Saturday, September 17, 2011

Nice graphic showing Financial Capital Inflows into select countries...A great resource for Macroeconomics OR to impress your teacher/professor...

We just completed a unit on the Foreign Exchange Market in AP Macroeconomics last week. This week we are going to look at how the government tracks international flows of currency through "The Balance of Payments".

This interactive graphic shows the Financial Capital Inflows to select countries and the corresponding effects on the currency exchange rates with the US dollar from 2001 and 2011. It will be very helpful when we learn about the Financial/Capital Account side of the Balance of Payments.

Go HERE for the interactive. What do you notice about the relationship between financial capital inflows and the relative value of the currencies of the respective countries?

Source: Wall Street Journal

Friday, September 16, 2011

Where's the Beef? Well, it could be in a number of places if competition is not hindered by "rent-seekers"...

This is an excellent example of how the market responds (even if slowly) to consumer demands in the fast food industry. 

Entrepreneurs with a good idea and executed with persistence can build their own niche brands and, as an unintended consequence, influence the behavior of the large chains in the restaurant buiness.

This article focuses on the "tween" burger business (not fast food and not casual dining, i.e. Chilis, TGIFridays, etc) and how their success has impacted the big boys in the fast food business.

As long as we have economic freedom and maintain conditions where competition is not limited/hindered, we will have more and better quality products available to choose from.

US burger chains beef up to keep up

""Top US fast-food restaurant companies are beefing up their hamburgers to keep up with an onslaught of competition from “better burger” chains, which have been gaining market share by offering premium meat and high-quality toppings.

McDonald’s started offering Angus beef hamburgers on fluffy buns, promising more thickness and juiciness. Rival Wendy’s now sells an eight-ounce hamburger, made from North American beef that is never frozen. And Burger King, trying to capitalise on greater health consciousness, is cooking “California” Whoppers, topped with fresh guacamole and ripe tomatoes.

Competition from better burger chains, which account for only about 3 per cent of the market, is good for the industry, according to Sara Senatore, restaurant analyst at Bernstein Research, because it gives consumers a new option priced between fast-food and casual dining. The focus on quality meats and toppings has forced industry leaders to sell healthier food.

“I think, given the demand environment, offering a premium-priced burger could make you raise your eyebrows a little bit, but it shows a continuing trend toward improved food quality,” Ms Senatore said. “All of the chains have ratcheted up the quality.”...

Monday, September 12, 2011

The writing is on the wall (or E-Reader) for the book publishing industry. Nice graphic showing price/profit differences between the two mediums.

Creative Destruction is working its way through the publishing industry, via technological advancement and book readers willing acceptance of the change.  The bottom line is, well, the bottom line $$: E-books are more profitable on a per unit basis.

You better go take a picture of your local bookstore to show to your grand kids someday---"Really, Grandpa/ma, they had buildings JUST for books?--That's crazy!"...(Don't laugh--when was the last time you went to a video store?)

Source: Wall Street Journal

World's Largest Employers (with governments included)...Do you see a trend here??

Source: The Economist

Who are the world's biggest employers?
ONE of the biggest headaches for policymakers in many rich countries has been how to create jobs during a period of fiscal austerity and anaemic growth. The private sector has been slow to generate jobs, and government-spending cuts usually end up cutting jobs. And governments employ a lot of people: in our chart of the ten biggest global employers, below, seven are government-run. America's defence department had 3.2m people on its payroll last year, equivalent to 1% of the country's population. China, the world's most populous nation and a big military spender, employs 2.3m people in its army. And the number of people working for the National Health Service in England is equivalent to over 2.5% of the country's population. The three private companies are Walmart, McDonald's and Taiwan's Hon Hai Precision Industry Company, a subsidiary of which is Foxconn, a secretive electronics manufacturer.

Sunday, September 11, 2011

If you have never viewed on of my charts, this is THE one---"Pie Chart" of Girl Scout Coookie Sales...

Here is my short take on why we are in between the proverbial rock and a hard place in terms of the economy...I think this is a worthy two cents...

I can see alot by looking at numbers. One source of our economic problems can be seen in just looking at one key government statistic.

Gross Domestic Product (GDP) is the sum total of a nations domestic output of finished goods and services. There are four major categories of expenditures: Personal Consumption Expenditures (what you and I purchase), Gross Private Investment (what businesses buy AND residential housing), Govenment Expenditures (what Federal, State and Local govts purchase) and Net Exports (exports minus imports). These categories are totaled below in (2), (7), (22) and (14). 

The recession officially started in the first half of 2008. Starting from left and going right, look at line 1.  Notice how total GDP declines, then recovers.  We are back to square one---Almost.

Look at the number in 2008 III and 2011 II.  Three out of the  four categories ARE back to 2008 levels or better.  How can that be and we have 9.1% unemployment vs 5% in 2008?

Source: Bureau of Economic Analysis (BEA)

Category Gross Private Investment is still in the red by approx. -$220 billion. Look at the subcategories on this line.  Non-residential structures (factories, office buildings, etc) and residential---the housing industry are still in a funk.  There is an acute lack of spending in these critical, job creating industries.

There is what is called "Excess Capacity" in the system---too many existing idle resources (factories, buildings, houses) in place that prevent new spending by businesses. In the simplest terms, we appear to have too many "structures chasing too few productive uses".

 If I own a business and want to expand, due to cutbacks in the last two years, I probably have extra space in my own  building or there is an empty one nearby.

Until this excess capacity is absorbed or becomes depreciated beyond productive use, seems we will be in slow period for an extended period of time. 
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