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This week’s book of the week is Mindf*ck: Cambridge Analytica and the Plot to Break America by Canadian, Christopher Wylie [0:04:38]
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A chart showing the ratio of the Nasdaq 100 index divided by the Russell 2000 [0:08:22]
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University endowment sued for active investing by 94-year-old Clarence Herbst. [0:10:02]
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This was not the first time Clarence Herbst had an issue with his alma mater. [0:13:05]
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Multimillion dollar mismanagement of public pension funds in Maryland, 2014. [0:13:22]
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Benjamin introduces the main topic, quantitative easing (QE), a central bank action. [0:14:42]
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What do money printing and the stock market have to do with one another? [0:17:37]
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You can summarize money as a social construct that facilitates economic activity. [0:20:06]
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As long as there are credit-worthy borrowers, banks will print money out of thin air. [0:22:28]
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The distinction between central banks and private banks, which interact with customers and have to monitor their net flow of money. [0:25:27]
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Open market operations allow a central bank to influence overnight lending rates. [0:28:30]
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The difference between regular open market operations and QE. [0:33:14]
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A couple of theories about how QE might work, like the portfolio balance theory. [0:37:42]
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There is no relationship between reserves and money in the economy. [0:41:11]
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What causes inflation? It’s not reserves! Demand for loans drives demand for loans. [0:43:07]
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What about the effect of QE on stock prices? We would expect a positive impact. [0:45:14]
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Money is this medium that facilitates economic activity and that’s all it does. [0:47:40]
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Five key personal finance lessons we can learn from this crisis: Stocks are volatile [0:50:35]
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Debt is dangerous and emergency funds have a very important purpose. [0:50:35]
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Don’t stop spending, always prepare for the worst – disability insurance is crucial! [0:54:51]
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Cameron still wants to understand how fee-free trading platforms make money – nothing is for free! [0:50:35]
Links From Today’s Episode:
Wells Fargo Raises Some Revenue-Sharing Fees for Asset Managers – https://advisorhub.com/wells-fargo-raises-some-revenue-sharing-fees-for-asset-managers/
Five key personal finance lessons we should be learning from this crisis – https://financialpost.com/personal-finance/five-key-personal-finance-lessons-we-should-be-learning-from-crisis
Evaluating Asset Market Effects of Unconventional Monetary Policy – https://www.federalreserve.gov/Pubs/IFDP/2014/1101/ifdp1101.pdf
Banks Cannot and Do Not “Lend Out” Reserves – https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/senior.fellows/2019-20%20fellows/BanksCannotLendOutReservesAug2013_%20(002).pdf
Money Creation in the Modern Economy – https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
Money Reserves and the Transmission of Monetary Policy – https://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf
Pragmatic Capitalism – https://www.amazon.com/Pragmatic-Capitalism-Every-Investor-Finance/dp/B01L988EGI
Bank of Canada – https://www.bankofcanada.ca/
Episode 106: Jim Stanford on The Economics of Capitalism in a Crisis – https://rationalreminder.ca/podcast/106
Maryland pays more than $320 million in fees to manage pension funds. What does the state get in return? – https://www.washingtonpost.com/local/md-politics/maryland-pays-more-than-320-million-in-fees-to-manage-pension-funds-whats-it-get-in-return/2016/06/12/add4319a-2c39-11e6-9de3-6e6e7a14000c_story.html?tid=a_inl_manual
University Endowment Sued for Underperforming the S&P 500 – https://www.institutionalinvestor.com/article/b1ml4nng27k0ln/University-Endowment-Sued-for-Underperforming-the-S-amp-P-500