Learning macroeconomics

I’d never been able to learn macroeconomics. With all due respect to Prof Chiranjib Sen, the IS and LM curves and M2 and M3 money supplies never really excited me, and despite scoring a high A in the course, it left me much more confused than I was when it started. Immediately after that followed a short stint at JP Morgan where I had been safely tucked away in the interest rates swaps sales desk, which didn’t have much to do with actually predicting how the rates moved, and other similar macroeconomic things. I quickly became really good at swaps, and even some more complicated structures, but never learnt macroeconomics.

Looking back, it seems like the primary reason I didn’t learn it was because of lack of excitement. Unlike a lot of other fields which had a large number of related anecdotes, which made learning so much more simpler, macroeco had come across as a dull thing, which one should avoid as much as one could.

The recent bloodbath in markets world over seems to have finally provided me the reason. Over a month back, when my aunt Sowmya told me that she had sold her Chicago home for much less than what she had bought it for a few years ago, nothing seemed amiss. Then came the news that KKR’s public offering had cupped. Then, the local stock markets crashed. With each passing day, things became more and more interesting. Yes, I have lost money for some stocks I hold have been going down, but the excitement of the whole episode has been unmitigated. And day by day, the happenings have intrigued me to learn more. To find out why what is happening is happening. In other words, to learn macroeconomics.

Over the last week or so, I have been bugging my friends in investment banks to explain the things to me. My brief background in the domain is also helping me appreciate things better. I’m asking a lot of questions. Talking to these guys, and thinking a bit, and finding answers. I think I’m learning. I’m learning macroeconomics.

All these days, I was figuring out pieces of the puzzle. And it all seemed to be fitting in. Still, the big picture was missing. How did this happen? How did it all begin? Yesterday I sent a mail to Vennai titled “chicken and egg”. “Which came first? The housing market crash or increase in interest rates?” I wrote. The discussion that followed helped ease matters a bit. I had a good idea now. Then, today I stumbled upon this? , and all my questions are answered I think. I think I know what’s happening. It all seems so beautiful now. Macroeconomics can be interesting, I finally agree! If only all this had happened in Jan 2005… 😛

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