Comments on: Thirteen Macroeconomic Musings http://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Sun, 12 Feb 2012 22:02:53 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: KSmithhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1685 KSmith Tue, 10 Jul 2007 05:06:42 +0000 http://alephblog.com/?p=167#comment-1685 David I am struggling to understand your concerns about the trade deficit. First, this is a balanced equation -- by definition everything adds to zero, which means a capital surplus to offset the deficit. Everyone seems to pick on the US and yet other parts of the world are just as imbalanced -- again by definition. As far as the carry trade goes -- that seems like more of an issue with Japanese policies and people's willingness to speculate than with US policies. Second, these are aggregate numbers based on millions upon millions of individual voluntary exchanges -- no one is forcing those countries to take our dollars for their goods -- they do it willingly. Third, in this globalized market, products or parts can be routed through several countries before arriving at their ultimate destination -- seems very likely the government must run into definitional issues when calculating these trade numbers. As far as investors using too much leverage -- I am not going to argue with you there -- I realize you believe the 3 issues are all connected but I would argue we have had a trade deficit for almost all of our history yet I do not believe we have had the kind of leverage that is in practice today for most of our history. I just find it hard to argue with Milton Friedman who, if memory serves, described a trade deficit as the closest thing to a free lunch. the blog is great -- thanks for writing David

I am struggling to understand your concerns about the trade deficit. First, this is a balanced equation — by definition everything adds to zero, which means a capital surplus to offset the deficit. Everyone seems to pick on the US and yet other parts of the world are just as imbalanced — again by definition.

As far as the carry trade goes — that seems like more of an issue with Japanese policies and people’s willingness to speculate than with US policies.

Second, these are aggregate numbers based on millions upon millions of individual voluntary exchanges — no one is forcing those countries to take our dollars for their goods — they do it willingly.

Third, in this globalized market, products or parts can be routed through several countries before arriving at their ultimate destination — seems very likely the government must run into definitional issues when calculating these trade numbers.

As far as investors using too much leverage — I am not going to argue with you there — I realize you believe the 3 issues are all connected but I would argue we have had a trade deficit for almost all of our history yet I do not believe we have had the kind of leverage that is in practice today for most of our history.

I just find it hard to argue with Milton Friedman who, if memory serves, described a trade deficit as the closest thing to a free lunch.

the blog is great — thanks for writing

]]> By: AAhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1679 AA Tue, 10 Jul 2007 01:21:28 +0000 http://alephblog.com/?p=167#comment-1679 David, It is possible you are right about the "not working hard enough" part of the analysis, but I think that the analysis is incomplete. I'll draw on Austrian economics to highlight the fact that inflation, especially high rates of inflation, by definition create inequalities in income (between those who receive the inflated money first and those who get the trickle down effects), thereby eroding the middle class. Extreme rates of inflation of course lead to the breakdown of societies. So my thought is that given the low levels of inflation, the answer is somewhere in between - your view of lack of sufficient hard work, and the Austrian view of the harmful effects of inflation. David,
It is possible you are right about the “not working hard enough” part of the analysis, but I think that the analysis is incomplete.
I’ll draw on Austrian economics to highlight the fact that inflation, especially high rates of inflation, by definition create inequalities in income (between those who receive the inflated money first and those who get the trickle down effects), thereby eroding the middle class. Extreme rates of inflation of course lead to the breakdown of societies.
So my thought is that given the low levels of inflation, the answer is somewhere in between – your view of lack of sufficient hard work, and the Austrian view of the harmful effects of inflation.

]]> By: PaulinKansasCityhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1677 PaulinKansasCity Mon, 09 Jul 2007 23:40:32 +0000 http://alephblog.com/?p=167#comment-1677 Great comments Don; the early 20th century labor/capital battles could be what is in store for our country; Great comments Don; the early 20th century labor/capital battles could be what is in store for our country;

]]> By: Barryhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1670 Barry Mon, 09 Jul 2007 18:21:31 +0000 http://alephblog.com/?p=167#comment-1670 Government statistics on inflation are badly understated. I've been charging by grocerices on credit cards since 97 and I can see my monthy expenditures. Overall, my costs are up 18% since 2002. What I don't understand is why short-term interest rates reflect the government's reported rate of inflation and the not the real rate of inflation. Government statistics on inflation are badly understated. I’ve been charging by grocerices on credit cards since 97 and I can see my monthy expenditures. Overall, my costs are up 18% since 2002.

What I don’t understand is why short-term interest rates reflect the government’s reported rate of inflation and the not the real rate of inflation.

]]> By: aliens8mycowhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1666 aliens8mycow Mon, 09 Jul 2007 13:01:58 +0000 http://alephblog.com/?p=167#comment-1666 Hi David, Can you elaborate on this statement: "The US government will not make good on all the promises it has made in money with today’s purchasing power." Are you suggesting that the US will experience higher inflation so the US government can use much cheaper dollars to pay its debts? thanks, Wade Hi David,

Can you elaborate on this statement: “The US government will not make good on all the promises it has made in money with today’s purchasing power.” Are you suggesting that the US will experience higher inflation so the US government can use much cheaper dollars to pay its debts?

thanks,
Wade

]]> By: PaulinKansasCityhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1658 PaulinKansasCity Mon, 09 Jul 2007 04:00:33 +0000 http://alephblog.com/?p=167#comment-1658 The willingnes to lead a somewhat spartan life style (although go the third world to be embarassed by the American definitiion of spartan) seems to be in decline from my view dealing with retail clients. The symptom I see from retired folks is still the willingness to push the limits on their income; the income approach I favor is very similar to david's balanced portfolios with cash reserves but I fight many battles to dissuade people from the "maximum yield approach". Even though I hear frequently "we can live on less" I never see it unless forced upon the client. What I see in younger individuals is the lack of after tax assets from families that have $60,000 to $100,000 incomes. They all have decent homes; cars; boats; etc. I also see a lot of business people that have weak balance sheets; they have no major cash reserve to fund their businesses. we are seeing the price of this now in the smaller homebuilders. The best advice I can give anyone in their twenties out of school is to save after tax in addition to retirement/401(k); it is tough to start or buy a business without these assets (I was very lucky and learned this in college; I was student loan debt free by the time I was married at 25 and had been saving money). I am also seeing individuals in their 60s inheriting assets that on average will not make it to their children; these individuals live well compared to their parents and will probably draw down their assets unless they invest consistently well; no small challenge for all of us. I do see many individuals in their 50s and 60s subsidizing adult children lifestyles. In the context of above I believe Social Security retirement age/medicare will be moved up to the low 70s; it makes sense to me so it won't happen!! I appreciate the blog reader's patience with this post! Thanks to all. The willingnes to lead a somewhat spartan life style (although go the third world to be embarassed by the American definitiion of spartan) seems to be in decline from my view dealing with retail clients. The symptom I see from retired folks is still the willingness to push the limits on their income; the income approach I favor is very similar to david’s balanced portfolios with cash reserves but I fight many battles to dissuade people from the “maximum yield approach”. Even though I hear frequently “we can live on less” I never see it unless forced upon the client. What I see in younger individuals is the lack of after tax assets from families that have $60,000 to $100,000 incomes. They all have decent homes; cars; boats; etc. I also see a lot of business people that have weak balance sheets; they have no major cash reserve to fund their businesses. we are seeing the price of this now in the smaller homebuilders.

The best advice I can give anyone in their twenties out of school is to save after tax in addition to retirement/401(k); it is tough to start or buy a business without these assets (I was very lucky and learned this in college; I was student loan debt free by the time I was married at 25 and had been saving money). I am also seeing individuals in their 60s inheriting assets that on average will not make it to their children; these individuals live well compared to their parents and will probably draw down their assets unless they invest consistently well; no small challenge for all of us. I do see many individuals in their 50s and 60s subsidizing adult children lifestyles.

In the context of above I believe Social Security retirement age/medicare will be moved up to the low 70s; it makes sense to me so it won’t happen!! I appreciate the blog reader’s patience with this post! Thanks to all.

]]> By: Donhttp://alephblog.com/2007/07/07/thirteen-macroeconomic-musings/comment-page-1/#comment-1653 Don Sun, 08 Jul 2007 17:40:16 +0000 http://alephblog.com/?p=167#comment-1653 IOW the benefits of free trade are accruing to the few owners who can access foreign labor markets, and thus get greater returns on their capital, and the costs of free trade are accruing to workers, who get diminishing returns for their labor. I wonder what will happen ultimately in a democracy, where the many workers outnumber the few owners. IOW the benefits of free trade are accruing to the few owners who can access foreign labor markets, and thus get greater returns on their capital, and the costs of free trade are accruing to workers, who get diminishing returns for their labor. I wonder what will happen ultimately in a democracy, where the many workers outnumber the few owners.

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