June 26, 2012

Frank Newman's Six Myths - #3: If everyone tries to save more, the nation will save more, and investment, GDP, and employment will increase

Charles Perrottet
Partner

Today we examine the third “myth” from Frank Newman’s book Six Myths That Are Holding Back America – the presumption that increased saving will drive increased investment.

Friedrich Hayek published an article titled the “Paradox of Saving” in 1929.  This concept was later popularized by John Maynard Keynes who discussed the “paradox of thrift”.  The paradox rests in the observation that, while saving by a single individual increases that individual’s wealth, if everyone in a nation increases their saving, this must necessarily decrease spending.  With less spending national...Read more

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June 22, 2012

Frank Newman's Six Myths -#2: Treasuries "crowd out" financing for the private sector

Charles Perrottet
Partner

Today we examine the second “myth” from Frank Newman’s book Six Myths That Are Holding Back America – the belief that treasury bills compete with private sector organizations for available capital.

Some of this confusion comes from the “fallacy of composition.” Paul Samuelson defined this as “A fallacy in which what is true of a part is, on that account alone, alleged to be also true for the whole.”  A simple example from arithmetic would be that since 1 and 3 are both odd numbers, then the number 4, which is made up of 1 and 3, must also be odd.  In economics it is clear...Read more

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June 21, 2012

Frank Newman's Six Myths -#1: Asian nations are bankrolling the U.S.

Charles Perrottet
Partner

Today we examine the first “myth” from Frank Newman’s book Six Myths That Are Holding Back America – the idea that Asian nations are bankrolling the U.S.

 

The key to understanding the impact of foreign purchases of U.S. Treasuries is that, except for the very small amount of cash physically carried by tourists, cash never leaves the country.  Money is never “used up”.  It merely changes ownership.  A deficit in the U.S. balance of trade creates a call on U.S. dollars by foreigners.  This in turn results in a transfer of dollars from one account to another,...Read more

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June 18, 2012

Book Review: Six Myths that Hold Back America

Charles Perrottet
Partner

Frank Newman's book, Six Myths that Hold Back America, exposes what he says are six false beliefs that are widely held in the United States – even or especially among people who are in a position to make policy.Read more

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June 01, 2012

U.S. Election Scenario Data Points: June 1, 2012

Patrick Marren
Partner

May job numbers come in weak for yet another month, after some hopeful signs in the first quarter. Some scenarios for the election campaign are coming into focus.Read more

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May 11, 2012

Scenario Consultant Perspective: Friday's Naive Two-By-Two Matrix

Patrick Marren
Partner

Paul Krugman's column today induces us to create scenarios...it's what we do.Read more

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May 04, 2012

Fault Lines: Two Years Later, Some Scenarios

Patrick Marren
Partner

Scenario fodder for the week: Raghuram Rajan's "Fault Lines: How Hidden Fractures Still Threaten the World Economy" won many awards as best business book of 2010. A couple of years on, it's worth examining Rajan's major theses to see how they have played out.Read more

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April 24, 2012

Creativity Diary, Monday, April 23

Patrick Marren
Partner

A little scenario about Jonah Lehrer's new book, Imagine: How Creativity WorksRead more

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April 22, 2012

This Week's Scenario Blast from the Past: Nation-Building in '01

Patrick Marren
Partner

Despite our leeriness about extrapolation from the past, we do read a lot of history at FSG in order to write our scenarios. As Mark Twain wrote, "It is not worth while to try to keep history from repeating itself, for man's character will always make the preventing of the repetitions impossible." (Mark Twain in Eruption: Hitherto Unpublished Pages About Men and Events (1940, Bernard DeVoto, editor). 

 

'"...[The] Committee...reluctantly published the Gardener Report on 11 April. It caused instant national outrage.... No sooner had the phrases kill and burn...Read more

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April 12, 2012

What We Are On About Here

Patrick Marren
Partner

Few people think more than two or three times a year. I've made an international reputation for myself by thinking once or twice a week. - George Bernard Shaw

The Nobel-winning economist and psychologist Daniel Kahneman published a book late last year entitled Thinking, Fast and Slow. In it, he distinguishes between two modes of thinking used by humans. The first is System 1: fast, automatic and intuitive. It suffices for the vast majority of our everyday purposes. We don't need to think deeply about not touching hot stoves, which leg to put our pants on first, or...Read more

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