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Asia banking bonds capitalism chart China commentary consumer debt Credit Cards credit crisis curiouscat debt economic data Economics economy employment energy entrepreneur Europe Financial Literacy government health care housing interest rates Investing Japan John Hunter manufacturing markets mortgage Personal finance Popular quote Real Estate regulation Retirement save money Saving spending money Stocks Taxes Tips USA Warren Buffett webcast

Simple Explanation of the Fractional Reserve Banking System

The webcast is by the great Kahn Academy which produces simple educational content (like the above) on all sorts of topics. I find this too slow but I think it might be good for people that are not really sure how the banking system works. There is a group of people that are very apposed to fractional reserved banking, as a principle. I actually am fine with it, but it needs to be regulated much better than we have done.

I suppose it might be true that our political leaders are much too subservient to those giving them lots of cash to regulate in a manner even close to acceptable: and therefore fractional reserve banking is dangerous. I am not sure that they are so hopeless that this is the case, though the more I see of how much they don’t know, and how often they seem to just vote based on what those giving them cash want it gets to be harder to believe they can be trusted to act close to properly (this is extremely sad). And it is mainly an indictment of ourselves: we keep putting people back in power that act mainly to reward those giving them cash and don’t seem interested in actually what is important for the long term interests of the country.

I believe the FDIC actually does quite a good job of providing a solution to manage some issues with a fractional reserve banking system and people being able to rely on getting their money back.

Related: Charlie Munger’s Thoughts on the Credit Crisis and Risk – Leverage, Complex Deals and Mania – Lobbyists Keep Tax Off Billion Dollar Private Equities Deals and On For Our Grandchildren

December 23rd, 2011 by John Hunter | Leave a Comment | Tags: Economics, Financial Literacy

How Economic Inequality Harms Societies

The increases in income inequality creates problems and increases serious risks. Some people have a political ideology that drives their thoughts on any economic policy. I instead, look to economic issues if they benefit society. The reason capitalism is great is because society benefits. The policies that create huge income inequality are bad for society and should be changed.

Sadly the strong support for policies to elevate trust fund babies in the USA have created a society where economic wealth in the USA is now greatly defined by how rich your parents are instead of your ability and effort. The USA used to have great social mobility now we have changed society to become more like feudal Europe, while Scandinavia has become more like the USA used to be for social mobility.

Related: Economic Fault, Income Inequality – Middle Class Families from 1970-2005 – Income Inequality in the USA (2006) – The Widening “Marriage Gap” is Breeding Income Inequality

November 7th, 2011 by John Hunter | 1 Comment | Tags: Economics

Auto Manufacturing in 2009: USA 5.7 million, Japan 7.9 million, China 13.8 million

This webcast includes lots of interesting data on China’s economy (the SAIC green transportation concepts is also interesting but not as much as the economic data, to me). I knew China had overtaken the USA in purchases of new cars. I knew China continues to grow manufacturing output amazingly. I did not know how incredibly rapidly Chinese growth in manufacturing cars has been in the last couple of years.

In 2007 the USA produced 10.8 million cars and light trucks, Japan 11.6 million, China 8.9 million. In 2008 USA 8.7 million, Japan 11.6 million, China 9.3 million. In 2009 USA 5.7 million, Japan 7.9 million and China 13.8 million. That is an amazingly quick transformation. The credit crunch is obviously a big part of the issue but the bigger story is the growth on the broad Chinese consumer economy (most of those Chinese cars are being bought in China).

Another interesting country is India: In 2007 they produced 2.3 million, 2008 2.3 million and in 2009 2.6 million. Global production: 2007 – 73 million, 2008 – 70 million, 2009 – 62 million.

The webcast includes more interesting statistics. More than 250 million people have been removed from abject poverty (this is am amazingly great outcome that is often ignored). In 1978, .2% Chinese homes had a refrigerator; by 2008, 94% had refrigerators. In 2030 China will have 220 cities with over 1 million people. Today China has 110.

Related: Manufacturing Output as a Percent of GDP by Country – China Forecasts 9.6% GDP Growth, Close to Becoming 2nd Largest Economy (Dec 2009) – The Relative Economic Position of the USA is Likely to Decline

July 29th, 2010 by John Hunter | Leave a Comment | Tags: economy, Financial Literacy

Forum on the Future of Manufacturing in the US and Europe

The Future of Manufacturing in the US and Europe, The German Marshall Fund. Speakers: Ron A. Bloom, Simon Fraser, Wilfried Porth and Philip Stephens. I must admit I didn’t find this to be the most useful webcast but for those interested it may be worth watching.

Related: Manufacturing Driving USA Recovery – USA Manufacturing Output Continues to Increase (over the long term) – Manufacturing Output in Historically by USA, Europe and Asia – Capacity Utilization Rate Up Slightly From All Time Low (Aug 2009)

May 17th, 2010 by John Hunter | Leave a Comment | Tags: economy

Middle Class Families from 1970-2005

As I have said before, Elizabeth Warren is one of the people I find most informative on the economy we have created. This lecture (from January 31, 2008) is very interesting: The Coming Collapse of the Middle Class: higher risks, lower rewards and a shrinking safety net. It is important for us to realize that the decisions we make have consequences. If we allow corruption to grow and grow in the USA we will suffer more and more. If we continue to elect people that give away society wealth to those the pay them to the detriment of society (investment banks, drug companies, “intellectual property” lawyers, retail banks, farmers, trial lawyers, hedge fund managers, trust fund babies, physicians…) that naturally means their is less wealth for the rest of society.

Interesting data. Looking at standard family (Mom, Dad and 2 kids from 1970 to 2005), in inflation adjusted dollars: earnings increased a great deal (due to women working much more) but disposable income decreased. This is because basic expenses increased: health care, housing, transportation… (and this is with assuming employer provided health care – which has really been decreasing in likelihood over time). Those families are also more deeply in debt and reliant on 2 incomes. And if either income producer losses their jobs the economics of the family fail. Which means the family is much more at risk.

It really is great that lectures like this are available to us now.

Related: Elizabeth Warren Webcast On Failure to Fix the System – In the USA 43% Have Less Than $10,000 in Retirement Savings – Failure to Regulate Financial Markets Leads to Predictable Consequences – Lobbyists Keep Tax Off Billion Dollar Private Equities Deals and On For Our Grandchildren

May 2nd, 2010 by John Hunter | Leave a Comment | Tags: Economics, economy, Personal finance

“What the Financial Sector Did to Us”

Nobel Prize winning economist Joseph Stiglitz explores the current financial system and the damage done to the economy due to that system. As he states in the video the credit crisis is not something that happened to the financial institutions. The credit crisis caused recession is something the financial sector did to us.

He covers the topics he discusses in the video in his new book: Freefall

Related: There is No Invisible Hand – Failure to Regulate Financial Markets Leads to Predictable Consequences – Market Inefficiencies and Efficient Market Theory – Congress Eases Bank Laws (1999) – Volcker on the Great Recession and Need for Reform

March 9th, 2010 by John Hunter | 1 Comment | Tags: Economics, Financial Literacy

Investments of Nobel Prize Economists

3 Nobel prize winning economists, Robert C. Merton, Robert Solow and Paul Samuelson, took questions about the impending retirement savings crisis from PBS NewsHour correspondent Paul Solman in October 2008. Paul Solman asked them about their personal portfolios in the clip shown above.

Robert Merton tells his portfolio portfolio is in a Global Index Fund, Treasury Inflation-Protected Securities, and one hedge fund. He said he had been invested in a TIAA commercial real estate fund until recently, but sold in early 2008 when he worried commercial real estate prices had increased too far. He also sold out his Municipal bond holdings.

Robert Solow says he has no idea of his portfolio.

Paul Samuelson declined to say. He did offer that timing is not something investors can successfully do. He stated that timing the selling of assets was not as difficult as timing when to get back in. And that markets move very quickly so you can miss out on big gains. 2009 provided a great example of this. Many people sold stocks in late 2008 and early 2009. And most did not get back in. In 2009 the S&P 500 was up 26%.

Related: Retirement Savings Allocation for 2010 – How Much Will I Need to Save for Retirement? – Gen X Retirement – Many Retirees Face Prospect of Outliving Savings

January 23rd, 2010 by John Hunter | Leave a Comment | Tags: Investing, Personal finance, Retirement, Saving

Elizabeth Warren Webcast On Failure to Fix the System

Elizabeth Warren is the single person I most trust with understanding the problems of our current credit crisis and those who perpetuate the climate that created the crisis. Unfortunately those paying politicians are winning in their attempts to retain the current broken model. We can only hope we start implementing policies Elizabeth Warren supports – all of which seem sensible to me (except I am skeptical on her executive pay idea until I hear the specifics).

She is completely right that the congress giving hundreds of billions of dollars to those that give Congressmen big donations is wrong. Something needs to be done. Unfortunately it looks like the taxpayers are again looking to re-elect politicians writing rules to help those that pay the congressmen well (one of the problems is there is little alternative – often both the Democrat and Republican candidates will both provide favors to those giving them the largest bribes/donations – but you get the government you deserve and we don’t seem to deserve a very good one). We suffer now from the result of them doing so the last 20 years. Wall Street has a winning model and betting against their ability to turn Washington into a way for them to mint money and be favored by Washington rule making is probably a losing bet. If Wall Street wins the cost will again be in the Trillions for the damage caused to the economy.

Related: If you Can’t Explain it, You Can’t Sell It – Jim Rogers on the Financial Market Mess – Misuse of Statistics – Mania in Financial Markets – Skeptics Think Big Banks Should Not be Bailed Out

December 14th, 2009 by John Hunter | 1 Comment | Tags: Credit Cards, Financial Literacy, Personal finance, Real Estate

Warren Buffett and Bill Gates on Business, Health Care and more


In the webcast interview above Warren Buffett and Bill Gates discuss business, health care, economics, wall street, the Fed and more. Both agree the health care system is far too expensive and needs to be fixed. And both agree the current reforms are far too small and seem to do little to address the core problems with incentives and entrenched interests maintaining system in need of reform.

Both also agree the future is bright for the USA and the world economically. The innovation possible will may well come from more locations in the next century but those innovations will also come from the USA.

Warren Buffett also defends the independent Federal Reserve board system.

Related: Warren Buffet Webcast to MBAs – Advice from Warren Buffett UT at Austin business school – Bill Gates: Capitalism in the 21st Century

December 1st, 2009 by John Hunter | Leave a Comment | Tags: Investing

Hans Rosling Data on Economic Development and Health Results

Hans Rosling uses his fascinating data-bubble software to burst myths about the developing world. Look for new analysis on China and the post-bailout world, mixed with classic data shows.

“The worldview students have corresponds to reality the year their teachers were born”

The software he uses, the very cool Gapminder world, developed by his son and bought by Google is available online.

He also correctly congratulates the USA for providing free data it has collected worldwide, for decades, on world health. And correctly criticizes the World Bank for selling the data they compile using taxpayer funds.

Related: Data Visualization Health Care Example – Economic Measurement Issues Arising from Globalization – Millennium Development Goals – Government Debt Compared to GDP 1990-2007

November 25th, 2009 by John Hunter | Leave a Comment | Tags: Economics, Financial Literacy
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