A guide to personal or national finances

Heading to Bankruptcy: Consumption greater than income, leading to debt-driven consumption. Safe growth:  Less consumption than income, and invest the savings. Risky growth:  Borrow to invest, betting that the investment return is greater than the cost of servicing the debt. Safe haven:  Store savings in sound money. Running your personal finance is in many ways similar to running a company or an economy. For individuals:  You sell your time, skills, and energy to cover your needs and wants, hoping to […]

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Tolls on the U.S. economy

The U.S. economy is losing its global competitiveness due to the following policy errors: 1.  High Taxes and Labor Unions are making manufacturing uncompetitive in the global market, resulting in a shift of the economy towards more driven by service & consumption.   Engineering jobs are now replaced with sales and customer service agents, making science, math, and engineering unattractive subjects in college. 2. Stringent immigration laws are driving science, math, and engineering foreigners trained in U.S. universities (often on […]

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Milton Friedman and Big Companies

Milton Friedman had pointed out that socialism and dictatorship is the natural tendency of human societies.  He had also observed that free market capitalism and the subsequent prosperity is the exception rather than the norm in human history. In fact, we can generalize the above conclusions to all human organization.   And such tendency is what drives big companies to failure.  These companies once had all the resources to maintain their market dominance.  Unfortunately, sooner or later the succumb to […]

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Keynesian vs. Austrian Debate on Deficits

Recently there are a lot of debates between the Keynesian and Austrian economists on the skyrocketing government deficit. My opinion is this: In general, government spending is wasteful.  To expect governments to efficiently allocate capital is a larger mistake than to believe in Bernie Madoff. Keynesian policies only makes sense if consistently followed.  The true Keynesian policy maker would save money during good times and spend money during bad times.  The intention of such policy is to smooth out the […]

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Decoupling of Stock Market & Economy

The recent stock market rally signals a decoupling between the stock market and the economy.   The economy, given its current state, would have a L-shaped recovery at best.   As the consumers facing terrible job market, and high debt levels for households and government remains if not worsen, the economy powered by consumption is not likely to have a robust recovery. On the other hand, aggressive cost cutting has fueled a recovery in corporate profit. However, sales trend still remains weak.  […]

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