The Chimera of Macroeconomics

  We often refer to 5W 1H. With us (Who) and the community (Where) given, we usually ask the Why question first, followed by What, When and How.   Question 1 . Why do we make investment? Is that for the future return or in avoidance of “the opportunity cost” now? Anyone in the right mind would choose the former. More specifically, investment is for the return per dollar (1) per period (1), or the rate of return in percentage per annum . The percentage is nothing other than certain numeric per 100 , where the unity (1) is indexed to 100. “The rate of return” in Finance is somehow called “the interest rate” ( i for nominal, r for real) in Economics.   Question 2. What do we invest in? The most probable answer would be: the best- expected return after deduction of all transaction costs (including risk premiums of various types). Question 3 . What is the most urgent thing you would like as alternative to your investment decision? How often, if ever, would it be “...

  Opening a text book on Principles of Economics, one of the first things we come across is “Demand.” Fact one, demand is for marginal benefit, or utility per unit of the product. Fact two, the value of utility is accounted for in the sovereign currency unit . Fact three, the demand exists with no regard to the Supply and a price. The price would be the “opportunity cost” of grabbing the unit of good or service .                Fact four, “Demand” is periodic (T -1 , or per period) because no household would buy any product once and for good. This is taken for granted and rarely specified in textbooks. Incidentally, each and every one of us has by creation blind spots in our visionary system. Consequently, we in general and macroeconomists in particular often miss the periodicity out, with or without FOMO.              Now let us put “Demand for Money”...