The Past as Prologue

The Federal Reserve raised the federal funds rate, the rate banks charge other banks to borrow reserves on an overnight basis, from 0 and 0.25% per year to 0.25 and 0.50% per year.
They are attempting to achieve their dual mandate of spurring the United States economy to full employment and keeping the inflation rate in check, which they define as 2% per year.
However, if we look at data prior to 1913, when the Fed was created, we see that short term interest rates, negotiated between willing parties, were never below 2% per year.
This level could be used as an effective lower bound for future Federal Reserve policy, using the past as prologue.

The interest rate balances Saving and Investment

The modern Keynesian theory of economics posits that there is no real correlation between saving and investment.  If the two are in equilibrium it is only by chance and the equilibrium could be at any level of employment.  Therefore, disruptions to the economy caused by this mismatch require that government intervene with fiscal and/or monetary policy.

However, in Classical theory, the rate of interest, if set by the market, acts as a natural barometer of the desire of participants to save or to spend.  Saving and investment will naturally move toward balance at full employment, without government intervention.

Value Added rather than Individual Income Tax

A Value Added Tax is a tax on each step of the production process from raw materials to final goods.  It is akin to a sales tax on suppliers of goods and services through to their eventual consumers.  Each entity in the process pays a share.  Conversely, the individual income tax is a burden that private individuals pay.  It takes a huge army of persons to gather the revenues and a huge amount of time and expense to comply with the individual income tax here in the United States.  A VAT (Value Added Tax) would cost much less to implement yet gather the needed revenues for government to function. 

The economy doesn't know

The economy doesn't know we exist.  The economy is simply the observed interaction of many persons going about the business of sustaining life.  It doesn't know the participants need resources to survive.  It doesn't know that a specific person is better or worse / more or less deserving than the other.  It is simply the sum of all wealth-building efforts.  It is foolish to expect the economy to automatically provide for all our needs and wants.  The economy is an opportunity - not a promise.

The balance sheet

A conversation you overhear at Denny's while eating breakfast suggests that a new technology company stock is a steal.  A stockbroker tells you to buy now or it may be too late.  Your wife/husband/uncle/niece/army buddies chime in with opinions.   Should you purchase or not?

Before any purchase decision you must look at the company's balance sheet.  Companies on major stock exchanges and others are required to produce quarterly financial reports for external viewing.  One of those reports is the balance sheet, or statement of position.  It shows the assets, liabilities and stockholder's equity of the company on a particular date.  A little online research on how to read this document should enable you to generally determine whether the company is in good or bad financial health.

The market price system

Let's say that you made all the economic decisions in the world - how many of each thing to produce and which services to provide and who gets what.  How would make those decisions?

You could ask everybody what they want; that would require over seven billion conversations, some with babies, who have a hard time putting things into words.

You could make all decisions without asking.  That would require seven billion decisions multiplied by the number of wants and needs you believe each person has.  You might have to skip lunch.  And then take an aspirin.

You could assign one or more other persons to make all economic decisions.  That would be fine, unless they decided not to feed you or clothe you or give you a place to sleep.

Or, you could simply let everyone choose for himself through a market price system.  Shared knowledge of price is the key.  Quantity, quality, and distribution of production is efficiently determined by how much consumers are willing to pay (price) for each product and service.  Each person can acquire as much output as his efforts contribute.  Billions of price decisions made each day by billions of individuals determine the result.  A very workable system.

Get rich slowly

Warren Buffet, the world's third richest man, was asked to name the biggest financial mistake most people make.

"Well, I think the biggest mistake is not learning the habit of saving properly, early. Because saving is a habit. And then, trying to get rich quick. It's pretty easy to get well-to-do slowly. But it's not easy to get rich quick."

Cash is not an investment

Time can help investments grow in value.  But time doesn't help cash grow in value.  Black Rock posits that between 1926 and 2012, if taxes and inflation are factored in, the compound average annual return for stocks was a positive 4.5% and bonds a positive 0.6%.  But cash had a negative annual return of -0.8%.