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REVIEW: The Curious Case of Anthony Scaramucci’s ideas on Interest Rates, Deflation, and Tax Policy

“ ‘Google before you tweet’ is the new, ‘think before you speak.’ ”~ Jonathan (Jon) Parker, via Joe Newton [Best attribution I can find – Mike].

As a layperson, I have serious doubts about the ‘Big Picture’ economic, tax policy and financial opinions of Anthony Scaramucci. (The Curious Case of Negative Interest Rates, By ANTHONY SCARAMUCCI (NY Times Dealbook), MAY 8, 2015)

Notwithstanding that Mr. Scaramucci is richer, more famous, and better-looking than I am, I still think his premises are flawed or simply wrong, and his conclusions are thus similarly wrong.

My eyebrows first rose when his new definition of “negative interest rates” began to sound a lot like the old concept of “deflation”.

“Negative rates imply that the money in your pocket today will buy more goods tomorrow. Think of money as just another fungible asset: A $20 bill today is still a $20 bill tomorrow or two $10 bills a year from now. Interest rates, on the other hand, reflect the opportunity cost of spending that money today relative to tomorrow. When rates are negative, the $20 bill is still worth four $5 bills in the future, but its utility value (i.e. what it buys) increases with time.”

This is actually a classic example of a deflationary ‘vicious cycle’; not ‘negative interest’.

My doubts were further fed by this absurd-on-its-face statement:

“John Keynes, you see, was actually wrong. His famous utterance, “In the long run, we are all dead,” isn’t true. Like it or not, the long run is upon us, and we are all very much alive (aside from Keynes).”

Mr. Scaramucci obviously misses the point here: In the long run, Mr. Keynes died. In the long run, Mr. Scaramucci will die. That he fails to grasp this point does not bode well for his further ruminations. Continue reading