Saturday, December 18, 2010

Getting medical care for peanuts. No, really, getting medical care for peanuts..It is a sign of the times...

This is what happens in the extreme when people and institutions lose faith in the currency.  Zimbabweans have essentially abandoned their currency and are using various commodities for exchange purposes.  Local heathcare providers have established a price list  that gives a commodity-to-US Dollar "exchange rate"...See photo below...

NYTIMES: Zimbabwe Health Care, Paid With Peanuts

""People lined up on the veranda of the American mission hospital here from miles around to barter for doctor visits and medicines, clutching scrawny chickens, squirming goats and buckets of maize. But mostly, they arrived with sacks of peanuts on their heads....""


Which is better for the environment, fake Christmas trees or real ones? The answer may surprise you...

Which is better for the environment, fake Christmas trees or real?  If you are trying to conserve trees, then fake is the way to go. But if you are trying to conserve resources overall and minimize your "carbon footprint", then the choice is not so clear...

NYTIMES:  How Green Is Your Artificial Christmas Tree? You Might Be Surprised

""Kim Jones, who was shopping for a tree at a Target store in Brooklyn this week, was convinced that she was doing the planet a favor by buying a $200 fake balsam fir made in China instead of buying a carbon-sipping pine that had been cut down for one season’s revelry.

“I’m very environmentally conscious,” Ms. Jones said. “I’ll keep it for 10 years, and that’s 10 trees that won’t be cut down.”

But Ms. Jones and the millions of others buying fake trees might not be doing the environment any favors.

In the most definitive study of the perennial real vs. fake question, an environmental consulting firm in Montreal found that an artificial tree would have to be reused for more than 20 years to be greener than buying a fresh-cut tree annually. The calculations included greenhouse gas emissions, use of resources and human health impacts.

“The natural tree is a better option,” said Jean-Sebastien Trudel, founder of the firm, Ellipsos, that released the independent study last year""

“You’re not doing any harm by cutting down a Christmas tree,” said Clint Springer, a botanist and professor of biology at Saint Joseph’s University in Philadelphia. “A lot of people think artificial is better because you’re preserving the life of a tree. But in this case, you’ve got a crop that’s being raised for that purpose.”

We don't have a trade deficit with China anymore!! So why all the protectionist talk?

Well, it has not been entirely eliminated, but is it nearly as bad as it is portrayed? As with many (most?) economic statistics, Gross Domestic Product (GDP) accounting is very imperfect and often misleading measure of a country production of goods and services.  Finished goods are called "outputs" and all the components that go into making the finished good are called "inputs". GDP does not count the market value of inputs because they are not in their "final end-use condition"--they are just on their way into making a final good.  This is not really a problem if all the inputs are produced in the same country they are assembled.  The problem arises when the supply chain becomes globalized and the component parts come from multiple countries. Under traditional GDP measure, the country at the end of the production chain gets full "credit" for the market value of the good, even if they contribute very little to the overall value of the good.  The point of the article below is that this distorts the trade situation with China, which in large part is the final assembly point for lots of high-value inputs produced elsewhere.  The i-Phone is used as an example of how GDP accounting affects the trade balance with China.  The inputs are high-value production and the assembly is low-value.  However, the countries that produced the high value items get no GDP accounting credit for what they produce, ONLY the GDP debit for importing it and consuming it...Perhaps a new measure of GDP is in order to keep up with globalization???

WSJ: Not Really 'Made in China'

Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step—assembling and shipping the phones.

So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.

Wednesday, December 15, 2010

Nice graphic on how some things have changed since the year 2000...

Technology use by the masses has really taken off in 10 years...Quite incredible if you stop to think about it...The price of gas intrigued me.  From 2000 until today (roughly $2.89) the price has increased 95%. Taking into account inflation, $1.48 in 2000 is the equivalent to $1.88 today (inflation calculator HERE).  In other words, if gas prices had simply increased in price along with the prices of everything else, as measured by the Consumer Price Index (CPI), we should be able to buy gas for $1.88 a gallon (a 27% increase).
Source HERE

Marine Corps promotional video for Marines who guard US Embassies---I served at US Embassies in Kingston, Jamaica and Bamako, Mali...

Me--1982. Bamako Mali (2nd from the Right)

Monday, December 13, 2010

News Headlines: "US imposes tariffs on Chinese tires"..."Traffic fatalities increase at an alarming rate"---How are these two stories related?

From WSJ: WTO Backs US in Tire Dispute with China
 The World Trade Organization Monday sided with the U.S. over tariffs the Obama administration imposed last year on Chinese tires, in a high-profile case likely to stoke tensions in coming U.S.-China trade talks.

The WTO dispute-settlement panel ruled in favor of President Barack Obama's decision from September 2009 to levy tariffs of as much as 35% on Chinese tires under a rarely used safeguard provision to protect against import surges, provoking one of the biggest trade spats between the two countries in recent years. In addition to taking the case to the WTO, China retaliated by announcing a series of duties on U.S. chicken, nylon and other exports.

U.S. Trade Representative Ron Kirk called the decision a "major victory" that demonstrates the solid legal underpinnings of U.S. trade remedy laws.

"This outcome demonstrates that the Obama administration is strongly committed to using and defending our trade remedy laws to address harm to our workers and industries," Mr. Kirk said in his statement.""
No "harm to workers and industries" in the protected industries, but what about the harm to consumers who have to pay more for not only Chinese tires, but American tires as well...Oh, wait, you did not think American tire producers would keep their prices the same now that they got the tariff imposed...did you?

The Chinese tires are of the lower end of the market type tires that, in general, lower income people purchase.  So the effect WILL BE (I don't mince words here) delayed purchase/replacement of tires by this group, which in turn means more unsafe tires on the road, which in turn means more traffic accidents, which in turn means more injuries/fatalities "at the margin". 

The lesson here is one of "rent-seeking"---the use of government to confer benefits on the few (the tire industry and their workers/Unions) at the expense of the many (everyone else who buys tires).  The benefits are concentrated while the costs are diffuse. 
Mr Kirk's statement could be worded like this too and not lose its meaning:  
"This outcome demonstrates that the Obama administration is strongly committed to using and defending our trade remedy laws to address impose harm to on our workers consumers and industries their families ," Mr. Kirk said in his statement.""
Is this too harsh? Tell me where I am going wrong...

John Boehner needs a little TLC? I can refer him to my favorite therapist...

John Boehner Couldn't Stop Crying On '60 Minutes'

""Last night 60 Minutes interviewed incoming Speaker John Boehner who got very emotional (we're talking tears and sniffling and a sob or two ) when Lesley Stahl pressed him to talk in school..."
Perhaps he could use some therapy from my favorite psychiatrist...

Sunday, December 12, 2010

Ok, rationality has left the building--to pass a tax bill that increases the deficit, Senate leadership offers incentives to reluctant Senators that will, well, increase the deficit...Will it ever end?

Why, oh, why does it have to be ethanol.  It is the one subsidy that has widespread support from the left and right to get rid of.  If they can't eliminate this one bad policy, I have little faith they can cut any spending on anything significant in the federal budget...Business as usual??

Reid Sweetens Tax Deal With Ethanol, Green Subsidies  

Senate Majority Leader Harry Reid, D-Nev., late Thursday unveiled a new version of the tax cut deal President Obama hammered out with Republicans. The package keeps the basic framework but adds several provisions clearly aimed at winning over wavering Democrats. Chief among them is an expansion of ethanol subsidies. The bill would extend existing tax credits on the additive as well as a tariff on imported ethanol.
What does ethanol have to do with expiring tax cuts? Well, Sen. Tom Harkin, D-Iowa., has slammed the deal but is also eager to preserve ethanol subsidies, a big deal in his corn-producing state.
The bill also extends tax credits for biodiesel and renewable fuels, energy-efficient homes, alternative fuels, manufacture of energy-efficient appliances, and investing in “alternative vehicle refueling property.” The provisions have been endorsed by the clean energy lobby and may help win over reluctant Democrats.
Additional article: Add-ons turn tax cut bill into 'Christmas tree'

For urban lawmakers, there's a continuation of about-to-expire tax breaks that could save commuters who use mass transit about $1,000 a year. Other popular tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances would be extended through the end of 2011 under the new add-ons.
The package also includes an extension of two Gulf Coast tax incentive programs enacted after Hurricane Katrina to spur economic development in Mississippi, Louisiana and Alabama.

I LOVE Millionaires and Billionaires!! And you do too, but don't really know it...

Here is a thought experiment for you...When you wake up in the morning and until you go to sleep at night, keep a diary (or mental note) of ALL the goods/services you touch, feel, smell, hear, see, consume or otherwise employ to help you get through the day. Think about how these things, in a tangible or intangible way, make your life better or at least easier. There are likely many millionaires, and even a billionaire or two (or 10), behind the production or delivery of these goods or services to you. Got your list? How many items did you count--1, 10, 100, 1,000...?

Do you know who any of these people are? Maybe one or two (Bill Gates, Steve Jobs, etc) but in general these millionaires are nameless, faceless people (to us) who got to where they are by producing goods or services  most of us use on a daily basis and improve our lives in a relatively seamless way. Their profit is not at our expense but adds to our surplus! I have no idea who the owner of Jiffy Lube is, but I am glad he is rich and I am glad I don't have to change my oil. I consider that an even exchange!

I think this gets lost in the debate over taxes and tax rates. We are not doing a good enough job in discerning who is rich, but more importantly, how they got that way. Listening to politicians/media one would think only Wall Street bankers, insurance and oil executives are millionaires. If you really think about it, the only rich people vilified publicly are people who profit GREATLY because of bailouts, subsidies, and an other-wise cozy relationship with politicians and bureaucracies. In economics we call these "rent-seekers", private citizens/industries that use political access to profit and limit competition. Let me say this as clearly as possible: I ABHOR rent-seekers! They are worst kind of "millionaires" because they got that way at the expense of the public (that means YOU).

Go back to your personal results from the first paragraph. How many of these goods/services were the result of rent-seekers or businesses/entrepreneurs, who only got "rich" providing you something that enhanced your life without you thinking much about it? It probably did not even cost you that much either (relative to the benefit you received). The rent-seekers good/service probably cost you the most and gave you the least satisfaction.  I am guessing a vast majority of the items came from the "silent majority" of millionaires who risked capital to bring that good or service to the market place.

In a purely non-partisan fashion, ask yourself: "How much more do these people owe society than what they have already given?". Is it not useful to consider this before you lump all rich people together? I am not saying the rich pay nothing in taxes, but should some consideration be taken to assess the benefits they endow on society before we decide how much "we" should take from them? Have they not already proven to be good stewards of societal resources, in general?  Just askin'...What do you think?

Note: I am not a "rich guy" (well, not monetarily anyway). I only recognize the value of the PROPER millionaire/billionaire...We hover in the mid-range of the 28% tax bracket. Hey, I have a productive wife whose skills are valued more in society than mine as a teacher....but that is ANOTHER debate! :)
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