EconAir

THE BASIC PROBLEM The most important fact about international relations is that the United States is the only  global  power.    Unlike China, Iran or Russia, the United States has to deal with foreign affairs everywhere in the world.    At the same time.    Although possessing huge resources, these resources are not unlimited.    The American president has to make two sets of related “economic” decisions – how to allocate foreign policy resources among many possible combinations of objectives, and the mix of resources in pursuing each objective.    The temptation is to rely solely on America’s powerful military.    But even this simple strategy has limitations, as experienced by failure in Vietnam, Lebanon, Somalia, and Afghanistan. The military success in invading Iraq was followed by the bungling of the "morning after" occupation that resulted in Iran dominating Iraqi politics and many officers of the ...

INTRODUCTION I was, for many years, in charge of finding and analyzing acquisitions for a large company.   Then, for two years, I was an independent merger broker and took part in negotiations. MERGERS AND ACQUISITIONS American corporations spend over $1 trillion a year buying other companies.   This is more than they spend on net new investment.   Even more than they spend on boxes at pro sports stadiums. Buying another company is a risky corporate strategy.   The few studies I have read indicate that 70-80% of acquisitions are failures.   They do not earn the acquirer’s opportunity cost of capital.   Many are a total loss and result in future write-downs.   This failure rate from published research is similar to the information I collected.   My department would use discounted cash flow/net present value analysis to determine the maximum price we would pay for an acquisition (the present value of the future net cash flo...

There is a story, possibly true, that when the British surrendered to American and French forces at Yorktown, effectively ending British rule of America, someone in the British army sang or played an old English folk song, “The World Turned Upside Down.”    (See https://en.wikipedia.org/wiki/The_World_Turned_Upside_Down ) I think I know how the British felt.   Many of the assumptions economists have made about economic reality and economic policies now seem out-of-date or even reversed. UNITED STATES The Fed fought inflation; now it sets inflation targets when there is no inflation. The Fed worries about deflation even though the major source is a fall in energy and commodity prices. Another source is the fall in the prices of technology products. There is a large increase in the money supply, large government deficits, a large trade deficit, and a large decrease in the unemployment rate. Economic theory and past experience says that there should...