Economics Explained

In the fallout of one of the most volatile American elections ever financial markets did something very strange, they rose, and rose to new record levels, again.

This would be unusual during even a normal election, where most investors tend to sit back and wait for the dust to settle but it is especially strange in 2020.

Joe Biden, who everybody is at least 90% confident will be the next president has spoken very openly about plans to raise corporate tax rates and this is coming in conjunction with the tension around how a transition of power may or may not take place, not to mention that global pandemic. 

If investors are supposed to fear uncertainty surely they would be terrified of the current world that we live in. 

Logic would dictate that the best outcome for the major corporations that make up financial markets would have been a nice simple and decisive Republican victory. At the end of the day, they tend to be a slightly more pro-business party.

Instead what they got was an extremely contentious Democratic victory with the potential to bring turbulence around key issues like covid relief packages in the coming month. 

So what is going on here?

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The war on drugs was declared in 1971 by president Richard Nixon in a press conference that went on to outline a plan to fight the trade of controlled substances across the world. Drugs were declared national enemy number 1. 

Since then over 1 trillion dollars have been spent on fighting this battle and by all metrics, it has been money poorly spent. 

It’s probably no surprise to anybody that drug-related deaths and crimes have done nothing but rise over the 50 years since Nixon made this declaration. 

With the benefit of hindsight, it was pretty easy to see why... you can’t fight the forces of supply and demand in unregulated markets with m16’s and government agents. 

Trying to do so would be like trying to fight a hurricane by dropping bombs on it. Not particularly effective and if anything it’s just going to cause even more collateral damage. 

But perhaps this is all starting to change, just last week during the election, the people of Oregon also voted on something else that will potentially have even more influence than who the next president is. 

The people of the state voted to decriminalize drugs, all drugs, even the hard stuff.

This might look like waving the white flag in defeat and finally admitting that drugs have won the war on drugs. But it might also be what we should have been doing all along, fighting the war on drugs with economics. 

To understand what economists mean by this we will need to look at a few key areas.

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Tesla is today the most valuable automaker in the world by market capitalization beating out industry giants like General Motors, Ford, Volkswagen group, and even Toyota. 

It has achieved this impressive feet despite a short operating history, a limited product lineup, and even relatively modest sales figures compared to these much more established entities. 

In spite of all of these indicators, investors are willing to pay more than five times as much for the same stake in Tesla as compared to the more traditional automakers. 

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This is Kazakhstan, and yes I know what you are all thinking, and yes in the interest of full disclosure we are definitely cashing in on the hype surrounding the second Borat, but in fairness so is the nation itself. 

Even still this country is so much more than that with one of the most, hmm let's call it exciting economies in the world. 

What was once a mistreated soviet state has now gone onto be the largest and wealthiest economy in central Asia, one that is welcoming foreign trade, international investment, and advanced development of technologies to continue this growth into the future. 

In this episode of Economics Explained, we'll explore the following questions:

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The US presidential election will be held in 2 days from when this video is published.

The process of electing who will go on to be the most powerful man in the world always makes for big news but perhaps never more so than in 2020. 

The United States is currently in the grips of a major health crisis that has caused untold suffering to people directly affected, and indirectly to people impacted by the economic consequences that came with it. 

This is all coming in combination with a mountain of other issues, wealth inequality, trade tensions, nationwide protests, a wildly unstable financial market, record-high levels of debts, and a host of other issues that are certainly getting less airtime in 2020 but are of no less importance. 

This election is a chance, at least in theory, for the citizens of America to have their say about how they would like these issues dealt with... and while there are more issues than ever the right solutions are desperately needed. 

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In this episode of Economics Explained, we will explore the following questions:

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In and amongst all of the happenings in the world this year these awards have kind of flown under the radar which is unfortunate because they all recognized some very remarkable works.

And in the field of economics, it all had to do with auctions. 

Auctions and Auction Theory are one of the most important systems to understand in economics because they act as an efficient way to build markets and correctly determine how we value items. 

In this episode of Economics Explained, we will explore the following questions:

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If you were to ask any random person on the street what it is that they knew about economics there is a pretty good chance that the first thing that they would blurt out would be the words “Supply & Demand”

The number of people out there willing and able to buy a good or service versus the number of people out there willing to sell a good or service, all individually vying to get the best possible price. 

If demand increases prices increase, if demand falls prices fall and visa versa with supply. 

Now I know this channel is called Economics Explained but for most of you listening, all of this should pretty much go without saying. 

The only issue is that this rosy picture is in no way a reflection of the real world. 

So what is going on here?

In this episode of Economics Explained we will explore the following questions:

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The long-suffering generation of millennials are now set to be significantly poorer than both baby boomers and Gen X'ers. 

Having entered the workforce during the fallout of the 2008 mortgage crisis and then being hit particularly hard during this current crisis has meant that today millennials only account for 3% of national wealth, where boomers at the same point in their lives accounted for 27%.

This trend is more than just another pity party for our fellow latte-sipping millennials. On a wider level, the share of wealth owned by people under the age of 40 has shrunk from 13% to just under 7% over the past 3 decades. 

Even if we ignore the social issues of younger families having to make do with half that of what their parents did this can have some serious 

Therefore if this trend continues businesses around the world might start to lose out on their Goldilocks zone of consumer spending. 

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This is California, the Golden State and one of the largest economies in the world in its own right. 

If California was counted as a sovereign nation it would be the fifth-largest in the world by GDP, with a 3.2 trillion dollar gross state product putting it just behind Germany and just ahead of India. 

In this episode of Economics Explained, we'll explore the following questions:

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