blog of kaiyen

ECON 405:  Macroeconomics
At a glance

• Workload:  Moderate
• Teaching Style:  Lecture
• Interest in students: High
• Relevance to outside world: High, especially if you’re into economics

Overall Professor Rating: 3 (she can get a bit impatient at times)

Overall Course Rating: 4 (but she can also make the course entertaining while getting the teaching across

The Review

This is the latest of my reviews on the professors I’ve had while an MBA student at Santa Clara University’s Leavey School of Business. There are lots of sites out there that provide feedback and rates – ratemyprofessor is the most notable. The SantaClaraMBA Yahoo group also has a big database of comments and lots of additional information in its message archive. That database can be a bit hard to wade through, and the comments are short and often just link to other threads, which are themselves pretty short and superficial. Only here can I write as much as I want 

I review professors from a variety of perspectives.  First, I explain the context(s) under which I took the class.  Time of year, time of day, etc.  Then I talk about the quality of the class and the professor, and finally about the professor as a person.  After all, we are trying to learn about our interactions with people, so knowing that side of a teacher is critical, too.  So these would be interactions outside the classroom, etc.  I also just write whatever it is that I think is relevant or will be helpful to others.  That is my overall goal.

The facts

I took ECON 405, Macroeconomics, in Winter 2009.  This is the second of two required economics courses, and Professor Kamas teaches several sections.  I took the later section of the evening, and I think that some of my comments about her patience, etc might be a result of that.

Them’s the facts (slim as they are). Now read on for the review.
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Last night, on the Daily Show with Jon Stewart, Peter Schiff was interviewed.  Schiff is an “economic commentator” (as compared to an economist?) and the head of a brokerage firm.  Stewart showed a number of clips of Schiff on CNBC prior to the current economic crisis warning of the dangers of the housing bubble, sub-prime mortgages, and over-leveraged companies and individuals.  These comments were made well in advance of the actual recognition of the situation and there is audio of people actually laughing while he is talking (I got the impression they were other guests of panel shows, not the moderators or CNBC folks themselves, but I cannot be sure).

At any rate, the gist of Schiff’s argument is that

1. The government should have let companies fail.  No company is too big to fail.
2. The market will dictate how things will fall out in the end, even if it means massive recession for now.  The market is strong.
3. This is all because of how messed up things were, so let’s let the bad die out
4. The government is just making things worse by intervening, and we might have hyperinflation.

In some ways, I find this very dangerous.  In others, thought-provoking.

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As I sit here getting ready to take my economics final exam, I am struck by a comment a friend of mine made the other day about our economy and our economic situation.  Essentially, his point was that what we needed to do was save more and spend less.  In other words, that it is our consumer-based economy that inevitably led us to at least some point of weakness.  His words were not that strong but I am distilling a bit here.

However, a consumption-based economy isn’t a bad thing unto  itself.  Yes, a low savings rate must be bolstered by some kind of government-based welfare system (Social Security) which does put a strain on earnings, but consumption can help fight off disinflation (which actually is an okay thing) but also certainly helps fight deflation or the threat thereof.  Even when our rate of consumption is low, we can still fight deflation (now, massive recession on top of low consumption is a different matter).  And high consumption also means payment of taxes, which means money to the government and local municipalities, and a stabilizing effect on the economy (it prevents it from overheating or going into recession for the most part).

The problem is how we fund this consumption.  For each person, it’s about whether we are borrowing in order to consume.  Are we using all credit card debt?  Taking out lines of credit on houses for which we already still have mortgages (and whose value then suddenly drops)?  For the government, the same applies – if we have a huge debt to foreign countries by selling bonds to them to fuel our economy, then we have ourselves in a precarious situation.

Selling bonds is a common way of funding deficit spending.  Because we have a current and potentially more big stimulus packages coming up (and the future ones will be all government spending, I bet, with little to no tax cuts (which is a good thing for stimulus, actually)), that means we are selling a lot of bonds.  When we sell bonds, we go into debt.  The biggest buyer of our bonds right now is China.  China has sent a “shot across our bow” about devaluing the dollar through the Fed “printing money” by selling even more bonds.  This dilutes the market, lowers the price of the bonds, we then have to sell more bonds to get the same amount of money, etc.

So the government is fueling its consumption – which we need – through debt as well.  But it was already deep in debt.  And just like a person who consumes through debt, already being in debt to start with just makes everything worse.  

But…a consumption-based economy isn’t bad unto itself…