the week in review
May 25-May 29, 2020
a look back at this week’s essays…
Art Collecting: Learn While You Earn*
5 Reasons to Invest in Art: Investing in museum-quality art will make you richer financially… owning it will give you a richer life.
Click here to read more.
What We (Should) Want for Our Children
When my children were infants, I wanted only one thing for them….
Click here to read more.
How to Get Better at What You Do Best
The greatest challenges we face in life are obstacles that reside inside of us. When it comes to mastering a skill, the greatest challenge is not the work and time involved in acquiring it but the desire to be a master before you become one.
Click here to read more.
- How much do you remember about this week’s “Words to the Wise”? Use each of these words in a sentence:
* fractious (5/25/20)
* serendipitous (5/27/20)
* reproach (5/29/20)
- Fill in the blanks in this week’s quotations:
* “The only time life allows for _____is the present. Right now. In this very moment.” – Michael Masterson (5/25/20)
* “Of all nature’s gifts to the human race, what is sweeter to a man than _____?” – Marcus Tulius Cicero (5/27/20)
* “If you accept your _____ you go beyond them.” – Brendan Behan (5/29/20)
- Are these statements True or False?
* The X in X-rays stands for electromagnetic. (5/25/20)
* Camp David was built as a retreat for President Dwight D. Eisenhower. (5/27/20)
* Every year, the Washington Post holds a contest in which readers are asked to supply alternative meanings for common words. (5/29/20)
recommended links from this week’s blog
* “Freedom Isn’t Free” – a powerful speech by President Ronald Reagan. I don’t know enough about Reagan’s career to have a strong opinion about it, but I can think of only two other presidents in my lifetime that were as good as he was at speechifying: Kennedy and Clinton. To watch the speech – which includes Reagan’s dramatic reading of “A Soldier’s Pledge” – click here.
* “New Tennis Rules” Here
* “More Than Money: The Good Life Parable” – In this short film about a well-known fable, a fisherman teaches a young businessman about life after the young man uses his MBA knowledge to explain how the fisherman could be more successful. Here
* A TED Talk by George Monbiot – lots of interesting facts about how nature works. Here
* This is wrestling…Here
I liked your essays on the Corona Economy, as you called it, especially your explanation of how the Treasury and the Federal Reserve work. For years, I’ve heard the term “printing money” and always assumed that the Treasury really printed new dollars. Now I understand how it works – how both the Treasury and also the Fed can create fake dollars out of thin air and still manage to balance their books.
One thing I didn’t understand: You mentioned that there was a difference between what the Fed did to bail out the economy after the real estate crash of 2008 and what it is doing now. What is that difference?
I put the same question to Tom Dyson when I was researching those essays. Here’s what he said:
“The difference between original QE and ‘monetizing the debt’ is in the intention behind it… its intended purpose. Mechanically, they’re identical.
“The QE they did 2008-2014 was to goose the stock market and give a tail wind to the banks. They did it voluntarily. It was somewhat of an experimental new idea put forth by Ben Bernanke.
“The QE they are doing now is out of necessity. They must do it because if they don’t the government won’t be able to finance itself and it will go broke.
“It’s a subtle distinction and one that I’m sure would be lost on most mainstream economists. Most mainstream economists probably wouldn’t even entertain the idea that the US government is insolvent if not for the Fed’s money printing.”
Tom said it is a subtle distinction, but he was being polite. It is a very important distinction and one that, after you “get it,” explains a lot.
One of the arguments against the 2008-2014 QE bailout was that it was going to be inflationary. (Increasing the money supply by a trillion dollars should, in theory, make prices rise because you have more dollars competing for the same number of goods and services.) That didn’t happen. I wondered why. Now I understand.
The larger economy didn’t inflate because almost all of those extra dollars went to the financial sector, as Tom pointed out. The financial sector did inflate. Hugely. Stock prices shot up and made Wall Street (its brokers, bankers, insurance agents, their lawyers, accountants, and shrinks, etc.) very rich. And that tidal wave of newly “printed” dollars flowed into the businesses that catered to Wall Street: luxury cars, fine art, expensive real estate, etc. But the rest of the country? Main Street? They got poorer.
Now that I understand it, it’s difficult to see it as some sort of brave fiscal “experiment.” It’s hard for me to believe that the effect of it would not have been apparent to everyone behind it (all those Wall Street insiders) that so nobly volunteered their time to conjure up and direct the bailout.
But the current QE is different. It is different not only because it’s necessary rather than optional, but also because the lion’s share of it went to the American public through stimulus checks and the PPP program. So will the next $3 trillion.
That probably will cause inflation in the general economy because most of those dollars won’t be spent on stocks and bonds but on food and clothing and other basic commodities. Those are the things that will become more expensive, which means that the productive classes – the people that pay taxes – will be paying off the government’s crazy borrowing by paying more for just about everything they buy.
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For a look back at the stock market, click here.