With the 24x7 news cycle, twitter, instantaneous communications, etc we quickly get concerned about things that don't matter. Often there are key underlying "Bounding Conditions" that define the "Solution Space" and lead us to reality. A recognition of reality can balance out the hype and drive the world towards a more rationale and simpler policy.
Bounding Conditions
Life
- Most of the stuff people worry about is never going to happen anyway
Economics
- Debt should only be used to pay to expand a proven growth plan
- If you continue to spend more than you have, it reduces the value of your company, country, etc
- Business owners include the long term cost of labor and capital equipment into their near term decisions, if they anticipate new future regulations and costs they are reluctant to invest
- If the cost of labor goes up faster than gains in labor productivity, businesses will not hire
- Unemployment benefits allow the unemployed to wait longer to take full time employment
- Short term ad-hoc policy initiaties discourage long term productive measures
- Inducing consumers to do today what they would otherwise do tomorrow does not increase GDP over the long term
- If banks are too big to fail, they are too big
- A constantly changing regulatory regime kills investment and limits economic growth
- If you increase taxes on something, people will do less of that something
- Every government program is an election away from change
US
- Economic recovery in the US is almost always led by decline in average home price (below the mean curve), leading to increased home buying as a result of low prices. Economy gains as new home owners fill the house with durable goods.
- US Productivity and per capita GDP far exceeds any other nation. The US has an inherent resilience that drives innovation like no other country.
- Though US financial stability is in question, investors that are diversifying risk are compelled, by the shear size of the US market, to continue to invest in the US. There are few other locations big enough to take investors money.
China
- China is very dependent on exports to the US. It has a lot of domestic reasons to buy US debt to keep that export market alive.
- China is a huge market opportunity. At some a dynamic middle class will emerge there. That middle class will push for improved working conditions, salaries, benefits etc. When it does it will also consume. As it shifts from exporter to consumer, its internal growth will stall.
- Like the US, and unlike many other countries, China respects personal innovation and people that run businesses.
