Economics – 101

On my birthday, my family and I went to one of those restaurants where they have TVs in various spots around the room. The TVs were all muted with captions and my seat faced the financial channel that features “Mad Money”, followed by a bunch of other Talking Heads (sorry, not the band with David Byrne) explaining why the stock market did this or that, why oil prices were getting higher even though mpresident Obama is releasing some part of the Oil Reserve. Needless to say, I didn’t catch most of it. Given the choice between my family, good Tex-Mex food and financial opinions, the latter didn’t stand a chance.
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But here’s what I was able to make of it:

The Stock Market goes up or down because:

1) Somebody rings a giant bell at the beginning of the day.
2) Some analyst with his own show yells a lot. The louder his volume, the higher the volume of trading is for that day.
3) A stockbroker’s dog ate his homework.
4) The giant ticker on the floor of the Stock Market is really a random number generator.
5) It’s 5 o’clock in Tokyo, London, Miami, or New York. Or, as Jimmy (or is that Warren?) Buffett says, “It’s 5 o’clock somewhere”
6) Because they say so.
7) Each day, the Boston Herald-American publishes a daily number on the cover. If the number is even, stocks drop. If it’s odd, stocks go up.
8) Each brokerage firm is given a Magic 8-Ball. Stock quotes are based on this.
9) There was an earthquake in Paraguay, which left a man dead in Brazil after a woman slipped on a banana peel in Taiwan.
10) The coffee harvest was smaller in the Antarctic than was previously estimated, causing demand for the beans to skyrocket (same concept as Libyan oil at 2% of our oil use).

While I’m on the topic of economics, I read an article on the potential collapse of the American economy if the Congress and White House can’t compromise on the debt issue. The article said that Americans are divided and many don’t actually care if we don’t pay our debt payments.

Why should they? There are a number of reasons why they don’t.
1) If economics were that important, they’d teach it in elementary school — or at least before college. Why would we care about the GDP if we don’t know what it is? No one understands the whole debt crisis. How can they care?
2) What we do understand in America– we can simply transfer our debt to another credit card at a lower starter rate for the next 6 months. Can’t the government do that?
3) Ask anyone who has ever declared bankruptcy — some times things are so messed up, it’s easier to simply stop trying.

That’s economics in-the-red 101.

Peace,

John

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