Thursday, December 30, 2010

Mazi's Link O' the Day

Here are some reasons NOT to jump on the equities bandwagon:

http://online.wsj.com/article/SB10001424052970203513204576048251198965310.html?mod=WSJ_hpp_sections_personalfinance

Wednesday, December 29, 2010

Mazi's Link O' the Day

First, learn what a league table is (it's not complicated):

http://www.investopedia.com/terms/l/league_table.asp


Next, another article by my favorite blog-author, The Epicurean Dealmaker:

http://epicureandealmaker.blogspot.com/2010/12/what-hes-really-thinking-first-time-you.html

Tuesday, December 28, 2010

Mazi's Link O' the Day

Here are some projections for the current account deficit. Although real consumption might be back up to its pre-2007 levels, total goods (excluding services) has not:

http://www.econbrowser.com/archives/2010/12/ruminations_on.html

Monday, December 27, 2010

Mazi's Link O' the Day

Here's a plan for high-earners and unemployment insurance/social security/medicare/etc... (Hint: they don't get any):

http://laglux.blogspot.com/2010/12/lets-talk-turkey-for-once.html

Sunday, December 26, 2010

Mazi's Link O' the Day

A neat, shifting Phillips Curve:

http://econ161.berkeley.edu/multimedia/USPCurve.html

Giving...and Taking

A great article by Mazi on Christmas, I totally agree. Enjoy being surrounded by friends and family, and helping others. That is a huge part of Christ's message (sorry for the religion, Mazi). However, I hope our politicians have learned that unqualified giving is NOT for the public sector. Friedman explains, cut here, invest there.

http://www.nytimes.com/2010/12/26/opinion/26friedman.html?hp

Friday, December 24, 2010

Christmas Ain't Dead

It's Christmas Eve, and every family with kids in elementary school or younger has got its Christmas tree up with presents encircling its base. For those families there is nothing superficial or hollow about this holiday of holidays. But something changes as we age, as we read more books, and get more educated. We grow jaded. Every Christmas "smart people" chime in about how "Christmas is dead, is bastardized, is not supposed to be about shopping and clothes and drinking."

Wah, wah, wah... That's what I say.

I'm not going to debate religion here, because that's a topic I'd like to keep my blogging, economics side away from. However, I will say, empirically speaking, this NEW version of Christmas seems to be working. Religious arguments aside, let's take it from the top:

1. Economics
People spend. People spend a HELL OF A LOT of money from approximately Thanksgiving week to the new year. Ok, consumption is a factor in GDP, so blah blah blah, yes, Christmas spending does help GDP. Great. But that's not my main point. What do we spend on? We spend on others. We buy gifts. This IS Christmas, after all, isn't it. As the Center for Social Innovation at Stanford University writes, "According to new research, giving other people even as little as $5 can lead to increased well-being for the giver." Well, that doesn't sound so bad to me...

2. Giving
In line with what I just wrote, giving is a good thing, and I think most would agree with that claim. I know Christmas as we practice it is not in line with any religion, but at least the premise seems right. People are nice to each other, people buy for each other. We may be giving up religion, but I think we're getting something good in return.

3. Kids
Remember the first part of the image I described at the beginning? That family with the kids, the tree, and the presents. They don't seem to worry too much about be true to the original meaning of Christmas. Santa Claus is coming after all, and we must get the cookies and milk ready. Though the rest of us may be growing "smart" and jaded and think we're bringing back the truth of Christmas, it doesn't mean we should ruin it for all those families who truly love this time of year. I'm not talking about getting drunk at your company party. I'm talking about an earnest belief that these are the best times of the year.

Keep your intellectual, religious, learned, scrooginess to yourselves! Let's just have a Merry Christmas!

Mazi's Link O' the Day

Paul Krugman... The oracle?

http://www.marginalrevolution.com/marginalrevolution/2010/12/paul-krugmans-predictions.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2FhCQh+%28Marginal+Revolution%29&utm_content=Google+Reader

Mazi's Link O' the Day

Paul Krugman... The oracle?

http://www.marginalrevolution.com/marginalrevolution/2010/12/paul-krugmans-predictions.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2FhCQh+%28Marginal+Revolution%29&utm_content=Google+Reader

Thursday, December 23, 2010

Sunday, December 12, 2010

Saturday, December 11, 2010

Friday, December 10, 2010

Mazi's Link O' the Day

If unemployment benefits get extended, what will the effect on the unemployment rate be? Here's some fun with fractions:

http://www.economist.com/blogs/freeexchange/2010/12/labour_markets

Wednesday, December 8, 2010

Monday, December 6, 2010

Mazi's Link O' the Day

Luckily, it looks like a deal on tax cuts and unemployment benefits is imminent:

http://www.economist.com/blogs/freeexchange/2010/12/fiscal_policy

Sunday, December 5, 2010

The Fed's New Tool, Part 2

You need to click on each image to read it. This is the only way to get equations on Blogger.





Luke's Link

An excellently written and easy to understand article underlining why we NEED green energy.

http://www.nytimes.com/2010/12/05/opinion/05friedman.html?_r=1&hp

Mazi's Link O' the Day

Some criticism of Christina Romer's comments about economic uncertainty:

http://cafehayek.com/2010/12/taxing-credulity.html

Saturday, December 4, 2010

Mazi's Link O' the Day

The New York Times ran a, relatively positive, biopic on Jamie Dimon, head of JP Morgan Chase, recently. Here's a less than flattering response:

http://www.huffingtonpost.com/simon-johnson/jamie-dimon-becoming-too-_b_791518.html

Friday, December 3, 2010

Mazi's Link O' the Day

First, a quick comment:

Jobs numbers out today, and they don't look good. Unemployment rate equals 9.8%.


Anyway, on to the link of the day. And, we're back to discussing China. More specifically, how do they reduce that current account surplus? The president of their central bank, Zhou Xiaochuan, offered his thoughts:

http://www.economist.com/blogs/freeexchange/2010/12/chinas_currency

Wednesday, December 1, 2010

Mazi's Link O' the Day

Some numbers on Canada for comparison (Hint: U.S. non-residential fixed investment increased at a rate of 10.3% last quarter):

http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/11/the-2010q3-gdp-report-investing-in-a-silver-lining.html

Tuesday, November 30, 2010

Luke's Link

Normally I like writing a full column about something that catches my eye, but I just finished a barn burner on Mill and individualism. Brooks gives an insightful, if more conservative take on Julian Assange, and I'm inclined to agree with him.

http://www.nytimes.com/2010/11/30/opinion/30brooks.html?scp=1&sq=david%20brooks%20wikileaks&st=cse

Mazi's Link O' the Day

I don't think this author is being fair by claiming economists "don't understand." However, he's right when he describes the ever-changing dynamic of the discipline:

http://www.csmonitor.com/Commentary/David-R.-Francis/2010/1129/Don-t-understand-the-economy-It-s-not-your-fault

Monday, November 29, 2010

Sunday, November 28, 2010

The Fed's New Tool, Part 1

Perhaps the Federal Reserve has not run out of tools just yet. Many have warned that the use of "quantitative easing" is the harbinger of an empty box of tricks. While the use of QE does mean that the Fed has resorted to other methods besides its tried and true ones, it does not mean the jig is up, so to speak. However, there may be one idea the Fed has not really considered.

I have a thought, and I'm going to go out on a limb and say it. Perhaps the Feds Open Market Operations report could be used as a policy tool. Voxeu.org just had an interesting report on the use of "pessimistic" language in central banks' "financial stability reports." Not surprisingly, there has been an increase in such language as the 2000s have progressed, what with the financial crisis and all. The Fed, naturally, takes into account many, many macroeconomic fundamentals (unemployment, inflation, etc...), along with certain economic "indicators" (Consumer confidence index, even stock market fluctuations) before making its decision on monetary policy. Firms, households, and investors read these reports and make inferences about where the economy is going. In a sense, then, the Fed's report is acting like ANOTHER economic indicator. I'm pressed to say, therefore, that perhaps if the Fed used more "optimistic" language, we wouldn't end up with appears to be self-perpetuating prophesies. I'm not supporting lying by any means. What I am saying is that the Fed should raise the interest rate just a little bit. That's right, I said raise. But won't that deter consumption and increase savings? I say, not in this environment. The signal a slight raise of the interest rate would send, would be that the Fed is feeling better about the economy. Firms and households then respond accordingly. There's more to this idea, but that's for next week...

Mazi's Link O' the Day

If the flood of commercials interrupting football games this week wasn't enough of a hint for you, retailers are doing pretty well right now:

http://www.smartmoney.com/investing/stocks/retail-stocks-with-sales-momentum/

Saturday, November 27, 2010

Tuesday, November 23, 2010

Knowledge is Useless

We have education all wrong. Politicians, educators, and number-crunchers alike all decry the current state of American education, claiming that we can't possibly compete in a world in which our children are under-educated and continually beaten on tests by foreign students. They are right to criticize our system of education, but they do so for the worst reasons imaginable. I say, let the Asians and Europeans pass us on those math and reading standardized tests. They don't mean squat.

For those readers out there advanced in the professional world (excluding professors), how much of your K-Bachelor's knowledge do you use? By that, I mean, can you recall any of the immense amount of data you stored in your mind for short periods of time, namely until the next test? I bet you can't take the derivative of x. What the vast majority of adults get out of their undergraduate education is formation of their character that makes them who they are today. Their ability to cope with adversity, cooperate with others, innovate, expand, they built on all of these during your time at school. Then, they either picked up a profession or went to grad school, at which point they learned the actual knowledge they needed to succeed at their given job. What didn't they need to know? How to take the derivative of x.

I could care less that the average Japanese kid is better than the average American at math. I'll admit that standardized tests do measure the important ability to synthesize and recall data, but they accomplish little more than that. Before the rise of meritocracy, education was all about building character, a moral compass, and the skills and traits requisite to succeed in any given circumstance. That world had immense faults: it was an old boy's club that only allowed the most privileged a spot at the table, but it was right to emphasize building the student, not filling the student's head with useless data.

So, stop worrying about test scores, how many AP classes a kid is taking, or how many extracurriculars they excel in. That won't matter nearly as much in the long run as how much they grow as a person when in those tasks. If kids continue on their trajectory of accepting authority and just chewing up numbers and facts thrown at them in class, we will lose the emphasis on individuality and innovation that has made our nation so dynamic. We need to fundamentally change our system of education back to the time when it fostered these qualities, not the ability to take a derivative.

What's the Deal with QE?

It would appear that the air is heavy with negative sentiments about the Federal Reserve's second round of quantitative easing, or QE2, as it is affectionately nicknamed. Congress likes to get hot-headed about economics (especially economics they don't understand), however now it seems they've gone past merely hot, all the way to boiling. There have been the occasional, acrid remarks about dissolving the Fed's independence, and there have been slightly less extreme accusations that the Fed's double mandate has failed. That mandate dictates that the Fed must strive for full employment and price stability. Of course, there is also the, now infamous, Youtube video of the fuzzy animals hashing out the details of QE. I'm not going to get into any of these attacks, or their validity, but I am going to give a few reasons why QE may not be the greatest invention since sliced bread.

Firstly, let's look at the markets. No, the stock market does not perfectly describe the state of the economy, but it is usually a fairly good barometer of how people FEEL about the economy, justifiably or not. FAS, a financials ETF, peaked on November 4 at $26.81. Since then it has tumbled around 20%. The S&P 500 went from a November 4 peak of 1226.26 down to 1180 today. Market jitters galore. When people are already worried about the effects of QE, we'll probably end up, as usual, with a self-fulfilling prophecy.

Secondly, QE is, quite simply, untested. This is, obviously, the second time it has been used, and there is not enough literature on the subject to really understand the effects. In classical lore, printing money (which is in essence what the Fed is doing to buy up long-term assets), is associated with rampant inflation. Of course, inflation is around 0.9% right now, so maybe we SHOULD hope for that number to rise. But then again, maybe it won't. Maybe it'll rise TOO much. We just don't know.

The last point I want to make is that other countries (notably emerging markets) are unhappy with us. The story's a bit complicated, so I'll simplify. The Fed, and U.S. government, have criticized China for artificially devaluing the renminbi. Fair claim, this is true. The emerging economies (and others, for that matter) look at the U.S. and say, "Hey, well, QE effectively works as currency manipulation, too. Don't be hypocrites America! You're (now weakened) dollar is hurting our exports!." This is, also, a fair argument. China, now, turns to us and says, "We hold a great deal of your debt. When you manipulate your currency like this, the value of our holdings declines, so stop it!" The Fed does not intend to play with the value of the dollar, but QE does change that value. Nobody's wrong in the arguments above, which, I suppose, is the real issue.

I won't come all out and completely lambast the Fed for QE. Economic policy takes time. Maybe the beginning is the rough part. So far though, I can't say I'm all too pleased.

Mazi's Link O' the Day

Some research on effective debt reductions in the EU's past:


http://www.voxeu.org/index.php?q=node/5831

Friday, November 19, 2010

Mazi's Link O' the Day

A video!!! I don't really agree with all that's said in it (sounds like some right-wing conspiracy to me), but it's funny, so:

http://www.youtube.com/watch?v=PTUY16CkS-k

Thursday, November 18, 2010

Mazi's Link O' the Day

For those of you who know something about Japan's economy over the last decade, this should be a little disconcerting:

http://www.economist.com/blogs/freeexchange/2010/11/inflation_1

Tuesday, November 16, 2010

Mazi's Link O' the Day

So, I've been looking for a way to voice my opinion on why we should stop blindly feeling sorry for all the people who got foreclosed on after/during the crisis, but I've been afraid of sounding like a raging asshole. The New York Post, on the other hand, has done a fantastic job of saying what I wanted to, so maybe now I know how to write it. But that's for another time. For now, here's the Post's article:

http://www.nypost.com/p/news/opinion/opedcolumnists/show_us_the_victims_IKAoxjhIzWCtrvXRBVsVIN

Monday, November 15, 2010

In Defense of Pain (Part 2)

I feel a bit out of my league following a bona-fide economist warning about the danger of overstating the problem a deficit poses, but I'll try to keep my points as matter-of-fact as possible. Earlier this week, the NYTimes came out with a "balance the budget" calculator, in which one can go through current proposals and cut spending and raise taxes in an effort to reduce the deficit. Here's my attempt.

As you can see, my solutions are based more off of spending cuts than tax increases. In keeping with part one of this series, I made cuts based off of what I think the positive powers of a government should be, not to balance the budget. Like Mazi, I'm actually not that worried about the deficit, what worries me is that it is projected to get ridiculously out of control as a function of rampant growth in entitlements.

Speaking of entitlements, if you look back at my budget calculator, I chose to cap Medicare growth starting in 2013. This measure would save the government over $500 billion over the next twenty years, and I realize that with such savings necessarily comes pain in the form of reduced coverage. However, I believe that by capping the growth of this out-of-control program, we can start the ball rolling towards more comprehensive medical reform. Obama's health care bill didn't do nearly enough to address fundamental problems in our health-care system, as revealed by the projections of wild growth in medical costs for Americans going forward. If we capped Medicare growth, we could necessitate further, comprehensive reform to ensure we are getting the most for our tax dollars.

As presciently pointed out by Mazi, Social Security really isn't that big a deal. Look at Peter Orszag's piece today in the Times concerning Social Security. The proposals put forward in Simpson-Bowles are both reasonable and politically feasable, and they would essentially make paying for Social Security for the next 75 years and beyond a non-issue.

Finally, taxes. If you refer to the budget calculator, you can see that I favor extending the lower Bush tax rates, with the tradeoff of eliminating loopholes for corporations and individuals. The USA currently has higher tax rates for corporations than most of the Western world, but the immense amount of loopholes in our tax code mean that much of the taxes are avoidable. If we simplify the code, we can actually reduce rates and increase revenue. Of course, the rates would effectively increase for all those who exploit the system, but all in all the transparency in government would do everyone a favor in the long run.

Of course, the budget calculator provides rough estimates for massive dollar amounts. However, you can see that a relatively modest amount of spending cuts, coupled by smart tax revenue increases, would actually close the deficit gap over the next twenty years. None of the cuts or tax increases that I proposed would hurt employment in a meaningful way, so they wouldn't hurt our national recovery, which of course is a pressing issue. In part one of this series, I defended my theory of limited government. In this part, I have shown how it is possible for us to start scaling back the scope of government.

Don't Be Fooled

Don't be fooled by politicians. They will tell you opinions like they are facts, and they will make you feel like they know something you don't. As the country gets ready for the Republicans, and perhaps more importantly, for the Tea Party to come to power, it is important to remember these lessons.

September 2008 seems far away right now. The effects of the recession still linger, but the immediate panic and danger of that fall is now in the realm of history. Our crisis-du-jour is the budget deficit and our debt. Actually, it would be better to call it "self-made-crisis-du-jour." My point is, no one REALLY knows the dangers of a large deficit. They could be awful, but on the other hand, and this is a BIG other hand, the fallout from all the spending cuts and tax increases necessary to combat the deficit could be dire. For example, in the event of another recession, without Social Security payments, the elderly of this country would lose almost 100% of their savings. Despite the fact that Social Security is bloated, and in a few years, we're going to be paying in more than we get out, the complete, immediate removal of Social Security could be hugely detrimental to the economy.

Politicians who tell you that we MUST battle the budget deficit need to be reminded of our 9.6% unemployment rate. There are fundamental measures of the strength of our economy: employment, GDP, inflation, etc... Before you get caught up in the deficit, "unfairness" of the tax rate, or any other hot topic, look around, and check the REAL measures of our economy.

Mazi's Link O' the Day

Use the link in this article to try and tackle our budget yourself. My friend showed me the Sunday Times with the game, and I gave it my own go last night:

http://www.petergordonsblog.com/2010/11/mountain-to-climb.html

Friday, November 12, 2010

In Defense of Pain

This column is part one of a two part column on my thoughts on the role of government, and how they pertain to the USA today. Part one deals more with theory.

Our nation is moving ever more quickly towards financial disaster. We cannot sustain the current amount of government spending. Already, we are looking at paying $1 trillion in interest on our loans by 2020, a sum which will keep on growing. So, there need to be cuts. Dramatic cuts. We are here because citizens have come to expect too much out of government. We keep demanding more and more, and to be elected politicians have to promise more. This model of governance is simply unsustainable.

People need to get serious fast about the role government can play in their lives. First and foremost, I would like to clarify to progressives everywhere that government is not there to solve every individual's problems. It is not there for equality of lifestyle, it is not there to make sure everyone has a rosy life filled with cupcakes and puppies. Every time a people has risen up against a ruling class to try to make a completely egalitarian society, the experiment has failed on epic proportions. Rosseau's writings fueled the French Revolution, and look what happened there. Hundreds of thousands of lives were lost in the name of some abstract "liberty", and France was back to monarchy in the 19th century. Pointing to the USSR as an example of the shortcomings of socialism may be cliched, but it underlines my point.

Government is there to help you live your life. It is there to make sure no one holds you back in an egregious manner, and is there to take care of those things that you can't take care of yourself. One of the most cherished principles of our colonial era was the Subsidiarity Principle. Simply put, the smallest and most local unit of government that can handle an issue can do so to the best effect, and should do so. The state legislatures of our colonial period concerned themselves with defense against indians and facilitating commerce between towns, and let all other matters fall to the individual townships. Our country was settled by fiercely independent and precocious religious outcasts to the North and commercial visionaries to the South. We must continue in the footsteps in our ancestors and demand not that the government takes care of life for us, but just that it ensures that we have the power to take care of our own lives.

Mazi's Link O' the Day

We should get over political ideologies, and take a good look at the Deficit Reduction Committee's proposals:

http://economistmom.com/2010/11/so-if-we-can-scorn-the-scorn-we-might-get-somewhere/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+economistmom+(EconomistMom.com)

Thursday, November 11, 2010

Mazi's Link O' the Day

In defense of Robert Zoellick's support of gold to be used as a reference point for inflation and currency values:

http://www.forbes.com/2010/11/10/currency-monetary-policy-china-opinions-contributors-charles-kadlec.html

Wednesday, November 10, 2010

Mazi's Link O' the Day

I didn't read the whole article (43 pages), but I couldn't pass up the opportunity for a paper like this:

http://www.nber.org/papers/w16517.pdf

Sunday, November 7, 2010

Selling to the Masses

Oh how we love to think we're smarter than the companies selling us our goods! Whether we do this out of some deep-seated iconoclastic beliefs or simply because we feel intellectually superior is not the point. We simply don't like to believe that we're falling for the advertising. Sadly (or happily, depending on your views), this may not be all that true. As I was reading an article on motherjones.com, I was led to another article on wired.com about the same subject.

To summarize, there was a taste test held by two researchers, Samuel McClure and Read Montague. The results of their tests showed that when Pepsi and Coke were drunk from unmarked bottles, brain patterns showed no distinction between the two. When the bottles were labeled, people almost always chose the soda in the Coke bottle, regardless of what soda ACTUALLY was in the bottle. Draw whatever conclusions you want from this test, but the one that is most startlingly clear to me is that Coke has done a very, very good job advertising. It is after all "the most widely recognized consumer product in the world," as the wired.com article claims.

A personal favorite example of mine involved Pabst Blue Ribbon beer. PBR has become the emblematic beer for our hipster generation. It's cheap, kind of shitty tasting (but not too much so!), and has been praised by the likes of Dennis Hopper (Heineken! Fuck that shit! Pabst Blue Ribbon!). But there's more to the story than meets the eye. In the early 2000's PBR rose from the dead on the taste-buds of 20 year olds. Why? They cut back on advertising, put their beer in cult movies, and they have user submitted photography on their website mostly featuring hipsters and their beer. None of this is on accident. So, the next time your good buddy goes around wearing a crushed PBR can around his neck, declaring his rebelliousness to the world, remind him that it took a very clever marketing guru to get him to do that.

Mazi's Link O' the Day

Here's an interesting banking system proposal:

http://www.coordinationproblem.org/2010/11/another-banking-proposal-from-toby-baxendale.html

Saturday, November 6, 2010

Mazi's Link O' the Day

Obama wrote an article for the New York Times. He wants to make sure the U.S. doesn't lose its place as a leading exporter. After $600bn of QE we shouldn't have too much trouble selling our goods abroad:

http://www.nytimes.com/2010/11/06/opinion/06obama.html?_r=1

The Value of Dissent

On Tuesday, Bob Hebert of the NYTimes claimed that Americans who made $50 million or more saw their incomes quintuple from 2008-2009. He corrected today:

"My column on Tuesday incorrectly described the situation of the small group of Americans earning $50 million or more annually. Their incomes declined by 7.7 percent between 2008 and 2009; they did not quintuple. The incorrect information came from a report based on flawed Social Security Administration data. An inspector general is investigating after two individuals filed false W-2 forms that led to the skewed data."

The sensationalism we see in the media today has to stop. Every issue has a compromise, every conflict has a thousand different viewpoints. When people solely seek out comments made by people who support their own agenda, we get nowhere. When Fox news and MSNBC provide outlets for those who willingly only listen to what they want to hear, we further divide our society into a screaming match of two opinions that have to meet in the center.

Our political system was set up for slow, gradual change that is nearly impossible to implement. Dissent, and more importantly, informed dissent, is possibly the most important part of the government which our founders set up. Consider this: our planet has been alive for 4.5 billion years. Most scientists expect it to last at least another 5 billion, and current research is only lengthening this estimate. Intelligent human life has more than half of our planet's life span to improve. Informed change, fueled by conflict, is how we must move forward.

When we demonize others, we devalue EVERY single point they make. If liberals brush off Republicans as irresponsible, war-crazy cronies of the rich, they destroy 50% of the human capital in one of the greatest nations on earth. Similarly, if conservatives consider Democrats wussy, soft fools who will never get anything done, they destroy the other 50% of the United States of America.

It is time to start considering the value in the thoughts of every person on this planet. No superficial characteristic makes any one person's opinion less than that of another's. Fighting without recognizing the enemy as human is pointless. Conflict while respecting the opinions of those that oppose you is the crux of society.

Wednesday, November 3, 2010

Monday, November 1, 2010

Mazi's Link O' the Day

Tuesday is a huge day for the country, not just because of the midterms, but also because the Fed will be meeting to discuss its next move:

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/31/AR2010103103818.html?hpid=topnews&sid=ST2010103103824

Friday, October 29, 2010

Now What?

Well, the numbers are out, and things still seem a little gloomy. The U.S. economy grew at a less-than-stellar 2% in the third quarter. For the optimists in the crowd, that's better than the 1.7% growth for the second quarter. For the rest of us, U.S. average quarterly growth from 1947 to 2010 was 3.31% (tradingeconomics.com).

What does this all mean? There's almost certainly going to be another round of quantitative easing (QE2), probably after the midterm elections. The Fed has already purchased $1,725bn of assets during the crisis, and the extent of this next spree is up for debate.

Let's start with the simple fact that QE has only happened once before (during the crisis). QE is when the Fed buys long-term assets in order to push down long-term interest rates. This can only occur when the short-term rate is near 0%, which it is right now. Why am I so certain that QE will happen? As alluded to earlier, 2% growth is not wholly encouraging (in fact, it may be downright discouraging), and it's probably not going to change our 9.6% unemployment rate at all. Also, inflation is still sluggish (CPI is up 0.8% on the year).

Lastly, remember that it's expectations that count. So far, there actually may be some good news there. The difference between 10-yr Treasury bills and inflation protected Treasury bills (TIPS) is about 0.5%. This shows that people expect the Fed's QE will have an tangible effect on prices. These things tend to be self-fulfilling prophesies. The Taylor Rule does, after all, take into effect expected inflation, however, it does feel like we're working backwards now. Instead of expecting high inflation and lowering interest rates, we lowered interest rates and hoped for higher inflation. Christ, my head's starting to hurt...

Mazi's Link O' the Day

Why the dollar is in trouble as the world's reserve currency, and how gold will emerge from the fray:

http://www.bloomberg.com/news/2010-10-29/gold-will-outlive-dollar-once-slaughter-comes-commentary-by-john-hathaway.html

Thursday, October 28, 2010

Mazi's Link O' the Day

Here's a column I wrote for the Miscellany News on currency wars. If you like snarky debates, check out the comments, too:

http://www.miscellanynews.com/2.1577/world-in-standoff-over-weak-dollar-1.2384491

Wednesday, October 27, 2010

Mazi's Link O' the Day

If the Obama administration had been more aggressive fighting unemployment, would the Democrats be in less dire straits this midterm season? Maybe not:

http://www.economist.com/blogs/freeexchange/2010/10/political_economy_1

Tuesday, October 26, 2010

Luke's Link

http://www.politico.com/news/stories/1010/44216.html

No, it isn't Karl Rove who is beating you, Dems. Facts hurt, don't they?

Mazi's Link O' the Day

The burdens of migration:

http://www.econbrowser.com/archives/2010/10/guest_contribut_9.html

Monday, October 25, 2010

TARP, the Republican Master Plan?

We all hate TARP. Whether you are angry about government spending, capitol hill being too cozy with the big bucks on wall street, the very concept of a bailout, or are just yelling because everyone else is, TARP gives everyone a reason to get upset. It stands for everything against which the populist storm that is the Tea Party rages, and it is probably the only thing that everyone can agree on. Upwards of $80 million dollars have been spent this election year disparaging the bailout bill in some way, with $53 million of that coming from Democrats. The thing is, TARP has performed wonderfully.

Originally expected to cost taxpayers $356 billion, TARP is now on track to come in with a cost of around $30 billion after all is said and done. AIG and Citigroup are expected to buy back their assets and "finish" TARP in the coming year. What TARP did, in a nutshell, was stabilize our economic system when it was on the brink of catastrophic failure while costing us little to nothing. It is a testament to the positive power of the government, and probably prevented unemployment figures in the 20s.

So, why all the hate? In a word, self-righteousness fuels the hate directed towards TARP. It has been portrayed as a bill that highlights the cozy relationship between the rich and Congress, and after all, everyone hates rich people. Some of the outrage is justified. Wall Street got bailed out after using risky and volatile banking practices that brought us to the edge. Americans have every right to be upset about that. But going a step further and denouncing TARP is irresponsible. Government is around to help people engage in whatever pursuit they will, provided it does not hinder that right in others. Had the government let the banks collapse, as many have suggested, we would be looking at a much, much deeper crisis.

I guess my message is, hate the derivatives and the greedy and irresponsible men who relied too heavily on them, not the responsible government program which bailed them out. The thing is, that doesn't make for an especially compelling campaign war cry. "It's all Wall Street's fault!" doesn't get either party votes, while a successful portrayal of a Democrat as cozy with the reviled rich makes for a cutting ad in these populist times.

Mazi's Link O' the Day

Thankfully, there are some people who see the harsh, inevitable, answer to the foreclosure crisis:

http://www.latimes.com/news/opinion/la-oe-adv-gelinas-banks-foreclosures-20101024,0,6089148.story?track=rss

Saturday, October 23, 2010

Mazi's Link O' the Day

As you may recall, I posted an article about Sanofi's attempted takeover of Genzyme. Here's how that's going:

http://dealbook.blogs.nytimes.com/2010/10/22/genzyme-makes-case-that-sanofi-bid-is-too-low/

Friday, October 22, 2010

Mazi's Link O' the Day

Paul Krugman drew parallels between Depression-era U.S.A., '90's Japan, and currently fiscally austere Britain. Here's why his comparison is off (according to Free Exchange, that is):

http://www.economist.com/blogs/freeexchange/2010/10/british_austerity

Wednesday, October 20, 2010

100th Post!

It's our 100th post! So, to celebrate this event, let's have a verbal montage of posts 1 through the big 1-0-0.

We talked about the foreclosure crisis, and I proposed a plan (which I no longer support, by the way) to fix it.

Toyota paid (big time) for it's screwy cars.

Overdrafts were, sort of, abolished

*****My Favorite (Maybe)******
I claimed it's time to stop saying "my two cents." Let's adjust for inflation and say "my 24 cents." (I'll have to run those numbers again).

We talked about Goldman's lawsuit. Turns out I was wrong about that. Guilty!!

Mr. Luke Crihfield, of Georgetown University, joined Econstu, and brought us his insights on Afghan minerals and U.N. sanctions

China, kinda, let its currency float again

Luke, kinda, lamented the death of Blockbuster

WE GOT TWITTER

We talked about the "swan."

We talked about pensions, Lehman, and Luke returned to say a brief, but much appreciated, hello before diving back into his studies (presumably)

We had a lot of "Link O'the Days" along the way.

We're the first hit when you Google "econstu," and we're finally showing up on other blog sites


That's all for now. Till the next 100 folks!

Love,
Econstu

Mazi's Link O' the Day

An escape from all the craziness of money, economics, and politics:

http://epicureandealmaker.blogspot.com/2010/10/weekend-interlude.html

Thursday, October 14, 2010

Mazi's Link O' the Day

Some criticism of Ben Bernanke's fast and loose monetary policies:

http://www.atimes.com/atimes/Global_Economy/LJ13Dj02.html

Tuesday, October 12, 2010

Gossip Wire

You've made $8.4 billion in 9 months. You're gonna have a bonus pool of $21 billion by year's end. So, who's complaining!? Looks like CEO of Goldman Sachs, Lloyd Blankfein is (or so they say). Dealbook recently got the eavesdrop on some unnamed Wall Street executive ranting at a restaurant. Who is it?

As I alluded to, the word on the ground is that is probably Mr. Blankfein. What's the evidence? Well, our incognito blabbermouth was quoted as saying, "Geithner is helpless," a sentiment Mr. Blankfein has shown to share. What else? The exec was also heard criticizing the new clearinghouses for derivatives. Guess what? That's a sentiment Mr. Blankfein has shown to share. Lastly, Mr. Blankfein has shown his sharp tongue and wit in the past. Looks like this case is pretty clear, but hey, you never know.

I doubt anybody really cares about this little gossip, even if people do confirm the identity of the speaker. Of course, Blankfein's past may play a role. He had a famed verbal gaff last year where he joked that he was doing "God's work." Personally, I think that's funny, but when you're one of the most hated people in America (let's face it, Lloyd, you probably are), you may wanna watch your words, lest you should be force to eat them. At least he was already at a restaurant...

Mazi's Link O' the Day

Despite its seemingly obvious positive implications, dual-earing households can further increase unemployment problems:

http://www.economist.com/blogs/freeexchange/2010/10/americas_jobless_recovery_0

Sunday, October 10, 2010

Saturday, October 9, 2010

Mazi's Link O' the Day

One of the main snags in M&A deals that people don't realize is how the board of directors at each company meet and work:

http://dealbook.blogs.nytimes.com/2010/10/08/air-products-wins-round-in-battle-with-airgas/

Friday, October 8, 2010

Mazi's Link O' the Day

The unemployment figures for September are out (95,000 jobs shed, 9.6% unemployment rate). Despite some encouraging signs (private sector growth), it's mostly bad news:

http://www.economist.com/blogs/freeexchange/2010/10/americas_jobless_recovery

Wednesday, October 6, 2010

Tuesday, October 5, 2010

Mazi's Link O' the Day

Here's a sentiment you don't usually hear in school or on Wall Street. I don't know if I agree with it, but it's worth getting a new perspective:

http://money.cnn.com/2010/10/04/pf/jobs/business_school_waste.fortune/index.htm

Monday, October 4, 2010

Mazi's Link O' the Day

In honor of the Nobel prize in medicine, which was just given to a Dr. Robert Edwards, here is... a hostile takeover in biotech:

http://dealbook.blogs.nytimes.com/2010/10/04/sanofi-goes-hostile-with-genzyme-bid/

Thursday, September 30, 2010

Where Are They Now?

Remember Lehman Brothers? Well, we're almost at the two year anniversary of their unfortunate demise, and though the company no longer exists, the pieces do. The Wall Street Journal ran an interesting article on what has become of Lehman's "assets," human or otherwise. How's this for irony? "The [Lehman Brothers] sign sold for $66,355 at Christie's on Wednesday."

As much time as the WSJ devotes to the futures of Lehman's employees, there may be more to this than just rearranging of jobs. The WSJ makes references to Drexel Burnham Lambert throughout, which I think is quite apt. The mistakes of Lehman Brothers did not generate out of thin air. It was the people in the firm who caused their crisis. Sure, it may not be everybody's fault, but certainly some of the top level people are responsible for some of the madness that ensued. The question is, is this the best way to cleanse Wall Street of the immoralists? Moving people around doesn't, obviously, bring in new ideas. Goldman may get some of the thoughts of Lehman, but clearly those weren't exactly great ideas. My point being, there needs to be a new generation. I realize that there are tons of budding investment bankers in every school around the country, but they're getting corn fed the same old bullshit (pardon my French). This is not the place to go into my moral views (maybe later), but if you think the companies going bankrupt, and their employees moving around, is the sign of change, think again.

Mazi's Link O' the Day

Nifty little summaries, with some good links to boot:

http://dealbook.blogs.nytimes.com/2010/09/30/special-section-big-tests-for-buyout-firms-and-banks/

Wednesday, September 29, 2010

Tuesday, September 28, 2010

Thursday, September 23, 2010

Tuesday, September 21, 2010

Sunday, September 19, 2010

Mazi's Link O' the Day

Very funny, and well played:

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=260665950097

It's Been a While.

It's been a while since I posted here, new school year, excuses excuses. Mazi has been staying with it well. I don't have time for another diatribe on clean energy, but I can post this must-read link.

http://www.nytimes.com/2010/09/19/opinion/19friedman.html?_r=1&hp

Saturday, September 18, 2010

Friday, September 17, 2010

Thursday, September 16, 2010

Mazi's Link O' the Day

Maybe someday Econstu will be able to pull in cash like this:

http://www.economist.com/blogs/freeexchange/2010/09/financial_markets

Wednesday, September 15, 2010

Tuesday, September 14, 2010

Mazi's Link O' the Day

An attack on all the "experts" hired by Washington to diagnose and fix the economy:

http://www.realclearmarkets.com/blog/cpr32n5-1.pdf

Sunday, September 12, 2010

Blight of the Economy

http://www.rtable.net/images/EmployRecessionJuly2010.jpg


This is courtesy of economicsroundtable. Need I say more than what the graph already shows? Pay close attention to the dotted line that represents the ACTUAL employment figures (i.e.- without temporary census employees). This may something of a normative statement, but I claim that unemployment is the greatest blight that can befall an economy. Some would argue inflation and perhaps other factors. However, the effects of unemployment are felt most acutely (obviously). First, we have people who have no jobs, and thus no incomes. I don't need to explain why having that group of people gain members is a bad thing. However, fewer jobs also means less production generally. Here's a graph from calculatedrisk that shows the correlation between real GDP and percentage change in payrolls:


http://calculatedriskimages.blogspot.com/2010/06/gross-domestic-income-and-employment.html


Add on to all of this the societal effects of unemployment, and you've got yourself a nasty little stew. Even the employed see the effects of joblessness, and pessimism spreads.

Anyway, I think that's enough good news for now...

Mazi's Link O' the Day

Excellent article on the crisis. A fantastic summary of what transpired. I can't wait for the follow-up:

http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/?page=1

Friday, September 10, 2010

Mazi's Link O' the Day

A friend just showed me this site yesterday. Very entertaining, including lots of econ related stuff:


http://chartporn.org/

Tuesday, September 7, 2010

Mazi's Link O' the Day

A study that shows the relationship between wage disparities and exports:

http://www.voxeu.org/index.php?q=node/5473

Monday, September 6, 2010

So Bloated

What is the first institutionalized "financial aid" program that comes to mind when you think of the word "disaster?" Social security? Try pensions. According to The Hill, "Randy Johnson, the Chamber’s senior vice president for Labor, Immigration and Employee Benefits, told The Hill the total shortfall for state pension funds could run as high as $3 trillion." So, how is that shortfall going to be made up? Many experts believe the next government stimulus is going to be directed at these pension funds. Of course, stimuli and bailouts don't emerge from thin air. In essence, taxpayers are going to need to prop up these funds.

How did this happen? Bad luck or bad planning? Some of the numbers behind these funds are beyond shocking. As New Geography reported, "In Orange County CA, lifeguards, deemed safety workers, retired with $147,000 annual pensions. The Orange County sheriff, recently convicted of witness tampering, will receive $215,000 annually while in jail. Bob Citron, the Treasurer of Orange County who pushed the county into bankruptcy in the 1990s, receives a pension of $150,000 per year." Not only are public employees being compensated too well, there's also just way too many of them. Many states have so many government agencies (California has over 200) that many of these agencies, inevitably, end up costing the state money without contributing a great deal. The first place, obviously, to start with this pension crisis is with the bloated public sector. Cut back.

Mazi's Link O' the Day

Despite phrases like this: "The US economy has slowed to stall speed: successive quarters of 5pc growth, 2.7pc, and 1.6pc (to be revised down), the worst recovery of the post-war era. Such is the crush of debt," the main message of this article is, "Don't give up, yet."

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7982807/Dangerous-Defeatism-is-taking-hold-among-Americas-economic-elites.html

Friday, September 3, 2010

Thursday, September 2, 2010

Wednesday, September 1, 2010

Mazi's Link O' the Day

Remember the suicides in China at the beginning of the summer? Here's what'd starting to happen to the price of labor in the country.

http://www.project-syndicate.org/commentary/fan18/English

Monday, August 30, 2010

Saturday, August 28, 2010

Thursday, August 26, 2010

Mazi's Link O' the Day

The Congressional Budget Office makes a few blunders, and given these mistakes, makes you wonder if we should have done things (stimulus) differently.


http://www.realclearmarkets.com/articles/2010/08/26/cbo_the_cover-up_budget_office_98641.html

Monday, August 23, 2010

All Rich People are Evil

Now, for my trick of the day, I will come across as a giant dbag.

In today's New York Times, Paul Krugman has an opinion column titled "Now That's Rich" that deals with the impending expiration of the Bush tax cuts. Obviously, he is wholeheartedly for letting the tax cuts expire, and does his usual "shame on Republicans and rich people" schpeel. I'd like to clear a few things up.

What happens to the Bush tax cuts isn't on the Republicans. Bush passed the tax cuts with much smaller majorities in the House and Senate than what the Dems hold now, so whatever happens, happens because the Dems did or didn't do something. And of course, Obama has the power to veto an extension as well. Republicans may have started this, but Democrats, the end is on you.

Next, he describes the tax cuts as "cutting a check" to the richest portion of our society. Tax cuts do not cut checks to anyone, rather, they let people keep the money they earned. Believe what you will about whether or not those salaries and stock options are deserved, it is all the rich's money, and the government is taking that money away. If anything, we should be grateful that the top 1% of income earners make up a whopping 42% of the income tax. Furthermore, 47% of Americans pay no income tax. I'm betting that many of those who pay no income tax are now screaming about how tax cuts to the rich are unfair.

Here is a news flash for the world. Life isn't fair. Not only is it not fair, it is impossible to make it fair. In fact, the whole notion of what is "fair" and "just" is arbitrary. The only absolute surrounding those concepts is that there is no absolute. We take much more of the rich's money, but they need that money less. We can't determine what percent is the right percent, or who should pay what. So please, Democrats, stop calling Republicans corrupt for wanting to extend tax cuts, they aren't. They just see one side of the coin.

What do I think we should do about the issue? Well, I think that first the issue needs to stop being an issue of right and wrong and start being an issue of what economically makes sense. Right now, most economic data says we need the extra taxes to pay for the massive expansions of social programs. So, even though I don't support many of these programs, I believe we need to let the cuts expire for the solvency of our country.

Long run, we need to get our whole country together. We are undoubtedly a country to the right of Europe, and Americans in general are averse to seeing the expansion of social programs. We like less taxes and less government, and I personally believe a few things need to happen. We need to seriously trim everything down. Make the tax code simpler and more transparent, and cut down taxes. At the same time, make what happens in Congress more transparent and cut back the programs coming out of there.

Of course, once the people have the programs, it may be impossible to take them away. In which case, I resignedly say, just increase taxes while expanding government forever. We may have no choice.

Mazi's Link O' the Day

This might be a good book for all those prospective New-York-investment-bankers.


http://epicureandealmaker.blogspot.com/2010/08/four-gates-to-city.html

Sunday, August 22, 2010

Surviving the Swan

It is no shocking revelation to claim that the global economy is still in volatile times. Central banks around the world have reemphasized the fact that growth will be slow for some time still. Greece has managed to tighten its fiscal belt (since employing certain austerity measures, the government has reduced the budget deficit by 39.7%). However, this has led to rampant unemployment and unrest. Of course, the U.S. employment picture is still, relatively, grim. What this is all adding up to is a picture of market sentiment. Many small investors have fled the market, and risk remains high (gold continues to be popular).

The Wall Street Journal ran an article today discussing the idea of the "Black Swan," a phrase popularized in 2007 by Nassim Nicholas Taleb. Essentially, the black swan is classified as a period of high volatility and unpredictability. These times are usually triggered by some external event (i.e- collapse of Lehman Brothers). I'll leave it to the Journal to explain all the different strategies people, and funds, are taking to deal with our current times of volatility. Although, on first glance, it may appear that those who are planning for black swans are always on the winning side, their strategies can have less than desirable consequences. In a bull market, most black swan plans do not generate large returns (the '90s). But this is a different era, and investors are seeking to profit from the current economic turmoil. I look at the flow of the market like a pendulum. As it swings upward towards a bull market, investors jump on, hoping to catch a ride to the top. Eventually, it peaks and starts its inevitable ride to the opposite side. As it moves back, perhaps to a bear market, perhaps just away from its peak, investors jump off one side and get on the other, hoping to profit from this new trajectory. Right now, we're seeing the herds flock to the pendulum, hoping to hitch a ride to pay dirt. Sooner or later, the pendulum will swing back to a bull market, or at least something more stable than our current situation. Till then, perhaps we should do as so many investors are doing, and try to enjoy the ride.

Mazi's Link O' the Day

A hedge fund giant, leaving the game (mostly)


http://dealbook.blogs.nytimes.com/2010/08/20/pellegrini-to-return-outside-capital-in-his-fund/

Thursday, August 19, 2010

I laughed out loud when I read this...

"An earthquake opens and underwater chasm, unleashing a swarm of ferocious man-eaters. The plot of 'Piranha 3D,' or a subtle allegory of the subprime mortgage crisis?" *



*Reprinted without permission from Crib Sheet by Henry Alford in today's NYT

Mazi's Link O' the Day

As the short article already says, discuss.


http://www.coordinationproblem.org/2010/08/unions-peaceful-picketing-and-coercion.html

19 Going on 10

Am I, as I progress in years, getting younger? Researchers (as well as NYT reporters, link in the title) can throw barrages of numbers at us that unequivocally show that kids are taking longer to grow up. To sum up the changes, I quote, "Sociologists traditionally define the “transition to adulthood” as marked by five milestones: completing school, leaving home, becoming financially independent, marrying and having a child. In 1960, 77 percent of women and 65 percent of men had, by the time they reached 30, passed all five milestones. Among 30-year-olds in 2000, according to data from the United States Census Bureau, fewer than half of the women and one-third of the men had done so." Sorry, long quote. But effective.

It is obvious that we are taking longer to grow up. It is also pretty evident why. I had a paragraph here giving examples of why, but decided that it took too long. So, we are taking longer to grow up because we are being coddled at heights never seen by previous generations. You'll have to take my word for it because previously, I used the word "disincentivize", which spell check tells me isn't a word, but google confirms. Therefore, I'm really smart.

General historical trends show that we have taken more and more care of our young as we mature as a species. In the Medieval Ages, good parenting for a noble was to have a child, send said child off to serve as a squire for a knight, cry at his funeral, then rinse and repeat. In our parent's generation, good parenting was to send a kid off to boarding school and not talk to them until vacation time, at which you informed them of your plans and shipped them off to summer camp. Nowadays, even shipping a kid off to boarding school means daily calls to check up, routine interactions with that kid's teachers, deans, advisors, hall residents, etc.

I posit that in the past, we got stronger as a race when we started taking more care of our children to protect them from physical dangers. Keeping a child safe from war is a good idea if you want him or her to procreate. However, we have got to the point at which we are taking too good care of our children. We coddle them to the point of no return, that is, they never become fully independent. Even in their thirties, many haven't completed the "Five Milestones". They are infants stuck in the bodies of adults. There is a visceral reaction to seeing a thirty year old eat breakfast prepared by his mother, and that reaction is ugly. Don't watch this increasingly common interaction unfold, it is terrifying. If you are so unlucky to hear the word "mommy" uttered by either party, immediately check yourself into a psychiatric ward for damage control. Coddling is BAD.

So parents, please let your children mess up their lives. A teenager learns a lot more from a mistake that they made than the lesson you preach to them right after you head off that mistake.

Wednesday, August 18, 2010

Something Vague

I'm taking a break on this post from my usual news-ian analysis to bring to you some thoughts/feelings/ideas on some broader philosophical topics. No, I am not basing this in any ACTUAL philosophy (in the academic sense, at least).

I have delved deeper into the recesses of good literature this summer, and I find myself relishing in the stories of people like Charles Bukowski and Hunter S. Thompson, along with my musical favorite, Warren Zevon. Dare I say, for better or worse, I find these people to be more of my own heart than some the more upstanding characters in society today. So here's the issue. Here I am, your genial narrator in this economic and political landscape. I like to think I work hard and take my studies seriously, and I'm not a down and out. Then there's the other side of me that I just mentioned. If not attracted to the lifestyle, I'm at least interested in the philosophy and the attitude. Am I a paradox? I have aspirations of Wall Street and government and academic prestige. Could Lloyd Blankfein listen to heavy metal? Yes is the answer I've come to.

I'd hate to barrage you with platitudes and cliches like "be true to yourself," but that's what I'm getting to. Portraying all Wall Street bankers as aggressive, overly-ambitious, narcissists with no personalities is the same as assuming all art majors are fashionistas. What's worse is when we decide to adopt these generalities in order to be "more like" others of our ilk.

Really, the point is, platitudes and groupings are usually false. This applies equally to making assumptions about markets/economics/politics, as well as to your everyday life. The best research comes from when you dig a little deeper and find something unexpected. You're not going to become CEO of Goldman Sachs by adopting what you may think is the "appropriate" lifestyle. You're going to get the job if you're a smart, hard working SOB. I used to worry about some of these little inconsistencies between my hobbies and lifestyle and my academic/career goals. My advice to you: don't sweat it.

Mazi's Link O' the Day

The overall picture is important to remember in this article (Washington does not necessarily affect Wall Street). Also, the finer point (the tax cuts could expire without causing the Great Depression II), is something I agree with.


http://www.washingtonpost.com/wp-dyn/content/article/2010/08/17/AR2010081705638.html

Sunday, August 15, 2010

Mazi's Link O' the Day

Goldman's economists have released their thoughts on a double-dip. In summary: probably not, because it's hard to imagine things getting any worse than they are now.


http://voices.washingtonpost.com/political-economy/2010/08/goldman_sachs_economists_no_do.html?wprss=political-economy

Saturday, August 14, 2010

Mazi's Link O' the Day

Something of a conspiracy theory. However, I do think there is some truth in the statement, "the FDIC is intentionally keeping foreclosures down because it knows it does not have enough money to pay off depositors who are insured by the FDIC." Of course, the FDIC could easily raise the money, but recently I have thought that it is best to flush the system, instead of delaying what may be inevitable foreclosures.


http://globaleconomicanalysis.blogspot.com/2010/08/former-bank-regulator-william-black-us.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MishsGlobalEconomicTrendAnalysis+(Mish's+Global+Economic+Trend+Analysis)

Friday, August 13, 2010

Mazi's Link O' the Day

This may be my favorite economics/finance blog, partly for the incredibly well written posts.... even if they have nothing to do with economics/finance, like this one:


http://epicureandealmaker.blogspot.com/2010/08/ooh-shiny.html

Thursday, August 12, 2010

Are We Overreacting?

Wednesday was a bad day. There was a grand, old sell-off in the stock market, fueled mostly by the chronic concerns over the U.S. recovery/deficit/etc and the news that China's production may be slowing down. (China explicitly stated it was trying to reel in some of its growth. Why the hell is everyone reacting like they were just blindsided by Mohammed Ali!?). In no way do I mean to belittle the problems at home, or the potential problems abroad, but slow growth does not a crisis make. An article on CNN caught my eye with its title, "Don't panic. Growth is still growth." I suppose that's true. However, there are, as always, two distinct poles in this debate. There are the folks who've decided that Wednesday's sell-off is the first day of the apocalypse, and then there is the CNN article. As a cool-headed but concerned individual, I'm going to opt for the middle path.

Yes, the U.S. economy is growing. Yes, it is not growing as fast as desired. The Fed's decided to keep interest rates low, and a lot of firms have recently released earnings reports, and, I have to ask, are we surprised at the results? The Fed was not going to increase the rate, especially after GDP was reported to grow by 2.4% in the second quarter, .3% slower than the previous quarter. That's what I can't seem to understand. I scour the news and data, looking for that sudden, terrifying, unexpected event that led to all this hubbub. It seems to me like this is more of the same type of news we've been getting all summer. HOWEVER, it's still not good news. This economy is not growing fast enough to make me comfortable about where we may be 3 or even 5 years down the road. We may be still struggling out of the pits of this recent crisis half a decade from now, and although the continued struggle may be commendable, it's certainly nothing to be happy about. 2.5% to 3% growth is not very impressive for a recovery period. As a paper from Rutgers University reported, "During the 1991–2001 expansion, the average annual real GDP growth rate was 4.3 percent... Forecasts for real GDP growth over the next several years are significantly lower (e.g., Global Insight projects an average annual real GDP growth rate of 2.8 percent from 2010 through 2014)." Wednesday's sell-off may not be the return of the crisis, but when a brand new recession appears down the road, I fear we may end up tumbling back down the rabbit hole to even darker depths.

Wednesday, August 11, 2010

Goodbye, Blockbuster

Yet another sign of the coming apocalypse, the internet takes another step into controlling out lives. I say old people (read: naysayers) be damned, let it control me.

Mazi's Link O' the Day

We haven't heard much from our old friends from the crisis of '08, A.I.G., in a while. But they've been working on paying back Uncle Sam for his aid.

http://dealbook.blogs.nytimes.com/2010/08/11/a-i-g-to-sell-consumer-finance-unit-to-fortress/

Wednesday, August 4, 2010

Some Brief Thoughts on Energy

In the midst of this summer's European near-crisis and the full-on crisis of the Gulf of Mexico, one usual hot topic fell a little by the wayside. With the exception of some sneaky scientists (you'll have to do your own reading if you don't know what I'm referencing), the world of global warming was somewhat removed from the public eye. I do not claim to be anything near an expert on the matter. In fact, I'm probably not that informed about it, generally speaking. However, I did read an interesting tidbit on the blog "Marginal Revolution." It seems, according to a Harvard study, "the world could cut global CO2 emissions by about 6 percent simply by scrapping price supports for fossil energy." That sounds like a pretty good deal to me. The point is that people are always clamoring for government subsidies to help industries gain a competitive edge in global markets. I tend to veer to the right on this debate and think that weathering the turbulence of foreign competition on one's own is good for almost any firm or industry. Regardless of whether that argument holds for all industries, I'm almost certain there is no real need to subsidize fuel. Sure, fossil fuel prices go up for a bit, politicians get angry, and somebody says it's the sign of the apocalypse. A lot of things are going to be more expensive... it's called inflation. I think we should let fuel prices follow their natural course to wherever that may be. It may hurt a bit in the beginning, but prices are after all a nominal value. The health of the world and its climate, well, that's a real variable.

Mazi's Link O' the Day

Going down, down, down, down....


http://www.marginalrevolution.com/marginalrevolution/2010/08/downward-revision-in-2nd-quarter-gdp.html

Tuesday, August 3, 2010

Mazi's Link O' the Day

I haven't read the book, but just for this quotation: "At The Dancers they get the sort of people that disillusion you about what a lot of golfing money can do for the personality," this is a worthwhile link.


http://epicureandealmaker.blogspot.com/2010/08/rich-are-different-than-you-and-me.html

Monday, August 2, 2010

Mazi's Link O' the Day

This is an interesting view on the current tax cut debate. The argument, summarized, is that when tax rates on the rich go up, instead of paying those higher taxes, they simply find more creative ways to avoid paying them. I'm not sure if I buy it, logically, but the writer provides some numbers to back it up.

http://online.wsj.com/article/SB10001424052748703977004575393882112674598.html?mod=WSJ_Opinion_LEADTop

Friday, July 30, 2010

Mazi's Link O' the Day

You can have an impeccable understanding of theory and models, but if you can't understand reality, then you're bound to run into problems. Seems obvious, right? Well, sadly, as this article argues, that is plight of many economists. Some might argue it was this detachment from reality that brought about parts of the crisis.


http://timothyblee.com/2010/07/29/the-neoclassical-lemonade-stand-and-other-confusions/

Thursday, July 29, 2010

It's Their Future, After All

I'm going to bring you back to a situation that happened all too often in the Crihfield house back in the day. A child would refuse to do his homework, and start annoying anyone in the house whose attention he could grab. To stave off this threat, one parent would take him to his room to make sure he does his homework. The parent would sit there and order the child to do his homework, staving off distractions, but in the end, the kid just wasn't making any progress. So, the next parent comes in the room. This parent insists that a different strategy is needed, and begins to more actively help the child, devoting all of his/her time, patience, and energy to trying to get the kid to do the homework. At the end of the day, however, the kid just didn't want to do it, and on top of that, his brothers were constantly popping their heads in and causing general mayhem. The Crihfield family doesn't really accept failure, so that kid would always get his homework done, no matter how much it cost the intervening parents.

Just in case you don't know where I'm going with this, I'll let you in now. We are facing a similar problem in Afghanistan today. America, annoyed by the Taliban after 9/11, decided to go kick them out and fix up the country they left behind. However, the more we struggle there, and the more we change strategies, the more the Taliban (and Pakistani) resistance grows. Quite frankly, we don't have the support we need from the Afghani people. Just like the kid who didn't want to do his homework, there is a huge portion of Afghanistan's population that has no will to do what seems right to us, and want nothing to do with fixing up a modern democratic regime.

So, what do we do? The parents could afford to invest an extra 30 minutes of their time making sure the kid got his homework done on that one night of distractions. However, the US war effort in Afghanistan is turning more and more into a proverbial 24/7 battle of wills with a completely petulant child who refuses to improve. Moreover, even if we did fix Afghanistan, all the bad guys in the world would just set up shop in Yemen! This isn't even a partisan question, war spending is set to peak this year under Obama, who during his campaign said something about ending...whatever.

There aren't enough people in that country that have the same vision as us to make it happen, so give them their damn rock. It sits on trillions of dollars of minerals, let them fall to the resource curse. We have tried too long and too hard with these people and seen no improvement. The Iraqis made an effort, and now their country is very much on the mend. Afghanistan is not. Pull out of Afghanistan. Give the terrorists no more legitimate reason to attack us. And invest in green energy so we never have to go within 1000 miles of that place again. Let the "Three Cups of Tea" guy fix it.

Mazi's Link O' the Day

Not sure what to say to this, but it's certainly interesting nonetheless. I wonder if people are growing disillusioned with this modern life that sometimes seems to cause more trouble than good.

http://blogs.wsj.com/economics/2010/07/29/the-amish-population-boom/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+wsj/economics/feed+(WSJ.com:+Real+Time+Economics+Blog)

Wednesday, July 28, 2010

Luke's Link

There are millions of issues that need to be ironed out for renewable energy, but every time you hear something like this, you know that if we just spent some more money in these sectors, we could have a booming green economy to lead the world into the future.

Mazi's Link O' the Day

Why aren't businesses spending? As I mentioned in an earlier post, lackluster demand plays a large role. Also, as this article explains, regulatory uncertainty is creeping in the backs of the minds of many businessmen.


http://online.barrons.com/article/SB50001424052970203964804575391453166193386.html?mod=BOL_hpp_dc

Tuesday, July 27, 2010

Mazi's Link O' the Day

Good news, I think! For those of you into being green (I'm too lazy to really try, but I appreciate everyone else's efforts). I'm happy to see car companies using these tough economic times, especially for them, to still move innovation forward.

http://www.marketwatch.com/story/nissan-to-start-us-leaf-rollout-in-december-2010-07-27-1216550

Monday, July 26, 2010

Twitter!!!!

We have successfully learned how to navigate the Cyberwebs and have created a Twitter account for ourselves.

Here we are:
http://twitter.com/Econstu

Sunday, July 25, 2010

Luke's Link 7-25

Check out the very last paragraph, quoted from Jeremy Grantham. I've been to an investor meeting for his hedge fund GMO and heard him talk, he's really damn smart.

(Link in the title)

Mazi's Link O' the Day- 7/25/10

I suppose this was inevitable, but good for Bob Dudley, as he moves up the BP ranks.

http://www.bbc.co.uk/news/business-10753573

Friday, July 23, 2010

Mazi's Link O' the Day

I'm going to try, as the title implies, to post a "link of the day" from now on. Hopefully, I will be disciplined enough to keep it up.


As for today's link...

1. If you're a Democrat, here's yet another sign of the coming Armageddon this fall.
2. Also, this link proves, yet again, why you shouldn't blindly believe what Congressmen and women say. Get your facts from somewhere besides the polity's mouth.


http://www.nytimes.com/2010/07/23/nyregion/23rangel.html?_r=1&th&emc=th

Wednesday, July 21, 2010

Teacher's Pets

Today, several big players in the oil industry announced they would collaborate to stop future "Deepwater Horizons" from occurring. These companies, consisting of ExxonMobil, Shell, ConocoPhillips, and Chevron, are setting up a $1 billion fund to create what can be regarded as a giant first-aid kit. Any company drilling in the Gulf of Mexico will have access to these supplies, should they need them (which hopefully they won't.... right?).

BP, not surprisingly, was left off the guest list. This is expected, given how the other big companies have been continually distancing themselves from the British company since this whole disaster started. I can't help but wonder if all this "charity" and criticism of BP are just ways to get on politicians' good sides before, say, one of Shell's rigs explodes. In fairness to these companies, they have insisted that their safety measures are far more rigorous than BP's, and I suppose we should take their words on it. Also, BP has a rather shoddy record of safety upkeep, so this sort of catastrophe wasn't exactly unforeseeable. However, a likely ulterior motive for being the "good guys" here is still related to politics. That is, these companies really, really, really, really want to do deepwater drilling, and, alas President Obama has already issued a moratorium on THAT. Well, luckily for the oil companies, other political pressures are forcing the Obama administration to reconsider the moratorium. Given the state of the economy, ExxonMobil and gang may get their wish. Is that a good thing? IF their safety measures are as rigorous as they claim, then maybe it is. I'll give them the benefit of the doubt. But if politicians do too, and this bet does not pay off (read: another well starts spewing like a garden hose), heads will roll, so to speak. Dare I say, could be BP Part 2 be a presidency killer? Let's hope we don't find out.

Red, White, and Blue Energy

The energy bill sitting in the Senate right now is not going to pass. Right now, it has been hacked and mutilated enough to get 53 hapless Democrats to vote for it, with 7 others still being whiny little bitches. The Republicans are intent on labeling everyone for the bill as "Carbon Taxers", and everyone in America knows that Carbon Taxers are the worst kind of taxers. What if seven Republicans decided to wisen up and support the bill?

First, they would give the war effort in Afghanistan its greatest lift ever. No, there isn't much oil there, but all of the terrorist organizations currently trying to bring us down are based in petro-dictatorships. Cut off these dictator's funding, and they will eventually die out, along with them the terrorist groups they tacitly (or directly) support. It is a great hypocrisy that we send troops overseas to die for America while we are unwilling to make small sacrifices for the country and for them here at home.

Next, China is set to be the leader in clean energy by 2012. There isn't anything wrong with that, I look forward to buying cheap Chinese goods. However, at this pace, we aren't going to even have a clean energy sector worth subsidizing in the future. We have to help it get on its feet now, and create millions of jobs here as well as giving the economy a huge boost.

Republicans and some Democrats profess to be against the bill because it would raise energy prices, hurting "middle America". I won't go off on a rant about the new obsession in the punditry and our leadership with populism, but take this statistic. The world is projected to add 3.5 billion people by 2050. Who want to live the American dream. Have fun at the pump in 2050, Senators.

Monday, July 12, 2010

A Business Agenda

There's been a lot of talk in papers and such about the upcoming "jobs summit" El Presidente is holding. There are, naturally, many things that can be discussed here. However, I'd like to focus on every politician's favorite enterprise: small business.

Politicians are fond of touting themselves as the champions of the little guys, and it wears thin eventually. However, there is something to be said for that position. Small business actually is one of, if not the, most important engines of growth in our economy, and when they do poorly, here come tough times. Currently of note is the fact that the interest rate being offered small businesses is relatively high. As the Financial Times reported, "The Fed’s data show that in early May interest rates on small commercial and industrial loans, on average worth about $500,000, were 3½ per cent higher than the federal funds rate, the widest gap since the series began in 1986." Obama has created a fund for local banks to help small businesses with loans, BUT there is always a but. These banks are not necessarily giving out the money. Why? Well, businesses have not seen sufficient demand. This means they're not expanding. Hence, no loans. The issue, as stated, is due to lackluster demand. You can stuff a piggy bank all you want, but if nobody's gonna break it open, who cares?

Monday, June 21, 2010

Free Fallin' (Or Probably Risin')

China has finally decided to let its currency float! Kind of... The Chinese government has decided to allow small fluctuations in the value of the renminbi now that is no longer pegged to the dollar. The government has set a "reference point," and the value of the currency may appreciate or depreciate .5 percent around that point. It may not seem like much now, but it is certainly a huge step for China. Expect this quasi-float to exist at least until new economic data emerges, and the Chinese can evaluate the effectiveness of the policy. If their exports are not adversely affected, they may decided to leave this policy intact for a long time. It would not only give the government some degree of control, but it would also allow the Chinese to fight claims of currency manipulation.

There are other factors to consider here, too. First of all, as alluded to earlier, this change in policy is probably as politically motivated as it is economically. With G20 meetings around the corner, the Chinese DO NOT want to have the hounds released, so to speak. Consider this currency float a preemptive strike against the renminbi naysayers.

Economically speaking, this move could be interpreted as a sign that China has ended, or is ending, its "recovery" policies. Export numbers were strong as the country posted a 48.5% year on year increase in May. As this policy moves forward, it will be important to look at China's trade figures with Europe. For all the talk US-Chinese trade gets, Europe is actually the countries biggest importer. Already today, the renminbi appreciated against the euro. Signs of things to come? We'll see...