Friday, February 11, 2011

Disneyland is being sued by a visitor who rode the "It's a Small World" ride...Based on the reason for his pain, I would vote to convict Disney and award him alot of money..

Disney is being sued but I am not sure for what exactly.  If I was on the jury I would compensate the gentleman, not for the lack of evacuation plans, but for his "pain and agony" suffered by listening to "Its a Small World" over and over and over and...

""On Monday, a quadriplegic visitor to Disneyland in Anaheim, Calif. claimed Disney violated the Americans with Disabilities Act by not having adequate evacuation procedures for visitors with mobility disabilities. Jose Martinez of San Pedro, Calif. says Disney left him in his wheelchair in the "It's a Small World" ride for 40 minutes after the ride had stalled and other guests had been evacuated during a visit in November, 2009.
While waiting for help, the Orange County Register reports, Martinez suffered from dysreflexia, a medical condition that can cause death if untreated. "It feels like an ice pick going through your temples," Martinez said. The pain was exacerbated "especially when you couple that with the continuous, 'small world' music in the background."
Link to article HERE.

Look at US Exports to China! Looks like Pres Obama is going to achieve the goal of doubling US exports. The sooner the better.

And why not? This is good for the US.  A nice trend in US exports to China.  As China develops a middle class they will seek more US goods and services.  Some people see low wage jobs and low-skilled production going to China as a bad thing.  I see low wage jobs for no-wage people as a way to develop and move up the economic ladder so they can buy goods produced by high-skilled, high wage US workers. Seems like a good trade-off to me.  It is not something that happens overnight, but by the trend line you see here, it happens none-the-less. 
Source: Business Insider

Rent-seeking and Austin,Texas "roach coaches"---Be careful what you ask for, Mr Businessman...You might get it....

A supplier of trucks in the Austin, Texas area for the mobile food industry, or as I learned the term in the Marine Corps, "roach coaches", is a victim of his own "rent-seeking". Rent-seeking is a microeconomic term for people/businesses that use the influence/power of government to maintain profits by limiting competition.  In order to limit competition he sought, and recieved, new regulations concerning the maintenance andsafety of "roach coaches".  Now it seems many of his own trucks don't make the grade.   Poetic justice...

New mobile food rules ensnare man who pushed for changes

""In 2009 Tom Ramsey pressed the City of Austin to add teeth to the city's mobile food vending ordinance.

Ramsey might have seemed an unlikely advocate; he owns a Pflugerville-based fleet of food trucks, which he leases to independent operators through his Snappy Snacks business. But as some in the booming food trailer business — there are now more than 1,300 food trucks in Austin — questioned his motives, Ramsey said the city needed tougher rules such as those found in other Texas cities to address health, safety and environmental concerns. In October, after an often-rocky 16-month review, the City Council approved a half dozen changes.

But now Ramsey says the teeth he sought have come back to bite him — since November, nine of his 53 vehicles either have not passed or would be unable to pass a city Fire Department inspection mandated by the new mobile food vending requirements. Passing is a requisite for getting an Austin/Travis County Health and Human Services Department permit, which vendors need to do business....""

See how my poll numbers differ from Republicans poll numbers on Federal Budget issues. I am a man without a Party...

In a poll of Conservative Republicans on spending and tax priorities, these were the results when asked about the relative importance of these goals---their poll numbers are on the LEFT.  In my opinion, the numbers on the RIGHT in red are what they SHOULD BE.  Too extreme? The elephant in the House (pardon the pun) not being addressed are these two entitlement programs.  Everything else is small change. Long Sighhhh.... 

56% - cut spending across the board (1%)
27% - cut spending from all government budgets except the military(1%)
10% - pass a balanced budget amendment (1%)
3% - cut taxes  (1%)
3% - fix Social Security/Medicare so they don’t pay out more than they take in (94%)
1% - raise taxes on the wealthy (1%)
1% - cut spending primarily from the defense budget (1%)

Trade deficit soars! All because of one good we buy...No, it is not Happy Meal Toys, although that is a problem...

In the news you will hear about the US's record trade deficit.  Trade deficits occur when Net Exports (N(x)) are negative.  To find Net Exports take Exports and subtract Imports.  The US imports more than we export. This graph shows the change by month.  Exports are in Blue and Imports are in Red.
Calculated Risk
(HT: Calculated Risk) The Department of Commerce reports the following:
[T]otal December exports of $163.0 billion and imports of $203.5 billion resulted in a goods and services deficit of $40.6 billion, up from $38.3 billion in November, revised. December exports were $2.8 billion more than November exports of $160.1 billion. December imports were $5.1 billion more than November imports of $198.5 billion.

 For December our trade deficit was $40.6 billion. Look at this number more closely in the context of the graph below.  If oil imports are factored OUT  we see a dramatic decline in the trade deficit.  This is useful so we can see how much of the deficit is driven by ONE commodity and shows our dependency on foreign sources of oil. The very top line '$0" would represent balance trade--exports =imports. The Blue line represents the TOTAL trade deficit and the Red Line shows the trade deficit WITHOUT imported oil included. 

Calculated Risk
 The trade deficit in oil is a little over 50% of the deficit!  Can you guess where just about ALL of the remaining imports in the trade deficit come from?  That was too easy...I am not even going to post the answer.

Procrastination Flowchart---If you look at this please note the irony.... :)

Source HERE (HT: Chartporn)

Thursday, February 10, 2011

What does the Sun rising everyday, Lindsey Lohan getting in trouble, North Korea asking for food aid, all have in common?

All are predictable and occur right on schedule...

North Korea appeals to foreign governments for food aid
""North Korea has ordered all its embassies to appeal to foreign governments for food aid in a sign of growing desperation in Pyongyang, according to diplomatic sources.

This direct approach to foreign capitals, launched in December, is highly unusual for the insular and totalitarian regime, which normally negotiates deliveries of food assistance with international organisations such as the World Food Programme (WFP).

The WFP and the Food and Agriculture Organisation (FAO) has begun a food needs assessment in North Korea, but the WFP said that last year it managed to raise only a fifth of the budget it needed for its North Korean aid programme.
That shortfall may be one of the reasons Pyongyang is trying a direct approach this year, observers said.
"This year, all 40 North Korean embassies have been ordered by Pyongyang to ask governments for food. They have each been given a quota," an Asian diplomat said....""

"Where's the Beef?!" In Nigeria, or course, where it is becoming a NORMAL good...As opposed to an ABNORMAL good?

As incomes rise so does the demand for products that are considered "normal goods".  It is a relative term. It represents a movement away from a good considered "inferior" to it. An example might be hamburger and steak. As incomes rise people, when it comes to choice of meats, people consume more steak (better quality and more expensive) than hamburger.  However, what is one persons inferior good might be anothers normal good. Example: As incomes rise, someone might move from Spam ("Inferior") to hamburger ("normal").  It represents a vertical move up the quality of food food-chain. 

The article below discusses beef as an emerging normal good in Africa without using the actual term, but is playing out as we speak. This is a GOOD thing. See graph to the left.  With rising incomes people are willing and able to pay more for beef prepared with more advanced methods. Even within the category or beef, people are choosing choosing to move away from an "inferior" method of buying it (open-air markets) to a "normal" method (prepackaged in formal storefronts)....

WSJ: Catering to New Tastes as Incomes Climb (HT: MV=PQ)

""Around 10 million Nigerians moved into the middle-income bracket, meaning they could buy more than just necessities, in the past five years, according to an estimate by London-based private-equity firm Actis LLP. Nigeria's estimated $9 billion market for red-meat products is the continent's second biggest, after South Africa, according to a recent study sponsored by the British government....

Zambeef expects that as the middle class in this country of some 150 million people grows, so, too, will the number of people shopping in Western-style stores. The company hopes to lure customers used to buying meat in open-air markets by offering clean, packaged products while charging only slightly more than the markets. While a pound of beef might cost around $4.10 at a Lagos open-air market, Zambeef might charge about $4.75....""

Wednesday, February 9, 2011

"Nobody Doesn't Like Sara Lee"---Does this mean Demand for Sara Lee products is INELASTIC?

This excerpt from today's Wall Street Journal on Sara Lee's performance in the last quarter:
""In the company's North American retail business, revenue grew 1% in the latest quarter on higher prices but weaker volume, and profit was down 28% on sharply weaker margins."
The numbers suggest, at least for the last quarter, that the demand for Sara Lee products is relatively INELASTIC. Even though they increased prices ("higher prices") to customers and quantity demanded decreased (assuming this is what they mean by "volume") total revenues INCREASED ("1%"). This happens if the the percentage increase in price is greater than the percentage decrease in quantity demanded. The formula for Elasticity of Demand is % change in Quantity Demanded divided by the % change in Price.  If it yields a number LESS THAN 1, then Demand is said to be relatively INELASTIC. 

However, they should not expect this continue.  The availability of subsitutes will tend to, overtime, make the demand for their products more elastic as people make alternative choices based on relative prices for the subsitutes:

""Sales volume fell and the company lost share in some categories to lower-priced options, such as store-brand products.""
Competition helps keep prices as low as possible, even in the face of rising input prices.  Sara Lee and other food producers have to balance their costs of producing with what consumers are willing and able to pay.  When allowed to function PROPERLY the "invisible hand" can work very well. 

The "Iron Triangle" of politics intersects with Economics---A brief history of the development of Ethanol and the politics that continue to shape it..Worth a read!

A former student (Matt Null) sent this link to me. He knows my opinion on Ethanol.  It explains the history of ethanol; why we don't use sugar for ethanol even though it would be cheaper and more environmentally friendly; the development of high fructose corn-syrup; corporate lobbying/rent-seeking; how corn producers helped sugar producers get tariffs on sugar; and much more. Maybe the best part explains the role of a guy named "Rusty" Butz played in all of this...ALOT of economic and political concepts in a very short essay.  Learn all you need to know about the relationship that take place between corporations, politicians, and the bureaucracies that support them--otherwise known as "The Iron Triangle"

American's Crazed Corn Habit

According to a recent Congressional Budget Office report, the increased use of ethanol is responsible for a rise in food prices of approximately 10 to 15 percent.
We're turning corn into fuel — a highly inefficient one, at that — instead of food.

The Mackinac Center for Public Policy points out that "mixing food and fuel markets for political reasons has done American consumers no discernable good, while producing measurable harm."

However, perhaps summing up the issue most succinctly is Mark J. Perry, professor of economics and finance at the University of Michigan-Flint:

Anytime you have Paul Krugman agreeing on ethanol with such a diverse group as the Wall Street Journal, Reason Magazine, the Cato Institute, Investor's Business Daily, Rolling Stone Magazine, the Christian Science Monitor, The New York Times, John Stossel, The Ecological Society of America, the American Enterprise and Brookings Institutions, the Heritage Foundation, George Will and Time magazine, you know that ethanol has to be one of the most misguided public policies in US history.

Monday, February 7, 2011

Short summary of why food prices are spiking world-wide. (YES, I am obsessed with this!) "Fact is, everyone eats"

Why food prices are increasing world-wide in a few easy to understand paragraphs (source: The Source):

""On the most basic level, there are over 70 million more people who’d like to eat in the world every year, alas just as crop yields are beginning to top out. The swelling middle classes of Asia also want more meat than ever before. This requires many kilos of animal feed, grown for every fillet and rib-eye on the grill.

Moreover, a lot of land which once grew crops is now under the urban sprawls of Asia’s mega cities, effectively growing people instead.

That’s the backdrop; now take a look at the foreground. There we see the worst drought in Russia and the Black Sea for 130 years, late rains in Canada and so on. The latest floods in Australia won’t have helped either, as it is a major exporter of wheat.

Sure enough, in response to higher prices comes the reinforcement of stockpiling. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last month, and Indonesia has ordered 800,000 tonnes of rice. Saudi Arabia, Libya, and Bangladesh are trying to secure extra grain supplies.""

"He's raising hope in southern Sudan by boosting crop yields – and women's rights" Why can't people like this win Nobel Prizes---OR ANY PRIZE?

Driuni Jakani’
I love reading stories like this.  Americans/Westerners need to be reminded that there are many people around the world working hard to improve their lives and the lives of their fellow countrymen.  They are not looking for a hand-out but for a hand-up...This story is full of confirmation of that. 

He's raising hope in southern Sudan by boosting crop yields – and women's rights

Driuni Jakani aims to transform his rural community in southern Sudan from postwar devastation to economic growth and prosperity

People like Mr. Jakani will be vital to the success of Africa's newest country. "Right now, because of the war years, there are a lot of international organizations here," Jakani says. "But over time, they will move out. And so we need to be ready to serve our own communities ourselves."

By late 2008 he decided he could have more impact in his community if he started his own group. Today Lacha Community and Economic Development (LCED) has 10 employees and has been recognized as a Community-Based Organization of Excellence by the local branch of the United States Agency for International Development (USAID).
Its mission is threefold: to support peace, agriculture, and gender equality.

"Let me tell you why we need all three," says Jakani, leaning forward to talk about issues he is clearly passionate about.

"Without peace, we can't do anything," he begins. "As long as our population is traumatized by war, we can't even think about development.

"Agriculture is key because more than 90 percent of those in our community make their livelihoods from agriculture. We have to work with what we have."

He pauses for breath.

"And gender equality: We are losing half our capacity because most of our women cannot read or write and so get excluded from decisionmaking."

Asked what is LCED's biggest success to date, Jakani responds, "Just one? Let me talk about two."

The first is the introduction of oxen to plow the local farms. LCED has supported training in ox-plowing and bought two oxen. Today, land that took three days to plow by hand is finished in three hours.

With the increased productivity, locals now can view farming as a viable business opportunity.

"Before, I only could farm enough to feed my family, and sometimes not even that," says Samuel Sunday, a farmer. "But since we started using the ox[en], I have enough for my family and leftovers to take to sell at the market. It has made me feel very happy."

The second success, Jakani says, "has never happened in the whole living memory of my community." For the first time, three women were chosen as chiefs of their villages.

For two years Jakani worked with local women to increase their skills and confidence. And he persuaded the local men to agree to have women present at their traditional meetings.

"What happened when the women began to participate is that when they spoke they made a lot of sense to people," Jakani explains.

How is Egypt like Zimbabwe? Egypt just printed money to increase the pay of its Government workers...This did not end well when Zimbabwe did it...Why do we study history again?

Is Egypt heading down the same path as Zimbabwe has for the past decade?   When an Authoritarian starts to print money to pay government employees and/or the military to essentially buy their loyalty, it is a path to monetary destruction.  It becomes a rob Peter (citizens through debasing the currency) to pay Paul (above mentioned bureaucrats/military). This may not end well...

Today:   BBC: Egypt unrest: Public-sector pay rise but protests go on
""The government put up $2.2bn of short-term debt up for auction to inject money into the battered economy....""

2001- 2007: BBC: Zimbabwe inflation rockets higher

""High money supplies have also been fuelling hyperinflation. Critics have accused President Robert Mugabe's government of printing money to finance his election campaign and prop up the economy. Month-on-month inflation in the country accelerated to 839.3% from 433.4%."

Sunday, February 6, 2011

Forget the Super Bowl---Farmers are making an Allocative Efficiency decision that will affect the snacks you are eating right now!

Well, not RIGHT NOW, but in the near future...

WSJ: Cotton Farmers Jump on Rising Crop Prices
—The amount of land in the U.S. dedicated to planting cotton this spring is expected to surge 14%, according to a closely watched forecaster.

The National Cotton Council of America, an industry group, said on Saturday it estimates farmers will plant 12.5 million acres of cotton. As a result, the fall harvest is pegged at 19.2 million bales, an increase of 900,000 from the 2010 harvest. The amount of cotton in one bale is enough for about 1,200 T-shirts, according to the council.
Farmers are making an "Allocative Efficiency" decision to produce more cotton than---(fill in the blank).  Assuming there is not that amount of idle acerage, to produce more cotton is going to necessarily mean less of something else. This is illustrated in the graph below.

 The bundle of Cotton and Food produced is going to move from Cotton* and Food* to Cotton 1 and Food 1.  The opportunity cost for the farmer is somewhat minimal---the land, equipment and know-how to produce cotton is about the same as corn, wheat, soybean, etc.  They are looking for the most revenue per acre and cotton is the choice commodity at this time. 

Where the real opportunity cost is incurred in the domestic and international food supply.  We can't eat cotton, so domestic food production will be impacted in some negative way...Won't it??

"Nothing is Made in the USA anymore!"--oh, really? Don't let evidence get in the way of a good Protectionist argument...

Carpe Diem

Is US manufacturing in decline?..."Nothing is made in America anymore!" If you look at the graph above, you will see that we have dips in manufacturing output but the historical trend suggests that manufacturing in the US is relatively healthy. SAY WHAT?  But China makes everything, right? I suggest you go on over to the source of this graph and read what Carpe Diem has to say--a short, concise explanation is provide there...I have an additional observation.

Look at the early to mid-1990's.  This is the era of the implementation of NAFTA and the rise of China as a manufacturer, otherwise known as "Doom and Gloom" to trade protectionists.  Notice what happens to the slope of the lines for BOTH the US and China. Both are increasing at an increasing rate--getting steeper.

Granted China's trend line is steeper, but they were starting from a lower base number.  The only anomaly is that in 2010 we took a dip and China did not. I have to assume when our recovery ramps up, our trend line will also head up. 

What do I see out of this?  Manufacturing does not appear to be a "zero-sum game"---their gain does not have to be our loss.  As discussed at Carpe Diem, we are not manufacuting the low tech, low skill, low wage paying stuff we see at Wal-mart but higher tech, higher skilled, knowlege-based, higher wage paying goods/services.  Isn't that what really should matter?

(The source of Prof. Perry's blog entry is this article in the Boston Globe)
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