Промышленный лизинг Промышленный лизинг  Методички 

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e ended Part One with the conclusion that both individuals and

markets are far from rational. Thus, the answer to the Mean Markets and Lizard Brains question of, Where should I invest

my money? varies depending on the circumstances. Sometimes the conventional wisdom of stocks will be correct, but sometimes other investments will be better bets.

Part Two sets the macroeconomic stage for choosing investments. Because markets can be far from rational, we cannot assume that prices are fair. Rather, we need to evaluate the prospects for bonds, stocks, and real estate. This section analyzes the fundamental forces that drive investment returns.

Chapter 4 presents an economic snapshot of the United States. Will government deficits hurt the economy? Can the productivity revolution allow us to be richer and lead better lives? Chapter 5 examines the prospects for inflation and deflation. Is the Federal Reserve creating inflation? Why would anyone worry about prices being too low? Chapter 6 looks at the U.S. trade deficit and its implications for the value of the U.S. dollar. How will the decline in the U.S. dollar affect investors? When will the dollar decline end?



chapter four

U.S. ECONOMIC SNAPSHOT

America the Talented Debtor

Financial Hangover versus the American Spirit

It was the best of times, it was the worst of times. So wrote Dickens in his famous opening to A Tale of Two Cities. Dickens continues with, it was the age of wisdom, it was the age of foolishness,...it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair.

Dickens intended that this description be applicable to all times. And, not surprisingly, his sentiments provide a good summary of modern times, both generally and economically. In this chapter we examine competing arguments regarding the U.S. economy. In one camp are the worst-of-timers-the doom and gloomers who predict a financial hangover that will last for years or decades. On the other side are the best-of-timers-the bright-eyed new-agers who predict a magical world filled with material abundance and leisure.



Revolution lurks just offstage throughout A Tale of Two Cities. The story begins in 1775, and Dickens readers knew that by the end of the century the streets of Paris would run red from the reign of terror. Revolution also lies at the heart of the debate about the modern economy. While the current revolution is less bloody than that experienced in eighteenth-century France, it is no less fundamental.

The Industrial Revolution loosened the connection between physical labor and economic wealth. With machines we no longer needed to work like animals. Even with machines, however, we still needed to work. Now the information technology revolution promises material luxury without work.

Even though he had never seen a computer, the famous economist John Maynard Keynes summarized the optimistic view in his 1930 essay, The Economic Possibilities for Our Grandchildren. 1 In it Keynes looks forward to a materially rich world filled with leisure. He imagines that his grandchildren will have so much abundance they will work very few hours and spend the rest of their time on artistic and intellectual pursuits. In fact, Keynes worries about the lack of work to fill the day:

we shall endeavor to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem [of too little work] for a great while. For three hours a day is quite enough.

If such a world is to exist for our grandchildren, information technology seems destined to play a major role.

Published in 1859, A Tale of Two Cities contained a cautionary tale. It warned that those who do not prepare for change well might end up at the wrong end of a guillotine. Specifically, Britain had to be careful to avoid the bloody aspects of change that befell (and beheaded) French society.

Similarly, the specter of the Japanese economy hangs over the United States. In the late 1980s, the Japanese economy was surging and analysts



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