Reddit Economics Network

This isn't an economics question but a question/suggestion for the sub itself. It would be nice to filter posts by "answered" or "unanswered" posts. Sometimes when people browse through r/AskEconomics, they see a post with like 20 comments, but none of them have been approved yet. The new flairs would take the guessing work of looking for posts with approved answers. Is this a good idea or no?

I understand there are short term and long term capital gains tax. Let's say I buy stock X every 6 months. Now after 10 years, I want to sell one stock X, how does the IRS know which stock I'm selling? I want to sell the one I bought over 1 year ago to avoid LTCG tax and not the one I bought 6 months ago.

Second question: Why is investing good? I've just used post tax income to buy stock that I have to pay tax again. I don't have the math done, but there will be some amount of ROI for X amount of years that will lose money due to the taxes...right?

I'm sure there must be many. I'm looking for a book or in depth article that is relatively accessible. But basically looks at different economic policies that have been implemented over the past 100 or so years. To see what has had the desired effect.

For example, looking at how Keynesianism or Hayeks ideas actually worked in practice. Or indeed many of the other theories I'm not aware of that have influenced chancellors, presidents, prime ministers and national banks etc.

I believe the answer is yes.

Currently, life in developed countries isn't really that great. Of course, it's better than in poor countries with no opportunities.

However, the developed countries most definitely rely on cheap labor that doesn't enjoy the same protections, rights, and benefits of the labor in the developed countries. Likewise, developed countries often use MASSIVE numbers of undocumented immigrants for food production and other low-skill labor.

So, what would happen if everywhere on earth we ensured that everyone has a good salary and protections, as you know, human decency requires.

Currently, life in developed countries is 6/10. Life in undeveloped countries is 2/10. Simplifying the numbers to illustrate what I mean. So if we improved the life from undeveloped countries to 6/10, what would happen to the developed countries?

Can we all live in a comfortable home with AC, fridge, stove, TVs, desktop PC, laptop, phone, internet, utilities, heating, a quality mid-range car, etc?

And let's ignore the varying costs of living for this debate. Or let's say that there can be varying costs of living but that the compensationa and benefits provide a relatively equal life quality world wide. That's probably the best way to gauge this.

So someone in a poor country that currently works 8h officially, but actually 11-12h, no social or health plan, horrible moldy rental apartment, no quality hospital availability, no kindergarten, no paid leave, no healthy food available, no regulated traffic, no quality public transportation, extreme corruption in politics, no laws enforcing equality, lots of discrimination, questionable systems in place for sick leave, blatant slave-owner like behavior by the empolyer, etc.

What would happen if we made it so that they get everything someone gets in Finland, Norway, Switzerland, Iceland, Germany, quality parts of US, Japan, etc.

Would we all prosper or would the developed world drop in life quality to compensate for the rise of quality elsewhere?

Shareholder Primacy…the root of our problems?

Corporate Greed Income & Wealth Inequality Price Increases (outpacing inflation) etc

Is stakeholder primacy the solution for improvement?

Why is a company incentivized to offer discounts on these consumer holidays? Isnt it logistically terrible for the company to have a lose of revenue and activity in the weeks leading up to the holiday as people await the discounts, and then a huge influx of purchases all at once?

I’ve been thinking about how the U.S. dollar’s role as the global reserve currency impacts developing countries, especially in times of high U.S. inflation. Let’s consider Nigeria, a developing country that holds a significant portion of its reserves in USD.

When the U.S. increases its money supply or runs large fiscal deficits (as has been the case recently), does this effectively export inflation to these countries?

Take a scenario where the U.S. economy faces slower growth (as many developed economies are expected to in the coming decades). To counteract this, the U.S. government and Federal Reserve may adopt Keynesian policies to “kickstart” the economy. While these policies can stimulate domestic growth, they also create inflationary pressures. The consequences of these policies differ starkly between the U.S. and foreign economies. Here are two key examples:

1. Quantitative Easing and Fiscal Expansion: When the U.S. government lowers borrowing costs to stimulate demand, it can successfully boost domestic activity. However, the inflationary effects spill over to countries holding USD reserves. While U.S. entities benefit from increased demand, foreign reserves lose value, effectively exporting inflation abroad.

2. Low Interest Rates: When the Federal Reserve reduces interest rates, U.S. entities benefit from lower borrowing costs, potentially expanding production capacity. If this leads to increased exports, developing countries may see their domestic industries suffer from cheaper imports. If the borrowed funds are not productively invested, inflation increases globally, further devaluing the USD reserves held by developing countries. This creates a lose-lose situation for nations like Nigeria: domestic industries are undercut by imports, and the value of their reserves diminishes due to inflation.

This raises several questions:

• Do countries like Nigeria face higher import costs as a result of U.S. domestic policies, worsening their economic challenges?

• How does holding USD reserves impact their ability to manage domestic inflation?

• Could reliance on USD reserves lock these countries into a cycle of vulnerability to U.S. economic policies?

• If alternatives to the USD emerge (e.g., regional currencies, the yuan, or even digital currencies), how might this shift the dynamic for developing nations?

A common response might be that returns on U.S. bonds outweigh inflationary losses. However, recent data suggests otherwise (see average treasury returns vs. average U.S. inflation rates). Even in years where returns exceed inflation, is this enough to justify the opportunity costs for developing nations?

I’d love to hear thoughts from anyone with insights into international economics or the role of the dollar in global trade and reserve holdings. What strategies could developing countries adopt to mitigate these risks while maintaining financial stability?

Reference on average return in US bonds:

Reference on average inflation

Edit: Added references.

Milton Friedman warned that government intervention would lead to monopolies.

He warned that leaning into government Healthcare programs would ultimately lead to socialized Healthcare.

He reperepetdly warned us that positive action by government worsens the issues it sets out to cure.

He warned us that the "graduated" income tax was just an illusion because the tax payers near the bottom would end up brunting most of the costs.

I look around and I wonder why we ignored him.

With all the talk of gutting government spending. I have to ask. Isn't the best method to solve the debt to simply freeze increases in government spending?

With the current deficit being 27% of government income won't inflation balance the budget in approximately 10 years as long as inflation stays at approximately 3%?

Wouldn't this be the most stable way to attack the debt without risking a significant recession.

I'm reading Stephanie Kelton's The Deficit Myth and find MMT really compelling.

But in it, she claims that tax exists to incentivise production (i.e. work), by creating demand for government currency.

This immediately sounded plausible until I remembered that in my home country of the UK, you only get taxed if you work and only if you earn above a certain threshold.

In other words, if you don't work and have 0 income, your tax obligations are 0.

Based on this, how could tax incentivise work? What seems to be operating here is the traditional logic of the government taking a cut of your income for itself.

Is there any research that calculates their net fiscal transfers? It’d be interesting if it also accounts for their birthright children, but it’s not necessary, and also any intl evidence.

Apologies for the wall of title. As a layman, I hope the question is well worded. Although I'm not looking directly for normative judgments, educated personal opinions are welcome :)

Markets have been boom alongside the adoption and access to financial markets.

The gain in popularity also coincides with covid savings as well.

Has anyone measured how much money app based investing (Robinhood, Wealthsimple, ect.) have added to the market?

So I was wondering about international direct cash transfers like Give Directly. Should the effects be basically equivalent to money printing in the repicient state? Of course, globally, the money supply hasn't expanded since it's a transfer. But for the local economy that receives the money, isn't it just an expansion of the money supply that is equivalent to what you would get if you print the same amount of money and give it to the same people? Of course, I don't believe that money printing is always bad. The thought is more like, if international cash transfer is effective (as it probably is, given the evidence), why don't the local governments just print the money instead?

I was talking to a person who said all taxation is immoral and should be abolished entirely. What would we as americans lose if we had 0 taxes and how would it affect society?

Could you provide me best websites or blogs or apps that provide & share economics news for beginners without knowledge

It is now commonly accepted that central banks should be independent, partly to avoid jeopardizing monetary stability in pursuit of political objectives and to enhance the credibility of the currency.

Don’t you think the same principle should apply to fiscal policy management? By entrusting the budget to an independent entity (such as the Fed or another separate organization), it could focus on long-term growth, fiscal stability, and reducing unemployment without being influenced by political pressures or succumbing to populism. Parliament could retain a supervisory role, for instance, by preventing excessively high taxes or setting economic goals to be followed.

From a strictly economic perspective, what do you think of this idea? If you disagree, why do you believe that fiscal policy management by the state is preferable to a model similar to that of central banks?

I'm familiar with the idea that the military-industrial complex is responsible for propagating (or at least lobbying for) war, which I've usually seen dismissed as oversimplified or conspiratorial. However, based on my very basic understanding of corporate law/norms, it seems like these companies might have a legal or even ethical imperative to promote war (i.e. it would be more far-fetched to suggest that that arms manufacturers don't actively seek to lobby/influence politics towards war using whatever means are available to them). I'm basing this on three basic assumptions:

1. A company's sole responsibility is to maximize its profits, and the directors of a publicly-traded company have a fiduciary duty to prioritize increasing returns for its shareholders over other concerns (i.e. even if war is socially undesirable in a general sense, the direct benefit of a war should be the foremost concern for an arms manufacturer).
2. On balance, war is likely to be positive for an weapons manufacturing firm in terms of profits and stock value, whereas peace is likely to be negative.
3. Therefore, firms/directors have a general responsibility, if not a legal duty, to promote war and discourage peace using whatever means of political influence are available to them (e.g. lobbying, PAC campaign contributions, etc.)

I'm assuming the above is oversimplified or mistaken to some extent since I haven't seen this widely discussed as a social problem aside from its role in conspiracy theories, but I'm not sure what I'm missing. Is this a problem that is discussed (even if on a different/more sophisticated level) in econ literature? If so, how do economists/corporate legal theorists think about this issue?

I'm reading about how Trump is threatening the BRICS nations with a 100% tariff if they were to dedollarize in the future. I've always had questions about the USD. Here they are:

• How is trading in USDs beneficial to the Americans? This would have the effect of making the USD a strong currency and, hence, every other currency is weaker compared to it. Therefore, their products are made cheaper compared to American goods/products. The Americans complain when other nations are weakening their currency or make their currency artificially cheaper, like the Chinese and how they buy trillions of our debt to keep their currency artificially lower. However, when the USA demands everyone to use the dollar, this also keep other currencies weaker and the USD stronger.
• Is the USA getting all their imported goods/services from overseas cheaper by dint of the foreigners using the USD?
• Why didn't foreigners not come up with the idea of dedollarization much earlier?
• When the EU came up with the euro, did the USA feel threatened by this?
• Why is Trump angered when the BRICS nation do trade amongst each other in a currency other than the USD? That makes no sense that when Indians want to buy Chinese solar cells, that they're forced to use USDs.
• What would the USA lose if they had to buy Rupees to do business with the Indians?
• Under what circumstances could Indians prefer to do business with the Americans in rupees and not USDs?

What is the optimal level of consumption for the USA economy and China's economy, and why isn't a lower level not a good thing?

I'm finding out that that the USA's GDP is about 71% based on consumption, but in China, it's more like 39% of GDP. However, we can see that their consumption was at 53% of GDP in 1981, but the economy then was far smaller and under-developed.

The USA, OTOH, has a GDP that's 71% from consumption, which is a level that's even more than what it was in China in 1981. However, the USA isn't poor like 1981 China.

I'm finding out that the UK's GDP is about 63% of their GDP, and Germany's is about 51%.

• All 3 of these Western nations are fully industrialized, and the standard of living is very high. Yet, the amount of consumption that they have is quite different. Does this difference in consumption explain why one of these nations maybe more robust in dealing with economic shock?

• Are countries with low consumption indicative of a populace who don't buy much? If so, how is this a bad thing, since it also implies that they're less wasteful of a nation whose GDP is very reliant on consumption?

• Why do Western nations want China to increase their consumption? In 1981, their GDP was 53% of consumption, and it was a much poorer nation then.

• Is there an inverse coorelation between government consumption and household spending, since a government like Germany has universal healthcare. So there is no personal consumption when a person in Germany receives healthcare, but in the USA, maybe when they take care of themselves in a health crisis, that this constitutes personal consumption.

Thanks for your consideration.

If times are good enough that someone gets greedy, and suddenly everyone's hurting (Like with Covid), then doesn't it follow that the true line for bankruptcy wouldn't line up with reality, and that someone would notice unless you adjusted?

Do people actually think about this and plan for it? Or do not and get caught?

Hi. I want to become a macro analyst, focusing on FX and rates. I had 1 year of experience as a FX & rates analyst in an investment bank. I worked directly under the economists and FX strategists. However, it is a contract job and my contract was not extended.

My educational background is somewhat unconventional, as I do not hold an UG degree in economics. So I want to pursue a master's in Economics to enrich myself and get back to my former jobs

While researching on LinkedIn, many FX & Rates analysts do start from economics degree. ​However, I asked people from the industry (my former boss) and they said traditional academic economics degrees aren't really that practical to help them write reports / initiate trading ideas. ​ After all, Economics covers a lot of thing, and many tend to be theoretical and not directly applicable to the job.

I am currently comparing the curriculum of various master's programs. 

(i) Which subjects do you consider essential for securing a position in the FX/rates sector? 

(ii) Additionally, do you have recommendations for specific master's degrees?

(I have heard that the MIEF program from Johns Hopkins Uni SAIS is very practical in this area, but probably too expensive for me)

Aside from Germany in the inter-war period and possibly Zimbabwe, what are some historical examples of the Wage-Price Spiral?

https://i.postimg.cc/7LtzVdTt/Screenshot-2024-11-30-131503.png

It is Cross Elasticity of Price between Education Spending and increases in the price of food, selected nations

I am a US citizen but work in Canada. Should I convert all my CAD to USD ahead of Trump tariffs and what not?

Why do all countries use the US dollar for world trade? This reliance causes a lot of trouble, like the need to follow US sanctions. Wouldn't it make more sense to use commodities like gold, whose value generally increases long-term and has less volatility?

Many international banks and financial institutions comply with US sanctions to avoid penalties, even if the transactions don't directly involve the US dollar. However, with cryptocurrency, there is no bank involved, thereby limiting that issue. There are cryptocurrencies that cannot be mined, and there are ways to limit their volatility, such as using stablecoins.

What are the main reasons countries stick with the US dollar instead of switching to gold or cryptocurrencies for transactions?

I'm in my mid 30s, have both a Bachlors and a Masters in Economics, currently working for a government department in Sydney, Australia, doing regulatory and competition economics.

I feel like I've pigeonholed myself into a niche area. My job is very comfortable with decent pay and a generous work-from-home policy, but I'm getting bored of it, so I'm now exploring other paths. I have some free time to do further studies as well.

I'm fairly introverted and generally prefer to do technical/analytical work (which is a large part of my current job as well, although it's become very repetitive).

So I'm wondering what are some other jobs out there that might suit me (preferably non-government and non-managerial jobs)? I'm not looking for the silver bullet, just ideas that I can look more into. I'm open to non-economist jobs where economics skills might be useful, e.g. data science.

I'm also open to ideas for side-hustles, e.g. I've found my economics/quantitative skills to be very useful in managing my own finances, investing in ETFs, churning credit cards, etc.

Thanks in advance

We're going to shamelessly steal adapt from /r/AskHistorians the idea of a weekly thread to gather and recognize the good answers posted on the sub. Good answers take time to type and the mods can be slow to approve things which means that sometimes good content doesn't get seen by as many people as it should. This thread is meant to fix that gap.

Post answers that you enjoyed, felt were particularly high quality, or just didn't get the attention they deserved. This is a weekly recurring thread posted every Sunday morning.

As a person whose grandfather lived to see 91 and a whose grandmother is still alive at 91, I feel blessed. May she hit 100. However, I decided to look at the topic of ageing and economics a bit more impartially.

It is evident that the median age for mortality in Western Europe and the US is going up. In the Netherlands, where I live currently, it is expected to be in the early 80s for males and in the mid-80s for females.

Often I wonder whether this is a curse. For one, you can't afford to retire at 60, you must keep working till 65-66 till the pension kicks in. Also, you might retire at 66, but how do you know inflation wouldn't increase so rapidly in 14 years, that the final years of your life are going to be miserable? Finally, how healthy are people who live that long. They may be alive, but if they need assistance for everything then they aren't living their life fully, just dragging through - like my grandfather in the last 5 years of his life.

If there was, hypothetically, a fixed age of mortality, say 80, wouldn't it be much better (to financially plan your life)? You know exactly how many years you've got when you are retiring, say 15, so that you don't need to "over save", and governments don't have to pay as much for old age healthcare. It feels like, the more our society develops technologically, the more unbearable life becomes.

5 months ago I asked about how interest rates affect currency appreciation:

https://www.reddit.com/r/AskEconomics/comments/1dprwok/if_the_central_bank_of_currency_x_has_interest/

However, in practice this doesn't seem to be quite the case. I have looked into the particular case of the USD and CHF, and wondered, what would have been more profitable, if to buy bonds in CHF (low interest rates) or in USD (higher interest rate). The time window of the analysis is ~10 years.

1. Starting value of the conversion rate is fundamental for the comparison. Beginning of 2023 was more or less stable. This means that from ~01/01/2013, CHF/USD grew by 3.67%. https://imgur.com/a/jyj0aaf
2. Then I have calculated the compound interest I would have gotten from the interest rates of CHF and USD respectively. The values of the interest rates and timestamps could be slightly off since I had to copy them manually from graphs. The code (thanks ChatGPT) is here: https://pastebin.com/xXQ9sm0J . The result: - 1 USD -> 1.19 - 1 CHF -> 0.97 (yep, long period of negative interest)

Now, applying the new conversion rate (+3.67%) if means that we would have:
- 1 USD -> 1.19 USD
- 1 CHF -> 0.97 CHF * 1.0367 -> 1.00 USD

In conclusion, if an investor had converted CHF to USD in 2013, and then relied only on interest rates, it would have obtained a return of 19% vs 0% that obtained the investor that did not change the currency.

What explains this difference? I could not analyse other currencies but I wouldn't be surprised if this is a common pattern. I suspect that interest rates are just a small part of the puzzle so I would highly appreciate any response that dive deep into what other factors influence, how they explain the behavior of the CHF/USD rate in the last 10 years and in which scenarios is likely (not certain) to be profitable to convert a currency to benefit from higher interests.

Thank you in advance!