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Pragmatic Capitalism

Practical Views on Money, Finance & Life

‘Myth Busting’

The MV=Py Myth

I’m pulling this one out of the AMA section because it’s a common question I see. Reader Oshe asked about the Equation of Exchange otherwise known as MV=Py, where M is the quantity of money, P is the price level, Y is total output and V is velocity, or the number of times that a dollar is used… Read More

Myths About the USA’s Fiscal Union

The FT ran a piece about the fiscal union in the USA and why this system couldn’t be replicated in Europe to help resolve the Euro crisis. I wanted to touch on the author’s main points to highlight some of the errors in the thinking there. Myth # 1 – “So let’s state three facts… Read More

Where Does Money Come From?

how

“The process by which money is created is so simple the mind is repelled.” – JK Galbraith There’s a reason why myth # 1 in my “biggest myths in economics” is “the government prints money”. It is, by far, the most pernicious and misleading of the economic myths that exists. I was reminded of this today… Read More

Why The Efficient Market Hypothesis is Useless

I noticed Noah Smith and John Authers on Twitter discussing how great the Efficient Market Hypothesis is because it explains why indexing works. I responded saying that the EMH really has nothing to do with why indexing works. They didn’t seem to see my point of view so let’s try this again and see if we… Read More

Beware the Macro Value Trap

CAPE

I’ve discussed my general disdain for the idea of “value investing” at some length (see here and here), but it’s worth reiterating at times because it’s such a common theme in the investment world. “Value investing” is generally an approach that is applied to stock picking, but has garnered increasing attention in the macro world… Read More

The 5 Best Things I Wrote About in 2014

I’ve written an embarrassing number of posts on this website over the last 6 years. Most of them probably aren’t all that useful, but every once in a world this blind squirrel catches a nut. Here are five of the more influential and popular things I wrote about this year: 1.  Pragmatic Capitalism: What Every Investor… Read More