Financial Fridays: Everything You Need To Know About Economics But… Actually There’s Nothing You Need To Know

everything you need to know about economics

I cheated on every economics exam. I was majoring in economics. But so was my girlfriend and she was smarter than me. So cheated off of her tests.

But then it turned out she wasn’t so smart and we both failed.

My parents were so happy I wanted to major in economics. They thought this meant I would be good at business. “You will succeed at everything!” they promised me.

To be good at business you need to start with two things:

  1. know how to help people.
  2. know how to bribe people.

There’s no economics in there.

I switched majors to Computer Science.

This is a polite way of saying don’t listen to me.

A) Warren Buffett Is a F***king Liar

Warren Buffett says the WORST thing is deflation. In other words, when prices get lower, he thinks, the world is over.

I have a saying, “there’s always a good reason and a real reason.”

Good Reason: if prices are lower, people will stop buying because they will wait until prices are even MORE low.

This leads to a death spiral until nobody buys anything ever again and the world, I guess, shuts down then. Puts up a “We’re Closed” sign.

That is stupid. If I’m hungry, I buy something to eat. If I need shelter, I rent an apartment. I don’t starve in the cold until prices get lower.

Some people argue prices have been inflating for 100 years.

This is BS also.

100 years ago, the first school for Dental Hygiene started. The Fones School of Dental Hygiene, in Connecticut.

Amount of bad smelling breath per dollar has gone down 99% since then. That’s deflation.

Try kissing a man or woman with bad breath. That’s more important to me than the dollar.

ALWAYS look for Warren Buffett’s real reason.

Real reason:

He doesn’t like prices to get lower because he has $50,000,000,000 invested in stocks and those stocks only make money for him when prices go higher.

That’s 1 good reason and 50 billion real reasons.

(Related: 8 Unusual Things I Learned From Warren Buffett)

B) Supply and Demand is Bullshit

Price is determined by situation.

If you want to buy a house and you look at two exact houses in the same area you would think they have the same price.

No.

What if one house had an owner that just died. Now his or her three children don’t want to own the house.

They want to dump it so they can split the money up. So the price is cheaper than the house next door with the stable family with 2 kids and a dog.

If you want to make money, look at situations more than supply and demand.

The reality is: we don’t know the supply of an object. Nor the demand. Nobody ever does. Maybe it’s a rough guideline.

Death, divorce, debt lead to cheap prices. Those are three types of situations.

And price is determined by many more factors:

I was shopping for a coat the other day. In one high-end store, a nice coat was $7,280.

In the store next door a coat that seemed just as good was $150.

What’s the difference? Not supply. Marketing.

Sixty years of marketing have created artificially high prices (inflation) because marketers have figured out the science of mass hypnosis.

That’s why good marketers get paid a lot of money. Because their slave owners make even more money.

If there was never any marketing, then prices would be 1/50 what they are now.

Unless a coat was made out of solid gold it’s not worth $7,280. Or unless you personally slaughtered the cow and then crafted the leather to make the coat it’s not worth that either.

C) Taxes

This is a hot-button issue.

I don’t care about the difference between the richest and the poorest. This effects 1% of the people in the United States.

The other 99% lives on my street.

Believe it or not, the name of the street I live on is “Main Street.”

The street I lived on before this one was “Wall Street.”

I mean this very literally. I lived on THE Wall Street on the corner of Wall and Broad, right across from the stock exchange.

And then I moved 70 miles north. Now I live on 24 Main Street in a town of population 1000 along the Hudson River. I live three houses from the river.

If the rich are taxed more I can guarantee you my neighbors on Main Street won’t make that extra money.

Some of them are illegal immigrants. Some of them are mentally ill. There’s been two suicides on my street in the past five years.

But the river is beautiful. And I walk by it and my mind drifts when I wonder, “are ducks really monogamous?”

I do care that money I worked really hard for is taken from me and used to buy bullets. Lots of bullets.

When the local high school goes on a class trip to Washington DC, my money is being used for half those kids to lose their virginity.

I do care that Kevin Spacey takes my money and throws Katie Mara in front of a train. That happened.

Democracy is rule by majority. But I’m in the minority and I also hope my opinion can be validated but it isn’t.

The way I can be validated is if I vote with my money – where I want it to be spent.

For instance, I’d rather use money to hire people or invest in platforms like prosper.com to help other small business owners hire people and innovate and be successful.

Or Patreon to support artists I believe in. Or kickstarter, to support projects by broke but extremely creative and exciting innovators. Or gofundme to support my friends’ charitable efforts.

I don’t want my money to buy a bullet for some 18 year old to kill some 14 year old. Another kid in Africa who just wanted to live.

And yet I have no choice because I’m in the minority and probably always will be.

D) There is only one issue that is important for the U.S. economy

This is the most important thing in this post by far. Ignore the rest of this post. But please PAY ATTENTION to this part.

I should have put this first because it’s the only issue I care about. And most people aren’t aware of this issue.

United States companies have $2.5 trillion in cash sitting in other countries.

Apple, for instance, has $158 billion overseas they are afraid to bring back.

They are afraid to bring it back to the United States because then it will be taxed.

Think of it: $2.5 trillion being left out of our economy because of fear, just sitting in foreign banks, making those banks money.

That’s $2.5 trillion that can be used to hire people, create innovation, fund educational programs, start companies, etc.

If the money comes back it can be taxed as high as 50%.

So the answer is simple:

Tax holiday. Bring all the money back and you only get a 5% tax.

That’s an extra $125 billion to the US government for basically free.

And then there’s something VERY IMPORTANT. It’s called the money-multiplier.

When you have a dollar, you buy a donut. Now the donut man buys a newspaper for the same dollar. The newspaperman buys a coffee. The coffee man buys a hooker.

One dollar is used on average ten times, equals about $10 in economic growth.

$2.5 trillion dollars equals $25 trillion in economy growth. That’s about $12 trillion in taxes, almost wiping out the entire US debt.

On top of that we can forgive all the student loan debt, stop wars, and give everyone free healthcare.

BAM! THIS SOLVES ALL THE PROBLEMS IN THE ECONOMY.

So why don’t politicians do this rule.

Because the bottom one percent will say the top 0.000001 percent are making more money, which may not even be true.

Politicians, as usual, are afraid.

I can tell you: most of the top 0.00001 percent are not very happy people anyway.

I’d rather have the $25 trillion in economy growth.

My girlfriend broke up with me so I couldn’t cheat off her tests anymore and I had to switch majors.

She lectured me on what “love” is and walked out and I never saw her again.

Then I was a horrible computer programmer. And then a mediocre businessman. An ok hedge fund manager. A better writer. A horrible husband. An ok father. And I don’t like being told what to do.

I don’t know why I just wrote that paragraph. Perhaps it’s to say, I don’t have a clue.

I hope I know a little more about what love is.

Or at least kindness. And tenderness. And gratitude.

And when I talk to you, I hope I make you laugh, and I hope we like each other. But I’m nervous.

This is more important to me. I think I love you.

And THIS is how introverted people can really scare people at cocktail parties.

  • JMark

    Hmm, so you DO think voting is important. And one-dollar hookers? Maybe deflation is a good thing.

  • Don

    That’s funny. As someone who has vehemently opposed Donald Trump in your previous blog posts, I would expect you to copy someone else’s platform. He introduced this idea about multinational repatriation months ago. I expect more from you James.

  • Blueskybookgirl

    Yes, James, you do make me laugh, or smile at the very least! And I do think I like you.

  • John Scheers

    In the past corporations were given temporary tax breaks to bring their foreign, oversea money back into the US under the guise of creating more jobs and investments. Instead of using the money as promised the corps purchased more of their own stock and put the rest in reserve. Your big take away point has been tried in the past and I am not sure if the economy fared any better for it. Just wondering what ever happened to all that tax revenue and why you think it would help now.

  • drieman

    You never hear (read) anyone discuss the concept of the money multiplier, but you James. Why is that?

  • Bob

    Great post.

  • Pinky

    How about 5% Tax Day for ALL businesses – sole proprietor up to corps? Not sure how it’ll work but every business could use a cash reserve in case of hard times. As long as the govmt uses the taxes for the purposes you stated – but then they wouldn’t be politicians, would they?

    • proxybooks

      Hear! Hear!

  • Darrin

    I don’t know why, but I think of Kate Mara as The-Girl-Next-Door-To-Me-Who-I-Could-Fall-In-Love-With-And-Live-Happily-Ever-After…

  • Captain Mike Rides

    James – You’re right about Warren Buffett. He’s also a hypocrite, in addition to being a liar. But, you are terribly wrong about supply and demand. It’s a universal law that plays out over and over and is the main reason why the government cannot really control the economy forever. Have you ever tried to buy plywood in a coastal town before a hurricane? Have you ever tried to buy hotel rooms in a college town before a big game? Why do you think that gas is below $2 a gallon in some parts of the country now? Supply and demand. But, that is not the SOLE influencer of price in every transaction, which is what you were really pointing out. Honestly, I seriously doubt you really believe that supply and demand is BS because you gotta know that saying supply and demand is BS is BS, which may have been you’re one of your hooks for the post.

  • PattiSluth

    Here is a bonus financial tip for you, James:

    Take those unused gift cards sitting in your drawer…

    And exchange them for cash at your local grocery store.

    This video shows you how to trade gift cards for instant cash:

    https://www.youtube.com/watch?v=FDhOFqYgRqE

  • proxybooks

    Nothing is a strong as the argument from one’s own mouth. James, if “they” would just put you in charge of the world, things would be different!

    I do hope you had something pleasant to eat and drink, as well as a lie-down, when you finished this post.

    P. S. Why is it so difficult to post a comment on this site? I have to keep refreshing the page — about four times — whenever I post because the !@#$% window keeps seizing up.

  • proxybooks

    P. P. S. Is there a particular reason you don’t affix a date to your posts?

  • You have just validated a passage in one of my future books:

    “All people are crazy but neglect to tell each other. Thus, the mass misunderstanding that exists in this world.”

  • James- Thank you for sharing your insight.

  • Veena

    I think it is all about creating a brand which holds both for products and people. Once you make a brand you can keep increasing your price every year talking of this addition and that addition. Take shoes for example, for our country the Reebok and Nike are very expensive but still people buy for the brand name, there is a huge supply of good other quality cheaper shoes… what’s the big technology around that? I could not believe that I got good hiking shoes for Rs 150 up the mountains and it still lasts. So its not about supply but more of the demand factor you create.

  • PG

    What the hell did I just read? This page is nothing short of economic ignorance and legislative illiteracy. Please don’t reproduce.