Amanda Stanhaus

Category: Economic Literacy

Author’s Note

Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Dear Reader:

I created the character Bettie to empower young women to answer the ultimate question: how can I spend, save, and grow my hard-earned money? Bettie shares her fabulous & frugal journey through blog posts, each signed XO, Bettie. Bettie’s story documents the common financial concerns of successful millennial women; personal finance topics are rooted in economic understanding. Bettie compellingly explains all the options–bank accounts to investment accounts–as well as the inevitable bumps along the way at

As a student of economics at McGill University, I have witnessed several of my classmates–despite their economic knowledge–make elementary money mistakes. Other than economically literate parents, there are few resources which provide the ins and outs, without requiring one’s money first. The antithesis of the current market, XO Bettie’s buzzwords are to engage young women and encourage them to become economically & financially literate.

My short-term goal for XO, Bettie–to engage successful millennial women with Bettie’s unique spin on common stories–has been met. Daily, the blog is read by my key demographic. In the long run, XO Bettie’s content would be a fitting addition to financial literacy initiatives that are launching throughout North America, an indispensable column in a major newspaper or magazine, and an engaging way for a financial services firm to explain its services to win over prospective clients.

The following is my senior research project that was inspired by XO, Bettie. In true economist

fashion, I sought to maximize efficiency, have my work recognized for academic credit, and prove through storytelling that I have mastered the material.

With my theoretical economics degree, my post-graduation goal is to be a “conversational”–not academic–economist; this set of stories is my dress rehearsal.

Amanda C. Stanhaus

Economics & North American Studies B.A. ‘13, McGill University

Creator & Chief Conversational Economist, XO Bettie


Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

“The economy is…”

“The Fed will lower…”

“Twitter’s IPO is unlike Facebook’s…”

Ladies, are you also left wondering what all the economic fuss is about?

I, Bettie, promise to be with you for every step of our fabulous & frugal journey.

“Economic Essentials” are up first, featuring: my Beau, my father Bernie, The Godfather, extra-long twin bed sheets, a sandbox, and strategies to say, “I love you.”

Then, “Economic Keys to Successful Investing,” featuring:  the Kennedys, Carrie, Samantha, Miranda, Charlotte & Mr. Big, Joan Harris, Michael Ginsberg, James Bond, Bernie’s credit card, aliens, and a camel hair coat.

Followed by, “Growth & Macro Tools,” featuring: Barack & Michelle Obama, Santa, my Man, my mother Bertie, my bestie Babe & her boy, my MacBook Air Blair, and an exclusive trip to Bettieland!

And I hope you’ll stay with me for “Events,” featuring: alive & dead men, my Bubbie & her beloved childhood pony named Princess, and bursting bubbles.

Plus, “Personalities,” featuring: more alive & dead men, Don Draper, Roger Sterling, Pete Campbell & Bertram Cooper, a trip to Europe, and fate.

And wait, there’s a“Glossary!” Definitions of all underlined words are stored in the Caboose.

Economic Essentials

Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Starring: my Beau, my father Bernie, The Godfather, extra-long twin bed sheets, a sandbox, and strategies to say, “I love you.”

Supply, Demand & Equilibrium

Everything in life is negotiable.

I learned the power of negotiation when I was a young’un–a freshman in university. I was having cell-phone troubles, and I was told I could either pay $200 for a new phone or drive 3 hrs in LA traffic in my rented-by-the-hour car to get one for free.

I solved this problem as I solved all problems in those days: I called my daddie, Bernie.

Within 5 minutes, I was out the door with a free, new phone in my purse.

I called Bernie back on my new phone and asked wide-eyed, “Bernie, what did you say?”

“I made him an offer he couldn’t refuse…”

“Bernie, you threatened his life from thousands of miles away?”

“No, just that our family would take our cellphone contracts to another company.”

And that’s how it’s done–negotiate like you’re ready to walk away.

It’s a give and take to reach the end of the negotiation–the equilibrium.

Suppliers want to maximize their profit, selling the most stuff for the highest prices. They take into account the cost of production and how their competition is faring.

I always demand the most bang for my buck, shop around, and wait it out for a good deal.

Since I’m at odds with suppliers, we do a dance till we are both pleased with the negotiated result. AKA the equilibrium.

Opportunity Cost

My action-packed schedule has me constantly in conflict resolution mode.

Usually the responsible choice is pretty clear. AKA stay in and get my beauty rest before my all-day strategic planning session.

But, what is a budding, hourly-paid career gal to do when an external networking event overlaps with my work hours?

Ugh, I have to pay for a cab there and is it really worth it to miss out on an hour of work (AKA $$)?

Well, will the networking event land me a higher paying job? One perhaps that doesn’t pay by the hour?

Ah, weighing opportunity costs. I don’t want to miss out on any opportunities. But I can’t be at two places at once. [add to to-do list: ask Man about hacking possibilities.] On top of transportation costs, there’s an opportunity cost to choosing one event or the other. I like this cost as tiny as possible. Meaning, I pick the best event pour moi!

Microeconomics vs. Macroeconomics

Ah the good old days, my last summer before university when I could buy like an almost-adult, but spend like a child. I set up my new life with extra-long twin bed sheets, monogrammed towels, an infinite amount of bubble gum pink hangers etc. All thanks to Bernie & Bertie’s parental support.

At a micro level, these extra special purchases shifted the allocation of resources in my family from my parents to moi. AKA B&B’s trip to Delray was a couple of days shorter than usual that year.

At a macro level, every freshman–regardless of height– bought extra-long twin bed sheets. Because of our demand, firms increased their productive capacity and raised total output of bed sheets. Major demand for all the other stuff that makes dorm rooms less dumpy had similar effects for the economy. Employment has risen as more and more Americans attend college and live in dorm rooms. And all the output–that is made in America–boosts our GDP.

Stocks vs. Flows

I’m always on the look out for a perfect carry-all. Something that goes over the shoulder, but also can be hand carried when my jacket is too fabulous to be rubbed by a shoulder strap.

Kate Spade’s “2 Park Avenue Beau Bag” is perfection. But the price tag is a bit imperfect.

I’m thinking of “investing” in it and owning it for the long haul. If I buy it, just this once, it will be a new addition to my closet’s capital stock.

As always, when making a value investment, I look at the potential pros and cons.

Pro: Beau conveniently and discreetly fits everything I would need for day & night.

Con: If I buy Beau, I will be committed to Beau, and because of lack of residual funds I will forgo all other suitable sacs.

[mind math…weighing opportunity costs]

I’m okay with that con. Beau is a classic piece.

Now, when value investing in stocks, I look at the capital stocks and flows of a company.

“Capital Stock” is the lingo that refers to the amount of buildings or equipment. Ideally, a company will continue to use these big ticket items for years to come. If a company is buying these big-time, they are confident about their business prospects. Also, sometimes called “Capital Assets.”

“Flow” is the jargon that can refer to the flow of services that come from a given stock of capital. A common use of this term is “cash flow.”

The one-time purchase of my Beau will be an essential piece of equipment, adding to my closet’s capital stock and it will cause a constant flow of compliments. Decision made! I’ve invested and have become a bag-holder!

Role of Government

If government did its job, there would not be The Godfather Trilogy. Thanks for being incompetent! Don’t ask me which one I like more, deciding between pt. 1 and pt. 2 is too painful.

Government is supposed to have a monopoly of violence, but if Sonny’s death is any indication…

Government is also suppose to enforce property rights, but the five families like their cut, and take things into their own hands if…

Now that we know what government is supposed to do and what happens when this doesn’t happen (Thanks for the visuals, Coppola!), let’s understand the dead-man debate over the role of government.

Adam Smith (author of The Wealth of Nations in 1776)  argued that government should have a monopoly of violence and protect its citizens. But, this manly man also believed in magic…the magic of Capitalism. An invisible (manicured) hand guides the market to the optimal allocation of resources. Governments need to be paws off. People do what’s best for them, specializing their skills and trade accordingly. Individuals, left alone in a sandbox, will achieve an [cough, “ever-elusive”] optimal equilibrium.

Karl Marx (author of The Communist Manifesto in 1848) believed that, even in a sandbox, there is a hierarchy. Karl would convert vulnerable workers to Commies. Adam’s Capitalism was just a phase, Karl claimed.  People would get pissed off when portions of the sandbox were restricted, especially when they are working so hard to grind rocks into sand and costs of machinery were eating into their salaries. Workers would use their pails as helmets, put their own paws up (à la Gaga), and abolish private property!

Neither Adam’s or Karl’s train of thought worked out in full. Instead, America (and most others too) is somewhere in the middle. Government claims to be paws off, but provides public goods and protects its citizens and…

Gains From Trade & Comparative Advantage

I specialize in collecting vintage jewelry. Literally, no stone is unturned when I go shopping at thrift shops, vintage stores, or estate sales.

Babe, my bestie, takes her consignment designer shoe shopping just as seriously.

Conveniently, we wear the same shoe size.

While we take our specialties seriously (AKA our comparative advantages), we occasionally trade when either I have a piece of jewelry that will match a pair of her shoes or vice versa.

We have David Ricardo to thank for connecting the dots and coining the term comparative advantage in the early 19th century. Pre-David, it was thought only absolute advantage existed.

I can shop consignment for designer shoes, but I’m just not as good as Babe, so I let her do the heavy lifting.

Canada likes to share its trees. America likes creating technology. America & Canada are besties (AKA trading partners) because they understand the gains from trade. They swap their special goodies, so American houses are made from Canadian lumber and Canadian factories use American technology.

My mommie, Bertie always told me I would be good at everything, but I would be better than everyone else at one thing. Mother knows best!

Game Theory

Saying “I Love You” is relationship dynamite. It can lead to an explosion of passion. Or the utterer could mortally wound her own relationship.

As Lady Gaga pointed out in LoveGame, “The story of us it always starts the same with a boy and a girl and a huh and a game! …A love game!”

I learned game theory to fully comprehend the pros and cons of professing my love.

If both profess, mazel tov!

If the lady professes and the gentleman does not reciprocate (I would say “or vice versa,” but I am unaware of that happening in the history of the universe), awkward…

If the three BIG words are not exchanged, safety zone!

But, it’s just so tempting to profess…think of the possibilities if he says “I love you, too”?!?

And that’s why love is a game.

Money as a Medium (and the Exchange Rate)

When I don’t have cash with me at a cash-only establishment, I make my eyes look really big, bat eyelashes, and get the waterworks going.

The man holding the hat that collects the $$ at the bluegrass night I frequent was not amused. It was an extra dry winter, so I pitched in my travel-sized hand cream. Never again would I forget cash.

Without money, I’m back to bartering. To get what I want, I have to offer exactly what the other person wants. It’s difficult to do.

Cash is a piece of paper. But I don’t doodle on it because that would ruin the value it represents. These pieces of paper are traded because the recipients know that they can trade it for whatever they want or need next.

Not all pieces of paper are created equal. Their different denominations clear up confusion and make the value a bit more precise. Plus, currencies differ by country (except for the euro zone and their euro).  Warning: mind math ahead.

When I had to venture to London for business, while there, I obviously had to parooze  Harrods, Topshop, and wherever Princess Catherine shops!

Before I embarked on some serious shopping, I needed to figure out how to make quick cognitive currency conversions.

One British Pound was equal to 1.5 US Dollars.

Meaning if…

a Topshop dress costs 80 pounds…1/2 of 80 is 40….80 + 40 is 120…or costs 120 US Dollars.

Currency conversions can be cumbersome, but one thousand times easier than finding the perfect bartering partner each time I want or need something.

Economic Keys to Successful Investing

Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Starring: the Kennedys, Carrie, Samantha, Miranda, Charlotte & Mr. Big, Joan Harris, Michael Ginsberg, James Bond, Bernie’s credit card, aliens, and a camel hair coat.

Interest Rate, Compound Interest, and the Rule of 72

Save? I was too busy spending my way to success. My fabulous outfits made me look like I should be running my company. Instead, I get the coffee.

I’ll be waiting approximately forever to earn the $$ that matches my outfits and pays off my closet’s credit card debt.

Forever is very expensive in debt-land.

Play with this compound interest calculator to see how $$ multiplied over and over again by an interest rate means more $$$$$$.

Compound interest goes both ways. Debt grows exponentially, but so does my cumulated savings.I’m hoping my saving account’s compound interest payments will pave the way to my own compound (à la the Kennedy Compound).

So how long would it take to double my $$?

The key # is 72.

If we divide 72 by an interest rate, the answer will tell us how many years until an amount of $$ is twice as much! Compound interest is truly a marriage of magic and math!

If I deposit $500 in a savings account with an interest rate of 5% (yes, not realistic for the times, but a girl can dream) it will be $1000 in … 72/5= 14.4… approximately 14 years!

In the meantime, any money I borrow I will have to repay plus interest to my lender (AKA my bank).

I noticed how the interest rate associated with my savings account is less than the interest rate I pay on my debt. Think I found the bank’s secret to making $$. Spread the word!

Balance Sheet

I’m rewatching the whole series of Sex and the City. I wish Carrie was real. We would for sure be besties, I tell myself. Her closet is covetable. Plus, I’m in a Mr. Big-esque love affair, so we would have lots to talk about!

Season 4’s “Ring a ding ding” was a fabulous review of what it takes for to bank to lend $$ for a mortgage. AKA a well-balanced balance sheet.

Aidan and Carrie have broken off their engagement (good riddance, he did not even match a fraction of her fabulosity) and Carrie is left with the option to vacate her apartment or buy it.

And in a key move (that I disagree with) she gave Aidan back her engagement ring.

Carrie gets all gussied up in a floral, primary colored dress for a trip to the bank, only to be refused a loan. She has no assets (stocks, bonds, property, fine jewelry) that could act as collateral (ways to pay off the loan if Carrie becomes strapped for cash).

From the Bank’s POV a mortgage is an asset. The interest payments associated with mortgages make the bank dream of dollar signs. Banks want to make sure dreams become reality (i.e. paid back plus interest). They have liabilities to pay off too. Banks need to make sure they have enough cash on hand to provide for customers’ withdrawal requests. Otherwise, uh-oh, bank run.

Miranda is the party pooper and mentions that if Carrie has a hundred shoes at $400 per pair, that’s $40k, “that’s your down payment.”

Carrie goes to Mr. Big (wearing a foreshadowing white suit) to learn about money. And leaves with a check for her down payment.

One of the most uncomfortable dinner sequences in the entire series ensues, as the subject of money is front and center. Samantha couldn’t say it any better, “Some people are funny about money.” Charlotte slurps her drink, while Samantha and Miranda offer to loan Carrie the money. Carrie rips up Mr. Big’s check.

In the end, after initial apprehension, Charlotte gives Carrie her 2.71 carat Tiffany wedding ring to sell and the proceeds become a loan Carrie can use for her down payment.

Banking Regulation & Moral Hazard

When spending my own money, I am frugal, bordering on stingy.

But when I was a young’un and had a credit card that Bernie paid, no expense was spared. Every want became an emergency must-have.

I know, it’s not great.

But I’m a needle in the haystack compared to the “too big to fail” banks who get crazy crafty with their balance sheet to make money, knowing the government has their back.

Yep, banks have the equivalent of Daddy’s credit card and invest & take on risk accordingly.

Banks feel that they are the government’s equivalent to Daddie’s princess–who cannot fail– no matter what happens to their balance sheet.

This is only magnified when, for example, you have a former Chairman/CEO become Secretary of the Treasury. (AKA Henry “Hank” Paulson of Goldman Sachs).

Sure, I’ll scratch your back, if you scratch mine.

Inflation & CPI

When I gained 15 lbs freshman year of college, it was a battle of the bulge to get dressed each morning. I refused to acknowledge my new figure by buying it appropriate clothes.

Anyway, when I finally caved and bought new clothes (à la Joan Harris), I felt and looked better.

And when I eventually lost the weight, it was not easy. I only ate fruits and veggies.

I’m sharing this fascinating life story to explain inflation.

Hmm yes, what is that? Why does it make everyone act like a scaredy cat?

Inflation means the dollar menu’s portions are smaller for the same price. [stomach growl] Inflation is when the price level is rising. AKA on average, all prices are on the up. What we need to know, less purchasing power.

Key #: 2. The Federal Reserve’s annual inflation target is 2%.

But with my paycheck the same, the price of fun (and essentials) rises.  I didn’t think it was possible, but drinking Manhattans can take an even bigger bite out of my paycheck.

It may feel like forever, but eventually my wage will match the dollar’s inflation. And if I’m lucky, a bit more.

New clothes to match my new bod. New wage to match my new purchasing power.

There must be a way to track prices…

Consumer Price Index (CPI) is where I will find my answer.

CPI is an inflation warning sign. Rising average prices signal inflation. It’s produced by tracking a variety of good’s prices month to month.

Not only do businesses price their goods accordingly, but companies also alter their workers’ salaries accordingly.

Hm, was my recent raise real (I’m doing a superb job) or nominal (adjusting to inflation)? Hopefully it was both!

Investment Vehicles pt. 1

Now that I know I need assets for a mortgage and must find a way to fight inflation, where should my money go? Two basic forms of investment vehicles are stocks and bonds. I’ll first explain what I’ve learned about stocks, and bonds will follow.

“At last, something beautiful you can truly own.” —Michael Ginsberg

I’m a busy bee. Breakfast meeting, work, power lunch, work, afternoon coffee, work, dinner at the latest-greatest, then more work.

Yet, there is more that I would like to do—and own.

A stock gives the common woman a chance to own a piece of a company, without the daily grind of meetings and emails. Hallelujah!

Warning: Sleazeballs sometimes offer the ability to buy even more stocks by borrowing money. Leverage is lame. Don’t take the sleazeball up on his seemingly-irresistible offer.

Instead, I view stocks as a valuable investment. As a little black dress that I’ll wear for years to come, receiving a flow of compliments. And when I sell this piece of my closet’s capital stock for more than I bought it because it’s Yves Saint Laurent–not Saint Laurent Paris– I’ll have capital gains on my hands.I was disappointed to learn that bonds are not redeemable to meet James Bond.

Instead, Uncle Sam needs me to spot him some $$. A bond is a more official version of spotting $$.

I’ll get my $$ back when the bond matures. Hmm…but James never seems to!

A bond’s coming of age story includes semi-annual coupon interest payments until Uncle Sam returns my $$.

Companies also sell bonds. Corporate bonds are generally riskier than government bonds. A company cannot directly control its revenue and cash flow like a government can (by raising taxes, for example).

If the American Government is unable to pay me back, most likely we will have bigger problems on our hands (à la alien invasion). A space helmet could be a fun new accessory though!

Investment Vehicles pt. 2

I want to enter the stock market.  But, I don’t have the $$ it takes to do it sensibly.

There’s no way little me could buy all the stocks necessary to have a fully diversified investment portfolio.  My mutual friends at my mutual fund make it possible.Once I buy a share of a mutual fund, I get a piece of the pie. The pie filling has endless possibilities!

The mutual fund pools the membership’s $$ and invests according to its objectives, which can range from– but are not limited to–investing in bonds or a stock market’s index.  Regardless, I wait and reap the rewards—dividends and capital gains!

Watch out, mutual funds–as with all investment vehicles— are not created equal.  Before investing, it is a must to research the vehicle I’m investing in. Even more importantly, I continue to read up on how my investment is progressing, because it’s value can go up and down.

My rule is 5 minutes of gossip blog time, per 10 minutes of investment news time,  so I’m up-to-date whether my bestie tweets me “OMG! Did you see…” or I receive a call from my financial advisor, asking “How would you like to proceed…”

Present Value of a Bond

I’ll get bitten by a bond when the economy is bullish and interest rates rise accordingly. A bond’s worth is best explained in terms of present value. Warning: math ahead.

Even though the $$ loaned will not be mine for awhile, I want to know how much it’s worth NOW.

I need to divide the bond’s payoff by (1+ the interest rate).

Sorry, but it’s easier to rationalize with fractions. 2/4 is larger than 2/5.

Accordingly, when interest rates rise the current value of bonds lowers. AKA 1000/1.05 is larger than 1000/1.1.

That one looked painful, so I plugged it into a calc.

My savings account cannot wait for the interest rates to skyrocket. But bond-buyers beware!

Diversifiable vs. Non-diversifiable Risk

I love when winter turns to spring. Not because I want the weather to change, I’m a snow bunny. I want winter coats & jackets to go on sale!

I’ve gotten great deals (read: steals) on fabulously colorful wool coats that only I would wear. But every year, the camel hair coat I aspire to own is never marked down more than 10%.

When will my sale-ship come in? Approximately never, I’ve learned.

The likelihood of an item having a major markdown is equivalent to beta in stock market land.

A share’s beta is large if it is sensitive to market movements. Ex. Trendy investments will be at rock bottom prices when the trend comes to an end.

Beta is small for stocks that weather a stock market’s storm.

Now if it is unseasonably warm, all the coats, classic and trendy, will be marked down. This is equivalent to alpha in stock market land.

The Capital Asset Pricing Model takes into account the alpha and beta of each stock and price accordingly. When talking with the financier who just bought us drinks, pepper our prose with CAPM, alpha, beta & price and he’ll be sure to ask for our phone #s.



Growth & Macro Tools

Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Starring: Barack & Michelle Obama, Santa, my Man, my mother Bertie, my bestie Babe & her boy, my MacBook Air Blair, and an exclusive trip to Bettieland!

GDP & Growth

I’ve been rolling over in my mind how to make an explanation of GDP young & fun, but there are very few things that work with 15 trillion. No closet could hold that # of shoes. My mind was working overtime…

I dreamed that I was gardening with Michelle at the White House and she mentioned the great GDP growth under Barrack’s admin., but I couldn’t get the words out to make an intelligent comment…

My man pulled me from my mortified edge of the bed status, by suggesting I tell everyone about my homemade lemonade stand. What a keeper!

First, Gross Domestic Product (GDP) is a really big # documenting how much stuff & services were produced in a certain country in a specific year.

Second, confession: I supplement my income sometimes by being a lemonade lady at my subway stop.

Now, imagine I’m Queen Bettie of Bettieland. [According to my Man, Bettieland borders Santa’s workshop.]

And Bettieland only produces lemonade.

In one very large equation, the value of final goods (lemonade) are added together and the value of intermediate goods (lemons, sugar, water) are subtracted, then the answer would equal the GDP of Bettieland.

Bettians would all be fabulously skinny on our liquid diets.  Frequent fainting would hurt our productivity though, so I would decide to import cake à la Marie-Antoinette from the Santa’s workshop at the neighboring North Pole. And, in exchange, I would export lemonade to quench the thirsts of Santa’s elves. I know, ek, I’m utilizing my comparative advantage. [pat myself on back.]

The very large equation expands…

GDP equals the amount of lemonade consumed (taking into account the use of intermediate goods), plus the investment of lemon-juicing machines, plus net exports (i.e. how much lemonade Bettieland exports minus how much cake Bettieland imports).

Now we’re all fully prepped to chat GDP while gardening with Michelle. But, let’s keep Bettieland between us.

Business Cycle vs. Long-term Growth

The highest highs…the lowest lows.

While a hopeless romantic, I know better than to deny what goes up, must come down.

I hate to break it to you, but the same is true of the economy. Notably named, business cycles.

After a fateful meeting, my (Mr. Big-esque) Man and I (Carrie-esque) meet for drinks, then share a few dinners, he shows off his dinner cooking skills before I head back to the office, and finally introductions to friends are made. We’ve reached a peak! Our relationship experiences China-like growth of 8%.

Then I learn he smokes on “occasion,” he resents how much I work, his friend makes a sexist comment that goes unchallenged in my presence, and finally family vacation plans are canceled. We’re at the lowest of the low, without being broken up, a trough. Our relationship experiences a great recession-esque drop in growth of 3%.

The breathing room makes our hearts grow fonder, he sends a middle of the night message missing me, I make his favorite oatmeal chocolate chip cookies as a peace offering….

No relationship or economic path is smooth. Bumps are inevitable. But if a couple can compromise or a company can innovate, any trough will eventually be followed by a peak.

Simply, in the long run, if good times outnumber bad, there will be growth of GDP at around 2-3%, the US economy’s usual.

Monetary Policy

My (Mr. Big-esque) Man made a big oops. He missed a two-on-two dinner with my out-of-towner parents, Bernie & Bertie. And didn’t acknowledge that he was missing it till 2hrs in.

He had a good excuse… his company is going public. But IPO…SCHMIPO…it was disrespectful and disappointing. I needed to cool off, went into elusive mode, and cut off contact.

My Man on the other hand went into overdrive to make it up to me and win me back. He knows how I love to bake, but hate to cook.

Every night, I would come home to a love note and a basket with the other half of his homemade dinner. Eventually, the basket would include tomorrow’s lunch. As my radio silence further grew, so did the basket to include breakfast items.

My bestie, Babe, is dating a financier, and her boy named these displays of affections my Man’s monetary policy. Men and their $$ references…but he’s kinda right. Here’s what I understood from her boy’s explanation.

Monetary Policy is used when the economy is in the can (i.e. relationship rough patch) and the economy is not reaching its full potential. To fix this, the Central Bank (the Federal Reserve in the U.S.) prints extra money and uses it to buy government bonds. The result lowers interest rates, puts loans on sale, and creates an opportune time to create a fabulously successful business. In the 1990s, Federal Reserve Chairman Alan Greenspan worked, just as hard as my Man, to lower interest rates to create a hospitable investment environment. Alan may or may not have overdone it, and created the housing bubble that burst in 2008.

My Man’s monetary policy did work–a bit. His homemade meals mended my broken heart enough for me to lower my defensives and leave a note where the basket would be inevitably placed.


Fiscal Policy

I’ve lost count of how many times my Man has said he misses me. I am a packrat and have kept each one of his notes, so I guess I could count. [add to intern’s to-do list]

None of my Man’s notes had asked anything of me, until last Friday’s. He asked me to take a walk in the park….and I would be free to strut away at anytime.

We walked for an hour up and over the hills, around the pond and I realized how much I had missed him too–which I obviously kept to myself!

He wanted to show me his new favorite place, knowing I would love it too. What we ended up walking into was a fabulous building with an extra smiley doorman…my Man showed me around the lobby…and stopped at the very last mailbox…labeled with both of our names…he was on one knee holding an open box with a ring.

“Fiscal Policy works every time,” interrupts Babe’s Boy when I relay the story to them, later that day.

I know: what a weirdo. I’m in the middle of rehashing the biggest moment of my life and he interrupts me–about economics–again! But I won’t forget his explanation.

Fiscal policy is when the government intervenes in the economy with direct spending or taxation. Obama invested in America’s future by building roads and bridges. My Man invested in our future by buying us a condo and me a ring. Nothing close to Obama’s $800 Billion in fiscal stimulus in 2009, but it was enough for me! The spark is back!

My Man and I don’t have definite plans (are there ever definite plans?), but his grand gestures or perhaps “policies” have made our future together brighter.

Debt vs. Deficit

Confession: I went a tiny bit crazy with my credit card this month…and last month too.

Last month, I replaced my surprise-shutdown computer with Blair, my new MacBook Air.

(VCs: please fund a startup that is attempting to make everlasting batteries.)

By the end of the month, my deficit was $400, as I spent much more more than I had earned.

As for this month, I prepped for winter by purchasing a snazzy statement coat to replace my deflated puffer jacket.

At the end of this month, I will have an extra deficit of $200 from my coat and it needs to be added to my previous deficit of $400.

Next month *fingers crossed* I will not have another deficit, but will still have the accumulated debt of $600.

See how deficits become debt?

Now don’t the Republicans look silly when they refuse to raise the debt ceiling? After consecutive deficits, America has a hefty debt to repay. With each deficit, our government borrowed to finance the difference between spending and revenues. And now our lenders would like their money back, please & thank you.

(FYI: a government’s deficit time frame is a year.)

Personally or federally, the money has already been spent and the debt needs to be repaid…eventually.

Michele Bachmann, let’s host a tea party soon and I’ll fill you in. Tweet me @XOBettie!

Inflation vs. Unemployment?

Bernie, my daddie, and I had a tiff at Thanksgiving dinner.

We disregarded the weather talk and dove into the details of the Phillips curve (Psst: it’s named after its creator, William Phillips). It has the same status of Santa; the Phillips curve may or may not exist.

I’m a staunch Santa-believer-inner and at Thanksgiving dinner I took the stance that the Phillips curve does exist.

Bernie is never a yes-man. Plus, my father experienced the stagflation of the 1970s (AKA inflation was at 12%). So, he begged to differ.

As the downward-sloping Phillips curve shows, inflation is negatively related to unemployment.

Here’s the story of the Phillips curve. More output is produced by using more workers. Workers then have the upper hand and can demand extra cushy wages. As companies have to pay more per worker, those costs are passed to the consumer and the price of everything goes up. So inflation naturally accompanies the higher output.

Now the 1970s makes this argument awkward; all major developed countries experienced a growth slump. Somehow there happened to be high inflation and low output growth.

Most likely due to the shocking embargo by OPEC (AKA Organization of Petroleum Exporting Countries). OPEC is not a fan of my people, so the embargo was payback for the U.S. supporting Israel. With oil extra pricey, everything else’s price went up accordingly. It cost companies way more to produce goodies, did not hire many workers, and not a lot of goodies were actually produced. The U.S. government did not really intervene and print money, so the price level only adjusted a bit. Main street (including Bernie) was bitten badly!

Bertie, my mommie, had to negotiate a truce. Bernie and I had to agree to disagree. And Bertie made us pie-promise to tone down our talking points for future events.

Here’s hoping Bernie still believes in Santa–for my stocking’s sake.

Gobble Gobble!




Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Starring: alive & dead men, my Bubbie & her beloved childhood pony named Princess, and bursting bubbles.

The Great Depression

I like to go straight to the source. Usually that entails quoting books. But to understand the Great Depression I called up my Bubbie, who lived through it.

I read John Kenneth Galbraith’s The Great Crash, 1929, as preparation for our interview.

When reviewing the transcript of our phone call I recognized that some of my Bubbie’s quotes were very similar…actually exactly like my notes of JKG’s book.

My Bubbie wanted no fuzzy facts, so she read from the book over the phone. Bubbie, like Bettie, goes to the source.

Here are the top takeaways from Galbraith’s The Great Crash, 1929 peppered with my Bubbie’s signature sass.

“My pony was named Princess. So yes, ‘the twenties in America were a very good time. Production and employment were high and rising. Wages were not going up much, but prices were stable.’”

“Yet, my father didn’t physically work, he was a voracious reader of the newspaper, always with a pad of paper calculating stock stuff, you could say he was  ‘displaying an inordinate desire to get rich quickly with a minimum of physical effort.’”

“When not reading the newspaper my father was writing letters to his broker because he speculatively bought his stocks using leverage. As I’ve told you since you were a bubala, leverage is lame. ‘The purpose [of leverage] is to accommodate the speculator and facilitate speculation.’”

“It’s called the roaring twenties for a reason dear, a ‘roaring boom was in progress in the stock market, and like all booms, it had to end.’”

“One thing all of my years have taught me is that an important puzzle ‘of politics is who is to regulate the regulators.’”

“The most spectacular contributing factor to the Great Depression was the investment trust. ‘[it] did not promote new enterprises or enlarge old ones. It merely arranged that people could own stock in old companies through the medium of new ones.’”

“Summer of 1929 I met your grandfather, it was a memorable summer. It was a memorable time on Wall Street too, ‘Everyday prices rose; they almost never fell.’”

“Even a Yalie said, ‘Stock prices have reached what looks like a permanently high plateau.’”

“Black Thursday the market plunged. It was a chain reaction, as ‘stop-loss orders tripped more securities into the market and drove the prices down farther.’”

“People refused to accept the market’s fate, instead ‘the papers were full of the prospects for next week’s market….On Monday the real disaster began’”.

“When it rains, it pours and ‘the singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning.’”

“As usual, the Republicans were to blame, ‘The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.’”

“Monday, October 28…was another terrible day…Once again a late ticker left everyone in ignorance of what was happening, save that it was bad.”

“Tuesday, October 29, was the most devastating day in the history of the New York stock market, and it may have been the most devastating day in the history of the markets. It combined all of the bad features of all of the bad days before. Volume was immensely greater than on Black Thursday; the drop in prices was almost as great as on Monday. Uncertainty and alarm were as great as on either.”

“FDR was such a fox, even in his wheelchair. He saved us, ‘with the advent of the New Deal the sins of Wall Street became the sins of the political enemy. What was bad for Wall Street was bad for the Republican Party.’”

“I sure did miss your grandfather when he enlisted for WWII. But, I was happy to get him out of the house, as he hadn’t worked in years. While we never forgot the  feeling of hopelessness of the Great Depression, after we won the war everything was looking up!”

The Great Recession of 2008

Clueless about why 2008 made the rich and poor, poor alike? Reference the glossary to learn the 28 underlined key words and then repeat after me…

The buy side thought mortgages made invincible asset-backed securities.  Mortgages were not created equally; they were not commodities. The bull market, lack of due diligence, and an aggressive investment style [eye-roll, mutter “Goldman”] clouded almost everyone’s view. Plus, lots of leverage with lack of worry about liability. The worst was the derivatives to cover the company’s, but not their client’s, asses. I mean assets….

Once the bear market began, boy did it roar with cyclical and defensive stocks alike taking a tumble. Default there.  Bankruptcy here. Magnified by balance sheets that were not diversified.If only I had used my spare time for technical analysis of leading indicators, benchmarks, and bond ratings, decided to be contrarian and short sell REITs, my retirement (courtesy of my IRA) would have come early!

Now, with the market obviously inefficient, fundamental analysis will help me pick the winners, just like Warren Buffett!

John Kenneth Galbraith’s Common Denominators

Why does this keep happening?

The Great Depression and the Great Recession seem to be creepily alike. What is it about capitalism that makes it bipolar?

Great minds think alike, as John Kenneth Galbraith’s A Short History of Financial Euphoria lists common denominators of all speculative booms and busts (AKA Bubbles).

Watch for these flags that signal the inevitable speculative boom…and bust…

  1. I don’t know what you’re talking about…

“extreme brevity of the financial memory. In consequence, financial disaster is quickly forgotten.”

  1. $$= Smarts

“We compulsively associate unusual intelligence with the leadership of great financial institutions–the large banking, investment-banking, insurance, and brokerage houses.”

  1. Is this new?

“All financial innovation involves, in one form or another, the creation of debt secured in greater or lesser adequacy by real assets.”

  1. I blame…

“Many people and institutions have been involved, and whereas it is acceptable to attribute error, gullibility, and excess to a single individual or even to a practical corporation, it is not deemed fitting to attribute them to a whole community, and certainly not to the whole financial community.”

  1. This must never happen again!

“There will be talk of regulation and reform. What will not be discussed is the speculation itself or the aberrant optimism that lay behind it.”


Sorry to burst our bubbles, but it is bound to happen again. Better to know what to look for!




Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.

Starring: more alive & dead men, Don Draper, Roger Sterling, Pete Campbell & Bertram Cooper, a trip to Europe, and fate.

Legacy Leaving Personalities

If I could grant three wishes to a genie, one would be for my fave tv show Mad Men to be real.  If that can’t be done, my back up wish is to have my pick of the costume closet.

Now known as Sterling, Cooper & Partners (sorry to ruin it for those who are still catching up. Actually no, this is your punishment. Where have you been? Under a rock?) Mad Men’s ad agency is full of memorable characters. I’ve been reading up on some big-named economists and found each has a SC&P equivalent.

Friedrich Hayek is the equivalent of Bertram Cooper, the cooky senior partner of SC&P. Originally from Austria, Hayek taught at The London School of Economics and The University of Chicago. Not so great in the classroom with his heavy accent, he is recognized most for his memorable monetarist writings. He thought that any awkward economic situations stemmed from miscommunication and coordination problems. Ideally, the free market had clear signals, so all “actors” could make fully informed decisions. No word on if Hayek also walked around in his socks and had a Rothko in his office, but I like to think he did.

“In the long run we are all dead.” Nope, not a quote from Roger Sterling on LSD. But John Maynard Keynes has some one-liners as good as Roger Sterling.  Such as, “When the facts change, I change my mind. What do you do, sir?” and “Markets can remain irrational longer than you can remain solvent.” Keynes broke the mold with The General Theory of Employment, Interest, and Money in 1936, because policies to fix the Great Depression were obviously not working. The economy needed a jump start. People didn’t have any money to spend, so weren’t buying anything and factories were producing accordingly (AKA not producing). Keynesian stimulus was born (AKA fiscal policy (AKA  government spending to reinvigorate employment #s)). Mad Men would not be the same without Roger Sterling, and so too, would the world not be the same without the original Keynesian.

Psst: Watch Keynes & Hayek rap battle, pt.1 here and pt. 2 here.

John Kenneth Galbraith is just as good as Don Draper at telling a story. Canadian turned American Ambassador to India, Galbraith was an economist with an unusual # of best-selling books. Influenced by Keynes, his writings mashed the best of econ/politics/culture. 1958’s The Affluent Society is awkwardly true today. America loves to invest in consumables and not in the people’s future (AKA education). Key phrase, “Private opulence and public squalor.” Kinda disregarded by academic economists, I bet they were just jealous. He controlled the message like Don, as Galbraith’s books filled both Presidents’ and  peoples’ bookshelves.

Milton Friedman is like the ever-present Pete Campbell. Friedman was a monetarist/free-market-lover à la Hayek and so too taught at The University of Chicago. Friedman’s The Theory of the Consumption Function, was a hit with economists because it explained the permanent income hypothesis and the importance of forward-looking consumers. His other hit with the economically-inclined was A Monetary History of the United States 1867-1960; while disputable now, the main take away was that the amount of $$ in a system affects the choices of economic “actors.” In addition to his serious economic work, he was a popular preacher of his theories’ political advantages. Yep, he could dominate a conversation just like Pete.

Modern Personalities

Repeat after me…

What to say when, over cocktails, someone mentions…

their upcoming trip to Europe: it’s so nice to not have to switch currency from one country to another, thanks to Canadian Italophile Robert Mundell’s optimal currency area.

fate is being at the right place at the right time: that’s wonderful, just like having Great Depression expert, Ben Bernanke, at the Federal Reserve during 2008’s Great Recession.

the negligible difference between smartphones: hm, yes they are similar, but not the same. Olivier Blanchard would point to the importance of monopolistic competition in driving the demand for smartphones.

their speeding ticket: Hope you learned your lesson that some rules are just meant to be followed. Like John Taylor’s rule, every central bank follows it to set its interest rates.

the latest vampire best seller: I wish Raghuram G. Rajan’s “Has Financial Development Made the World Riskier?” was a bestseller pre-Great Recession. He had the crisis pegged, but no one listened.

they miss Steve Jobs and his innovations: What about Paul Samuelson? He’s the Father of Modern Economics and we all know “the children” who run our economy need guidance, only a father could give.

the new menu at your favourite restaurant: Did they finally changes the prices too? Reading Gregory Mankiw recently made me realize how prices are sticky due to “menu costs.”




Originally submitted for an Economic Literacy independent research project with Professor Christopher Ragan at McGill University.


Absolute Advantage: I’m superior at doing everything compared to you because I am extremely efficient. [snap, snap.]

Alpha: A number that measures the performance of an investment compared to a benchmark, like the stock market index.

Asset: An item that has monetary value, which we hope will benefit us in the future.

Asset-Backed Security: Banks take loans for things like houses and cars, break them up, and squish them into packages called an asset-backed security. These make money from interest payments on the outstanding loans.

Balance Sheet :A sheet of paper stating how many assets (value owned) and liabilities (money owed) a company or person possesses.

Banks: An establishment that stores and plays with $$. Fun fact: investment banks are not the same as my corner commercial bank.

Bank Run: “I must have my money now!” I say in a state of pure panic. And my panicked state is made worse when I’m at the teller window and I’m told the bank does not have cash on hand to give me the $$ in my account. Need a visual? Watch It’s a Wonderful Life.

Bankruptcy: The legal water bucket that puts out the flames of unpayable outstanding debts.

Bear Market: This is not the selling of a nude animal. It’s a falling market that makes investors growl.

Benchmark: Like the pretty girl in the room that everyone judges herself against, this standard can be applied to the performances of securities, mutual funds and investment managers.

Beta: A number that represents how much a share price moves along with a market’s movement.

Bond: A fixed income security. When a company or government needs money, they issue a bond in exchange for a lender’s $$. The bond is a promise to pay the bondholder back the money loaned with a bit more (interest payment) in a certain amount of time.

Bond Rating: Just like in school, when I got a grade for my book report, bonds get grades based on their quality. Moody’s, Standard & Poor’s, and Fitch hand out the grades. The grades range from AAA to C. Conveniently, the bond buyers pay these companies to grade them. Wouldn’t school have been easier if I had been paying my teacher?

Broker: A person who sells and buys stocks or bonds on behalf of another person.

Bull Market: The market is on the ups, so enjoy the ride and hold on tight to those horns.

Business Cycle: Everyone has her good and bad months, and so does the economy.

Buy Side: The big boys (and girls) who research and buy large portions of securities for mutual funds, pension funds, and insurance firms.

CAPM: Capital Asset Pricing Model. How much should I price this volatile stock? This model tells me, taking into account risk & expected return.

Capital Gain: An asset is sold for more than its purchase price. Another thing to report to the tax man!

Capital Stock: I own big ticket items to help me produce my flow. Think investment pieces. That little black dress that fits just right, perfect for fabulous occasions, and everyone will compliment me accordingly.

Cash Flow: Money coming in and out. The speed can range from a rush to a trickle.

Commodity: A uniform good (ex. gold or oil) that is used in producing other goods and services. Must meet a minimum standard (basis grade).

Comparative Advantage: I’m better than you, I have a lower opportunity cost.

Compound Interest: Think about how a snowball rolling down a hill gains snow. So too, can $$ grow exponentially. The initial investment is increased by an interest payment, which increases the value of the investment, which increases subsequent interest payments.

Consumer Price Index: CPI. A # that tracks changes in prices (inflation) by tracking a basket of goods ranging from groceries to cars.

Contrarian: Buy when everyone is selling, sell when everyone in buying.

Corporate Bond: A loan to a company.

Coupon: 1. Redeemed for discounted groceries. 2. The fixed payment received semiannually from owning a coupon bond.

Cyclical Stock: A stock that moves with consumer preferences and the market’s movements.

Debt: Owe something to someone.

Default: I just can’t! This hurts whether my boy or bond tell me this.

Defensive Stock: Rain or shine these stocks will keep steady. Everyone needs to eat.

Deficit: Oops, I spent more $$ than what came in this month.

Demand: I want it! And I want it now!

Derivative: A contract (really a bet) on an underlying security. Its price is derived from the underlying security.  Futures and options are derivatives.

Diversification: I have rain boots, riding boots, ankle boots, booties and snow boots to wear depending on the occasion. I want just as much variety in my portfolio to perform well, no matter the market.

Dividend: A company or mutual fund’s pocket change that it throws at shareholders every few months. A slice of the returns! Common, but not mandatory.

Due Diligence: Cross those t’s and dot those i’s before signing.

Equilibrium: Ohmmmmm…Ohmmmm. I’m meditating to find balance, find my center.

Fiscal Policy: “Hi, I’m from the government and I’m here to help.” Thanks for this type of policy, John Maynard Keynes!

Flow: I use my capital stock to produce this. From those one time purchases, I get a flow. Think constant compliments of my classic watch.

Free Market: Kiddies, go play in the sandbox. And no, I won’t help you if you get sand in your wound.

Fundamental Analysis: Evaluate the value of a security. Used by value investors (i.e. Warren Buffett) to decide if there is a difference between the genuine value of a stock and its current price. If price<value, buy and potentially could make lots of money.

Gains From Trade: Win-Win. Let’s trade.

Game Theory: I want the best. I want the most. But what is the other person gonna do?  How should I proceed?

Government Bond: The Government needs me to spot it some $$. A formal certificate, instead of crumpled up napkin with a scribble, “I owe $$ to…”

Gross Domestic Product : (GDP) The value of EVERYTHING (think stuff & services) produced within a country within a year. Everyone likes this to grow.

Individual Retirement Account: A way to invest/save for retirement. All taxpayers welcome. Especially a great option for those who do not have a 401 (k) offered through work. Variations include the Traditional IRA and the Roth IRA.

Inefficient Market Theory: Prices do not reflect market value—why Warren Buffett has made so much money.

Inflation: The growth rate of prices. The change in purchasing power of money. On average, the price of everything is going up. Those classic pumps are more expensive each year.

Insurance: Attempt to create financial predictability in an unpredictable world.

Interest Payments: The payment resulting from the product of the interest rate and the account balance.

Interest Rate: When using someone else’s money, this determines the associated fee.

Investment Bank: Not my corner bank. These kinds of banks bring stocks into being (AKA IPOs (AKA initial public offerings)) and help them as they grow up (AKA underwrite (AKA buy up the stock no one else buys after an IPO)).

Investment Objective: Goal. I want those shoes. I want this rate of return.

Investment Style: Risk lover or hater. Black/white or color blocking.

Leading Variable: Know before it happens. These start rumors, just like gossip mags.

Leverage: Using debt to buy an asset. Can pay off splendidly. Or make me wish I was never born.

Liability: The amount of $$ owed to my friend who spotted my drink Monday night. Must pay back.

Liquidity: Ready for duty! Cash is as liquid as $$ can get.

Loan: I was spotted $$ and will have to pay back the $$ plus interest. Like loaning a library book, but more $$ is on the line.

Maturity Date: When I did this, I moved out. When my bond does this, my principal (AKA my $$) is returned.

Mixed Economy: A government is pretty much paws off, but intervenes in cases of market failure.

Monetarist: Money solves/causes all the problems. Print accordingly.

Monetary Policy: [helicopter noise] [thud] “Here’s more money.” Thanks for this type of policy, Milton Friedman.

Monopolistic Competition: Hate to break it to you, but any company can start making cigarettes and use a little Don Draper magic (pre-season 4 episode 12) to make their brand stand out from the crowd.

Monopoly of Violence: If the government controls this monopoly (AKA its military is the biggest, baddest, and supreme those who commit violent acts) there isn’t a chance for organized crime (AKA the five families) to run the show and ruin the lives of citizens. Be careful, this can go either way. Think George Washington or Al Capone.

Mortgage: I don’t have enough cash to pay for my house in full, so I took out one of these. It’s a form of amortization. AKA: paying my debt with installments over time.

Mutual Fund: Professional portfolio management that I can buy into. Instead of having to buy the whole pie, I can buy a slice. A great way to introduce myself to the market.

Opportunity Cost: What will I give up to do that?

Optimal Currency Area: One currency could be a good idea, no more currency conversions every time I take the train over the border.

Permanent Income Hypothesis: How much I decided to spend depends on what I think my income over forever is.

Phillips Curve: A downward sloping line that claims inflation is negatively related to unemployment.

Present Value : The value of money in the future discounted to today. I know I will wear those fabulous shoes one day to a black tie. How long in the future? Discount the price by the interest rate and the length of time from the present and I will find the present value.

Portfolio: Closet:shoes::portfolio:stocks.

Profit: Equals revenue minus costs. Liked by all.

Purchasing Power: Not a magical power, sorry. This is how much bang I get for my buck. Inflation decreases my purchasing power.

REIT: Real Estate Investment Trust. Invest in real estate in stock form.

Resources: The land, labor, and stuff at my disposal to make it happen.

Security: Own a piece of the pie (of a company, govt., etc.). Examples include stocks and bonds.

Short Sell: I expect a stock will go down in price. I borrow a stock and then sell it,, expecting that when I have to deliver the stock I buy it for less than I sold it. If all goes well, I make money.

Speculator: Looking to make $$ off of the hot, new thing. Fun… till it fails… and it generally does.

Stagflation: A time of high inflation and low output.

Sticky prices: Until I can get some Goo Gone and update my menu, this price isn’t going anywhere.

Stock: A security. Own a tiny piece of a company.

Stock Market: I went to the market to buy an AAPL (AKA a share of Apple stock). Where stocks are purchased.

Stock Market Index: A measure of the market overall. The average change in value overall.

Stop-Loss: Make it stop! Please sell my stock. That’s an order!

Supply: [outreached hand] Here you go.

Technical Analysis: If he texted me at 8pm last friday, he’ll text me this Friday at 8pm. If the stock price is on the up, it will continue to do so.

Ticker: Tell me what the market is up to.

Value Investment: This is an inefficient market. This company’s stock is worth much more than it’s current stock price. Buy!! Quality, ladies!

Withdraw: Take away.