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Economics and Weather



April 17, 2013 – Comments (1)

Board: Macro Economics

Author: qazulight

I think the issue now is not so much how we can further increase productivity and wealth, the issue is developing social and economic systems that will sustain (and motivate) the people of earth, safeguard the planet itself, all without falling into horrendous civil unrest.

I have watched the threads on gold and currency since the melt down in gold.

The conversation has become irrational and reveals a complete lack of understanding of economics. While I am simply a guy that drives around the piney woods of East Texas, even I can understand most of the basic concepts of economics. It really doesn't take that long to learn, a few books, a couple of courses from Khan Academy, maybe a Nova show or two.

This board used to provide information, talk about the different schools of thought, how they were different, the flaws in the theories.

The statement above is a case in point "the issue is developing social and economic systems"

While it is a noble goal, the statement reveals an underlying incorrect assumption. We cannot develop an economic system. Economic systems develop. Much like my yard. I can trim the grass, I can even find a different kind of grass, but I cannot create grass.

We are in a social and economic system, it is growing and developing. As individuals within it, we can only attempt to understand the economic forces in play and either use them to our advantage or not be crushed by them.

Additionally, because we tend to think of investing in a very narrow scope, buying or selling financial instruments within the financial markets we need to do two things.

One, understand that there is a world outside the financial markets. The closing in of minds into a single train of thought is a way to move sheep to the shearers.

Two, understand that abrupt movements in the prices of our beloved investments tend to revert to an average unless a significant event has happened. (The failure of a long term trading pattern does NOT qualify)

Finally, we must remember that studying Macro Economics is important, but it is like studying the climate. And, investing based on Macro Economics is like trying to predict the weather based on climate studies.

To see how absurd it is, quick, tell me if it will rain on my vacation to west Texas next month. (You can even play the odds, and I will give you a hint, West Texas Big Bend country is a desert.)


1 Comments – Post Your Own

#1) On April 17, 2013 at 6:17 PM, constructive (99.97) wrote:

I don't quite grasp the absurdity.  I'll sell you insurance against it raining on your vacation.

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