Understanding Economics
David Horner, Ph.D.
Chief Economic Advisor | Fixed Income Academy
Susan Munson, CFP
Founder & CEO | Fixed Income Academy
Objectives
Provide answers to commonly asked questions to provide a basic
understanding of often misunderstood economic theory.
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Our goal is to provide a foundation to enhance the ability to
evaluate the news and debates in political and economic circles.
Goal: Minimize Spin
Reasons for Spin
Examples of Spin
 Incentives
 Financial Firms
 Official Effect
 Ben Bernanke
 Lack of Knowledge
 Rick Santelli
 Ideology
 Steve Forbes/Fox
News/MSNBC
John Maynard Keynes (1883 – 1946)
 British Economist whose revolutionary
ideas serve as a benchmark by which we
define economic thought today.
 Keynes was not a Keynesian!
 Keynes was a monetarist who advocated a
strong dose of fiscal policy in times of
financial crisis.
Zandi/Blinder Study Results
 Saved 8 ½ million jobs
 GDP would have been 11.5% lower
 Total cost was approximately $1.6 billion. (i.e.: Much of
TARP was recovered)
 Note: Authors’ best guesses. The counterfactual is not
observable.
To view report: http://www.economy.com/markzandi/documents/End-of-Great-Recession.pdf
Cause for Concern?
Fed Reserve Balance Sheet
It’s an Asset!!
Fed Debt as % GDP
Simpson/Bowles Proposals
 Sizeable cuts in growth of entitlement programs
 Cuts in both defense and other discretionary spending
 Increase in tax revenue
 Moderate tax reform that would maintain incentives
 Limited increases in spending for investment would have a
beneficial return
Report was bipartisan and attempted to “share the pain”
For Report Summary:
http://tpmdc.talkingpointsmemo.com/2010/11/deficitcommission-co-chairs-simpson-and-bowles-release-eye-poppingrecommendations.php
Questions?
Topics/Video Discussions in the Works…
Tax Reform
Plusses and Minuses of Consumption Tax
Importance of Private/Public Partnerships
Underfunded Pensions
Effect of Globalization on Wages
Emerging Pressure on Public Wage
“Ask the Economist” Meet Ups
Today at 5:15 – 5:45 PM
Importance of Public/Private Partnerships
Tomorrow at 7:30 – 8:00 AM
Emerging Pressure on Public Wages
Stop by the Fixed Income Academy Table near Registration for details.
To Reach Us: www.fixedincomeacademy.com 800-243-5097