Saturday, January 9, 2010

The Creator of Gumby has died...This is TERRIBLE news!!! :(

From WSJ...Art Clokey, the creator of Gumby, has died at the age of 88....Gumby was a show I always looked forward to watching and I STILL to this day remember getting a Gumby for Christmas...Some people should be allowed to live forever....:( See short video below...

To Work in College or Not to Work in College, THAT is the Question...

Nice article in NYTIMES on the opportunity cost of going to college and deciding to work or to not work...Any former students have any advice for my current Seniors??? Thanks!!!

There is a "Playa" in the White House again!!!...

The White House  Budget Director is a "playa"...Who says Nerdy Economists cannot get the babes AND be a babies-daddy...NYTIMES

"Obama's budget guru has secret love child with the heiress he dumped before hooking up with new ABC News fiancée!
White House Budget Director Peter Orszag's ex, Claire Milonas, gave birth to daughter Tatiana Zoe in New York on Nov. 17, sources told the NY Post.
Shockingly, the new baby was born a mere six weeks before Orszag and ABC financial correspondent Bianna Golodryga announced their engagement December 28 on TV and media.
Shipping heiress Orszag, 41, and Milonas, 39, had been a couple for months when she became pregnant last spring.
"Claire told Peter she was pregnant, and he said he'd marry her -- and then something went wrong," a source old The NY Post.
"He made it clear that he wasn't going to marry her, but that he'd help take care of the baby."
Orzag became smitten new love, ABC News doll Golodryga after being seated next to her at White House correspondents dinner.
The divorced Orzszag, then began squiring new love Golodryga to highly visible social and political events while former GF Milonas was in the throes of labor."  Source HERE.

Should You Be Allowed to Sell a Kidney? Should You Be Allowed to Buy a Kidney?

Should you be allowed to SELL a kidney if you wanted to (1) help someone or (2) make some money? In the US the selling of kidneys (or any other body part) is illegal.  Recipients are 100% dependent on donors either upon death or as a donation (you only need one to survive).  An article in today's Wall Street Journal discusses how Iran (YES, Iran!!) has all but eliminated the shortage of kidney's in Iran by allowing the selling of kidneys. The following chart (HT: Carpe Diem) shows the Quantity Demanded and the Quantity Supplied for kidney's in the US...
In 2008 the estimate is a a quantity demanded of kidneys of  83,146  but a quantity supplied of only 16,864. As you can see, the  need for kidneys is increasing but the number of kidneys available each year does not change much.   Using a supply and demand analysis we can graph this relationship....

 At a price of $0 there is a SHORTAGE of 66,282 kidney's in this market.  IF the government set  a regulated price of, say $10,000, would that serve as an incentive for more people to donate a kidney?  You certainly have to assume yes.  In addition to the people who would STILL donate for free (perhaps a family member or someone who does not want money) there would be people selling a kidney, so the SUPPLY of available kidneys would increase relative to the previous level (16,864).  The graph below shows a shift of the supply curve to the right.
At $10,000 there is a market equilibrium at, oh say, a quantity of 60,000 kidneys demanded AND supplied.  There is STILL a shortage of kidneys but it is something less than before (again, how much exactly, I don't know).  It appears this would save lives...Questions to ask yourself...
(1)  Is there a moral question involved in allowing people to sell body organs?
(2) Should we allow people to sell an organ solely to make money?
(3) How would this affect people who cannot afford to pay the market price?

What do you think????
UPDATE:  A commenter suggested that the supply curve would not shift but would become more ELASTIC.  I inserted an alernative supply curve below (in RED) to show this.  I am assuming that the first 60,000 would continue to donate for "free" (not likely!!) and that every kidney greater than that would be supplied at some postive dollar amount until we reach the $10,000 regulated price, indicating there would be some Producer Surplus to be had.

Thursday, January 7, 2010

How much does a Big Mac Cost around the world???

Burgernomics shows the Chinese yuan is still undervalued....

"THE Big Mac index is based on the theory of purchasing-power parity (PPP)—exchange rates should equalise the price of a basket of goods in different countries. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value benchmark. So our light-hearted index shows which countries the foreign-exchange market has blessed with a cheap currency, and which has it burdened with a dear one. The most overvalued currency against the dollar is the Norwegian kroner, which is 96% above its PPP rate. In Oslo you can expect to pay around $7 for a Big Mac. At the other end of the scale is the Chinese yuan, which is undervalued by 49%. The euro comes in at 35% over its PPP rate, a little higher than half a year ago."
The Big Mac, or ANY good from China, is inexpensive in terms of dollars because China maintains a fixed exchange rate relative to the dollar that is LESS than it would be if it were exchanged in a flexible market like most currencies.  The Chinese Centarl Bank actively intervenes in the Foreign Exchange Markets to make sure the Yuan stays within a certain value relative to the dollar.  If they see that the Yuan is appreciating at any given time they  buy dollars and sell Yuan to stay with a trading band (currently approx 6.82 Yuan to the Dollar).  The inertia is for the Yuan to appreciate because, (1) we buy lots of stuff from them and (2) companies want to invest in China and need Yuan to do it.  Basically they keep it WAY undervalued so that their exports, which are a significant part of their economy, are less expensive for foreigners to buy....So, head to Beijing if you want to satisfy your  Big Mac craving...

Chinese Conduct Open Market Operations---Read further to find out which one and its effect...:)

The Chinese Central Bank, Peoples Bank of China (PBOC) recently conducted monetary policy to INCREASE their equilivent of our Federal Funds Rate (the inter-bank lending rate).
In its weekly open-market operation, the central bank sold 60 billion yuan (US$8.8 billion) worth of three-month bills at 1.3684% Thursday, after keeping the yield unchanged at 1.3280% since Aug. 13.
Notice this was the SELLING of SECURITIES (3 Month Bills). This will DECREASE the reserves in the financial system or, more simply, decrease the money supply.  This sends a signal to the banking system that there is less money in circulation and banks should adjust their interest rates accordingly.  In this case, it should lead to increases in interest rates that people/businesses pay/receive for money.

The Money Market Graph we are familiar with from class illustrates the result of this policy on the Nominal Interest Rate(s) in China. (althought this graph is for dollars, ANY currency can be substituted and the result will be the same).

Why would the Chinese RAISE interest rates just as their economy is recovering from "The Great Recession"?
The tightening move, in the form of a higher yield in its weekly bill sale, came less than a day after the People's Bank of China hinted its priorities had shifted toward managing inflation expectations and away from single-mindedly supporting economic growth.

Higher interest rates serve as an incentive for people to borrow less money to buy houses, cars, other consumer goods, and for businesses to borrow less money to buy new capital equipment, replace capital equipment, expand factory production or build new factories.  The goal is to reduce demand for goods and services in order to take pressure off of rising prices (Inflation). 

It is only a matter of time before the US Federal Reserve has to cross this road.  When/if all the money pumped into the economy during the last year or so starts to promote recovery, the Fed will have to absorb some of that currency in order to get ahead of inflation.  If they delay too long then inflation MAY be a problem down the road...Stay tuned for that story to be written.

Adapting to your surroundings...

I remembered this video below after reading about the concept of "Jugaad" on a fellow AP Economics teachers blog. The short version it from Wikipedia is
"Jugaad" is also colloquial Hindi word that can mean an innovative fix,often pejoratively used for solutions that bend rules, or a resource that can be used as such or a person who can solve a vexatious issue. It is used as much for enterprising street mechanics as for political fixers. In essence, though it is a tribute to native genius, and lateral thinking.
Talk about adapting to your surroundings...

ATTN STUDENTS: Advice in looking for a Job...

Students: If you are looking for a job do not go into it blindly.  Here are some easy, common sense things you should do in preparation.  Click HERE for the source of this info.
5 Things You MUST Do Before a Job Interview

On December 27, 2009, In Resume Writing by Melanie Szlucha, By Melanie Szlucha.So you just found out that you have a job interview tomorrow and unfortunately procrastination is a weaknesses you haven’t yet conquered. Here are the down and dirty tips to pull it together at the last minute.

1. Look at the job posting you are applying for, and develop sound bites that address the needs of the employer. Think of examples where you demonstrated the skills that appear in the job posting and develop answers that clearly show an employer that you are the perfect candidate for this position. All sound bites should be 2-3 minutes in length.

2. Use the TODAY acronym to develop additional sound bites of your experiences. TODAY stands for Teamwork, Overcoming Obstacles, Duties of your past positions, Achievements, Your strengths and weaknesses. Remember to clearly describe exactly what you did in each situation. The employer is hiring you, not the other people in your story.

3. Research the company. Search the internet for any recent press releases and check out the company’s website. Know what they do, and develop some idea as to how the position you are hiring for fits within the company.

4. Think of questions to ask an interviewer. Look at the job posting and your research about the company and think of 3-5 questions you can ask during the interview. What are you curious about? Do they manufacture a product you are familiar with, or never even knew existed before you started to research the company? Where does this department fit in the grand scheme of the company? What projects is the department currently working on?

5. Lastly, prepare answers to the following questions: Tell me about yourself, Why did you leave your last position, or why are you looking for a new job, Why should I hire you, and The Salary Question. You know that these questions will be asked in one form or another, so there is no excuse to not have prepared an answer.

And that’s it. Interviewing is just that simple when it’s broken into it’s simplest components. Focus on preparing answers to all of the scenarios above, and you will be ahead of the game. Remember to clearly articulate in each and every sound bite exactly what you did. Practice with a tape recorder to critique yourself, or with a friend to repeat back to you exactly what you did in a situation to make sure you’re preparing correctly.

Sunday, January 3, 2010

The Pet Rock is back...with an updated look...

If you remember "The Pet Rock" you will be pleased to know it is making a re-emergence, with an updated has a USB port now!  And who said the crazy days of unbridled consumerism are dead...

The Federal Govt is Hiring Lobbyists to Lobby the Federal Govt...Huh??...

I am officially confused...GM, which is majority owned by the Federal government is hiring lobbyists (at taxpayer expense??) to lobby the Federal government to get preferential treatment from the Federal government who owns GM who is hiring lobbyists to lobby...??? Get me out of the never-ending loop, please)... If you concentrate money and power in one place "rent seekers" will concentrate their money and power (i.e. lobbying) in that one place to gain access to that money and power.  Wasn't a Constitution written sometime ago to address this problem?? Just askin'...

Source of article HERE
Idea for post from HERE

Pirates cause a housing,no, not the Pirates you are thinking about...

The Pirates of Wall Steet are blamed for the housing crisis and other financial ills, but sometimes it is REAL prirates that cause bubbles.
The hike in real estate prices in the Kenyan capital has prompted a public outcry and a government investigation this month into property owned by foreigners. The investigation follows allegations that millions of dollars in ransom money paid to Somali pirates are being invested in Kenya, Somalia's southern neighbor and East Africa's largest economy.

Even as housing prices have dropped sharply in the United States, prices in Nairobi have seen two- and three-fold increases the last half decade. (link to full story)

(idea from Kids Prefer Cheese)

North Korea---Revolution through Market Activities???

Kim Yong Ill is trying to tamp down on the "informal" economy in North Korea.  Informal economies (we might use the term "black markets") are those that exist outside of offically sanctioned economic activities.  Informal markets are very prevelent in countries that have command and control type policies towards the economy. 
North Korean leader Kim Jong Il moved early this month to wipe out much of the wealth earned in the past decade in his country's private markets....the kind of command that for more than six decades has been obeyed without question in North Korea. But this time, in a highly unusual challenge to Kim's near-absolute authority, the markets and the people who depend on them pushed back...The change is driven by private markets that now feed and employ half the country's 23.5 million people, and appear to have grown too big and too important to be crushed, even by a leader who loathes them. (Italics mine)
We must not forget the power of markets to change the lives of ordinary people who live under repressive regimes or live in places that do not respect and encourage people to do for themselves to make their lives better.
But capitalism seems to have already taken root. U.N. officials estimate that half the calories consumed in North Korea come from food bought in private markets, and that nearly 80 percent of household income derives from buying and selling in the markets,
Cheers to the people of North Korea who defy their dictator and work everyday to evolve a system to take care of their needs and want.

(source article HERE and idea from Carpe Diem)

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