Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
Anyone who talks to me about finance/economics, will know very quickly that I’m a stickler for definitions. It’s really annoying (to me) when people misunderstand economic/financial terms, and then applies the finding wrongly, leading to, often, ridiculous results. In that vein, this particular video hits home, and explains why over-simplifying can be dangerous.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
Money & Macro
To quote Joeri,
People pretending that something is simple when it’s actually complicated, giving you a solution that is really easy to understand, but also horribly wrong. And in economics, that is especially dangerous because misunderstanding concepts like inflation, recessions and unemployment could lead to decisions that actually cause inflation, recessions and higher unemployment, ruining the livelihoods of millions of people.
Joeri, https://www.youtube.com/watch?v=eyCaXPcDvng
Final words
At any point in time, I am probably involved in at least one discussion thread somewhere, where I find myself oddly defending regulators, central banks or the law to some extent. This is ironic, given that for the most part, most folks working in finance (I work at a hedge fund currently) tend to really hate legal, compliance and regulations, because they often add to our work load with bizarre requests. Frankly, I am not immune to this sentiment.
However, while we can discuss and be critical of how the central banks have, generally, been late to fight inflation this cycle, and that regulators often are unable to follow up on every shenanigan that happens in the markets, I think such criticism should also be balanced with fairness.
Ultimately, we need to recognize that regulators, law makers and central bankers are human, and they cannot see the future any more than we can, and given their very limited resources (the SEC has around 4,000 (1) employees), it is somewhat understandable, if not desirable, that things fall through the cracks, or that shortcuts are taken.
So while we must hold them accountable, we must at least be reasonable. And being reasonable, in many of these discussion threads, starts with actually understanding the details of the financial, economic or legal nuances surrounding the issue, and trying to understand why the laws/rules are as they are.
Since laws/rules tend to be formed over time based on the latest expert opinions, then having a decent understanding, a correct understanding of finance and economics becomes paramount.
For a prior take on why definitions and understanding nuances are important, please see Code Review.
Footnotes
- Original version said SEC had just over a thousand employees, which turns out to be false — they have around 4,000. See https://www.eeoc.gov/federal-sector/securities-and-exchange-commission-sec-0
Janky Thoughts 