Friday, February 13, 2015

Creating Savings from Printing More Money: Is It Possible?

The Status quo thinks printing more currency leads to economic growth. Does it? This article, "You Cant Create More Savings by Printing More Money" discusses this. However, I will submit one extra item for mindful consideration. Consider the law of marginal diminishing utility. It states simply the following: As more of the item is used, the utility, need for the item declines. Recall from the prior blog entry, this law is the foundation of the downward sloping demand curve.

Money, more specifically, currency, can be considered a commodity. As more money is printed, as per the law of marginal diminishing utility, each additional unit printed does not hold the same utility as the prior unit printed.  The end result of printing or expanding the money supply is that the currency is debased.

Tuesday, February 10, 2015

Gross: "The Fed Must Be Careful

Key Excerpt from the article titled, "Fed Must be Careful Raising Interest Rates": 

"Bill Gross, the former manager of the world’s largest bond fund, said the U.S. Federal Reserve must be 'very careful in their moves' and needs to see a nominal growth rate of 4 percent to 5 percent before raising interest rates. "

The Fed should be careful with price fixing interest rates: High or Low.

Raising Minimum Wage Still Impacts Unemployment

While this seems to be quite obvious for many in the Economics profession, this may not be as obvious to others outside the profession. Many politicians present emotional arguments that stir up images of poverty and squalor, while making the case to raise minimum wage. However, in the world of Economics, what seems true to others, is typically the opposite in Economics. The case of raising minimum wage is no exception. Yes, there are many studies showing that raising minimum wage does not impact the OVER ALL unemployment rate, but this action still causes unemployment, at the individual level: i.e. Business Owner and Employee.  This is true because of many reasons, as this article titled, Yes, Minimum Wages Still Increases Unemployment states.

If the Economy is Strong, why is the Fed keeping Rates Low?

This is an excellent question, as Ryan McMaken addresses here with this article.

Many argue that the economy is not rebounding, or it is not rebounding as strongly as advertised.

Sunday, February 8, 2015

More on Deflation

Bloomberg provides an article on the "The Eight Unlucky Countries Facing Deflation This Year".  Deflation is a scary proposition for the ECB, or the Federal Reserve. However, in another article, "Deflation: Is It Really a Bad Thing?", it makes an argument that deflation is a good thing for the economy.

Since deflation represents falling prices, with respect to the money supply, this can be a good thing for consumers. As per the Law of Demand, as the prices of the good drops, the demand for that good increases. Consumers are able to purchase items, that were previously at higher prices, at lower prices.