fed has cut interest rates by three quarters of a point. Is this as bad as I think it is, or is there something I'm not seeing here?

I am starting to think it was good for the US economy.

Yesterday the Euro lost value against the dollar, so this interest rate reduction will reduce the attractiveness of the dollar, reducing its value.

The dollar must devalue in order to correct the trade deficit and have exports replace the US consumer as a supporter of aggregate demand.

This interest rate cut wasn't meant necessarilly to stimulate consumption it was meant to devalue the dollar.

 

[Whomp]

I started a thread on SWF's.
http://forums.civfanatics.com/showthread.php?t=258835

I think there is a difference between a government owning a business versus a true investor. I know Sarkozy and Merkel are trying to create a golden share to avoid it from happening.

Merrill Lynch is currently 40% owned by employees and now another ~20% between Kuwait, Singapore and Singapore governments along with a Japan bank and Davis a buy side money manager.

I think it will be interesting to see in competitive bid who gets deals done in these countries. Merrill or UBS or Goldman?...time will tell.