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Macro Economics

I read an article the other day that I neglected to save, and which I can't, for the life of me find anymore.

Normally that'd stop me from blogging about it, but I found that their economic theories so convincing that I'm going to try to muddle on through without it.

In a nutshell, the article talked about how "large amounts of available capital" distorts market prices.

Some Examples:

Lowering Risk Thresholds for New Home LoansIncreased Home Demand and Prices
Increased issuance of student loansRising Tuition Costs at rates 50% above inflation
Medicare paying for all medical bills of patients over a certain ageCost of procedures goes up
Department of Defense spends billions on AeronauticsJet Fighters somehow become more expensive each year, rather than less

Reading through this, it smack of reductive thinking that I normally try to stay away from. Afterall, these are all very disparate examples spanning different markets and customers, could there really be anything to be gained by comparing them?

Odder still, is that I agree with half the obvious solutions and pale at the other half. What snarky thing would I have said about someone holding a sign saying "Make Universities More Affordable, Restrict Student Loans!" as well as a "Universal Healthcare for all" sign.

I guess that is why I'm saying all this out loud. It makes sense, but I am wary of it's logic and am constantly snuffling at it to see if it has any hint of turning sour.

I think one interesting exclusion from the list is 401ks. I know a lot of people who have them, and very few who actually know what and where that money is invested in. That seems like a massive amount of money that is *somewhere* being controlled by the whim of whoever administers the 401k plans for the companies. I've tried to think hard on applying the above logic to identify where this money might be going and what, if any, item it might be inflating.

All I could come up with is "The price of all stocks", which is an interesting proposition. Can that economic slight of hand continue indefinitely? If not... What does *that* bubble popping resemble?

Or maybe it is the perfect marriage, the exception to the rule. In real life there is a limit on how "pink" an elephant can be made. But a unicorn's pinkness can increase indefinitely.