Archive for January 2012
It’s All Greek
Greece is adopting severe austerity measures yet is not making enough structural changes to its economy to boost log-run growth to “grow out” of its problems. If Greek growth remains weak, and with Europe in a recession bank on it, Greece must run huge budget surpluses, which are socially impossible, to stabilize its debt-to-GDP ratio.…
Read MoreThe Sound of Music
The Friday File: US album sales rose 3% in ’11, to 458 million; the first rise since ’04. Digital sales are why. They rose 20% (or by 20 million) to 103 million albums while CD sales fell 6% (14 million) to 225 million. The remaining 130 million albums consists of 1.3 billion single-track downloads, which…
Read MoreDelayed Demography
As standards of living in industrializing nations improve, their population soars. Here’s why. As better sanitation, food and healthcare are introduced death rates in industrializing countries rapidly fall. But, birth rates remain stubbornly unchanged as it usually takes at least a generation for them to decline to the new lower “replacement fertility” rate. This process…
Read MoreMoney for Nothing
The Federal Reserve transferred all $76.9 billion of its profit to the Treasury in ’11 down from the record $79.3 billion in ’10. The Fed is profitable because rather than borrowing money, it simply creates what it needs. Thus all interest earned, is profit. The $76.9 billion paid to the Treasury was 3.3% of all…
Read MoreLobbying Pays
There are tons of lobbyists in DC because it pays to lobby. A paper out of the University of Kansas shows that lobbying for The American Jobs Creation Act of ‘04, which reduced taxes to 5.25% from 35% on repatriated profits, had a return on lobbying investment of 22,000%, yes 22,000! Eli Lilly spent $8.5…
Read MoreKeystone Pipeline is Key
Because demand creates supply building the Keystone XL pipeline makes sense. If we don’t build it Canada will build a pipeline to the BC coast and sell its energy to Asia, leaving us increasingly reliant on OPEC. Worse, the oil from Canada will get refined in Asia where their weak emission standards allow more pollutants…
Read MoreWorth More than Diamonds
The Friday File: Psychology moves markets yet economists and others don’t appreciate it. Last month Liz Taylor’s spectacular jewelry collection went to auction and took in $116 million, five times pre-auction estimates. The auction more than doubled the record for a single-owner collection set when Lady Diana’s jewels sold for $50 million. A gown she…
Read MoreNot all Debt is Equal
While being in debt is not so great for a household–because interest payments leave the household and go to a bank, or credit card company, debt can be tolerable for a country. If the debt is largely internally held (Japan), interest payments go from the government to domestic creditor households. The problem is that to…
Read MoreKiller Cars
Heavier cars are safer for their occupants, but more dangerous for all others. The baseline chance of being killed, given that you are in a collision, is one in 500. If you now increase the weight of one of the cars by 1,000 pounds you increase the chances of being killed in a collision by…
Read MoreCrystal Ball Economics
Last year I made predictions; some right others wrong. Unless you know how good my predictions were, valuing them going forward is meaningless. With that in mind, I am pleased to inform you that 24 of my 32 ‘11 predictions were correct; a batting average of .750. My average didn’t include predicting that the sun…
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