More Weighty Issues Discussed

If you need to, return to Friday, November 6^th’s post of this blog for the initial discussion on weighty issues. Monday and Tuesday of this week I continued the chat on this subject. The bottom line is this: many of our most important topics are simply too complex to bat around in news articles or on-air news programs. There simply isn’t enough time to do the issues justice. They are too complicated for short discussions to make a dent in understanding the issues. Much more involved programming is needed to help consumers of news programs understand the issues under discussion.

The Pacific Rim trade agreement known as TPP is one such topic.  It is important. It is a huge agreement. Much to read, research, and then discuss. After all of that we can begin to understand both its intent and calculate probable outcomes. Until then we truly need to withhold criticism. 

The same respect for complexity is needed in many other arenas currently popular topics of news programmers and pundits. No wonder the average news reader and consumer feels lost at sea!

So far we’ve identified the TPP, Senior Citizen Cost of Living Adjustments, Suicides and Family Murders, and Power Among Nations. Next we will take a look at…….

Understanding Economic Policy: In the four years I’ve been writing this blog I must have talked about economics 50 times! Still, it is a major topic that most Americans do not understanding. They get balancing their check book, taking out a car loan or mortgage, but they don’t understand the policy formation process required to make economic policy. And why the policy is made in the first place is a mystery to most folks.

Micro economics is basically about you and your household’s finances: income, expense, savings, debt management, acquiring asset values that outweigh liability values over many years. That’s micro economics. Also included in this field of study is the operation of firms and businesses, normally small ones. Like households, they also generate income streams from their activities and support expenses including salaries and wages of the people involved in producing the income stream in the first place. Those businesses acquire over time steady revenues, controlled operating expenses and stronger net incomes (hopefully!) which lead to equity value in the business. That is an asset value that far outweighs any liabilities incurred to acquire the operating pieces of the business. Not all such pieces are paid for at acquisition; loans are involved, and such pieces also depreciate and require replacement. Thus loans are a normal part of doing business and the balance sheet reflects this.

Micro economics is economics at the cellular level of America’s financial operations.

Macro economics, however deals with how a nation manages its economic activity.  It takes a national government to set macro economic policy that gives rise to success and growth for everyone living in the micro economic world of the country.

Why? Because money and banking create currency and currency value. The government prints money, but for it to have value, how much money is printed or created in any manner, is important.  National debt creates money. So, printing T-bills, T-bonds, savings bonds and the like, is a form of currency. The supply of currency in use in the economy is a major macro economic issue to manage. And the activity of that currency (or money) is important; how often and at what speed does the currency supply circulate throughout the economy? The same dollar bill may be used 20 or 100 time in the course of a year. Each time it is used it counts as an income or an expense. Taxes are paid on those transactions. Asset values of people and businesses accumulate on the basis of those transactions as well.

So, currency and banking policies affect the currency supply. Interest rates affect how active the currency speeds through the economy doing transactions. If the transaction speed is slow, lethargic, individual incomes and cash flows for businesses are reduced or recessed from normal patterns. So too are tax collections by the governments involved.

How difficult or easy it is to get a loan from a bank, is also a matter of public policy as well as enterprise policy by the individual banks. They are governed by government policy so they have rules to follow. But they also have capital accumulated by investors in the bank and don’t want to lose that capital by making bad decisions on loans. So enterprise policy is a real arena for management to deal with.

Taken together, government policy and enterprise or industry policy, money flows and money supplies are affected and effect financial outcomes. These are mathematical calculations and thus are projectable, malleable, and programmable. Mathematical modeling can also be performed with these numbers. But remember this – CAUTION – math calculations here are not empirical. They do not reflect fact. They do, however, reflect the probabilities of people in households and businesses to react to certain policy threads that produce economic changes.

Remember that economics is a social science. People do not always act or react to things in the same way each and every time. Sometimes money causes happiness, even elation. Sometimes it causes unhappiness, greed, crime and misery. Policy is used to maximize the good while minimizing the bad.

You and I do not set national policy here. But our elected officials and professional staff do set policy in our name.

Now do we see a bit more clearly why economic discussions are not merely a matter of opinion? There is real fluidity involved in this topic and the art and science used to manage economic policy is not readily understood by masses of people. We must trust in the system. We must trust in our government. We must rely on reasonable people to react reasonably to economic circumstances, too!  A lot of trust and assumptions involved here! No wonder it is such an arena of political shenanigans!

Global Warming: Well, if you think economic policy is subject to political game playing, just imagine what is involved in changeable weather patterns and the science behind those changes.

The whole issue of Global Warming is not that weather is variable, but that the swings, highs and lows of weather patterns are somehow affected by how people live on the planet. We know people must deal with the weather as they live on the planet, but the REAL question is if how people live affects adversely the patterns of weather.

That question has been researched for many decades. The enormity of the scientific field alone makes conclusions difficult to assemble. But it is becoming clearer that how mankind uses the planet does in fact affect weather patterns and the variety and speed of change.

The trouble appears on the scene when we attempt to determine what we could do differently as people living on the planet that would lessen negative weather patterns that we may cause. We don’t even know much about this yet, so how we can change how we live to effect a better outcome is even more difficult to project. Besides, if we sacrifice a living style or pattern to improve the earth’s climatological health, we must calculate what this sacrifice will cost us. And if all nations on earth are going to do the same? Or are we the only nation who will suffer the sacrifice.

Well, this discussion only gets more exciting and bloody as it goes along! But at some point we need to advance our understanding and commitment that global warming is something to be concerned about and take action about. We aren’t there yet but we are getting close. Earning commitment and agreement is a totally different challenge still ahead!

These are the weighty complex issues that deserve our attention and understanding. They also require a huge professional expertise to manage them. Meanwhile, are we prepared to be patient until we understand what we truly don’t know?

Hmmmmm!

November 11, 2015