Saturday, October 2, 2010

On economics and physics

What's next: Deflation, double dip, inflation...?

Quite frankly, I do not think even the best economists know the answer for sure. I am no economist and after reading Economics book about half way through I don't know what to think about the dismal science. Mathematically, micro/macro economics 101 is easy to follow. The only question is: does it really work that way? Is there laws?

Atleast to the latter I can say that there seem to be very few hard laws in economics. And I am talking about the kind of laws which you can use to predict what will happen given a set of starting parameters. In physics you can make accurate predictions based on work released in 1687 (Newton: PhilosophiƦ Naturalis Principia Mathematica). Still works today like clockwork if given certain limitations (that were pointed out later by Einstein in theory of relativity), no need to discuss about it.

Take economics: There seems to disagreements over the very key concepts.
  • What causes inflation? Some say money printing and some say something else.
  • How about what to do if an entity (like city or country) is loaded on debt and near bankrupt due to rising cost of funding their debt load and especially due to deficit spending. How about a little bit more debt? Or should they just admit that maybe you have overextended themselves and need to cut back?
Would it be a good idea to cure hangover with some more alcohol? Maybe once, but not every day.. 

What is clear to me is that many western economies are now in the corner. Anything bad happens and shit will hit the fan. The only way out seems to be ... yes! ...more money out of thin aĆ­r!

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