Economics

I just finished my audio course from The Teaching Company entitled Economics (3rd Edition) by Professor Timothy Taylor of Macalester College. This was quite a departure for me personally; all of the courses I've studied in the past have been on history and culture. In my quest to really understand the world, however, I felt it more than important that I strive to really understand the fundamentals of economics.

I was pleased to learn that I really do have a basic understanding of the fundamentals of both micro and macro economics. The vast majority of the lectures served as a refresher, or validation, of my understanding of the financial world. It really helped organize economics in a much more logical framework that will allow me to gain more useful, actionable conclusions.

I certainly did, however, learn some incredibly interesting stuff along the way, and feel considerably wiser after having studied the material closely.

For example, although the national debt of the U.S. hasn't grown much in relation to GDP, the forecast for coming decades is incredibly gloomy. As Professor Taylor confesses, it's difficult to see how this can be avoided.

At some point in the future the rest of the world will decide to stop serving as net-investors in the U.S., and that poses a remarkably difficult problem. To cover the shortfall, the only options are, quite literally, a dramatic drop in the federal budget (doubtful at best; and painful at worst as the drop in federal spending accelerates a dramatic recession/depression), exponential growth in tax collection (again doubtful, and again accelerating the economic decline), and/or a huge growth in domestic savings (my vote for the only realistic option).

I must admit that part of my interest in the course was to help with our personal investment strategy. What I learned reinforced my belief that we need to have most of our equities in overseas investments. Besides the doom and gloom scenario of the previous paragraph, I just don't see how the U.S. can continue to outpace the rest of the world in growth. India and China represent the most obvious growth opportunities as they develop a bona fide middle class with self fulfilling consumption and growth. India particularly strikes my fancy, as it's earlier in its growth cycle, has a more transparent and dependable rule of law, and is generally moving in a more free-oriented, market-based direction.

Those two nations are only a couple of examples.

Lastly, one of the more interesting points I learned has to do with the best means for depressed nations to achieve real economic growth. It seems the answer lies not so much in "rich" nations transferring their wealth (through whatever means, investment, charity, trade, etc.) to "poor" nations. The most productive means of growth is for nations to grow their economies from within. If they can increase internal consumption of their own products and services, they are well on their way to real economic growth. Later in the development cycle international trade will help the cause, but growth typically starts from within.