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I think I take it for granted that people don’t understand the distinct differences between the two. People in the news, as well as people in everyday speech, seem to use the terms interchangeably to refer to the same thing. But they are indeed different.

Fiscal policy is the policy made by federal, state, and local governments to spend on so-called “government services.” It includes both the taxing and the spending of the taxes.

Monetary policy, on the other hand, is made by the Federal Reserve (the central bank of the United States). For the sake of simplicity, I don’t want to get into the nitty gritty of how this is done, but by buying and selling government bonds, the Federal Reserve adjusts the supply of money in the economy as well as influences loan interest rates.

What are the implications of these two types of policy?

Keynesian economics (named after British economist John Maynard Keynes — economists who follow Keynes are often called Keynesians) emphasizes government expenditures to give stimulation to the economy in the short run during economic depressions (the term recession is simply a euphemism). The total wealth of a country (its GDP) is a combination of factors, including what individuals, businesses, and government spend on consumption goods, services and investments. If taxes are reduced, people will be inclined to spend more on goods, services, and investments, so GDP should rise. Another option is for government to increase its spending, as government expenditures also trickle into the economy and boost the GDP.

Monetarists (Milton Friedman is probably one of the most famous in this group) emphasize expansionary monetary policy during depressions. By “pumping money into the economy,” interest rates are lowered and loans are more easily made. People can borrow now and pay back later when the economy recovers (as it always eventually does). In fact, as people borrow to spend on goods, services, and investments, this increases GDP in the short run and gets the country out of the funk it was in.

Although the exact causes of the Great Depression are still being debated to this day, most economists agree (at the very least) that a combination of several New Deal policies and abysmal Federal Reserve policy direction exacerbated and lengthened the problems we encountered.

Something must be noted about both the views of Keynesians and monetarists: both “solutions” only work in the short term. There is an optimal or equilibrium point that GDP naturally moves toward. Otherwise, economists could continually manipulate fiscal and monetary policy to achieve “super” rates of GDP growth. More importantly, both forms of “temporary stimulation” take the attitude of “borrow now, pay back… some day.”

Like an organic being, the economy can suffer many blows and recover naturally on its own. Anytime a foreign substance — a medicine (or in the case of the economy, economic stimuli) — is introduced into the being, good things, as well as unintended consequences, can occur. The unintended consequence of economic stimuli is that by unnaturally fixing the economy, it sets it up for bigger problems later on. The “boom and bust” business cycle is not a natural occurrence, but a byproduct of economic policies which artificially prop up failing or aged parts of the economy. Just like an occasional fire in the woods is a good, natural part of life, allowing new undergrowth to burgeon and expand, an economic depression shuts down floundering enterprises and replaces them with new entities.

After nearly a century of Federal Reserve monetary policy and more than a century of legislative bodies fixing fiscal policies, it is no wonder that we are facing such difficult economic times.

The hopeful part is that, like an organic being, the economy is a very strong and robust creature, able to withstand much. In time, this bust will again turn into a boom.

Calculus is not a required course for my degree; I am taking it because it is a recommended/required course for most graduate programs in economics. This is my second to last semester of undergraduate coursework, and in my entire college career, I have never had a more terrible “teacher” than Mr. Phanord.

Our class was scheduled to meet twice a week during the semester; Phanord canceled (or didn’t show up to class) for FOUR of the class periods.

During the lectures we did have, he would spend precious time trying to teach us Latin or French, or talking to us about physics or other science subjects. While I appreciate he was trying to help us with “real life examples” it only resulted in most students being completely confused — even the ones studying science and engineering! Or at the very least, wasting time that we should have been using to study derivatives, integrals, etc. The class is Calculus I — not engineering!

Phanord assigned only even-numbered problems as homework. I realize homework assignment is at the discretion of the professor, but assigning homework for which you can’t check to know whether you’re doing the problem correctly or not is a bad idea. What if I was doing the process incorrectly?

He used strange mathematical notation that appears nowhere in the book, which lead me to think, “Is this guy just trying to show off how smart he is?” (I would ask the same question when he would expound on scientific topics, too, as was previously mentioned)

His grading system is ridiculous; while the final grade is (according to the syllabus) a composite of homeworks, tests, and a research paper (Yes, a RESEARCH paper for a Calculus I class… which is also absurd!), he told us throughout the semester that “Whatever you get on the final is what you will get for the class,” which lead me to wonder, “Why should I worry about turning in homework problems, a paper, or even stressing out for midterm, if my final grade really just depends on the final exam?”

I will never recommend this “teacher” to anyone I know; in fact, I will exhort any individual taking a math course to avoid Mr. Phanord like the plague.

From Slashdot,

High school students in Maryland are using speed cameras to get back at their perceived enemies, and even teachers. The students duplicate the victim’s license plate on glossy paper using a laser printer, tape it over their own plate, then speed past a newly installed speed camera. The victim gets a $40 ticket in the mail days later, without any humans ever having been involved in the ticketing process. A blog dedicated to driving and politics adds that a similar, if darker, practice has taken hold in England, where bad guys cruise the streets looking for a car similar to their own. They then duplicate its plates in a more durable form, and thereafter drive around with little fear of trouble from the police.

I love it.

Or should we replace that with the pervasive mantra of most conservatives/Republicans?: Get the hell out of my country.

It’s strange to me that Lady Liberty, “From her beacon-hand Glows world-wide welcome,” yet a majority of people want to shut out all the would-be immigrants.

I recently started reading The Myth of the Rational Voter by Bryan Caplan, economist at George Mason University. I highly recommend the book, as well as checking out the blog he co-manages, EconLog. A couple-chapter-excerpt from the book can be found at The Cato Institute website, but seriously, just buy it.

Professor Caplan discusses “Antiforeign bias,” and I found one particular passage particularly interesting. With so much theoretical and empirical evidence showing the benefits from dealings with foreigners, why could anyone (especially a so-called “free market” conservative) favor restrictive foreign trade and immigration policies?

I’ve been wanting to write about this topic for a while, so I’m glad I found something so well-written. Why reinvent the wheel?

From The Myth of the Rational Voter:

Popular metaphors equate foreign trade with racing and warfare, so you might say that anti-foreign views are embedded in our language. Perhaps foreigners are sneakier, craftier, or greedier. Whatever the reason, they supposedly have a special power to exploit us.

Alan Blinder laments that People around the world scapegoat foreigners:

When jobs are scarce, the instinct for self-preservation is strong, and the temptation to blame foreign competitors is all but irresistible. It was not only in the United States that the bunker mentality took hold. That most economists branded the effort to save jobs by protectionism shortsighted and self-defeating was beside the point. Legislators are out to win votes, not intellectual kudos.

The Survey of Americans and Economists on the Economy (SAEE) amply confirms Blinder’s point. Respondents rated the severity of the economic harm caused by the fact that “companies are sending jobs overseas.”

Economists are especially critical of the anti-foreign outlook because it does not just happen to be wrong; it conflicts with elementary economics. Textbooks teach that total output increases if producers specialize and trade. On an individual level, who could deny it? Imagine how much time it would take to grow your own food, when a few hours’ wages spent at the grocery store feed you for weeks. Analogies between individual and social behavior are at times misleading, but this is not one of those times.

The law of comparative advantage, one of the most fascinating theorems in economics, shows that mutually beneficial international trade is possible even if one nation is less productive in every way. Suppose an American can make 10 cars or 5 bushels of wheat, and a Mexican can make 1 car or 2 bushels of wheat. Though the Americans are better at both tasks, specialization and trade increase production. If one American switches from wheat to cars, and three Mexicans switch from cars to wheat, world output goes up by two cars plus one bushel of wheat.

How can anyone overlook trade’s remarkable benefits? Adam Smith, along with many 18th- and 19th-century economists, identifies the root error as misidentification of money and wealth: “A rich country, in the same manner as a rich man, is supposed to be a country abounding in money; and to heap up gold and silver in any country is supposed to be the best way to enrich it.” It follows that trade is zerosum, since the only way for a country to make its balance more favorable is to make another country’s balance less favorable.

Even in Smith’s day, however, his story was probably too clever by half. The root error behind 18th-century mercantilism was an unreasonable distrust of foreigners. Otherwise, why would people focus on money draining out of “the nation,” but not “the region,” “the city,” “the village,” or “the family”? In practice, human beings then and now commit the balance of trade fallacy only when other countries enter the picture. No one loses sleep about the trade balance between California and Nevada, or me and my grocer. The fallacy is not treating all purchases as a cost, but treating foreign purchases as a cost.

Modern conditions do make anti-foreign bias easier to spot. To take one prominent example, immigration is far more of an issue now than it was in Smith’s time. In theory, trade in labor is roughly the same as trade in goods. Specialization and exchange raise output— for instance, by letting skilled American moms return to work by hiring Mexican nannies. The SAEE confirms that the public is quick to see great dangers in this process— and economists and the enlightened public to minimize them.

In terms of the balance of payments, immigration is a nonissue. If an immigrant moves from Mexico City to New York and spends all his earnings in his new homeland, the balance of trade does not change. Yet the public still looks on immigration as a bald misfortune: jobs lost, wages reduced, public services consumed. Many see a larger trade deficit as a fair price to pay for reduced immigration. One peculiar pro-NAFTA argument is that if we admit more Mexican goods, we will have fewer Mexicans. It should be evident, then, that the general public sees immigration as a distinct danger—independent of, and more frightening than, an unfavorable balance of trade. People feel all the more vulnerable when they reflect that these foreigners are not just selling us their products. They live among us.

Calm reflection on the international economy reveals much to be thankful for, and little to fear. On this point, economists past and present agree. But an important proviso lurks beneath the surface. Yes, there is little to fear about the international economy itself. But modern researchers—unlike economists of the past and teachers of the present—rarely mention that attitudes about the international economy are another story. Paul Krugman hits the nail on the head: “The conflict among nations that so many policy intellectuals imagine prevails is an illusion; but it is an illusion that can destroy the reality of mutual gains from trade.”

Regarding Ben’s ridiculous question of “why are you here [in the United States]?”…

Despite claims that “the government derives their powers from the consent of the governed,” in this day and age that “self evident truth” is no longer true. As a result, I have no (real) choice in the matter of where I live.

Yes, I could move to another country, but I still wouldn’t have any more rights there (Full disclosure: I believe that anywhere I could move to, I am about 99% sure that I would in fact have fewer rights there as opposed to here).

The point is that the Founders all recognized that the government gets its power from me only if I consent to it. The very act of declaring independence from another government points to this undeniable fact. But ironically, in a country that was founded on the principles of freedom of association and the freedom of self-government, I no longer have this right. Ironically, when the Southern states attempted to do the same thing that the Colonies had done less than a century earlier, it was deemed illegal. I would fight for my freedom, but I wouldn’t stand a chance against the US military. Self preservation supersedes the flame of liberty here.

On the other hand, you may say that my being here is my consent. Well, it’s not. I’m pretty sure the Redcoats used that line of reasoning, too. But it appears that Washington and crew disagreed. That’s why they declared independence. That’s why Jefferson thought it was important enough to include in the second paragraph of the Declaration that people have the right to alter or abolish tyrannical governments. Do we have that right today? I didn’t think so.

So you ask “why are you here?”…

I ask: What else can I do? Where can I go?

From The Crowd by Gustave Le Bon,

Logical minds, accustomed to being convinced by a chain of somewhat close reasoning, cannot avoid having recourse to this mode of persuasion when addressing crowds, and the inability of their arguments always surprises them.

I actually read that in Bryan Caplan’s The Myth of the Rational Voter, which I’m thoroughly enjoying.

This is thoroughly enjoyable to watch. I mean, it’s really funny. I suppose I would be worried if I had children in the public school system. But since that won’t happen, I just think it’s great entertainment.

(HT: My dad)

My brother Ben recently started a blog, and he’s already made several posts.  In his most recent post, in reference to puppet-like politicians, he writes

A few months ago, I would have – in fact I did – dismiss these sorts of statements as crackpot conspiracies, but watching how the financial bailout has unfolded, I have to wonder.

That, along with his other posts, gives me hope that my brother is finally coming around to the truth.

Most LDS Church members have a mistaken, misguided notion that the United States of America is infallible. Our scriptures and our prophets speak highly of our great nation. We are told it is a land of promise and a land of freedom.  Unfortunately this is where church members seem to stop listening.

Moroni, near the end of the Book of Mormon, in Ether 8:24 tells us, “When ye shall see these things come among you… ye shall awake to a sense of your awful situation, because of this secret combination which shall be among you.”

He is referring to our day. What is this awful situation? What is this secret combination?

“Secret combinations” in the Book of Mormon were conspiratorial deals and acts committed by groups to get power and gain at the expense of others’ lives, freedom, and possessions. If you study secret combinations in the scriptures extensively, you’ll discover that governmental figures and leaders are regularly involved.

The “awful situation” is the fact that, despite living in a place that was founded upon the ideals of freedom and justice, secret combinations have snuck in and taken over. Yes, I say that emphatically: secret combinations have taken over.

Ben is noticing it with the federal bailout program. But that’s not the only thing. There is the Federal Reserve system.  There is the United Nations. The World Bank. The PATRIOT Act. And most recently, the bailout. Just to name a few.

There’s not one single secret combination. In fact, in the scriptures, the secret combinations were usually manifold, colluding when possible, backstabbing when appropriate. Today’s times are no different.

Satan is always striving for our destruction. As members of the church, we are to be the people on the front lines fighting against him. What better plan could he concocted than to confuse millions of good people — people that should understand secret combinations — into thinking there are no secret combinations, and that the United States is perfectly fine?

This year is quickly coming to an end, so I’ll be publishing my highly acclaimed Brandon’s Top 5 Movie List of 2008 in the next couple weeks. But since I hadn’t published my previous years’ lists anywhere except on Ashley’s Facebook wall, I figured I’d put them up for you all to see.

Brandon’s Top 5 Movie List of 2006:

5. Thank You for Smoking
4. The Departed
3. Pan’s Labyrinth
2. Blood Diamond
1. V For Vendetta

2006 was a fantastic movie year. And I don’t think it’s just because that was the year I got back from my mission and started watching movies again.

Brandon’s Top 5 Movie List of 2007:

5. American Gangster
4. Transformers
3. Stardust
2. I Am Legend
1. Shooter

I might possibly replace American Gangster with No Country for Old Men; I watched them both only once and seemed to enjoy them both about the same. 2007 was a sad year for movies, I think.

Watch out for the 2008 List, to be released soon!

I’ve been slacking on the blog-writing lately. It’s because the semester is almost over. Here’s what you all have to look forward to in about a week:

• Review of the Twilight Saga as well as the first movie from the series, Twilight.
• Ratings of some of my professors, as well as classes, from this past semester.
• Why Lincoln was a terrible president.
• Time permitting, I might start fleshing out my philosophy on pride, selfishness, honesty, and self esteem, among others. (These topics, contrary to what some people might believe, are not in total agreement with Ayn Rand.)