Financial Modeling Self Study Program

Why is the world so messed up?

Here’s another post inspired by the Trump election. What the hell is going on in the world? Why are people so angry? Why are the Brexits and the Trumps of the world winning elections? Why are extremists of the right-wing and the left wing, the populists, the isolationists, the politicians of anti-immigrant and anti-trade persuasion, the fascists and the socialists gaining power all across the western world?

It feels like in recent years that the world has taken a big step backwards. The short-lived optimism brought upon by the end of the cold war has been replaced by fears of global terrorism and the anxiety brought upon by power-hungry dictators and empowered rivals such as Russia and China. Meanwhile, belief in a prosperous “age of moderation” was shattered by the global financial crises and by the indisputable evidence of surging income inequality.

Many smart people have tried to explain the various factors causing our world-wide angst. Capitalism. Wall Street. Globalization. Trade. Technology. Immigration. Terrorism. Some get parts of it right. Some get none of it right. But few correctly see the larger picture, that is, the fundamental trends underpinning these trying times. We can do better.

I believe that the world is experiencing forces brought upon by a combination of two global trends: 1) massive financialization brought upon by short-sighted monetary policy, and 2) the growth of big government and its evil-twin, crony capitalism. Together (and they do go together), these two decades-long trends have depressed productivity and economic growth, subsidized job loss due to technological disruption and excess international trade, and sown the seeds for global terrorism.

No institutions have done more damage to the global economy over the past several decades than the world’s central banks. No idea has done more damage to the global economy over the past several decades than the belief that a centralized government agency can, and should, dictate the economy’s interest rates. Led by the U.S.’s Federal Reserve, this monetary policy experiment has lead to a world in which money is in massive over-supply, risk is massively under-priced and the financial sector has grown to become a massive drain on productivity.

Low interest rates are supposed to encourage investment. Financial bailouts are supposed to prevent disastrous depressions. Perhaps a short-period of monetary stimulus and a once in a blue-moon bailout might not do too much economic damage. But 30+ years of easy money and near-continuous bailouts of banks and the financial system have created such economic distortions that to categorize the U.S. economy as anything near a free market would be utterly wrong.

Of course, Wall Street is not the only entity in town that has grown substantially larger. Growth of federal governments has been almost as devastating to global economies. Marx thought that it was capitalism that was unstable and would inevitably collapse. He was wrong. Regrettably, it is democratic government that seems ultimately unstable and prone to collapse by slowly, but inevitably strangling the economy.

Democracy’s fundamental flaw is that it is biased towards its own growth. Growth of the government workforce, growth of regulation, growth of taxes, growth of disincentives, growth of monopoly. The flip side? Lack of productivity, lack of efficiency, lack of employment, lack of competitiveness, lack of growth, lack of freedom. What began as more or less a free market, becomes, through the growth of government and the cradle-to-grave welfare state, a system of crony capitalism, less and less distinguishable from socialism.

Decades of easy monetary policy combined with the growth of big government have, among other things:

  • Encouraged speculation and short-term financial results at the expense of long-term productive investment in infrastructure, research and development and human capital.
  • Subsidized consumption at the expense of savings, fostering a culture of indebtedness and instant gratification and exacerbating worldwide trade imbalances.
  • Subsidized investment in vastly unproductive uses, creating serial asset bubbles in the process. Nowhere is this more evident than in the technology industry where money losing companies funded with massive amounts of inexpensive capital that employ few disrupt profitable companies that employ many. This is not creative destruction, as some would claim. This is subsidized economic suicide.
  • Subsidized large, publicly traded and monopolistic companies at the expense of small, privately-held and entrepreneurial companies because of easy access to capital markets, crony capitalism and an emphasis on financial engineering, M&A and private equity activity.
  • Caused enormous inflation in non-tradable goods such as healthcare, higher education and real estate. Is it any wonder why the middle class is drowning in debt? Is it surprising that young people can’t afford to pay for college, can’t afford healthcare and can’t afford to buy a house?
  • Destroyed the centuries-old business model of local, relationship-based banking and is in the process of destroying pensions, retirement savings and the insurance industry. Collectively, these are the cornerstones of a capitalist economy.
  • Directly enriched the wealthy by funneling money through and to Wall Street and inflating financial assets, creating an enormous bifurcation of “haves” and “have-nots.”
  • Encouraged an entire generation of the best and brightest to become investment bankers, traders, venture capitalists and consultants, rather than scientists, engineers, doctors, and teachers.
  • Allowed governments (the U.S. in particular) to finance naive, adventurous wars in the middle east without the sacrifice of higher taxes, and thus without sufficient contemplation from the citizenry. Further, easy money and big government has subsidized a military-industrial complex lobbying for arms sales, arms subsidies, arms grants and general armament of questionable groups, not to mention all sorts of military involvement and war. Needless to say, the predictable result has been anarchy, terrorism (often, facilitated with our own weapons), untold number of deaths, and the largest migrant crises since World War II.
  • Fueled a worldwide energy and commodities boom that enabled petro-dollar dictators like Vladimir Putin and Hugo Chavez to stay in power, and countries like Iran and Saudi Arabia to sponsor and finance global terrorism and religious extremism.
  • Subsidized internet and communications technologies that have led to a less-informed global citizenry, the decimation of more-or-less non-partisan media coverage in favor of the consumption and belief in “fake news” and conspiracy theories, as well as aiding in the planning and recruitment of terrorists. Oh, and few if any productivity increases.
  • Destroyed entire manufacturing sectors because of regulation, tax policies, protected unionism, and the short-sighted policies of refusing to allow wages to fall. The result being outsourcing, offshoring and global trade far beyond what would likely occur under a true global free market, and significant unemployment.
  • Completely divorced the healthcare industry from competitive forces, resulting in the worst of all worlds, the privatization of profits and the socialization of costs (just as the government did with the financial services industries). The inevitable results being skyrocketing healthcare costs, a less healthy populace and monopolization within the entire healthcare vertical.
  • Created a bloated, wasteful and monopolistic education system that favors teachers, administrators and bureaucrats at the expense of students. The result of which is an education system that neither produces the “good citizens” necessary for democratic government nor the job skills necessary for a competitive economy.
  • Fostered a culture of dependency, blame, over-sensitivity and selfishness rather than self sufficiency, responsibility and community.

The ramifications of poor economic growth and the slow-motion implosion of the welfare state

The upshot of decades of absurd and counterproductive monetary policy and an ever-growing government? Economies especially prone to speculative bubbles and financial crises. Economic growth and productivity far below potential. A bleeding and resentful middle class. Easily financed and poorly planned wars with the terror and chaos that follows. And income inequality the likes of which the world has probably not experienced since before industrialization.

But it gets worse. Combine poor economic performance with the enormous welfare state and you get a downward spiral difficult, perhaps impossible to break.

First and foremost, poor economies hurt those at the bottom of the food chain, most notably young people. With job prospects few or nonexistent, young people delay or completely avoid forming households and having children. You wind up with an aging population with fewer and fewer workers paying into the ponzi-like welfare system and ever greater number of aging retirees taking money out. This is playing out all over Western Europe, but even more obviously in Japan, a country in its third decade of economic depression. (It is mainstream economics to blame Japan’s weak economy on its demographic challenges and aging population. However, this gets cause and effect exactly wrong. It is Japan’s weak economy and poor job prospects that causes its demographic challenges and aging population.)

Further, what happens when masses of unemployed and underemployed young people with poor prospects and little hope are further and further removed from productive society? They turn to drugs (witness the opiate epidemic in the U.S.), crime, and in some cases terrorism.

Moreover, a stagnant or shrinking economic pie causes everyone within society to take a zero sum mentality. That is, whatever government benefits you get, means less that I get. The result is a bifurcation of the populace into two groups: those within the system that are currently benefiting from the crony capitalist welfare state, and those outside it trying to get in. Most notably, who’s in the “out” group? The young and the immigrants. Naturally, this bifurcation leads to resentment and anti-immigration bias. It leads to a two-tiered society. It leads to an unassimiliated underclass, as has occurred in many Western European countries.

So now you’ve got a slow death cycle. The economy is weak and jobs are scarce. The young are unemployed. Immigrants are shunned. The population ages and more and more money flows to entitlements, to pensions, to retirees, to healthcare. Meanwhile local services, education, infrastructure and other forms of investment are cut. More money to unproductive uses, less money to productive uses. So the economy becomes even weaker, and the cycle continues. Yet the elite blame capitalism and ask for even more government. Sooner or later, crises ensues. Pensions can’t be paid. Local governments go bankrupt. Then state governments. Then federal governments. The implosion of the welfare state. It is occurring in Western Europe. Though less apparent and more slowly, it is occurring in the United States too.

The way forward: optimism or pessimism?

As I’ve mentioned several times, the twin maladies of easy money and big government have led to a stagnating world economy, financial bubbles in nearly every asset class, excesses of trade and technology, unprecedented income inequality, global terrorism and anti-immigrant and anti-trade sentiment throughout the world. Is there anything we can do? And are there any reasons to be optimistic?

First, we need to end the era of easy money. We need to stop subsidizing financial markets. We need to let banks and investors fail if they deserve to fail. We need to allow market forces to set prices, whether of financial assets or labor, and allow those prices to decline. We need to let our economy reorient itself from its short-term and transactional focus back to one based on long-term investment and long-term relationships.

We cannot continue to subsidize large corporations at the expense of smalls ones, just because large companies have the money to lobby. We must find a way to reduce pensions at the state and local level. We must return healthcare to a market system and recognize that one way or another healthcare consumption must shrink. We need to limit the power of the federal government, return power to local governments and reduce regulations that favor monopoly.

We must not turn our backs on global trade, but recognize, and acknowledge two truths. Yes, trade will always have negative effects on a small portion of the population (while having less obvious, but more significant positive effects on a larger portion of the population). And yes, there has been an excess of outsourcing, offshoring and foreign trade over recent years. But this is due to the prevalence of easy money and crony capitalism, not because of free market forces.

Similarly, we must recognize that while entrepreneurship is fundamental to a strong functioning and growing economy, the vast majority of recent entrepreneurship, specifically from the technology sector, has been wasteful at best, and extraordinarily damaging at worst. Only an end to stimulative monetary policy will fix this.

Finally, we must encourage not discourage immigration. Immigration is morally correct, is good foreign policy and is economically beneficial. Immigrants must be viewed as assets, which they are, not liabilities. And given aging populations and poor economic growth, population growth through significant immigration is the only chance to delay the inevitable implosion of the welfare state for another generation.

Are any of these things realistic given today’s toxic, and corrupt political system? Not a chance. There is absolutely no realization whatsoever among the economics profession, the mainstream media or the political community of the disastrous consequences of “modern” central banking. Nor is there any reason to believe that those in power who have benefited so much from decades of easy money will change their viewpoint.

Similarly, there is no political will to accept the near-term pain required of weaning the economy off of monetary stimulus and letting the economy restructure as needed. There is no political will to cut pensions. No political will to view healthcare as a consumer good, not an entitlement. No political will to end crony capitalism, to end the power of special interests. In short, there is simply no incentive for politicians to favor a long-term outlook. And herein lies the paradox of democratic government: it works until it grows too big to work.

So what happens next? Perhaps the world stumbles on for a while. Populists continue to come to power. The rich stay rich, the powerful stay powerful and the poor stay poor. Trade suffers, immigrants are shunned. Economic growth is weak. Capitalism continues to be viewed as the problem, big government as the solution. Maybe another financial crises that we can inflate our way out of. Maybe another financial crises that we can’t. Sooner or later the music stops.

About 100 years ago, the world sleepwalked into World War 1. Today the world sleepwalks into the next global disaster. Regrettably, I see few reasons to be optimistic.

Does the Federal Reserve’s loose monetary policy actually hurt employment?

It goes without saying that the Federal Reserve’s monetary policy has been extraordinarily loose since the financial crises of 2008. The Fed has had a zero interest rate policy (ZIRP) for 7 years now, not to mention its 3 rounds of quantitative easing (QE). The Fed’s balance sheet has grown over this time period from approximately $800 billion to $4.5 trillion. And even if the Fed raises rates 0.25% as it is expected to do in December 2015, it will be years (or perhaps generations) before we see anything like normal monetary policy.

There are many, many reasons to criticize the money printing policies of the Federal Reserve (and all the other central banks of the world). They blow serial asset bubbles. They create moral hazard. They favor borrowers over savers. They cause future inflation. They bail out undeserved banks. They create “too big to fail” conditions. They encourage risky investment and speculation. They contribute to income inequality.

Even supporters of easy monetary policy, a group to whom nearly all mainstream economists and politicians belong, will admit to some, if certainly not all of these risks. But, they would argue that these risks are worth it. Worth it to help the economy recover from financial crises. More specifically, worth it to help employment.

As you might know, when it comes to monetary policy, the Federal Reserve has two congressionally mandated goals. One is stable prices. The other is maximum employment. Since inflation, at least as measured by the Consumer Price Index (CPI), has been quite benign, the Fed has felt compelled, or at least free, to focus on helping employment. Hence the policy of low interest rates and printing money.

Related post: Why does loose monetary policy help employment (the mainstream argument)?

Low interest rates and printing money should lead to more borrowing, more consumption, more investment and more jobs. But, and this is a big BUT, what if that’s not what happens? Put simply, what if the Fed’s policy of easy money is actually destroying jobs, not creating them? That’s what I think is happening. Let me explain why.

The Subsidy to Growth

First, recall one of the most fundamental principles of finance: the value of any asset, such as a company or its stock, is inversely related to its cost of capital. In other words, the cheaper a company can access money, the higher its valuation. Since interest rates are the primary driver of a company’s cost of capital, the Fed’s loose monetary policy acts as an enormous subsidy to all companies and all asset classes.

But, the Fed’s valuation subsidy does not impact all companies equally. By suppressing interest rates the Fed has encouraged and even forced investors to take on incrementally more risk. Or in technical parlance, risk premia have been compressed. The higher the risk of the investment, the more that the risk premium has been reduced, and the greater the increase in asset value. So while all assets have received a valuation “subsidy” due to easy monetary policy, high risk companies have received a proportionally larger one.

You may be thinking, how can the Fed “force” investors to take on risk. We live in a free country. Nobody is forced to invest in risky assets, right? Not exactly. Consider an insurance company or pension fund that has future liabilities that it must fund. If the insurer or pension fund cannot meet its necessary investment return from safer assets then it has no choice but to take on more risk. The same concept holds for any investor that requires investment income, either now or sometime in the future. Need a 6% return but very safe assets pay nothing? Take on more risk.

In fact, risk premia are compressed not only by artificially low interest rates. They are suppressed even further by another central banking policy, known as the “Greenspan put.” Simply put (no pun intended), the Federal Reserve has made it very clear, since at least the stock market crash of 1987, that it will provide liquidity to support asset prices in the event of market “dislocation.” Hence, with the implicit promise of a bailout, risk premia are even lower and valuations even higher.

By encouraging risk and suppressing risk premia, the Fed has subsidized high risk companies. Who are these high risk companies? More than anything else, these are high growth tech companies. We see this subsidy through the high public valuations and trading multiples of the Facebooks, Twitters and Amazons of the world. We see it through the private valuations of the “unicorns” such as Uber, Airbnb and Dropbox. And we see it through the basic business model of venture capital where a higher and higher valuation for a winning investment can support more and more losing ones.¹

Creative Destruction or Subsidized Disruption?

Why is it a problem that the Federal Reserve is subsidizing high growth, high risk companies at the expense of lower growth, lower risk companies? Isn’t that a good thing and isn’t that exactly what the Fed should be doing to help grow jobs?

Unfortunately, the answer is no. High growth/high risk companies, as best exemplified by the tech industry are not adding to overall U.S. employment. In fact, in today’s world, high growth companies are typically net destroyers of jobs, not creators. To use the trendy term, tech companies are “disrupting” traditional employers.

There is no better example than the internet retailer, Amazon. Amazon is great (at least in the near-term) for consumers. You can shop in your pajamas, pay rock bottom prices and get fast, free delivery. And certainly, Amazon’s stock performance has been great for its investors and its management. But has Amazon’s enormous growth really benefited the U.S. economy? In terms of employment, the answer is clearly no.

As you can see in the table below, Amazon had about $100 billion of revenue over the past twelve months and accomplished that with approximately 154,000 employees. So in one sense Amazon created 154,000 jobs, or about 1.5 jobs for each $1 million of revenue.

Sounds like that’s great for the economy, right? But that’s not the whole story. For the most part, Amazon’s revenues come at the expense of traditional retailers. So the question to ask is how many people would traditional brick-and-mortar retailers have employed if they, and not Amazon had generated those revenues.

Again, looking at the following table, we can see that Amazon’s competitors, such as Walmart, Barnes & Noble and Toys R Us employ far more people for each dollar of revenue. A simple average of this metric for 6 traditional retailers indicates about 4.9 employees per $1 million of revenue, far higher than Amazon’s 1.5. And this figure is probably understated since smaller privately held retailers probably have even more employees per dollar of revenue.

So for each $1 million of Amazon’s revenue, around 3.4 jobs in the U.S. economy are lost or never created. Based on its most recent twelve months of revenue, Amazon is directly responsible for the destruction of more than 300,000 jobs.


Amazon destroys jobs


Now you may be thinking, doesn’t this sound like capitalism at work, like creative destruction? Old companies and old technologies being replaced by new companies and new technologies? The automobile replacing the horse and buggy? The digital replacing the analog?

In a proper world with normalized interest rates, you would be correct. Investors would make discriminating decisions on where to invest their money based on a company’s business model, its projected profitability and cash flows, and its perceived risks. Let the company with the better product or the more efficient operations win, and if that company happens to be more productive and employ fewer people, so be it.

But thanks to the Federal Reserve, we don’t live in such a world. We live in a world where the cost of capital especially for high growth companies is much, much lower than it should be. This is a world where companies are too easy to start and money is too easy to raise. A world where growth trumps profitability and where not even a plan for revenue, let alone actual revenue is a prerequisite for an IPO or a multi-billion dollar valuation.

This is a world where established companies with real business models and real profits are “disrupted” by an endless wave of companies, large and small, with full bank accounts and empty business models. Facing this subsidized onslaught, good companies, those that are profitable (or would otherwise be), forego hiring or worse, are forced to shrink or go out of business.

Amazon, with about 20 years of operating experience, has yet to show that it can be consistently profitable. Given the total absence of barriers to entry in Internet retail, it likely never will. Absent easy money, Amazon would probably not exist, and certainly would not be the disruptive retailing giant that it is.

But this phenomenon of Fed-subsidized job destruction is not limited to the retail sector. It is happening in nearly all sectors of the economy.

Profitless companies like Twitter and Pinterest along with a near infinite number of money-losing Internet content providers have decimated the journalism and print media industries with their free content to the tune of significant job loss.

So-called “sharing economy” startups like Airbnb, a company with a $25 billion valuation and a business model based substantially on flouting local occupancy laws is doing its Fed-subsidized best to disrupt traditional hotel companies such as Starwood and Hilton, companies that employ hundreds of thousands.

Stock market darling but profit-challenged Netflix, a company with about 2000 employees, having put video retailer Blockbuster (60,000 jobs) out of business some time ago now has its well-funded sights set on disrupting the TV and Cable industries.

These are just a few prominent examples of Internet companies that probably shouldn’t exist, fueled by cheap money, eliminating American jobs.


Traditional critics of the Federal Reserve’s extraordinarily loose monetary policy cite the blowing of serial asset bubbles, potential future inflation and “moral hazard” as cautionary tales. But as we’ve seen, the Fed’s actions have a much more direct and immediate effect on the economy. Current monetary policy is hollowing out the economy by subsidizing companies that destroy jobs, to the benefit of a few fortunate investors and entrepreneurs, and to the detriment of many working Americans.

Monetary policy is also an example of the failure of mainstream economics. That is, the failure of mainstream economic models to reflect the complexities of the real world. Textbook models assume that printing money encourages risk taking. This is correct. They further assume that risk taking will lead to investment and job creation. This is also correct. But they fail to realize that much of this new investment competes with established businesses and many of these new jobs come at the expense of a substantially higher number of existing ones.

To be fair, normalizing monetary policy will be a very painful process. In the short-term, many startups and even large tech companies will fail. Asset prices, including real estate and the stock market will decline. It is highly likely that the economy will fall into a recession. Politically this is very hard to stomach. But stomach it we must if we ever want to return to a vibrant economy with real and sustainable job growth.



¹ Assume a venture capital firm requires a 20% annual rate of return (IRR) and invests $1 million per company. Further assume that after 5 years time, the VC firm can exit one successful investment and all the other investments fail with zero return. If the successful exit has a valuation of $25 million, the VC can fund approximately 10 total investments. If the exit has a $100 million valuation, the VC can fund about 40 investments. If the exit is valued at $1 billion, then the VC can afford to fund more than 400 investments.


What is economics?

Let’s start with this: there is no single correct definition of economics. But in textbooks and other resources about economics you tend to see variations of two definitions.

1) Economics is the branch of social science that studies the production, distribution and consumption of goods and services.


2) Economics is the branch of social science that studies how individuals and groups make decisions to allocate scarce resources.

My personal definition is bit more comprehensive (and perhaps a bit cynical). Economics is the branch of social science that knows how to use (and misuse) basic math and statistics. To me, economics encompasses all of social science. There are really no boundaries between the questions economists ask and those asked by, for example, psychologists, sociologists or political scientists. What separates economists from those other social scientists (for better or for worse), is the former’s ability (and the latter’s lack of ability) to pose and answer their questions using math and statistics.

So rather than define what economists study, let’s define what social scientists study. Here, I think a variation of the second mainstream definition mentioned above, is a good starting point. Social science is the study of how individuals and groups make decisions, and how those decisions in turn affect the individual and the group. I personally think the words “allocating scarce resources” are unnecessary since absent perhaps only breathable air (at least on the surface of Earth), ALL resources are scarce.

As you probably know, economics is almost always divided into two categories: microeconomics and macroeconomics. Studying how individuals and groups make decisions is essentially the generally accepted definition of microeconomics. But I’d argue that macroeconomics is really a subset of microeconomics. Rather than study the decisions of individuals or such groups as a firm, macro-economists are studying the decisions of a specific type of group, called a government, and analyzing data of a specifically defined aggregate of individuals and groups, called an economy.

About EconomicsFAQ

In 2007 while I began teaching corporate finance and investment banking classes, I created a simple website called IBankingFAQ for my students to help guide them through and prepare them for the investment banking recruiting process. That site has grown into one of the most widely visited online resources about the investment banking industry and led to me authoring the book, How to Be an Investment Banker. Ever since then, I’ve been meaning to create a companion site about economics but I kept getting distracted by various other projects. Well, now it is 2015 and finally, I’m getting around to it.

While IBankingFAQ has a narrow focus geared towards students recruiting for investment banking, this site has a much broader focus. My not so humble goal is to, well, explain all of economics. Now you may be wondering why does the world need yet another economics resource when there are countless websites, blogs, books and periodicals covering this topic. Allow me to explain.

First, I believe that an awful lot of what is considered mainstream economics is flat out wrong. From the definitions of rationality and value to the causes of recessions and income inequality. From an understanding of inflation and deflation to the long-term drivers of economic growth. On these key issues, and many, many more I disagree with the mainstream economics you learn in school and with the economic commentary you read in the mainstream media.

As you will see, I am highly biased. Biased towards free markets, biased towards limited government, biased against active monetary policy and biased towards long-term, though not necessarily short-term, growth. There exists a view that economics is more faith than science. I tend to agree. And like all economic commentators, I believe that my economic faith is the one supported by evidence and by history. I’ll do my best to show you that. But I want you to make up your own mind. So wherever I do disagree with mainstream economics, I promise to try to both explain the mainstream view and explain why it is that I dissent.

We seem to be at the beginning of an intellectual and political war against capitalism. Or perhaps that war began the day after Adam Smith published “The Wealth of Nations” and we’re just at the start of its latest battle. Either way, tepid economic growth, declining middle class wages, rising income inequality, the expansion of Wall Street and the contraction of Main Street have led to a vocal chorus of criticism against the free market, against capitalism.

These symptoms of a broken economy are real, but the root causes are not too much free market but too little. We should be railing not against capitalism but against the pervasive and overwhelming crony capitalism, big government, and socialistic monetary policy that rot the economic system and invert the incentives necessary for growth, for progress and for well being.

The free market is misunderstood, no less so than by most economists. As Adam Smith knew, this is in part because the workings of the free market are not intuitive, and therefore nor is good economic policy. That self interest leads to societal interest. That trade is beneficial to both the exporting country and the importing one. That declining prices can be a sign of progress not impending disaster. That immigration can create jobs. That falling wages can benefit workers. That promoting high growth companies can reduce overall employment. These are just a few examples of economic concepts that can be difficult to comprehend and challenging to defend.

But defend them we must. The battle for economic freedom must be continuously fought, especially in the face of today’s political trends. If not, we risk the continued stagnation, cessation and indeed reversal of economic progress, as is currently happening in the U.S. and elsewhere. Those few fighting to explain and to defend the free market are losing. But we mustn’t lose. Explaining the free market and defending free market principles is the second purpose of this site.

Third, I believe that even when the concepts are correct, economics is incredibly poorly taught. So I will try to explain basic concepts as simply as possible. No graphs, no equations, no fancy math, no unrealistic assumptions. And occasionally, I’ll even try to share some evidence. I will also try to point out something that economists are loathe to talk about: what is known, what is unknown, and what is, likely, unknowable. Nearly all economic policies and regulations, and especially monetary policies, are based on the unknowns and the unknowables. I want you to know that.

As for my qualifications to do what I aim to do? You’ll have to judge for yourself. You can read my brief bio, which I hereby amend to state that I have no PhD in economics, merely a useless undergraduate degree in the subject, and an even more useless MBA. What I write is what I’ve learned from a short stint at the Federal Reserve, a somewhat longer stint on Wall Street, some time spent teaching finance and a bit of experience as an entrepreneur and in the general business world. And most importantly, what I’ve learned from reading. Reading some economics, yes, but more so from reading history. Long story short, take it all with a grain of salt. But I’m sure you already knew that.

Finally, I ask you to remember that this site is a work in progress. Right now the content is very slim, but my goal is to cover basic economics (and related finance) a few posts, a few questions per week. I may, from time to time, add some posts about more topical discussions as well.

On any and all posts, I welcome and encourage your comments and questions.