/Econ/ Economics General #5: Dow 20,000 Edition

>Europe has been trying to crawl out of their recession for a decade now.
you say that like it's a bad thing, or something

greeks are facing reality for the first time in a century

europe is doing terrible because, unlike US FED, the BCE feeds states with brand new money one by one, unlike the US where there's no state bias, so at Europe the monetary system puts pressure on shitty countries (like Greece, Italy, Portugal and Spain) so their politicians are forced to change their policies to make a little more sense, in an attempt to not abuse inflation too much.

youtube.com/watch?v=nxv4rIEEPgQ

The euro, as any currency is fucked up, but not as bad as the dollar bruh

The Euro, for all intents and purposes, has been a growth strangulation machine for most of southern Europe. It's cost the taxpayers of Europe billions and has cost the jobs of hundreds of thousands of young people.

>Feeds states with brand new money one by one
Yeah it's a dysfunctional currency union, just look at pic related. Without the Euro, this crisis would've ended years ago.

Milton Friedman correctly predicted that forced monetary integration would cause political disunity in Europe.

>hyperinflation

We've barely been able to hit 2% inflation after injecting trillions of dollars into the economy. We have much more to fear from deflation than hyperinflation anytime soon, even if we do use 's plan

it's not that bad

there's still growth, just small, the point is, not all growth is good

>b-but why? how do you dare to say that?

because growth due to credit expansion and bubble economy is temporary, it last as much as the effects of low interest rates keep diggin in

when shit hits the fan, it's time to reallocate wasted resources and that's called recession

if it wasn't for the Euro discipline, southern europe would have pushed fantasy thought even more inflation/monetary policies with their own currency, but they're moderated

I'm not defending the BCE actions tho, it's basically a "happy accident" that the system goes more case by case so it just simply doesn't allow any political agenda to shitty states

yes, now it's hurting germans, but at the long run the economical scenario will get better because shitty states will enjoy fiscal discipline, alternatives would be less popular and more harming

all currencies have the same illness anyway

hi /econ/
I'm a pleb and don't know much about economy, do you have any good economy news sources or vulgarisation material to recommend ?
I want to stop having to take mainstream media or politician's word for it about these matters and hopefully start to figure out how shit works fo myself

>hurting Germans

If anything, the Germans have prospered under the euro. Having other countries subsidize your exports by sharing the same currency does a lot of good to an economy. Germany is on its way to overtake china in net exports within the next 5 years.

the germans are also eating up all the inflation that comes from the UE rescues to shittier countries while german's pensions are at stake of exactly these shitholes with political tendencies to resists common sense to keep pushing for fantashy and top-bubble keynessian economics

>stop taking mainstream media

Well it depends. CNBC and the Wall Street Journal are usually good in general for economic news and are more unbiased than you may think, especially in the case of CNBC. A lot of CNBC's investing is conventional thought and bluepilled, but their economic news shows a good diversity. I read Bloomberg even though I'm not a leftist because they have good pieces on there too.

For outside the norm sources, maybe Investors Business Daily and Seeking Alpha- you can follow different authors on Seeking Alpha and they argue perspectives anywhere from Post-Keynesianism to Austrian economics.

>even more inflation/monetary policies with their own currency, but they're moderated

That's the whole problem. The monetary policy that works for Germany isn't the same monetary policy that works in Southern Europe. During a crisis like the Eurozone's in 2007, you would need to ease monetary policy, just like in the United States. That's why there's such a dramatic decline in Southern Europe; you can't just say that you're helping them by getting rid of any options to help themselves.

There's a different between easing to boost AD and hyperinflation, the former does not cause the latter. The Eurozone as a whole has more to fear from deflation than inflation anytime soon, considering that 2% deflation would probably be worse than 20% inflation.

>eating up all the inflation
Not really

Thanks my man i'll look it up

no problem

What are the pros and cons of the border tax idea? (cnbc.com/2017/01/26/white-house-spokesman-says-trump-seeks-20-tax-on-mexican-imports-to-pay-for-border-wall.html)

I'm kind of interested in the policy because it would raise a lot of revenue, but it also seems overly complicated and could make it harder for future tax reform efforts

Bump for interest

If it's just a tax then he's just fucking the future for some short term gains. There's lots of other things going on though. Deportation of tons of people will increase the cost of labor while the proposed tax reduction and simplification, the reductions in overall regulations, and capital repatriation could make the US extremely attractive for businesses in the short term.

Ultimately this will all depend on the specifics. If he can lure companies back I bet they will be producers of items with highly technical processes and items that have high shipping costs. Companies with aging overseas plants or hose that heavily utilize copackers will have to take a hard look at the numbers. If all the policies are implemented to the maximum I expect to see moderate growth in several industries and an explosion in logistics jobs.

smells like trade war

i'm not entirely sure, but i believe mexico could honestly sue us through the WTO for this. maybe not, depends on whether or not they can find it to be a discriminatory practice. probably so since it's not just consumers forking the bill.

Do you actually need to understand mathematics to get a grasp of economics?

I'd quite like to broaden my theoretical understanding beyond applying history and heuristic, but I've no practical need to make calculations.

not really.

you'll need to understand entry-level mathematics for SOME basic things, like the money multiplier but that's all babby sub-7 digit multiplication shit a third grader can do.

generally speaking, you can make it through your average principles of macro/microecon course without any heavy mathematics.

there's a heavy focus on graphs tho, especially in macro.

Are dividends a meme? say i have £30k to invest and i just buy stock in coca-cola how long will it take to get the roi back just from dividends on average?

if dividend return is 5% p.a then it'll pay for itself in less than 20 years...... but you also get to keep the stock and the stock will (if its not shit) increase in value.

Q.E.D get fucked

Usually the only math that you need in economics is if you go into econometrics. Unless you're planning on actually becoming an economist and just do econ in your free time, you'll probably be fine.

There are no economic pros.
It's an entirely political move to get American consumers to pay for the wall twice while getting to say "he cut taxes".

If it didn't exclude exports, would Mexico still be able to sue us in the WTO?

And if it is, then why aren't we suing China over their subsidy activity and the fact that their average tariff is like ~9%?

I support free trade by the way, I'm not a protectionist. I'm just curious about the answers to these questions.

Can't he just incentivize domestic investment with his corporate tax reform plans and by listening to Peter Navarro's infrastructure investment tax credit idea?

The only pro I've gotten out would be more revenues, since it seems like it could make a lot of money.

I get the sense that the market has already overcompensated for the value Trump's policies will add, and is basically a big bubble waiting to burst, probably when interest rates rise. I'm buying metals and hiding in my bunker.

>Can't he just incentivize domestic investment with his corporate tax reform plans and by listening to Peter Navarro's infrastructure investment tax credit idea?
sure, but its more of a putting plaster on a amputated leg at that point.

cool idea for a general OP. hope we see some more stuff like this.

i don't know much so i'm gonna lurk. i know basic economics 101 but where can i find more theory related to news events? i can only find one or the other

>read FT/economist
>usually just basic "pop knowledge"

>read a textbook
>old case studies

Usually econ blogs are the answer. Scott Sumner, Greg Mankiw, Stephen Williamson, Paul Krugman, hell I think even Bernanke has a blog somewhere around here.

Seeking Alpha has good economic updates, but it varies. The purpose of the website is to track stock/finance information, but there are a few economists that author articles about economics on there. I mostly read Scott Sumner and Lars Christensen, but there are others who write about it.

Also, what is the likelihood of starting a trade war if that plan for the border tax passes?

Bump for interest

cool thanks dude

I want to start educating myself on economics. Where should I start guys?

What do those two terms mean, floaters and peggers? Does it have to do something with the currency helping or slowing down economic growth?

MOM?
WP?

Currency that's pegged means it's price is tied to that of another currency, , like the USD. Sometimes it's pegged to the prices of a basket of commodities, like the Kuwaiti Dinar. That currency used to be tied to the USD, 3.5 USD to 1.

A floated currency isn't tied to the price of anything, like most currencies.

I don't trade 4X so I have no clue what effect that really has on currency trading.

Yeah I understand the definition of a pegged or floating currency, but I still don't get that chart. Lithuania, Slovakia, Germany, Belgium, Austria, Estonia, Slovenia, Spain, Latvia, Portugal, Cyprus, Italy and Greece are all in the Eurozone and thus under the same currency yet some of them are on the opposite ends of it.

I work on the emerging markets desk so I can give you a quick rundown.

>be investor
>invest in Nigeria
>local currency is pegged to USD
>no need to hedge your cashflows, as local currency shouldn't move at all
>so you spend your dollars to buy some assets valued in local currency and the bring you the cash flows in local currency
>it goes ok, you convert local currency back to dollar at the fixed rate
>suddenly oil price drops hard
>Nigerian economy goes south
>Nigeria is unable to hold the peg
>they abandon it
>suddenly your investment is worth 50% less

Fun times.

bloomberg.com/quote/USDNGN:CUR
reuters.com/article/us-nigeria-currency-idUSKCN0Z61F7

There are many F500 companies and PE funds that don't want to buy some derivatives to hedge exposure on a pegged currencies and last year and some of their investments imploded.

My guess is the economic contraction of those shitty countries like Italy and Greece cause strain on the value of the Euro, like a banana republic's peso struggling to legitimately stay pegged to the USD, while the growing economies help float the currency.

That's probably wrong and oversimplified, just a guess.

I thought the USD is essentially tied to the price of crude oil since commodities are priced in USD and crude is the most important commodity or something?

Wait nevermind I'm retarded.

nice thread

Not sure what you mean by this. I'm a guy with a communications degree just trying to educate myself a little bit.

cant tell, its purely political at that point, sorry about late response. Probably unlikely if you consider that mexico would be hit very hard by it, but its not like policians act in their countrie's economic interest. Their president would likely be seen as weak if he does not in some form respond to the levied tax

If Mexico retaliates, is there anyway for us to de-escalate? I don't think even Trump would want to get into a trade war. Most of these measures seem like bluffs to get other nations to reduce export subsidies.

Dividends are the way to go! Look for companies with a long history (at least 10 years, preferably 25) of growing dividend payments (this means the stock will appreciate to retain the same yield) and a wide economic moat, preferably in a relatively uncyclical sector (coca cola ticks all these boxes)

As a rule, a good way to know when it's a good time to buy is to buy when the current divided yield added to the past 5 years compound dividend growth rate equals more than 12%

Buy and hold, reinvest dividends using a DRIP scheme and you are laughing. Repeat this with other stocks in various sectors

Not a get rich scheme by any means, but leave it long enough and you will be able to live off those dividends

fuck those boomer fucks and the asshole who created this stupid fucking system. Socialism never works so long as you have an exponential pop growth.

>Socialism never works so long as you have an exponential pop growth.
This is a meme though.
You just need growing tax revenue. The dependency-ratio may fluctuate, but It should be a relatively virtuous cycle if set up properly.
The other side of the problem is that wages have been awfully stagnant for most people, and that tax revenue hasn't been utilized at the very top for various reasons.

Increasing efficiency, automation, yada-yada-yada should (and i say "should", as in "ought", not "will") render agedness a temporary hump from which spending will eventually decline. You get falling population, but in a country with a labor surplus anyway - who cares?

Millenials are missing out. Red states are missing out.

I can understand why Trump won.

Cant really disagree. Though I have to say I dont understand the purpose of medicare and social security in a world where there exist comparable if not better retirement opportunities.

Marxism doesn't work in general. It's a flawed system.

If socialism needs more tax revenue to remain sustainable, isn't that irrelevant since socialism kills incentives for people to engage in productive activity, which is the source of the tax revenue to begin with?

I'm referring to phenomena like capital flight, offshoring, etc. etc.

look at nature
parasites and predators have always been everywhere

it doesn't work for the host/prey but it's not about that

I would say that the maxim it kills incentive is hyperbolic. It reduces incentive, yes, but people will nearly always engage in productive activity even when you set up barriers. If going around the barrier is easier than skirting it, people will do that - but otherwise they tend to pay.
By funnelling a lot into infrastructure or just being in a good location, you can wind up with a situation where people pay the taxes because on the whole it's still the best place to be. (Hence how the UK, for example, props up a welfare state while having a huge financial sector.)

It's more about sources of revenue than one big confusing ball of "taxation", and the policy implications of each type. For example if you depend on income tax for most of your revenue, stagnant wage growth means stagnant revenue unless you put up the tax rate. Especially since once you pass a certain point, you might be taking income in other forms that don't come under income tax. With a less clunky tax system (or renewed wage growth for most people) finding sufficient revenue shouldn't be difficult.

Even without a punitive tax burden, it's quite likely that businesses would still offshore/outsource for lower labour costs/laxer regulation. I'm vaguely reminded of companies registering in the Channel Islands because of more sympathetic labour regulations, and Airlines registering their planes from Ireland. I suppose the key-question is market access, and to what extent the national government is permissive of tax avoidance. (Sticking with my tendency to use the UK as an example, they've always seemed rather relaxed to the prospect.)

Regarding capital flight and the like my latent nationalism makes me think those are arguments for capital control mechanisms as much as they are a case against excessive taxation. Welfare policies are not the only thing that could lead to a demand for increased taxation, and the risk of capital flight destroying an otherwise salvageable country is concerning.

>cnbc
>nyt
>theguardian
>fox
plx op
don't start a thread full of fake news
>South America is going to shit... Venezuela inflation at 800%. Brazil president impeached.
This is nothing abnormal in LA economies, back in the 80's shit was much worse and most of LA crawled out of it in a decade, with some countries taking up to two decades
Venezuela has little relevance in LA as a whole, and Brazil's impeachment seems like Brazil being saved from retardation and corruption

>fake news
I just used a diverse set of sources. Zerohedge is good for getting raw data, but not necessarily good commentary. I posted a diversity of views, it's just economic news