CHAPTER THREE
Let’s Look at the Rules
The more constraints one imposes, the more one frees one’s self. And the arbitrariness of the constraint serves only to obtain precision of execution.
—Igor Stravinsky
There are rules in sports. Three strikes and you’re out. You have to make ten yards in four downs to get another first down. You can’t touch the soccer ball with your hands. Rules are a great annoyance to the beginner, but to the experienced player, they make for a beautiful game.
Baseball is a confusing game for most non-Americans. There are so many rules and subtleties. I confess to not understanding the rules in soccer, although I am getting better. And forget about understanding hockey.
There are rules in economics, but many are not as well-known. And breaking these rules has consequences for individuals, companies, and countries. Sadly, there is no independent referee who can blow a whistle and stop the game, assess a penalty, and make you obey the rules. There is, however, a market that can decide not to buy your currency or your bonds if you don’t play by the rules.
We are going to look at some of the more important rules in this chapter. But, gentle reader, don’t panic. These rules are fairly easy to understand if we take out the academic jargon often associated with them. And if you get it, then it is much easier to understand the consequences of what happens when a nation violates the rules, both from a policy perspective and from a personal investing point of view. ...
