Finance economics looks at the allocation of resources over time. All cycles survive in an uncertain environment. It examines how money is traded now to create money in the future. It tries to gauge the amount of money transferred into the future, based on uncertainty and risk. It looks at how one party of the transaction can make a decision to affect the future outcome of the money transfer. And lastly, it examines how future knowledge can reduce uncertainty. Their safety ratings and bank checks seemed reasonable, so they led us to believe.
One could also argue the government is taking the necessary steps to get the economy back on track, according to numerous theories of macro economics. However, the blinders were on for many of the nation’s most respected economists and it’s going to take some progressive solutions to bring redemption to this tarnished profession.
Financial economics focus on the fair values of assets, how risky assets are, which discount rates should be applied, what cash flows will come from a transaction and which events cash flow or assets are dependent upon. As such, it has a combative role with behavioral economic theory. Commodities, stocks, bonds, derivatives, money market, financial institutions, regulations; these are all the language of bank and finance economics.
A, more psychological approach to finance is behavioral economics. They examine how economic decisions by borrowers, consumers and financial institutions affect return on equity, market prices, allocation of resources and values. Bubbles, market trends, crashes, socioeconomic and market trends, prospect theory; these are all terms used in that discipline, which tends to consider more microeconomics theories. However, on the personal economic front, lowering high prices is attention getting. Buying cheap checks online are a practical way to benefit from online sources that have found a more efficient way to market their product. Saving 50% off what financial institutions would charge, cheap personal checks online is a direct add on to anyone’s bottom line.
Even though financial economic experts propose solutions to problems, politics can devastate the implementation of any meaningful solution. Now that they’ve acknowledged the possible devastation that “bubbles” can cause in the market, they must work out how to manage those risks and limit the scope of the damage. They must learn how liquid markets can suddenly cease to exist and determine which political actions could keep cash flowing freely and purchasing power strong.
Socialist labor unions and government are at odds over a purer form of capitalism, despite the fact that capitalism in its purest form would solve most allocation of resource problems. They must look at how special interest government regulation (or lack thereof) played a part in the current crisis and make wise guidelines for the future. They ought to implement fundamental models for calculating systemic risk and help bank institutions look at the cause and effect picture in management economics to create far more informed conclusions.