If you answered, “that’s easy, the Federal Reserve,” guess again!

The following statement is not true:

“In the U.S., interest rates are determined by the Federal Open Market Committee (FOMC), which consists of seven governors of the Federal Reserve Board and five Federal Reserve Bank presidents.”

Investopedia, “Understand the Role of the Fed”

Investopedia is not alone in being wrong. A simple search on “who sets interest rates in the U.S.” will often yield the same, inaccurate answer, over and over, an excellent example of how search engines spread misinformation, possibly for the rest of eternity.

Why are so many…


And why do they have value?

NFT stands for “Non-Fungible Token,” which is, of course, gibberish.

Fungible sounds a lot like fungus but has nothing to do with mushrooms.
Being “fungible” is characteristic of good money, that all $20 bills have the same value, that they store the same amount of wealth for a given time & location. Does not matter who holds the $20 bill or the history of that $20 bill.

This implies that “non-fungible” tokens can have different values…

Where a token is a tradable digital asset whose ownership is managed by a blockchain. …


The data suggests yes.

The government does not directly create wealth. No, wealth creation would be the output of productive private labor applied to economic resources.

What the government can do, via the Treasury and its partner, the Federal Reserve, is redistribute wealth via the expansion of the money supply, deciding who directly receives checks, and who indirectly receives low interest loans, from banks with recently expanded lines of credit. …


The times they are a changing…

As of Feb 1, 2021, the price of MSFT stock was $232 per share, with a market cap of $1.79 trillion. Which tells us that there are about 7.72 billion shares of MSFT stock in circulation. The average trading volume was 7.87 million shares, from which one can estimate that on any given day 99% of MSFT stock is being passively held, while about only 1% is actively traded.

Meaning that every trading day the one percenter’s set the price for the rest…

But this is true for just about any other financial asset…


Exactly how did GameStop stock increase from $147 to $310 in one day?

Like any other financial asset, the price of any publicly traded stock is solely set by the supply and demand for that stock, at a public stock exchange, at that moment in time. Period. But given the recent price volatility of stocks, perhaps this is good time to take a deep dive to understand exactly how markets establish prices for traded financial assets.

As bitcoin is a financial asset, consider the Poloniex bitcoin exchange, which can be found at:

Clicking on the “Depth Chart” tab brings up…


The thirty year party is about to end.

U.S. Treasury debt is a financial asset, unique in that it is backed by the full faith and credit of the U.S. Government, historically making it a low-risk investment compared to most other financial assets.

The 10-year Treasury Note yield is the source of much attention because it establishes the bottom for mortgage loans interest rates. It is the interest rate bellwether.

Why do investors buy treasury debt? Short term treasury debt is particularly good for safely storing and preserve wealth, even better than cash for large amounts that exceed FDIC insurance…


The cold, hard truth is that this is the worst economic decision that a society can make.

Wealth will be gathered from all by devaluing the dollar, enabling a few in Washington to redistribute as they see fit. Instead of the invisible hand funneling wealth to the productive and successful, much will go the well-connected.

Will there be a price to pay?

Most of us are familiar with stock market corrections, the most recent taking place in March of 2020. For whatever reason, a market selloff begins, building momentum as the panic sets in, with more and more stocks being…


It is time for better measurements.

This piece assumes that you have read my two prior blogs pertaining to economics…

Ever wonder how astronomers map the stars? First imagine a sphere that shares the center of the Earth but is larger than the Earth. The stars are mapped onto this larger sphere, using a special coordinate system. Next imagine a line extending from the Earth's north and south poles, with the earth spinning like a top around this line. Extending this line in both directions to the larger, outer sphere identifies two points of reference for the celestial coordinate system.


This is what you missed last night

Time to take a break from the “dreary science”, i.e., economics.

One of my other hobbies is astro-photography. I have two telescope systems, one in Aspen, Colorado, the other one in San Diego. You will be surprised how many good images I have captured on my driveway in coastal San Diego with its still air.

Both systems are configured exclusively for taking pictures, you can see samples of my work at:

www.MountainsAndSky.com

Last night was the peak of the Geminids Meteor shower, so I decided to capture some meteors.

First step was setting…


Because once again, it is not good enough to measure in dollars.

This writing assumes that you have read my prior one, “Understanding the Wealth Flow of Real Estate Investments”, and thus given your understanding of the wealth flow involved in real estate investments, let us see how this translates to owning shares of stock of Z Corp.

In year 2020, at $1,000 per share you buy 100 shares of Z Corp stock for $100,000. Ten years later, thanks to an increase in the price per share of Z Corp, you sell it all for $150,000.

On the surface it…

Eric S Johnson

Eric Johnson is a husband, father, engineer, pilot, surfer, investor and amateur astronomer who has read a lot of books on economics.

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