Here’s an interesting online calculator that gives you a recommendation on how big your emergency fund should be. It says I need $10,000 which is less than I would have thought. A big factor for me is that my risk of having to do an emergency car repair is precisely zero.
Okay, here’s my Christmas morning post. According to Monevator blog, research shows that people don’t appreciate more expensive gifts more than less expensive ones, and the thought really does count. Also, women don’t like expensive wedding rings. That last one surprises me a little bit, but hey, it’s research!
According to the Economist, Japan’s economy is officially back in recession. I don’t fully understand these things, but I do find them interesting, so here’s my attempt at an explanation. They’re in a deflationary spiral, which means prices are falling, and people aren’t spending money because they expect prices to keep falling. It makes sense – if you want to buy something, and you expect it to be cheaper next week than it is this week, you will wait. It’s hard for an economy to grow under these circumstances. The government combats this by printing massive amounts of money and loaning it to itself, which it can then spend. Normally that would create massive inflation, but it doesn’t because no matter how much they print, everybody just sits on it and won’t spend it. If you think about it too much, you can’t help wondering whether money actually has any value or meaning under these conditions. It’s best if people don’t sit around wondering about that too much.
The Shifts and the Shocks: What We’ve Learned and Have Still to Learn from the Financial Crisis
Felix Salmon in the New York Times has this to say:
Martin Wolf is as grand and important as an economic journalist can ever become… His is the loudest and foremost voice saying that the global policy response to the crisis was far too timid; that it all but ensures we will have an even worse crisis down the road; and that unless we start implementing extreme measures today, we will be running headlong into catastrophe.
According to Salmon, his (Wolf’s) solution to the problem is the following:
Okay. I don’t know. I don’t really have the expertise to agree or disagree. All this seems aimed at giving the government and/or central bankers more direct control over the money supply. But do the experts really know exactly what the money supply should be? If we give the keys to the printing press over to the politicians, I think we know what will happen. If we give them to a handful of “experts”, I’m not sure we know what will happen, except that the world economy will be at the mercy of whatever theories they happen to believe in. That leaves the ebb and flow of individual banks setting interest rates based on supply, demand, and greed, with the government trying to nudge the system back toward balance if it starts to get out of balance.
It doesn’t seem like a great system, but if we experiment with something different and it causes the masses to lose our faith that money is a real thing (because it is only because we think it is), that would be hard to recover from. So I don’t know, maybe higher capital requirements but short of 100%, complete transparency in trading of derivatives and other weird forms of risk trading, and a constitutional amendment (in the U.S. anyway) to ban campaign contributions or political speech of any kind by financial corporations. The individual human persons who work for those corporations could still engage in political speech, of course, but only as private citizens using their own time and money.
