Introduction A basic understanding of the economy
Drilling down
- We reserve the word investing to the idea of applying to savings to primary markets. Again, like building a business or house from scratch.
Here's a key point. Withholding is a zero-sum game. The total withholding across household, corporate and govt sectors sums to 0. In the US, households are net withholders while the govt and corps run deficits (ie they are net borrowers..they spend more than they save). This deficit spending is funded by the issuance of money and debt securities which in aggregate are held by the household sector as savings. Specifically the witholding type...secondary market liabilities of corporations and the govt.
- the segments of the economy (govt, household, corps)
- the components of saving (investing vs withholding)
- and flows (injections and removals)
Conclusion & Favorite aspects of paper
- Accounting identity framework via Kalecki-Levy. I should add that one of the brightest investor friends I have has embraced this approach and pointed to the supreme work of China-focused economist Michael Pettis.
- Learning how spending power via fiscal policy differs from monetary policy and why monetary policy loses effectiveness as the credit channel becomes neutered (the real constraint is worthwhile projects to underwrite)
- Historical contexts for stimulus esp WWII. The idea that credit expansion drove increases in spending power since the 1960s and growth in M2 was substituted for credit expansion since the GFC (in fact I wonder if these must counterbalance as the growth of M2 is tied to lower interest rates which make credit expansion too risky to undertake)
- Jesse's methodical treatment of complex topics and the ability to break things down and bring the reader around slowly without excessive hand-waving. It would be tedious if he wasn't such a careful and engaging writer.