Sunday, July 31, 2011

Mazi's Link O' the Day

Debt crisis... SOLVED:

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:

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:

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…

Mazi's Link O' the Day

Number 2 on this list also has a blog that I use to get a conservative take on things, sometimes:

Sunday, July 24, 2011

Friday, July 22, 2011

Mazi's Link O' the Day

Is the European bailout package enough, and how hard is the zone willing to fight to stay together?:

Tuesday, July 19, 2011

Mazi's Link O' the Day

What's in store for Italy? Are they the next default, and is time running out to get the house in order?:

Monday, July 18, 2011

Mazi's Link O' the Day

One of the key metrics of an economy: automobile production. There was a noticable slump last quarter due to the crisis in Japan, and hopefully the future is brighter:

Sunday, July 17, 2011

Saturday, July 16, 2011

Who's Laughing?

There is a man named Yoram Bauman. He has a Phd in economics and, I believe, is a professor of the subject. He is also a stand-up comedian. Not only that, but the two aren't mutually exclusive. His humor is based entirely around economics, politics, and current events. But more importantly, his humor is based in a certain requisite intelligence. Now, I'm not going to delve into the debate and discussion about the relationship between humor and intelligence, but I will say that, an economist, or more appropriately, an academic economist is perhaps more able and inclined to be funny than another professional. Let me explain.

The academic circle has much different requirements than your traditional career. In fact, as a student, I can already sense this difference, especially now that I am also gainfully employed. At school, as long as you get the work done and you are able to display your intelligence, you're golden. At work, half of the show is your appearance, your interactions with people, and your ability to navigate "office politics." As many have experienced, a stray joke or off-hand comment can derail many professional accomplishments. On the other hand, we all probably have met the consummate "awkward academic" whose social skills may be a bit clumsy or might not come across as the friendliest individual. Yet, he still has a job, and barring extreme cases, no school would turn down a well-published or famous teacher over a couple social faux-pas.

Narrowing down my point, most true "economists" are professors. And the economics profession itself requires a good understanding of the current goings-on in the world. Hence, many of the economists I've met are rather funny people, and many of your standard career types are a little on the, shall we say, bland side. Of course, these are just generalizations. Perhaps it would be more apt to say that even if those professionals are funny, they can't really show it. So, don't judge, but if you like telling jokes, don't leave school...

Mazi's Link O' the Day

A good segue from yesterday's link. Be humble:

Friday, July 15, 2011

Mazi's Link O' the Day

In the words of Earnest Hemingway, "If you talk about it, you lose it.":

Wednesday, July 13, 2011

Mazi's Link O' the Day

A few separate stories: A plan for Greece, the Fed tripping over its own shoelaces, and the higher taxes to come:

Tuesday, July 12, 2011

Luke's Link

Coming a day after Krugman extolls the virtues of Keynesian economics, I can't help but think this is a jab. However, I think Brooks hits the nail on the head. Polarization forces our political parties to adopt absurd, black-and-white stances, but what we really need is compromise.

Mazi's Link O' the Day

High-frequency trading and its effect on stock market returns over time, with a little blip at the end about why HFT can increase systemic risk:

Monday, July 11, 2011

Mazi's Link O' the Day

Tim Harford claims that disaffected young physicists are flocking to finance and that is a brain drain. TED explains that there are plenty of young scientists to replace them, and that we need not worry about the one or two true geniuses in the bunch being missed or forgotten:

Saturday, July 9, 2011

Mazi's Link O' the Day

There's a period known as the Innovation Stagnation (early 70s onward). This post shows how, using patent data, this stagnation may not actually exist:

Friday, July 8, 2011

Get Money to the Greek

The International Monetary Fund just approved the 5th tranche of it's bailout package for Greece. The total bill comes out to 110 billion Euros and a whole boatload of new rules for the embattled country. Most of these are the standard "austerity measures" that everyone seems to be chattering about. But really, aside from creditor sentiment, the immediate employment of such measures has no bearing on Greece's current fiasco. In plain English, they need money. They need to pay off creditors and assure the world that they're solvent. Their previously loose policies and, let's be frank here, lying about their budget situation only served to exacerbate the amount of debt and to keep that hidden for longer. Now that the proverbial cat is out of the bag, it might seem prudent to raise the sort of money the IMF has and to hand it over to the Greeks. Unfortunately, it's not enough.

I don't mean they need more money. I mean it's too late. In 2010, Greek debt was over 140% of GDP. That's a big number on an absolute and relative scale. Let's put it this way, they're selling airports. You really need money if you're selling airports. Here's where the austerity measures kinda matter. If Greece was a magical country that could instantaneously and seamlessly implement these policies, then the bailout would work. However, this is not the case (obviously). The bailout will reduce the debt, no doubt, but unfortunately some old policies will remain in place for a little bit, and the debt will not continue to decrease at a fast enough rate to prevent default. The graph below illustrates this point.

The bailout is fairly easy to understand. It's a lump sum decrease. However, the part that follows might be problematic. As the country eases into new programs, it may have a hard time decreasing debt consistently. If there was to be a Greek default, it would happen then, I believe.

But here's the silver lining: this bailout is good. Why? In short, putting off the inevitable (or almost inevitable), is the correct strategy. A Greek default right now would cause Portugal to default too, and that ever so present "contagion effect" would appear. Of course, this is assuming Portugal is no longer a default possibility when Greece eventually does go under. That assumption may not be so great, but that's a whole other story. And you thought the U.S. had debt troubles?

Mazi's Link O' the Day

A new economics blogger enters the arena for the NY TImes. We'll be watching you, Floyd:

Thursday, July 7, 2011

Mazi's Link O' the Day

The U.S. mint is printing less bills. It's also minting fewer coins. Why? Coinstar and the recovery from the recession:

Tuesday, July 5, 2011

A Link by Luke

A takedown of the Republicans, by a Republican. Possibly the best article I have ever read.

Mazi's Link O' the Day

Why do we love Ikea and our children so much? Surprisingly similar reasons: