Economic Terms for the New Normal………..A-K

20150211_yellen

Pictured above are the Central Bankers of the world………..

Austerity: Also known as “sado-fiscalism”. A forlorn attempt to stave off government bankruptcy.

Bank: An institution which, by applying leverage and mismatching assets and liabilities, earns short-term profit and generates long run losses.

Bankrupt: A person who has run out of liquidity (ie money). Also, the intellectual state of modern economics.

Credit cycle: The ebb and flow of finance determined by the actions of central bankers, who are blissfully unaware of its existence.

Debt supercycle: The apparently endless accumulation of financial obligations by people and governments around the world. The road to perdition.

Derivatives: “Financial weapons of mass destruction” was the definition once used by Warren Buffett, but that hasn’t stopped the Berkshire Hathaway chairman from dabbling in them himself.

Dollar: A worthless token conjured up by an entry in the Fed’s balance sheet. The lynchpin of the global financial system, which results in low U.S. interest rates wreaking havoc in all corners of the globe.

Earnings per share: A corporate performance metric, published quarterly, which says little about a company’s true profitability and is easily manipulated. Often set as a target for executive compensation schemes.

Economist: A person who failed to anticipate the global financial crisis; generally, an undistinguished mathematician with a poor understanding of finance. See Bernanke, Ben.

Emerging markets: A collection of relatively poor countries with little in common save a history of economic mismanagement, widespread corruption and the absence of the rule of law.

Forecast: An inaccurate prediction, invariably optimistic, produced by brokers to generate turnover and by pension plan sponsors to mask insolvency.

Financial regulation: A Maginot Line constructed around Wall Street after the last bust.

Global financial crisis: An event which, before the Fed came to the rescue, threatened to bring to an end Wall Street’s well-oiled fee-extraction machine.

Gold: “A pet rock” (Wall Street Journal).

High-frequency trading: A zero-sum game played by computer nerds.

Inequality: The social consequence of Fed policies that inflate Wall Street fees and CEO pay while simultaneously reducing returns on the public’s savings.

Interest: A reward for saving enjoyed in distant memory by our forefathers.

Interest rate: The price of money over time, which balances saving and investment. In the hands of the Fed, a dangerous policy tool.

Keynesians: Economists “who hear voices in the air and are distilling their frenzy from some academic scribbler of a few years back”  John Maynard Keynes

You should familiarize yourself with these terms.  They are thrown around in the media, halls of Congress, The Federal Reserve, Wall Street etc…but they don’t understand the ramifications of these concepts over a long period of time.

Economics is a funny thing.  It’s basic principle of risk, productivity, and debt are never beaten for long.  Till I can come up with more this should get you started.

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