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I Read the Financial News Today

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September 16, 2026:     A Day in the Life of a Retired Finance Professor The Fed raises the Fed funds rate for the first time since 2023. This will raise most short-term interest rates, in response to a rising inflation rate. President Trump is not pleased. European countries are pulling central bank gold out of the Fed’s gold vault in New York. Gold is slowly replacing the dollar as a central bank reserve asset. (Personal note:  Many years ago I was in a small group given a tour of the NY Fed that included going into the Fed's gold vault. As we entered, the guide said "Don't even think about it.") Many countries are exploring and implementing ways not to use the dollar in international transactions. One method is to use central bank digital currencies to settle international trade payments instead of the dollar. Scott Bessent, the U.S. Secretary of the Treasury, announces a government buy-back of a small amount of U.S. 10-year Treasuries ($4-$6 billion) to lower long...
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Critique of Basic Economic Theory

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  Assumptions Economic theory starts with a set of assumptions about behavior.  The most basic is the assumption of rationality in the limited sense that individuals can calculate and compare the marginal costs and marginal benefits of decisions.  They then pick that decision that maximizes net benefit. Economists and psychologists have attacked this assumption.  Some have won Nobel Prizes in Economics. It is refuted by virtually everything that has been learned in cognitive psychology and neuroscience. Yet it remains the foundation of economic theory. This assumption is not even supported by one of economists’ favorite tool, game theory.  One famous experiment, the “ultimatum game,” demonstrates that moral considerations can overcome maximizing income. This outcome seems to hold for many different social groups and many different cultures. Profit Maximization Maybe the most defensible assumption is profit maximization.  While it is...
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Who Do You Fear More, Big Business or Big Government?

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NOTE:  I wrote this is 2018.  OK, who do you fear more, big government or big business?   Historically, Americans saw a relatively small government with regulatory powers as a check on monopoly and big business.  But the rise of big government because of the Great Depression, World War II, the Cold War, and the Great Society changed that.  Government became much bigger. There was a consensus that we had to spend a lot of money for national and international security during the Cold War. But the expansion of the social welfare state and environmental regulations changed attitudes towards the federal government. The two largest programs of the social welfare state, Social Security and Medicare, have been financed by very large tax increases. These tax increases are somewhat offset by federal income tax cuts. Since the 1980s, there has been a well-financed campaign to roll back the regulation of big business, especially the ...
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Chinese Central Committee Report on America

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FROM:  The American Analysis Group of the Public Security Subcommittee of the Central Committee TO:  General Secretary Xi Jinping RE:  The Decline of the United States Thank you for the opportunity to continue our important work on behalf of the Central Committee. We are honored that you allow us to contribute to the defense of China against the arrogant pretensions of the United States. America is degenerating and weakening. It is ruled by a typical imperialist bully. He is the usual combination of ignorance, arrogance and a belief that military might is the only basis of power and influence. He insults and extorts allies. He forgets that global power is based on industrial might; he is doing everything to undermine America’s industrial predominance. We are in a battle of innovation, battle for the world’s economic future. The example of England is relevant here – they stopped innovating and declined in power follows. America is overextended. An expensive ...
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Age and Class in America

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Age and Class in America             As an economist, I define class in economic terms. In the past, income and income inequality were usually the main determinants. Now it is a combination of income and wealth (actual and potential) as more Americans grow old and retire.   There are four classes in America:   1) seniors over 65 with assets (wealth) and their inheriting children or relatives. Demographically, the fastest growing class.The number of seniors is expected to double over the next 35 years while the number of all Americans is expected to decre           Total U.S. household net worth reached a record  $166.7 trillion  in the first quarter of 2026, according to the   Federal Reserve's Financial Accounts of the United States . This reflects the total value of all assets (like real estate, equities, and bank deposits) minus all liabilities (like mortgages ...
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