Saturday, December 31, 2011

Mazi's Link O' the Day

Off to the great unknown that will be 2012:

http://epicureandealmaker.blogspot.com/2011/12/turn-page.html

Thursday, December 29, 2011

Mazi's Link O' the Day

Wouldn't be right to wish off the foul year of our Lord, two-thousand eleven, without the best bits of TED:

http://epicureandealmaker.blogspot.com/2011/12/ted-greatest-hits-of-2011.html

Wednesday, December 28, 2011

Mazi's Link O' the Day

Ricardian equivalence is not really supported empirically, but here's a good summary of the idea. And, as they mention, usually these defunct, yet basic theorems, are good starting points for further discussions:

Monday, December 26, 2011

Sunday, December 25, 2011

Saturday, December 24, 2011

Friday, December 23, 2011

Mazi's Link O' the Day

I'm almost certain I made this point earlier, but because all those foreclosed homes are selling for cheap, we're going to see existing home sales far outpace new home sales... FOR A WHILE:

Monday, December 19, 2011

Mazi's Link O' the Day

It's been a while since we had some TED. So, here you go. Ruminations on leaving this world behind:

http://epicureandealmaker.blogspot.com/2011/12/walking-song.html

Sunday, December 18, 2011

Saturday, December 17, 2011

$50 or Build-a-Bear? That Is the Question



Dan Ariely (of Predictably Irrational fame) writes about the irrationality of gift giving. At least, that's what the standard economist would say. Of course, Ariely, being a behavioralist doesn't think this way. He gives a number of examples of why, if you combine psychological reasons with economic ones, gift giving can make sense on a lot of levels. The one I am most interested in is a more general point: gifts vs. just giving cash.

My argument is that giving a gift creates more utility than giving the equal measure of dollars. Let's see why.

First, the simple cash gift... If you give someone $50, you are $50 poorer, and the recipient is $50 wealthier. For a short while after, your friend is happy for the money, and maybe you're glowing after doing something nice. But pretty quickly, this fades. There's no guarantee that your money gets spent quickly, and, more likely than not, your buddy probably just deposits into his bank account. Also, obviously, the good vibes form giving a gift don't last indefinitely, and you'll eventually realize you're $50 poorer.

Alright, now let's say you give a gift of equal value, and for simplicity's sake, let's say you take a pretty good guess at what your friend wanted. The first part of the situation is identical. You are $50 poorer, and your friend's wealth has increased by $50 (since he could always sell the gift for the money). Let's really simplify things down, but not lose generality here.

Your friend wanted a Build-a-Bear for $50. However, that toy doesn't fit in his budget right now. If he were to receive $50 exogenously of his own income (i.e.- as a gift from you), he would run off and buy the bear. So, if you gave him the gift, you're pretty much eliminating a lot of steps here. You're saving your friend's time. Which, you might argue, is an added bonus to the bear. Also, the bear will remain in your friend's mind longer (since he has to see it), and therefore the psychological boost probably lasts longer. (I'm no psychologist. Just a guess)...

Point being: the equivalently valued gift, in my view, is worth more to your friend. Even though it costs you more to think of a gift and go get it, you also get the bonus of a longer "emotional high." Everybody wins.

Second point being: Everybody loves Build-a-Bear

Mazi's Link O' the Day

A rebuke to the claim that we should increase gas-efficiency for cars because people want better mileage. I agree that people don't necessarily want said improvement, but I also agree that we should still have efficiency mandates:

http://cafehayek.com/2011/12/here-the-evidence-is-clear.html

Friday, December 16, 2011

Mazi's Link O' the Day

Remember Emerson? No? Well, here's a recap. Naturally, brought to you by the libertarians:

Thursday, December 15, 2011

Mazi's Link O' the Day

Well, Nouriel Roubini certainly doesn't have a rosy view of 2012. You don't need a PhD in economics to see that much of what he's talking about is already in the works:

http://www.project-syndicate.org/commentary/roubini45/English

Wednesday, December 14, 2011

Mazi's Link O' the Day

Ok, I'm not opposed to leveling criticisms against my discipline of choice, but people, PLEASE do your research first. This new group, Econ4, wants to challenge the way we think about economics. (Radical)! For example, what if we had "true cost pricing?" (Wait... Have ever taken a microeconomics class? They're called externalities).

The point is, everybody thinks they've figured it out, as if economics is something you can just "think about." Whatever... Let them eat cake:

http://www.env-econ.net/2011/12/dont-mainstream-economists-already-embrace-benefit-cost-analysis.html

Tuesday, December 13, 2011

Mazi's Link O' the Day

Good piece about the different schools of thought on the Great Depression. However, I like his side-point at the end  best: What happens when statism is aligned with scientism? Corruption of a discipline:

http://www.coordinationproblem.org/2011/12/thinking-about-the-great-depression.html

Monday, December 12, 2011

Is It Worth It?

So, I've been thinking recently about a question inspired by my time at the London School of Economics. The students of this institution tend to be highly "career-oriented." In so many words, people are falling over just to get an interview with Goldman Sachs, Morgan Stanley, JP Morgan, etc... Luckily, I already have summer employment, so I get to watch this carnage from the outside. I can't help but wonder how these kids expect to distinguish themselves in this atmosphere, and how do they stay motivated? I decided to to go to my friends for answers:


I posed the following question to three people who are/were interested in working in the financial industry. I asked, "Do do you think as the process and competition become more intense, people will be discouraged from applying? Is the glamour of Wall Street fading?"


Here are the answers:


Kathryne:


"I dont think people will be discouraged from applying, but I do think the glamour is fading. It seems the hot new jobs are at Facebook and Google now."




Bianca:


"It is really hard to predict, but I think if people are indeed interested  in interning in the sector they will not be discouraged from applying. Especially since there isn't really anything to lose. Also, if Wall Street will manage to keep its glamour, the competition will become more intense (as in every sector will, because internships become more and more popular/"mandatory"), and the people will not become discouraged by that. After all, you know it's hard to get there, but as long as you eventually make it, you know you can stick there for awhile. 

As for people who aren't indeed interested, they might become discouraged from applying; this can also be an opportunity for them to actually figure out what their primary occupational/career interest is."


Dylan:

"I don't think either is really the case, at least at Duke. The profession is attractive to undergrads because you have an opportunity to be financially independent immediately after college. I think in fact that its competitiveness increases its appeal. Students at competitive institutions want to be perceived by their peers to have the "best" internships or the "best" jobs. At Duke specifically 67% of my class was premed as freshmen, and now 13% of the class is still premed. Obviously medecine is a fine profession, albeit hard work, but not comparable to financial services in initial compensation, and thus, prestige.

I think the biggest argument to be made for it losing prestige is through support for movements like Occupy Wall Street that a re largely a reflection of dissatisfaction with the economy as a whole. In other words, I bet less than half of Zucotti Park could tell you what TARP, Simpson Bowles, or Dodd Frank did, or what a mortgage backed security or credit default swap is."



My take is in line with the other three. Mainly, I think we can turn to economic theory for our answer: SPECIALIZATION. Already, all sorts of programs are being created at universities seemingly to get students into banks. I think it's going to be more difficult for your typical liberal arts student to "just apply to banking jobs." Prospective employees are going to need more skills in order to make it. But, this is not a bad thing. It's going to save a lot of uninspired candidates the time of application. Banks won't have to sift through so many people, and will give more time to each candidate. And the people who will endure this ordeal will be TRULY interested in finance. Specialization is always good for an economy, as a whole and on a micro level.



Mazi's Link O' the Day

Chocolate crisis!

http://blogs.wsj.com/economics/2011/12/12/vital-signs-bumper-crop-eu-troubles-pressure-cocoa/?mod=WSJBlog

Saturday, December 10, 2011

Friday, December 9, 2011

Mazi's Link O' the Day

He's right: America has changed, although I'm not sure about the glib comment about the size of government. Click on the link to see just how much it's changed:

http://www.newmarksdoor.com/mainblog/2011/12/americas-biggest-companies-then-and-now-1955-to-2010.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NewmarksDoor+%28Newmark%27s+Door%29

Thursday, December 8, 2011

Mazi's Link O' the Day

An argument for compensation for organ donation: I think it's a good idea. As they say in the article, a district court just allowed compensation for bone marrow transplants:

http://marginalrevolution.com/marginalrevolution/2011/12/organ-donors-for-compensation.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29

Tuesday, December 6, 2011

Mazi's Link O' the Day

A post about the minimum wage. Specifically, in 2006 (I think) the nominal minimum wage was raised from $4.25 and hour to $7.25 an hour. Has this increased GDP?

http://politicalcalculations.blogspot.com/2011/12/can-increasing-minimum-wage-boost-gdp.html

Monday, December 5, 2011

Mazi's Link O' the Day

The Fed is set to announce its long-run inflation goals (apparently). They think  we can get to 6% unemployment without a large increase in inflation. Well, that would be nice...

http://www.calculatedriskblog.com/2011/12/wsj-new-fed-communication-strategy.html?

Thursday, December 1, 2011

Tuesday, November 29, 2011

Mazi's Link O' the Day

Two "Marios" have risen to prominent positions in this eurozone saga. Mario Monti, Italy's new prime minister, is charged with saving that country (and thereby stopping contagion). Mario Draghi is the new president of the European Central Bank, and it is up to him to decide to put aside the ECB's old mandates to pursue extreme rescue measures or not. Are these our new heros?

http://curiouscapitalist.blogs.time.com/2011/11/29/can-the-super-marios-save-the-euro/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+The+Curious+Capitalist%29

Sunday, November 27, 2011

Playing the Market

All this chit-chat about Greece and Italy has caused another notable debtor to fly largely uncriticized recently: Ireland. So, I'll take care of that briefly and give a scoop of that country's situation. According to Paul Krugman (via Phillip Lane), this is how I read what happened there.

Aside from Luxembourg, which doesn't really count (because it's, well, Luxembourg), Ireland has the largest amount of external debt as a percentage of GDP, 1,165%! (Thank you World Factbook). What did they do?!

Not only did they borrow a lot of money (just like Greece... just like Italy... just like the U.S... wait, what?), but they also made risky investments abroad. That last bit is the proverbial "kicker." On one hand, the U.S., for example, borrows a great deal, but that money gets invested back in the economy. Ireland took a lot of that money, sent it out, and put it in "bets," so to speak. Sound like any sort of financial firm to you? And wouldn't you know it, Paul Krugman's article was called, "Hedge Fund Ireland." Now you learned something about hedge funds, too.

And now, the Irish people are taking the brunt of austerity measures (whatever the hell THAT means these days) because their government had an identity crisis and thought it could be a highly leveraged investment firm. Whoops... I'd be mad if I was you, laddie...

Mazi's Link O' the Day

Brand loyalty and how it relates to your iPhone:

http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-brand-loyalty-in-mobile-phones?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+economics_news+%28tutor2u+Economics+Blog%29#When:09:33:20Z

Tuesday, November 22, 2011

Mazi's Link O' the Day

Professor George Schiller believes a new branch of economics is on the rise: neuroeconomics:

http://www.project-syndicate.org/commentary/shiller80/English

Monday, November 21, 2011

Sunday, November 20, 2011

Bridge the Gap



Well, the Keystone XL pipeline was delayed, to much applause from environmentalists and local farmers. The supporters of oil tube claim we've just thrown away a hefty number of jobs. Both sides have a point here, and quite frankly, neither is wrong. If you're sane, you can't really argue against environmentalists (I mean their overarching goals, not their means of implementation). And yes, this pipeline would have created jobs, at a juncture when said jobs are quite badly needed.

Let me clarify the point about environmentalists. Perhaps we all don't advocate attacking tune fishing ships in the middle of the Atlantic Ocean, but most of us agree that we should be vigilant about "protecting the Earth" and the climate change is a real issue that needs to be contended with. Just because most of us (sane) people agree with those claims, doesn't mean we're all environmentalists, or, more specifically, that we were all overjoyed at the blocking of this pipeline. So, why not?

This is all about ideology, not science. There's no point in discussing the critics who refute the science, since they probably don't believe in evolution either, and they're idiots. But there is a "time-horizon" difference in ideologies that does create this gap. In a gross generalization, I'll say that the environmentalists among us have a rather far-reaching view of the world. Their concerns lie in "tomorrow and after." What will the natural state of the planet be like in 50 years? This is a good question, and if the answer doesn't look so appealing, then yes, it's time we took measures to better the world. The critics take a much more "here today" viewpoint (another generalization). Mostly, their favorite tune is, "The costs of implementing too many pro-environmentalist changes are too high. We'll be hurting people NOW." (E.g.- No jobs from the pipeline).

I agree with the blocking, in this case. Being of a liberal bend, I'm all for protecting the environment whenever possible. And, from an economic point of view, I don't think sustained job growth comes from one-off projects like the pipeline. I do, however, get surprised when people on both sides of this argument appear to be dumbfounded by the fact that there is any opposition to their viewpoints. This battle over climate change has become so vicious and has involved so much teeth-gnashing, that at this point compromise seems very difficult to foresee.

I understand, critics and supporters, that you are all fervent and devoted, but you must practice tact if you want to make any progress in winning over the other side.Pointing at people who drive SUVs and degrading them does not win you any favors. Back down your dogs of war if you want bridge this ideological gap.

Mazi's Link O' the Day

In defense of the liberal arts:

http://epicureandealmaker.blogspot.com/2011/11/sovereign-triviality.html

Saturday, November 19, 2011

Mazi's Link O' the Day

The threat of a Eurozone break-up is causing people to hold more cash. Cash, as a percentage of M2, is up from 8.9% in 2009 to 9.7% right now:

http://blogs.wsj.com/economics/2011/11/19/number-of-the-week-more-stress-more-physical-euros/?mod=WSJBlog

Friday, November 18, 2011

Wednesday, November 16, 2011

Mazi's Link O' the Day

Middle-class neighborhoods are vanishing as the income distribution in the United States becomes more polarized:

http://www.nytimes.com/2011/11/16/us/middle-class-areas-shrink-as-income-gap-grows-report-finds.html?_r=1&partner=rss&emc=rss

Sunday, November 13, 2011

Bye-Bye Bunga Bunga



There goes Silvio Berlusconi off into the sunset (but might he return? Rumors abound).

Mario Monti will be Italy's new PM, and he will almost certainly appoint Guido Tabellini as the economics minister. Prof. Tabellini is known for his work on constitutions and political economy (notably: politicians do not always act with the best interests of their constituents in mind... Shocking). He was also the president of the European Economic Association. He seems to be the right man for the job, as both Monti and he are conservatively leaning (economically speaking). And, to be frank, conservatism is what Italy needs to show investors right now.

There's also a lot of chatter about the other government posts to be appointed. It is true that Italy's political system, in general, could do with a little tidying up, the debt worries should be at the forefront of Monti's mind. I'm pretty sure they are, since you could argue that the debt crisis is what finally did old Berlusconi in. However, perhaps because he thinks it best to move quickly, Monti is looking to replace a whole host of ministers (justice, cultural, etc..).

I say, leave that till later. Replace the ministers who are key in fixing the economy first. Obviously, it's not gonna get better over night, so I'm not saying wait till all the problems are solved. Just get the damn country away from the edge of the proverbial cliff. The political malpractice that led to this crisis is a REAL problem that needs to be dealt with right away. The rest of the political corruption was created to, frankly, keep Berlusconi from being a felon. Let's give him a few more bunga bunga parties...

Mazi's Link O' the Day

It can be done! We can breach the NY Times comment filter. Go, my children! Attack!

http://krugman.blogs.nytimes.com/2011/11/13/spam-spam-spam-spam-2/

Monday, November 7, 2011

Sunday, November 6, 2011

I Can't Picture This

The Mises Institute now has a Spanish site. For those of you who are unfamiliar with that institute, it is a hyper-conservative (economically speaking) think-tank.

Yes, can you see it now? Some Mexican worker sitting at his computer, while his country is being raped by drug gangs, reading, "Less government is better."

Or maybe somebody in Spain reading about opposition to bailouts...

As for Latin America, well they haven't had the best of luck economically or politically for a while (Brazil excluded)...

Something tells me that libertarianism might take a while to catch on...

Mazi's Link O' the Day

Berlusconi out?

http://www.angrybearblog.com/2011/11/italy-update.html


Thursday, November 3, 2011

Wednesday, November 2, 2011

Tuesday, November 1, 2011

Tale of Two Incentives



In 2010 36.2% of public employees were union members. Whereas private sector, only 6.9% of employees were members of unions (Bureau of Labor Statistics). Numbers like these, and they are part of a trend, beg the question, "Why?" The answer comes both from a theoretical and empirical perspective.

First, let's see why, theoretically, this shouldn't be surprising. Many of you are familiar with a "monopoly." Perfect monopoly exists when there is one firm in some goods market. Therefore, the firm's individual demand curve is the same as the market demand curve. The firm then picks whatever price and quantity on the demand curve satisfies the "marginal revenue = marginal cost" optimization condition. That's all technical and whatnot, but the point is "They have pricing power over their goods." There also exists something called a "monopsony." This is the analog of monopoly in the labor markets. That means, there is one employer who, therefore, has power over the prevailing wage. Naturally, it should be no surprise that, when there is no competition, the employer can pay lower wages and still find people to work there.

In many markets (e.g. public schooling), the government has monopsony power. Having unions to "fight back" and prevent the government from taking away benefits and lowering wages (not that the government would EVER be unfair!!!), takes away some of this monopsony power.

The empirical argument is much more obvious. You're the governor. You would like to be re-elected. And a large part of your constituents are blue-collar, union employees. In what world would you try to raise the retirement age, or lower wages, or cut pensions?

Actually, I'll tell you which world: this one. And you can thank the recession for that. Cash-strapped states are looking to raise finances. Now, we see the titular "two incentives." You're the governor again. You have your blue-collar, union constituents. But this time, you've got a state in dire economic straits. Lower pensions? Infuriate the unions, but become the "recession fighter?"

That questions will be answered as states take up these issues. So keep your eyes open and watch the tug-of-war...

Mazi's Link O' the Day

Altucher talks about the importance of being proactive in business and life:

http://www.jamesaltucher.com/2011/10/the-1-most-effective-habit/

Thursday, October 27, 2011

Mazi's Link O' the Day

Simon Johnson is happy about Thomas Hoenig getting involved with policy making at Capitol Hill. And I trust Simon Johnson:

http://economix.blogs.nytimes.com/2011/10/27/mr-hoenig-goes-to-washington/

Wednesday, October 26, 2011

Mazi's Link O' the Day

James Altucher talks about one of the essential skills of the entrepreneur: connecting:

http://www.jamesaltucher.com/2011/10/the-9-skills-needed-to-become-a-super-connector/

Tuesday, October 25, 2011

Sunday, October 23, 2011

Mazi's Link O' the Day

Apparently, TED thinks something is rotten in the state of, well, The States:

http://epicureandealmaker.blogspot.com/2011/10/youre-doing-it-wrong.html

Saturday, October 22, 2011

Something Is Rotten in the State of England...



Dale Farm. For those of you who have heard, perhaps you have mixed feelings. Mine are very straight-forward.

To recap: Recently police and other authorities evicted a huge number of "travellers," or gypsies, from Dale Farm, and illegal establishment. Protests broke out, as the police brought stun guns, cut power, and destroyed settlements.

Here's the fact: It was an illegal place. The police were "in the right" to evict them.

Here's the truth: You don't do that to people. You don't destroy their homes, even if you can. An old man was hospitalized because the police cut power from his defibrillator. I'm surprised there isn't more outrage.

Stand up for Dale Farm!

http://www.dailymail.co.uk/news/article-2050762/Dale-Farm-eviction-Protesters-torch-caravan-riot-police-wield-axes.html

Mazi's Link O' the Day

Lease out your island!

http://marginalrevolution.com/marginalrevolution/2011/10/charter-city-offer.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29

Friday, October 21, 2011

Mazi's Link O' the Day

James Altucher gives us a different take on the "1%." How about the 1% happiest?

Thursday, October 20, 2011

Wednesday, October 19, 2011

Mazi's Link O' the Day

Macroeconomic Advisers says GDP rose 0.4% in August. September numbers aren't out yet, but other indicators suggest that things won't be awful. Hopefully, we're inching away from another recession:

http://www.capitalspectator.com/archives/2011/10/macroeconomic_a.html

Monday, October 17, 2011

Mazi's Link O' the Day

What's the link between between raising the minimum wage and the % of workers being paid that wage?

http://fatasmihov.blogspot.com/2011/10/minimum-wage-and-unemployment.html

Sunday, October 16, 2011

EconStu on the Ground




These are some images from the Occupy London protests (one of the sister movements to Occupy Wall Street). As any good source of information ought to, EconStu trekked through this grey, English city to St. Paul's cathedral, where the show was under way.

I wrote a post on the movement earlier, and now, having seen it in person, I would like to reiterate a couple of points.

Firstly, I still don't think many of these people know what they're protesting against. If you have problems with government bailouts for banks, why aren't you at Parliament or Congress? There was also, of course, some of the "usual suspects:" People looking for a cause, without even having a stake in it.

Secondly, I would like to say, I still think this is the BEGINNINGS of a good movement. Currently, it's kind of directionless. However, so was the Tea Party. I think once this circus gets a ring-master we might end up with the counter-weight to that Tea Party, and that's something we need.

The protesters have organized themselves into working groups, such as toilets, entertainment, donations, etc... A lot of time was spent with speakers from each of the groups tackling administrative business. And for the most part, they're actually quite organized. Invisible hand anyone?


Thanks to Peter Honey for the photos.

Mazi's Link O' the Day

James Altucher answers your questions:

http://www.jamesaltucher.com/2011/10/ask-james-what-is-success-how-to-get-rich-online-dating-meditation-ows-and-more/

Saturday, October 15, 2011

Friday, October 14, 2011

Thursday, October 13, 2011

Mazi's Link O' the Day

One of my new favorite bloggers: James Altucher. He's funny. He's worked in finance. He's worked in technology. He's written books. He's got good advice. Here, he talks about honesty, and what will happen to you when you become honest:

http://www.jamesaltucher.com/2011/10/7-things-happen-to-you-when-you-are-completely-honest/

Monday, October 10, 2011

Mazi's Link O' the Day

While China's storied economic growth continues, many households are afraid to transform China into the massive consumer economy it could be:

http://www.nytimes.com/2011/10/10/business/global/households-pay-a-price-for-chinas-growth.html?pagewanted=3&_r=1&partner=rss&emc=rss

Sunday, October 9, 2011

Occupy Your Mind

I suppose the time has come for this blog to address the ubiquitous news story of the past month: Occupy Wall Street. Although, I will grant myself some slack and say that I have relented from discussing this issue for fear of making hasty judgments before the curtain has come down, so to speak. I have broken my fast simply because this play seems like it's going to last longer than I initially anticipated.

The first notion that needs to be dispelled with is the idea that this protest, like so many other protests, has clearly defined political sides. We would like to be able to examine our own political leanings, and then, given that information, figure out which side of the street we're on. I am liberal, and I hope that usually shines through on this Internet monologue that I address to you, Reader. Having said that, I am not prepared to unconditionally carry the flag of Occupy Wall Street.

I like my protesters to have a firm grasp of the issues at hand, and while I do not doubt that some in this movement do, the de facto slogan of "Fight the Evil Banks," always gathers forth a veritable storm of idiots. From what I have read and heard, there is a slew of people out there who are looking to get Barak Obama reelected and have decided that this campaign will assist his own. Let's just start by saying that Goldman Sachs is one of the president's largest contributors. So, we put that notion to rest. This is not the Dems vs. the Reps. However, it is a political issue.

The banks, I would imagine, do not give a rat's ass about the crowd outside the window. And if you're one of the fighters who can form cogent thoughts about finance and economics, then you probably there because you don't feel like justice has been delivered to the culprits of past and present economics woes. I'll agree with that point. Someone(s) should be in jail, although I doubt anyone will. I'm no corporate lawyer, but I'm unsure that any laws were actually broken. And I don't know how flexible the charge for fraud is. But if you can't jail them, you might as well carry signs around their offices.

Except that's not right. Keep your signs and head a bit further south. Head to Washington D.C. The people who get money from Obama and Co. are not hanging around Grand Central Terminal or Park Avenue. They work in lobbying firms that don't have famous names. Now, that money does get to the banks, somehow. But it's the political system that gets the rabbit into the hat. Your local senator is not going to put forth a bill to let Bank X fail, if the lobbying group that supports Bank X just paid for his vacation to Bermuda.

Get to Washington and say, "This is a bullshit cycle." Alright, I like my money to be safe, and I'm not prepared to see some enormous financial institution go down in flames, so yeah, bail-out our Too Big To Fail firms. Instead of focusing on the "Big" part of that phrase, which people tend to do, let's focus on "Fail." It's not so easy to say, "Just don't fail." Ask your local senator to put some bills forward that will tighten the leash on the dog. He may not be free to run around as much, but at least he doesn't have enough slack to stumble into the street and get run over. The fact that your senator enjoys his tropical vacation is going to complicate the issue, but I never said it'd be easy. Now, if you're down for that plan, give me a call, I've got some good signs to make...

Mazi's Link O' the Day

I've mentioned the Great Stagnation before (specifically why we may not be in it). Here's a back and forth debate on the same question:

http://marginalrevolution.com/marginalrevolution/2011/10/more-russ-roberts-on-tgs.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29

Friday, October 7, 2011

ATTENTION!

Friends, relations, enemies, gargoyles... We want you (that's right) to write for the world un-renowned, EconStu, the best economics/current events blog named EconStu. Say you'll do it baby! We need ya!

Anyway, seriously, do it. This is a good time all around. Email me at mazikazemi@gmail.com if you're interested.

Peace out homeskillets

Wednesday, October 5, 2011

Mazi's Link O' the Day

The Occupy Wall St. movement suggests a "Tobin tax." That may not be such a bad idea:

http://crookedtimber.org/2011/10/04/time-for-a-tobin-tax/

Sunday, October 2, 2011

Friday, September 30, 2011

EconStu Abroad

Friends, relations, coworkers, and enemies, I apologize for our absence here at the Stu. However, your humble blogger has been in the throes of moving from one country to another. EconStu is back, and we're in London. So, keep your eyes on your screens and your minds ready to absorb some delicious tid-bits on news, economics, and life.

Cheers!

Monday, September 26, 2011

Mazi's Link O' the Day

In light of the recent articles about Morgan Stanley's co-heads, TED discusses the inherent clashes between corporate finance and capital markets at banks:

http://epicureandealmaker.blogspot.com/2011/09/victim-of-soycumstance.html

Thursday, September 22, 2011

Wednesday, September 21, 2011

Tuesday, September 20, 2011

Mazi's Link O' the Day

Some more economic round-ups: Milton Friedman and QE, Glenn from Columbia doesn't like the jobs plan and short-term stimulus , and more thoughts on inflation:

http://blogs.wsj.com/economics/2011/09/20/secondary-sources-friedman-on-qe-short-term-stimulus-inflation-fears/?mod=WSJBlog

Monday, September 19, 2011

Sunday, September 18, 2011

You Need New Medicine

For every new, innovative health care plan that's offered, we still seem to faced with the same choice. Disguised in many different forms, the question continually remains: "Do you want more choice?" If you answered "yes," then open up your wallet and pay more.

What's important about this question, and why it always reappears, is that it is the easiest cost control measure for private sector healthcare. In this private market, we have insurance, HMOs, and all these other proposals for healthcare plans competing. For the most part, they offer identical services. While there are differences between hospitals, primary care physicians (PCPs), and specialists, it's not like comparing Yugos and Ferraris. So, the pricing mechanism in the market does not become quality of care. Certainly, there isn't really any monopoly power: this market is probably monopolistically competitive. Anyway, point being, different providers have to differentiate. Thus, our market comes from choice. That's why every plan doesn't cost the same, obviously. And that's the difference between offering identical widgets and, essentially, identical healthcare. I can't sell you a widget for a higher price than my competitor's widget. Why would you buy it? However, I can say, "My plan is more expensive, but you can go to many more hospitals and specialists without paying extra on your co-pay."

The point I'm driving to is, "Clearly, HMOs are losing popularity. Isn't it time to change the medicine?" This  article offers some good data to that point:

http://thinkprogress.org/yglesias/2011/09/18/321861/reinventing-the-hmo/

Perhaps, it's a good time to reassess why having a public healthcare plan is a nice idea. Standard health insurance doesn't impose as strict a set of rules as HMOs do. When it comes to their doctors, apparently people are willing to pay up for more options. Right or wrong, people are "angry" that they have to choose between choice and cost. But that's what you get with a private market. I realize this is a massive issue in the world today, with many different viewpoints and arguments. This is merely one more in favor of a blanket, government plan, eliminating this market that people don't really like anyway.

Mazi's Link O' the Day

Not all small-businesses want to become large? Shocking:

http://econlog.econlib.org/archives/2011/09/this_should_not.html

Friday, September 16, 2011

Thursday, September 15, 2011

Mazi's Link O' the Day

Falling prices are GOOD. Think I'm crazy? Well, if you're in dire economic times, as a consumer, at least you want your unemployment/lower wages to be offset by cheaper stuff:

http://blog.mises.org/18432/bring-back-falling-prices/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MisesBlog+%28Mises+Economics+Blog%29

Tuesday, September 13, 2011

Mazi's Link O' the Day

Even people on TV need to retake their intro economics classes. For you budding EconStu readers, these mistakes should be easy to see:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/09/economists-still-have-work-to-do-ontario-edition.html

Monday, September 12, 2011

Sunday, September 11, 2011

Saturday, September 10, 2011

Jobs... The Final Frontier





The word on everybody's lips has been, and should continue to be, jobs. That were certainly the word on President Barack Obama's lips on Thursday when he outlined his $450b stimulus package. Naturally, the pundits are running their mouths, and the back-and-forth has begun. So, what's the take-away?

Let's start from the most basic question: Do we need anything at all? Yes, stupid question. Why did you ask it? The Fed is out of gas. We're in a liquidity trap because no one wants to borrow. No one wants to borrow cause no one wants to invest. Why would you increase investment, if you're a business, if no one wants to buy your crap in the first place? This is a financial crisis (did he just say crisis??!) of demand. Hence, time for some stimulus to get people off their couches and into their shopping malls.

The most talked about part of this bill has been the increased emphasis on infrastructure spending, from $32b to $140b. This will create some blue-collar jobs as well as add the obvious benefits of improved infrastructure to the economy, a good bet by all accounts. What about the rest though? Lots of tax credits, which I'm not to crazy about, especially because they're targeted at business. As aforementioned, business is sitting on its hands waiting for consumers to show some life.

The extension in jobless benefits I reluctantly accept. Even as a liberal, it's hard to argue with the incentives issue here. People can just continue to rely on their government checks, so why look for a job? But ending up with a whole bunch of people with no income is worse, so we'll take that point.

Pumping demand is the golden egg here. The home buyer tax credit worked before. Construction companies were doing better than the general economy during that period. The government should be looking to invest in certain industries and new companies in places like green energy and tech firms (except Solyndra... Shhhh.). It's a tough question: How to make jobs? If I had the answer, I wouldn't be a student blogger.

I'll tell you what I see, though. As I said, it's a demand side problem. Consumers will not spend until they have the money and feel decent about their finances. They will not feel good about said finances until they feel secure with the direction of employment. The direction of employment will not improve until businesses see the economy improve (read: people start spending). And around and around we go... I get headaches thinking about this shit... But I promise I'll think some more and get back to you whenever I find a solution (never).

Mazi's Link O' the Day

In memory of 9/11:

http://epicureandealmaker.blogspot.com/2011/09/grave-in-clouds.html

Friday, September 9, 2011

Mazi's Link O' the Day

Railroad company activity is a good indicator of economic health. The CEO of one prominent company does NOT see a double-dip headed our way:

http://blogs.wsj.com/economics/2011/09/09/union-pacific-ceo-doesnt-see-double-dip-recession/?mod=WSJBlog

Thursday, September 8, 2011

Tuesday, September 6, 2011

Monday, September 5, 2011

The Economics of Love


A while ago, I wrote a post called "Low Expectations..." which was about the economics of disappointment. I suppose it's time to cheer up the scene with something different. I made the point in that article that disappointment is a waste of time. It does not motivate any sort of action, or change, and does not make your psyche feel better or worse. The opposite could be said for love. Which may seem strange. At least, to me, love and anger, or love and sadness, seem like they should be opposites. But there is a lot of similarity across them. Mainly, something is GAINED from all three. Whether that be knowledge about who you are (what makes you happy, sad, etc..), or whether it be knowledge on how deal with others (someone makes you furious...). Disappointment does none of this. But love is more powerful than anger or sadness, because both of those feelings can be captured there.

 I have had 2 experiences this year that truly made me appreciate this emotion. (No details... Sorry gossip-queens). And in the words of Joni Mitchell, "You don't know what you got till it's gone." Alright, edit that: ALMOST gone. It was only when faced with the prospect of losing what was there, that I found myself acting and performing feats that I never thought I would. The ACTIONS love springs can be so sudden and powerful, you don't realize what you did or said till later, and sometimes you don't do the best things. But you always DO something. You might say love is the perfect incentive. And another economics oddity is shown here. People are given more sadness by losing something than they are given happiness by gaining it. I don't know if Ms. Mitchell knew that when she wrote that lyric, but I think she got it pretty good.

 It seems wrong that such a wonderful thing as love should lead to pain, as it often does. But pain, even emotional, passes. The human body and mind are engineered to sustain a lot of brute force, you know. Love, so long as you don't purposefully kill it, is always there. The sadness from love and losing, I believe, comes from making incorrect associations. Let's say you lose someone dear to you or you will no longer be able to "do the things you once did," as people say. Our first reaction is, "Oh, I can't have any more hamburger's with Larry! My love is gone." But did you love eating hamburgers with Larry? Sure, you enjoyed it. However, that memory or event wouldn't be as memorable or important if you didn't ALREADY love Larry. It has nothing to do with WHAT you did together. Take any of those memories with someone you love, that you BELIEVE are WHY you loved a person. Replace your loved one with someone else, even someone you find attractive, or funny, or admirable. While the events don't become un-enjoyable, do you suddenly love this new person? NO. There is no equation to love. It's intangible and can't be created willfully.

 So let's put it in econ terms? Love requires no inputs. It was no costs, since sadness and anger can actually be positive things to feel. It is in infinite supply, too. You can't over-use it. In fact, the more love you feel, the more it builds. And it will give the ability to motivate yourself to do great things. Love is the world's greatest resource.

 Loving is more important than being loved. If you do love, be thankful, even if it hurts you sometimes. Even if it makes you feel vulnerable or "weak" or embarrassed. You have something that not many do. You have the ability to tap into this incredible resource and do amazing things that require more than just hard work and skills. But now look at me. I'm turning love into a thing to be analyzed and used. I stand by all that I just wrote, but please, the more important point awaits. And this point doesn't take as long to explain.

 If you love someone, make sure he or she knows it, even if it's awkward. Make sure that person knows you're never really gone, even when it seems like you are. Make sure you don't try and forget and that you always miss him or her, even just a tiny bit. Make sure the love you felt and feel makes you a better person than before, even when it's difficult. Never shy away from your feelings and hide your passion. You will always regret your actions with the ones who never knew. And what if you don't get these things back? Well, friend, smile, be brave, be good, and never give up on love.

Mazi's Link O' the Day

Bad times for unions: http://economistsview.typepad.com/economistsview/2011/09/unions-continue-to-take-a-beating-in-post-recession-climate.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FKupd+%28Economist%27s+View+%28typepad%2FKupd%29%29

Thursday, September 1, 2011

Mazi's Link O' the Day

Limericks involving the ten principles that every economics student should have seen a thousand times: http://gregmankiw.blogspot.com/2011/09/ten-principles-of-economics-in.html

Wednesday, August 31, 2011

Mazi's Link O' the Day

TED explains why have strict sexual "rules" in society actually helps women, more than the sometimes proposed "liberally erotic" lifestyle:

http://epicureandealmaker.blogspot.com/2011/08/too-funky-for-me.html

Tuesday, August 30, 2011

Mazi's Link O' the Day

An analysis of two opposing schools of thought: The first claims the world is naturally in a state of conflict and strife, the other assumes that society is bettered without these internal conflicts:

http://mises.org/daily/5502/The-Profound-Significance-of-Social-Harmony

Monday, August 29, 2011

Efficiency in Movement

That very small group of EconStu devotees might have noticed that said blog has been silent for the past few days. It was so because your humble blogger was in the process of moving. Not merely the verb, by definition, but I, along with my mother and father, put all of my belongings into boxes, left my keys behind, and took someone else's keep as my own. Yes, we "moved."

From the packing of the first boxes to the final unpacking, I'd estimate the process will take around 2 and a half weeks. In the grand scheme of life, that's not a long time, however I can't help but feel that things could be done more efficiently. Of course, it could be done A LOT more quickly if we had some absurd technological advancements (teleportation, anyone?), but barring that, here's my proposal:

First, a professional of some sort takes multiple photographs of each room in your house, making sure to capture all the "objects" that need to be transported. Those images are uploaded to a computer, and the objects are marked. The computer, using the angles in the pictures, gives the dimensions of the objects. Next it runs an algorithm to determine the quickest, most efficient use of box and truck space for everything. That way, instead of haphazardly throwing shit into boxes, you know, "Things A, B, C, and D go in this box, etc..."

I'm just not sure if this is cost efficient. How expensive is a computer program like that?

Mazi's Link O' the Day

Home sales still look weak, and the Pending Home Sales Index is down, suggesting things won't be picking up. Lesson: It takes a LONG time to recover from real estate crashes, and, unfortunately, real estate is mighty important to the economy:

http://www.calculatedriskblog.com/2011/08/pending-home-sales-decreased-in-july.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Wednesday, August 24, 2011

Mazi's Link O' the Day

A theory on why unemployment is still high: Capital is siphoned away from productive, private-sector jobs to "welfare and warfare":

http://mises.org/daily/5558/American-Workers-Deserve-Better-Than-This

Tuesday, August 23, 2011

Mazi's Link O' the Day

If you're gonna bail-out the banks because they're too big too fail, why not bail-out homeowners?

http://www.multiplier-effect.org/?p=1459

Monday, August 22, 2011

Michele Bachmann, Stop Speaking

Some of you might have heard Michele Bachmann's pledge to bring gas prices down to their 2008 levels. That, for those of you who have forgotten, was somewhere around $2.00 a gallon. She says we're a "can-do" nation. Well, the problem with that logic is, you cannot just make prices be something.

So, as the rest of the world, particularly China and India, demands more oil, what do you think happens to the price of oil and gas? If you said, "Goes up," then you're not Michele Bachmann. Perhaps she's going to ask those nations' leaders to "make demand fall?" I have a solution. If you want to lower prices, just set a price ceiling at $2.00. Here's what will happen: The price of gas WILL NOT exceed $2.00 a gallon, and there will be an ENORMOUS shortage of gas, as suppliers will provide much less than what is demanded. Because who wouldn't rather have cheap, unavailable gas than market-priced gas?

The real sad thing is that she is a serious political contender. Somehow in this system, you can say something so asinine, something that displays your ignorance of key matters so profoundly, and STILL be viable. Sure, a few angry bloggers and some newspapers will ridicule her, but the beat goes on...

Mazi's Link O' the Day

Here's where you stand on the totem poll of life:

http://epicureandealmaker.blogspot.com/2011/08/devils-book-of-aphorisms-part-1.html

Saturday, August 20, 2011

Mazi's Link O' the Day

Does economics makes us envious, particularly the "distribution" of income?

http://econlog.econlib.org/archives/2011/08/how_i_fought_en_2.html

Wednesday, August 17, 2011

Mazi's Link O' the Day

I'm just so nice to Austrian economists and their websites these days. But it's for an academic cause, so it's okay. Here's a resource for you would be Austrians:

http://www.coordinationproblem.org/2011/08/ben-powell-has-a-new-website.html

Monday, August 15, 2011

Sunday, August 14, 2011

Mazi's Link O' the Day

Cool numbers... The thing we see: Lotsa unions and lotsa money to Democrats:

http://econlog.econlib.org/archives/2011/08/the_top_politic.html

Saturday, August 13, 2011

Is the World Ending?

A maddening week in the world economy has come to a close, and we stand at levels that are not so distant from what they were at the beginning of this week. Of course, ignoring how we got here is simply ignorant and misses some large points. Money market funds, funds of short-term government securities that offer virtually no return or yield, saw inflows of around $50bn this week. This is one week after those some funds posted enormous outflows. Money markets are considered to be very risk-less investments, hence their low yields. So are we seeing pessimism about the world economy from all this risk aversion?
While all this money flows to these funds, equity markets finished the week rallying. Looking at the starting and ending points of the major indexes that week, one might be tempted to say it was relatively low-key. That person would also have to have lived under a rock, because anyone paying attention would have noticed the crazed volatility of the market. As the Financial Times reports, “… the Dow Jones Industrial Average recording for the first time seven straight sessions that alternated between ending the day higher one day and lower the next.”
For those who like to judge the state of the economy by looking at markets, it will be very difficult to come to anything resembling a consensus this week. But let’s act like bigger picture people for a second and look at what’s actually going on. The Fed announced on Tuesday that rates were going to stay down for a good while more (till 2013) and left open the door for more maneuvering. Alright, so no surprises there. It seems that most investors have not lost their minds over the S&P downgrade. People recognize that the move is more a comment on the U.S.’s political situation than it is on our credibility, financially speaking. What’s cracking in Europe? Well, the ECB pulled the good old-fashioned “Buy the stragglers’ bonds” technique to stave off a bit of fear over Italy and Spain. At the same time, some European regulators introduced short-selling bans again. The latter is a somewhat trite move, and while I respect the goal of trying to stop a downward spiral, if certain companies are overpriced, then their share prices should fall. Yes, it's painful, but as the saying goes, "It's not nice to fool Mother Nature." Interfering in the stock market obfuscates investors' views of where prices REALLY should be. But that's a side point. The big picture is somewhat counterintuitive to what I stated at the beginning of this piece. Yes, ignoring the ups and downs of the week is silly, but the world looks very much the same as it did seven days ago. The day to day fluctuations of financial markets are NOT good indicators of the macroeconomic health of an economy. Remember, in economics, when we say “short-run,” we still mean longer than 24 hours.

Mazi's Link O' the Day

STILL no sign of a return to Twitter for TED:

http://epicureandealmaker.blogspot.com/2011/08/tie-me-to-mast-lads.html

Friday, August 12, 2011

Thursday, August 11, 2011

Mazi's Link O' the Day

Is it unfair to subsidize/give checks to certain taxpayers, namely those who couldn't refinance out of their crappy mortgages?

http://blogs.wsj.com/economics/2011/08/11/guest-contribution-pushing-back-on-idea-of-refi-stimulus/?mod=WSJBlog

Wednesday, August 10, 2011

Mazi's Link O' the Day

The Bank of England expresses similar feelings towards to the U.K. economy as the Fed did to the U.S.'s. Some economists weigh in:

http://blogs.wsj.com/economics/2011/08/10/economists-react-boe-turns-more-dovish/?mod=WSJBlog

Monday, August 8, 2011

Low Expectations...

Disappointment. A feeling deep in our stomachs that we have all felt. The numbness that is wrought does not sting like anger or sadness. It merely wallows and persists. We do not feel this way because we failed. We feel this way because the results we see in life are incompatible with the ones we imagined. They’re usually not bad, but they’re not as good as they could be. Or the feeling of success in an endeavor brings is not the feeling we expected. Disappointment does not make one stand up and take action. It does not encourage us to change. It is a lulling emotion that roots us to our chairs. But this being an economics blog, after all, it is worth adding that disappointment is simply inefficient.

In your life and in mine, many, many, many things will not work out. We will try to accomplish many tasks. We will fail at some and be mad. We will succeed at some others and be glad. Yet, more often than both those occurrences, we will finish somewhere in between success and failure. Interestingly, people are terrible at recognizing randomness. Even if we lived in a polar universe where there was only absolute success or failure, our perceptions of randomness would probably lead us to further disappointment. How do I mean? Well, if you asked someone to give you a completely random series endeavors with different outcomes, you’d likely be given a list which alternates between success and failure. Of course, just like flipping a coin won’t give you heads every other flip exactly, neither will pursuing goals in life give you achievement every other try. Add this on to the fact that success is simply harder than failure, obviously, and you’ve got a stew of disappointment.

So what’s so “wrong” with it? Being mad is natural, as is being sad. The real point comes from the beginning of this piece. Disappointment does not stir to action. We don’t need to make a fundamental change to overcome it, which is why we rarely change anything at all. Disappointment, in the end, arises from setting our expectations too high. This is why disappointment can be so easily avoided, especially compared to the inevitability of anger, happiness, and sadness. Reality is not as glossy and wonderful as you’d expect. But don’t despair. If you recognize that truth, you might be a whole lot happier person. Low expectations are the key to happiness.

Mazi's Link O' the Day

TED takes a swing at pretentious undergraduates (**cough Ivy League cough**):

http://epicureandealmaker.blogspot.com/2011/08/school-for-scandal.html

Friday, August 5, 2011

Mazi's Link O' the Day

The price of electriciy reached rcords in some places across the country. Supply and demand:

http://www.env-econ.net/2011/08/daily-demand-and-supply-an-easy-example.html

Wednesday, August 3, 2011

Mazi's Link O' the Day

TED's right you know. I even posted the previous article a while ago, but the point is this: as wrong as it might seem, good bankers/lawyers are the only ones who can make good regulators:

http://epicureandealmaker.blogspot.com/2011/08/i-think-ive-said-this-before.html

Tuesday, August 2, 2011

Monday, August 1, 2011

Debt Deal: Armageddon?

In the last paragraph of his opining on the debt deal, Paul Krugman suggests that our system of government is broken. His basic argument is as follows: the Republicans "won" the debt limit standoff by being the more ruthless party and threatening to destroy America, and if these tactics work, our system of governance needs to change. I would agree with him if his premises are correct, however, they are not.

Since the federal debt exploded into the national consciousness a few years ago, one thing has been clear above all. Americans do not want to be like Europeans. We don't want our government to spend and spend and take care of every little detail for every person. We were born a capitalist society, and public opinion stays staunchly to the right of socialism. In 2011, the majority of our nation does not want to be told by the government, "you must buy health insurance", and I believe as a nation we will take that sense of freedom and liberty to our graves. This is one half of America's problem with the exploding national debt: the majority of Americans don't want the government to spend money taking care of everything for us.

The other half of America's problem with the debt is the chafing notion that spending beyond one's means cannot be a good thing. Regardless of economic theory that clearly shows nations can spend in ways households cannot, there is a limit to this difference, and Americans sensed that deficit spending was spiraling out of control. This, along with our inherent distaste towards big government programs (aka taxes), is a big part of the reason why the deficit was such a big deal to Americans, even in the midst of the second-worst recession in our history.

This brings me back to Krugman's point. I believe that Republicans "won" the debt standoff because they represented fundamental American interests. They were elected to Congress to reign in spending, they promised to reign in spending, and now they have done so. Krugman can whine and scream all he likes, but economic oracles be damned, Americans wanted to cut spending. Which is why I say: he is right that this is bad for the American economy in the short run. Yes, his theory that this won't help much in the long run may even be correct as well. However, he is incorrect when he claims our system of governance isn't working. We are Americans, and we don't want the government to spend and spend and spend until we all live in the Elysian fields. We want to do it ourselves.

Mazi's Link O' the Day

TED is missing Twitter already:

http://epicureandealmaker.blogspot.com/2011/07/why-oh-why-didnt-i-take-blue-pill_30.html

Thursday, July 28, 2011

Mazi's Link O' the Day

Many of you follow this blog also follow TED on Twitter. Alas, he has quit the tweeting business:

http://epicureandealmaker.blogspot.com/2011/07/adios-muchachos-companeros.html

Wednesday, July 27, 2011

Mazi's Link O' the Day

Once again, the point is made that the EU has no central fiscal authority. The ECB is their Fed, but who's the Treasury? Well... It's been the ECB, too:

http://blogs.ft.com/economistsforum/2011/07/squaring-ecb-independence-with-fiscal-decentralisation/#axzz1TJVfd9b4

Monday, July 25, 2011

Where You Gonna Go?

8 days. That’s how long is left for these silly politicians to do their jobs and raise the debt ceiling. By the way, the debt ceiling, as a concept, is a completely ridiculous and stupid invention, meant only for political dances like the one we find ourselves in now. Neither side wants to concede its position, and ideology may get the better of common sense. And no matter how many different permutations of the same compromise is offered, until one party makes a radical concession, they’re going to fail.

The most recent proposal put forth by the Republicans calls for the ceiling to be raised in two stages: $1,200bn now and then another vote during the election year. This is classic political behavior, and instead of solving the issue, merely delays it (read my last post on Greece anyone?). Of course, if they were going to discuss the debt ceiling between now and then, maybe progress could be made. But they won’t, because they’ll turn their heads to the election cycle. Both parties have forgotten microeconomic 101: there are two sides to saving, costs and revenue. While the Democrats love to increase revenue with taxes, and the Republicans are looking to cut costs, neither side seems to realize that, numerically, they can get to the same place by doing a bit of each. And anyone who claims they won’t do something simply based on principle, without any quantitative argument, is, quite frankly, a moron.

Regardless, here we are, so what’s the worst that could happen? Well, we could default. Or maybe we could avoid default (which we can), but simply refuse to pay the bills to the FBI or Coast Guard or some other similar entity. I say, between those options, default is better. How do you think life without police would be? It’s unfathomable to most people, and those police officers, let’s not forget, are without paychecks now. So, we must ask, what will default trigger? The end of U.S. economic dominance? Riots? I do not believe the fall-out would be as dire as some people would have you believe. Are investor’s going to stuff money in their mattresses? If we do default and begin restructuring, there will still be ample supply of inflows and purchases of Treasuries. With everything else going on in Europe, the dollar is still the world’s main safe haven.

I’m going to turn around and offer a contradiction to myself, right now. The markets may be hinting at where investors would go, if default occurred. The Swiss franc and Japanese yen climbed 1.7% and 0.3% against the dollar today, respectively. Naturally, with the Greece crisis and all, the euro has its own problems. Gold also gained 0.9% today, and would also likely see more gains if the country defaulted. So, while I said investor confidence would not be lost in the U.S., it seems it certainly could be rattled.

Of course, things are not helped when that ever-so-nasty self-fulfilling prophesy lurks around the corner. What am I talking about? The IMF recently gave its opinion on our debt situation, and, in so many words, painted a picture of something of a doomsday scenario. And while it is difficult to bridge the line between sound research and policy making, perhaps the economists at the institution might have remembered that their words can inspire investors to actions. And in this case, those actions would probably make the economists’ nightmares come true. What could have been a little shifting of bond holders in their seats and a polite cough or two from irritated investors, could now turn into a screaming crowd running out of the theater…