I’ve had some time to think about my interests for articles as I’ve begun the process of posting some over the past month. It has been fascinating for me to consider why I chose to discuss the issues of an intangible asset like trust, the importance of appreciating cash, and a simpler, more efficient tax system. Moreover, I wrote briefly about what I believe may continue to be two of the more important commodities over the next decade for investors and economic analysts – gold and oil.
As I mentioned, I believe increased trustworthiness is the underappreciated key to fostering economic growth. The increased velocity of economic activity that would result from a more trustworthy set of economic participants would alleviate concerns that capital is not being optimally employed. Unfortunately, the intangibility of the asset tends to make it go unnoticed as a vital driver of economic activity.
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My discussion on cash has been two-fold so far. First, there is nothing wrong with loving cash. One is not unpatriotic by saving some money. One never knows what types of issues will arise: a newborn child, a desire to purchase a home, an investment opportunity, etc. I am not commenting negatively regarding any macroeconomic thesis on optimal policies regarding issues such as aggregate demand, debt ratios, etc., but I do think a healthy economy requires recommending folks err on the side of conservatism when it comes to liquidity.
Next, I discussed the importance of understanding the origin of that cash you are stashing. If one doesn’t understand why the dollar is different than Monopoly money, then one is vulnerable to being taken advantage by it. Add a dollar’s worth of value to society, earn a dollar – case closed.
As for taxes, I have enjoyed getting feedback about my brief proposal. Although our tax system is quite large and complex, there are a certain key set of taxes that have overlapping issues and provide much of the revenue for government spending. By making the system simpler and stopping the disincentives for suboptimal behavior, the opportunity exists for a short-term fiscal stimulus which also gets the US back to an optimal long-run system.
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Lastly, I briefly discussed gold and oil. Each of these commodities is not only important from an investment opportunity perspective, but also as economic indicators. As is often the case, perhaps it may not be wise to view any one indicator in isolation to come to a conclusion. The chart I included in the relative analysis not only shows the average, but also the fair amount of dispersion around that average.
In conclusion, an increase in trustworthy behavior by folks should help increase the velocity of economic activity, thereby leading to the growth and more prosperous economy that would benefit all stakeholders. Any distaste for an investment decision to overweight cash or gold in one’s portfolio might melt away when a growing, fundamentally-strong economy crushes those risk-averse choices relative to growth-loving investments like equities.
Related Reading: The Math of Low Trust
Wouldn’t it be nice to get back to solid growth? (Click Chart to Enlarge)