Economics from a people first point-of-view

Last time I pointed out that money from the stimulus will be going not to US workers, but to workers in emerging economies abroad. This won’t just happen because wealthy individuals individuals use their tax-cut extension funds to buy investments in companies who do business in emerging countries. t will happen because big banks themselves are rapidly moving into emerging economies to make a killing overseas.

In order to compete with each other, large investment “bank chiefs say they will… overhaul their trading operations, change geographical mix towards emerging markets, and reduce pay and staff levels.”  (“A sparser future” Financial Times, 12/20/10 p 9)

Does this seem to you like a hopeful sign for the U.S. economy? Continue reading →

Of bonds and bond funds

A few years ago I took a workshop on investing led by a local Merrill Lynch representative. (Yes from the very same office that Suze Orman and I both worked at long ago!) His workshop covered bonds, and he pointed out the disadvantages of owning bond funds.

Afterwards, feeling worried, I went up and asked him about my Charles Schwab short-term-yield bond fund. Basically he said that fund was a bad deal, and I should get out. Sadly I decided not to trust him and stayed in.

As a novice to bonds, I thought that higher yields were a good thing. To me they seemed just like high yields on stocks. “Up” is good when it comes to interest income, right?

Well, no, bonds are not stocks. Stocks are a piece of the pie. When stock prices go up it means the pie just got bigger, or at least people think that pie looks bigger.

Bonds, on the other hand, are debt. The company or government entity is not selling pieces of itself to you; it’s borrowing your money and is supposed to pay you back. The bonds the company or government entities sell are actually IOU’s. Continue reading →

On February 11th, 2010, based on my reading of several Rich Dad Poor Dad books by Robert Kiyosaki and concerned about the deficit, I wrote “Our Government: A Business Without Assets?”

In that post I discussed the difference between debits and assets and noted that our government doesn’t even track the total worth of its assets. I said, “What’s missing is a serious discussion in Congress of the US government’s debits and assets.”

This week British economist, Martin Wolf, echoes that statement in the concluding sentences of his op ed piece in the London Financial Times. In “Assets matter just as much as cutting debt” (11/26/10 p11), Wolf advises the US: “So stop focusing only on liabilities. Look at the assets too.” Continue reading →