Saturday, February 19, 2011

Baby Gorilla taking first steps...No, no connection to economics in any way... ;)

In one photo we can see the "problem" in manufacturing in the US...Output is up but employment is down in that sector...

This is a photo that accompanies an article about a Hyundai plant in Alabama.  In the battle for the "soul" of manufacturing, it seems technology has won---At least in the auto industry.  I can spot only one worker! The graph below shows that while manufacturing output is increasing, employment in manufacturing is declining.  Not enough attention is paid to this issue.  How much of the manufacturing job loss is for this reason and not off-shoring? Is it much different for a person to lose a job to a machine than to some "foreign worker"? On the one hand we want to tax/punish businesses for sending production line jobs overseas but, on the other hand, we give tax CREDITS to domestic businesses to purchase technology that will, well, eliminate jobs on the production line...Hmm...That is two postings from me today on Irony...

Source: Carpe Diem

No serious budget cutting will take place unless entitlement programs are put on the table...No wait, entitlement programs ARE the table!

The Economist
Add together Medicare, Medicaid, Social Security and Net Interest and you see our problem.

Do as I say, not as I do...A lesson in irony from our Secretary of State.

More information  here on the incident.

""As Secretary of State Hillary Clinton spoke in Washington, D.C., on Tuesday about the failures of foreign leaders to respect people’s freedoms, a 71-year-old U.S. veteran Army officer, a man who spent 27 years in the CIA and delivered presidential daily briefs, a peace activist and proponent of nonviolence, the man who famously confronted Donald Rumsfeld for his war lies, the man who drafted our letter to Spain and delivered it to the Spanish Embassy on Monday, our friend Ray McGovern turned his back in silence. As Clinton continued to speak about respecting the rights of protesters, her guards – including a uniformed policeman and an unidentified plain-clothed official – grabbed Ray, dragged him off violently, brutalized him, double-cuffed him with metal handcuffs, and left him bleeding in jail. As he was hauled away (see video), Ray shouted “So this is America?” Clinton went right on mouthing her hypocrisies without a pause....""

Nice graph showing decling sales in the music industry AND a lesson in Creative Destruction. A two-fer for a Saturday morning

When I teach Joseph Schumpeter's version of "Creative Destruction", I use the evolution of the technology we use to listen to music. This graph shows the emergence and decline of the various modes of delivery.  Perhaps technology has gone too far. With the advent of the digital age, pirating music has become so commonplace that the revenues in the music industry have declined significantly, perhaps permanently, and I am not sure how they can recover. Can the industry survive without selling music at the retail level? Is this actually a good thing because music will become much less concentrated in the hands of a few music mogels? OR will it consolidate into even fewer hands?
Source: Business Insider

Friday, February 18, 2011

Cost of College Textbooks...need I say more...Nice graph on the rising cost of them relative to everything else

Most of my students who take and pass (about 70-75 out of 100) the AP Macroeconomics and Micoreconomics test NEVER even open the college textbook (McConnell/Brue) we have for the class.  With enough resources (teacher generated and found on the internet) coupled with in-class instruction, it seems to me most introductory-level college classes could organized relatively textbook-free.  The chart below shows through an index that the cost of college educational materials increasing approx. 700% over time (from an index of 100 in the base year of 1979 to 800 today), while the prices of all goods and services in the economy rose only a fraction of this amount (from 100 to about 330).  If young people in the US want to protest anything on college campuses, this seems like a good cause...

Source: Carpe Diem

Thursday, February 17, 2011

Population Pyramids of several countrys in the Middle East---Were these uprisings predictable and inevitable?

Click on image to make larger.. A perponderance of young people coming of age in several authoritarian countries/societies is going change the dynamics in the Middle East in the near future. Perhaps this current turmoil was predictable and inevitable...It just took an unusual event to reach a tipping point where action by enough people got the revolution ball rolling..
Source: Chartporn

Tuesday, February 15, 2011

Egypt just deposed a leader...BUT will they be able to depose the REAL LEADERS in Egypt (oh, you thought they got the main guy, did ya'...)

Their authoritian leader has stepped down and the military has taken charge, but will anything really change?  He, or who, controls the nations productive resources is really in charge. I did not realize the extent the military in Egypt controlled the economy.  Those who are profiting from the status quo will not go down easy. This is an additional facet, and to me, a more complicated one than the political one that just took place. 

Egypt's military, an economic giant, now in charge

""It owns companies that sell everything from fire extinguishers and medical equipment to laptops, televisions, sewing machines, refrigerators, pots and pans, butane gas bottles, bottled water and olive oil.

Its holdings include vast tracts of land, including the Sharm el-Sheikh resort, where ex-President Hosni Mubarak now resides in one of his seaside pala-ces. Bread from its bakeries has helped head off food riots.

"It's a business conglomerate, like General Electric," said Robert Springborg, professor of national security affairs at the Naval Postgraduate School in Monterey, referring to the Egyptian military. "It's represented in virtually every sector of the economy."

So is what's good for Egypt's GE good for the country, now that the military is, at least temporarily, in formal control?

In a September 2008 classified cable recently released by WikiLeaks, U.S. Ambassador to Egypt Margaret Scobey wrote, "We see the military's role in the economy as a force that generally stifles free market reform by increasing direct government involvement in the markets."

The cable noted "the military's strong influence in Egypt's economy," with military-owned companies, often run by retired generals, "particularly active in the water, olive oil, cement, construction, hotel and gasoline industries." ""
Read the rest of the article HERE

Good news...You DON'T have to eat your veggies! Why? Because there aren't any...

Well, there are veggies, but a shortage is developing because of bad weather in the last few weeks in several Southern states.  Get ready to pay more or hear "Do you want tomatoes on that?"...

Freeze Hits Vegetables:  Suppliers Scramble Following Cold in Mexico, Florida, Texas.

""A major freeze in Mexico earlier this month has resulted in a shortage across the U.S. of tomatoes, cucumbers, bell peppers and other produce that could last until April and lead to higher prices at the grocery store.
Supermarkets, distributors and restaurant chains are scrambling to find other sources for the items and to offer replacements. But the problem has been compounded by the fact that inclement weather has also hit other growing regions, like Florida and Texas, that would normally be able to make up for a supply interruption from Mexico...""

 In equilibrium before the bad weather, the Market for Vegetables looked like this:
I use a price of $1.00 for the various vegetables and a market quantity of 100 for simplicity. Because bad weather has destroyed alot of the harvest, the supply of vegetables is negatively impacted. Shown in the next few graphs, there will be a decrease in quantity supplied of vegetables at every price RELATIVE to supply curve  "SUPPLY*".
If we connect these new price and quantity supplied  combinations, we derive a new supply curve, "SUPPLY 1" that lies to the LEFT of "SUPPLY*".  ONLY one of these price and quantity supplied combinations intersect "DEMAND*" and that is at Point "C". 
The market price increases to $1.25 as the market quantity decreases to 88.

The article suggests this situation will persist at least until April.  Until then restaurants will either have to charge MORE for foods that contain, say, tomatoes OR ration the tomatoes to customers who request them.

Look to see if this happens to you in the near future.  Because you are now more informed, you will know the source of this problem.  Amaze your friends with your inside economic knowledge!!

Rising Food Prices Disproportionately hurt the extreme poor---44 million plunged into bordline subsistence level existence...

Of the remedies suggested, the easiest place to start would be Ethanol---just sayin'...

Food Price Watch--World Bank

""Global food prices continue to rise. The World Bank’s food price index increased by 15% between October 2010 and January 2011 and is only 3% below its 2008 peak. The last six months have seen sharp increases in the global prices of wheat, maize, sugar and edible oils, with a relatively smaller increase in rice prices. Higher global wheat prices have fed into significant increases in local wheat prices in many countries. Higher maize, sugar, and oil prices have contributed to increase the costs of various types of food, though local maize prices have largely been stable in Sub- Saharan Africa. Local rice prices have increased in line with global prices in some large rice-consuming Asian countries. These food price rises create macro vulnerabilities, particularly for countries with a high share of food imports and limited fiscal space, as well as increases in poverty. Estimates of those who fall into, and move out of, poverty as a result of price rises since June 2010 show there is a net increase in extreme poverty of about 44 million people in low- and middle-income countries. In the immediate term, it is important to ensure that further increases in poverty are curtailed by taking measures that calm jittery markets and by scaling up safety net and nutritional programs. Investments in raising environmentally sustainable agricultural productivity, better risk-management tools, less food intensive biofuel technologies, and climate change adaptation measures are all necessary over the medium term to mitigate the impact of expected food price volatility on the most vulnerable.""

World's top 5 economies: Most Americans already think China is No. 1

World's top 5 economies: Most Americans already think China is No. 1
""It's official. On Feb. 14, China was recognized as the world's second-largest economy after the United States. Japan released its 2010 economic figures, announcing that its full-year GDP was $5.47 trillion – about 7 percent smaller than China's.

But read between the lines and look beyond the top three rankings. You find that Americans are already convinced that the US has fallen behind China, that Japanese are not necessarily dismayed at the news that they've fallen to No. 3, and that other nations are showing notable economic changes.""

5. France, $2.55 trillion

4. Germany, $3.3 trillion

3. Japan, $5.47 trillion

2. China, $5.88 trillion

1. United States, $14.66 trillion

Is it likely the US will fall to China? Yes. The International Monetary Fund has projected China's gross domestic product could hit $28.1 trillion by 2020, well ahead of the US's projected $22.6 trillion economy. But even then the average Chinese citizen will earn far less than the average American on a per capita basis. Moreover, writes Harvard Professor Joseph Nye in today's Wall Street Journal, looking only at GDP growth ignores America's military and soft-power advantages.

"American power is based on alliances rather than colonies, and it is associated with an ideology that is flexible and to which America can return even after it has overextended itself. Looking to the future, Anne-Marie Slaughter of Princeton argues that America's culture of openness and innovation will keep it central in an information age when networks supplement, if not fully replace, hierarchical power."

That isn't likely to soothe American fears, however. A new Gallup Poll taken in early February found that most Americans already believe China is the world's largest economy. And consider the current best-selling book "Battle Hymn of the Tiger Mother," which attempts to explain the "marked and quantifiable differences between Chinese and Westerners when it comes to parenting," as author Amy Chua wrote in the Wall Street Journal op-ed, "Why Chinese Mothers Are Superior." The book does not mention China or other Asian “tiger economies," but The New Yorker's reviewer says "they growl menacingly in the background."

Monday, February 14, 2011

This sports complex in the UK gives new meaning to the term "Dead Heat"...Yikes!

The borough of Redditch in the UK estimates it can save $23,000 per year by heating a community sports complex with excess heat from a near-by CREMATORIUM...I am all for saving energy, but the creep out-give-me-the-willys-factor is too high for my taste...Sorry, but I would have to cut expenses elsewhere...

(Source: Wall Street Journal print edition---not on their website)

London Coffee Shop has higher prices for drinks to go than to drink on premise (see photo). Why is this so? Anyone have an answer

Why do you suppose this Coffee Shop in London prices the drinks where is cost MORE to get a drink to go than to drink it in the shop?  I honestly don't know...I am sure there is a Microeconomics lesson in here somewhere.

I am keepin the source a secret for now...

Sunday, February 13, 2011

Prison Economics: Money can be whatever Prisoners say it is---who am I to disagree!

Prison Economics: How Fish and Coffee Become Cash

""Nothing makes you more powerful inside the joint than a strong grounding in currency arbitrage. Inmates in federal penitentiaries aren’t allowed to have actual money; family members can load up prison commissary accounts, which usually max out at about $300 a month, but the money’s not transferable and can be redeemed only at the commissary. And cigarettes, the former gold standard for securing everything from a bodyguard to starched laundry, have all but disappeared since tobacco was banned at federal pens in 2004. So inmates have to rely on other forms of currency. All of which means the prison economy runs much like a commodities market: Money in a commissary account can’t be traded, but goods sold at the commissary can be. And since the amounts in circulation are tightly regulated, their value can far surpass their price in dollars. So if you’re sent away to, say, the US Penitentiary in Lewisburg, Pennsylvania, for “mistakes” you made in the run-up to the Great Recession, here’s how to get the best return on your next investment.

1. Mackerel
Cost $1.40 per 3.5-ounce pouch
Limit 14 per week
Use Tipping for laundry service, cell cleanup, or a haircut.
Value If you don’t open the pouch, it never spoils … which means the fish retains its close-to-a-dollar value.
2. Instant Coffee
Cost $3.35 per 4-ounce bag
Limit 3 per week
Use Getting buzzed cheaply.
Value Prisons just say no to drugs, so caffeine is the licit stimulant of choice.
 3. Postage Stamps
Cost $8.80 for 20 stamps
Limit 3 books per week
Use Paying off large gambling debts or buying protection quickly.
Value High price-to-size ratio; easy to conceal. Without email access, snail mail is king.
4. Combination Lock
Cost $6.50 and up
Limit 1
Use Keeping stuff secure. Plus, you can put it inside a sock to make a weapon.
Value Let’s just say it’s worth a heck of a lot more than a pack of cigarettes if someone needs one in a pinch.

HT: Carpe Diem

The Price of Labor is less than the Price of Capital...Nothing can go wrong in this picture...

Workers checked electric wires above an intercity high-speed railway in China's Jiangxi Province. NYTIMES photo

The Information Age Revolution in the Middle East could NOT have happened without the Information Age Revolution in the Middle Ages--- GREAT map showing why....

 (HT: Carpe Diem)...As we marvel at how the viral spread of social media, driven by internet technology, has spurred revolution in the Middle East, perhaps we should pay hommage to the original viral information age---the Middle Ages and the invention of the printing press...Graph below shows the "viral spread" of the printing press in a relatively short period of time, 50 years (well, a short time in the 1400's!!)...Amazing...

Source: This STUDY HERE
It is a VERY short analysis that is very informative

Borders Bookstores Declares Bankruptcy...This is GOOD news, right? Schumpeter lives...

Another victim of Creative Destruction---the "darkside" of progress that brings us products in new and innovative ways.  More and more books are bought/sold through E-readers.  Is this an example of the supply-side responding to the demand-side, or vice-versa?  It is quite amazing how markets emerge with no single entity guiding it. However, it is necessary to acknowledge the costs associated with this progress. It won't change the inertia towards technology use in the book industry, but people will lose jobs in the  "brick and mortar" stores. Fewer workers in bookstores, fewer stores need to be built, fewer construction jobs to build the stores, fewer other stores that depend on a Borders as their anchor store, which means even fewer construction jobs as well as retail jobs....Can you think of any other "costs" (although some of these costs can be seen as benefits too).  Or maybe where I am going wrong in my analysis?...Don't let it hurt your brain!

Borders bookseller faces bankruptcy

""Faced with stiff competition from online book retailers like Amazon, plus the proliferation of e-books designed for devices like the Amazon Kindle and Apple’s iPad, Borders faces bankruptcy...""

9 out of the 10 Roses you buy tomorrow will come from Central/South America. It might be good for Love, but is it good for the environment? Make your choice: your loved one or the planet...

Well, maybe it is not that bad after all...The Cut-Rose industry is a good example of an important concept in economics--Comparative Advantage. In this case, Columbia and Ecuador can produce roses, not only at a lower cost in terms of price relative to those grown in the US, but in terms of minimizing the cost to the environment as well.  It seems counter-intuitive, but roses grown, harvested and flown to the US may have a SMALLER overall impact on the environment than roses grown in the US!

""Imported flowers have come to dominate the U.S. market in the past 40 years, as entrepreneurs and scientists have found ways to make blooms survive intercontinental plane trips.

In 1971, just 8 percent of the roses, carnations and chrysanthemums sold in the United States were imported. (These three flowers account for the majority of cut-flower imports.) By 2003, that number had grown to 91 percent, with most of those flowers coming from Colombia and Ecuador. 

This shift from local to imported flowers is a mix of good and bad news for the environment. The bad news first: South American growers rely heavily on chemical fertilizers and pesticides. According to a study by the International Labor Rights Forum and the U.S. Labor Education in the Americas Project, 20 percent of the chemicals sprayed on Colombian flowers are illegal in the United States or Europe. They have contaminated the soil and caused severe health problems for many workers. There are certification programs for responsible growers, but it's often difficult to determine how any individual bunch of roses was raised.

On the other hand, flowers grown in equatorial zones and shipped to your local market probably use less total energy than the locally grown equivalent, despite spending five hours on an airplane. February isn't prime flower-harvesting season in most of the United States, and efficient growing conditions usually trump buyer-producer proximity. ""

Source: Which are better for Valentine's Day: eco-certified bouquets or silk flowers?

 GO AND ENJOY YOUR ROSES!! It is ok!! :)
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