The psychology of Economics---Consumer confidence is down and it serves as a drag on the economy. Simple, but powerful...

Economics is part social science and part psychology.  What people think "en masse" matters.  Consumer expectations are one of the factors affecting Aggregate Demand.

This short posting below from the WSJ suggests that expectations for the near term are not positive for a good percentage of people.  Consumers tend to hold back spending when they are unsure about their immediate situations. When consumers hold back then businesses cut back---the cycle continues.

More Than 50% of Poll Respondents Expect Economy to Get Worse

Consumer spending in the U.S. continued to decline during July as consumer sentiment about the economy waned and expectations about personal finances were unchanged, according to Discover Financial Services’ U.S. Spending Monitor.

The poll index, which tracks economic confidence and spending intentions of about 8,200 consumers a month, declined 1.4 points to 89.3 points last month.

The poll found 28% of respondents view the U.S. economy as improving, down from 29% in June and 33% in May. Roughly 53% of respondents now rate the U.S. economy as poor, unchanged from June.

However the portion of consumers that expect the economy will get worse rose to more than half for the first time this year–up 4 percentage points at 53%–as sentiment among men worsened. The portion of men who indicated expectations the economy will worsen was up 9 percentage points at 57%, while the amount of women who felt that way was unchanged at 50%.

The number of people who said their personal finances were improving was unchanged at 23% in July from June, but was down from 25% during May. Respondents who see their personal finances getting worse was up 2 percentage points to 49%.

While 28% of respondents planned to spend more next month, the increase was driven mostly by an increase in anticipated spending on nondiscretionary items. About 38% of respondents expect to spend more on household expenses.

Cartoon " Desert Island Recession"---See if you agree with the premise and conclusion...

The genesis of a recession.  I have a problem beginning with the frame "The Next Day".  How about you?

From Gocomics  Via Mike Norman

A simple, inexpensive product is saving lives in Somalia...Why do the inventors of this product NOT have a Nobel Prize?

I learned something new today. It is one of those things that makes me wonder why the inventors of this product have not won an Nobel Prize.  At the minimum, they should be featured on "Oprah"!!!

The product is called "Plumpy'Nut" and it is an easy to administer, peanut base food, that is fed to extremely malnourished people.  It is playing a major role in the current human tragedy in Somalia. It is very inexpensive and easy to prepare and feed to children.  Apparently it actually tastes good too.

 Anderson Cooper interviewed someone about this product (he may have been a rep for the company, but I don't remember). Anderson asked him about the dangers for a child that might have a peanut allergy.  The person said something that really surprised me AND Anderson too: Peanut allergies are an issue in developed countries and not in under-developed, especially very poor ones.  I had never heard this before.  I could not find a definitive reason for this, but the "Hygiene Hypothesis" seemed to make sense to me, but I cannot vouch for its veracity:

""In medicine, the Hygiene Hypothesis states that a lack of early childhood exposure to infectious agents, symbiotic microorganisms (e.g., gut flora or probiotics), and parasites increases susceptibility to allergic diseases by suppressing natural development of the immune system.^[1] The rise of autoimmune diseases and acute lymphoblastic leukemia in young people in the developed world has also been linked to the hygiene hypothesis...""

In other words, a high(er) level of hygiene makes us less immune to potential allergies of all types.

Whatever...This is a good lesson for students and how they can impact people with science and technology.  You may not be a "Do-Gooder" in the classic sense of helping people directly, but your research and development skills/knowledge may do more good than anything else.

It does not matter what the price of rice is in China. You still need chopsticks to eat it...Guess which country is a growing supplier of them?

Comparative advantage is a strange thing... A Georgia company is a leading exporter of chopsticks, of all things, to China...Nice example of a small business with an unromantic product filling a niche.  Read story HERE and/or watch video below...HT: Carpe Diem

Oil and Bio-Fuels clash...The winner? Better question--The loser? Answer--all of us.

Bad energy policies equal bad outcomes...Two reminders in as to why we need to wean ourselves off of oil AND why using food-for-fuel is NOT the way to do so. You are just subsituting one set of bad trade-offs for another. Can we do better than this?...By the way, I am NOT a hardcore "Greenie"  at all.  I just believe in utilizing resources in the most efficient manner. While oil may have served us very well in the past to get us to an unprecedented level of standard of living, I think diminishing returns are setting in with it and we need to move on to develop a new fundemental source of energy production.  Are we there yet? No...Are we working hard enough to get there? I don't really know, but I believe we should be moving a little quicker to do so. Howver, in my humble opinion, bio-fuels are not the way to go.  Where am I going wrong???
Yellowstone river suffers oil spill

""An Exxon Mobil pipeline that runs under the Yellowstone river in Montana ruptured on Saturday, leaking hundreds of barrels of oil and causing a 25-mile (40km) plume that has fouled the riverbank.

The breach in south-central Montana led to the temporary evacuation of hundreds of residents along a 20-mile stretch of the river, a key tourist attraction in the region that runs through the famous national park of the same name. Cleanup crews deployed booms and absorbent material as the plume moved downstream at around 7mph (10km/h):""....Read more HERE

Biofuels land grab in Kenya's Tana Delta fuels talk of war

""The eviction of the villagers to make way for a sugar cane plantation is part of a wider land grab going on in Kenya's Tana Delta that is not only pushing people off plots they have farmed for generations, stealing their water resources and raising tribal tensions that many fear will escalate into war, but also destroying a unique wetland habitat that is home to hundreds of rare and spectacular birds.

The irony is that most of the land is being taken for allegedly environmental reasons – to allow private companies to grow water-thirsty sugar cane and jatropha for the biofuels so much in demand in the west, where green legislation, designed to ease carbon dioxide emissions, is requiring they are mixed with petrol and diesel.""...Read more HERE

Netflix customers collectively consume 30% of US bandwidth. Shouldn't they pay MUCH more for video stream?? See chart here...

I am very ignorant of how the "guts" of information technology works. Sort of like my car--I don't know HOW it works, I just want to turn the key and go.  Is the supply of bandwidth equal to the demand for it? Is supply greater than demand or can the supply be expanded with little extra cost? If I am not mistaken, this is one of the issues with net neutrality.  Can someone give me a middle-school intelligence level explanation of why I should not pay more for my Netflix subscription than I do...   

Source: Business Insider




""Netflix's streaming service is so popular that it's now consuming 30% of peak downstream internet bandwidth in North America, according to data from Sandvine, a broadband equipment company, via TechCrunch.""

While the giant slept the world moved on to eradicate poverty...We just don't get what is happening in the rest of the world.




Source: CSM

  The world is changing rapidly and is becoming less dependent on the success of the US.  We are still very relevant but, in my opinion, the economic success of the rest/most of the world is eroding our status .  And, I fear, we are letting them.  1.4 Billion  Chinese, 1.3 Billion Indians, 190 million  Brazilians, AND the continent of Africa are rapidly developing middle-classes. These middle-classes are not to be confused with the US middle-class, which in dollar terms is way ahead of the aforementioned countries.  BUT the purchasing power of 100's of millions of people is increasing at an increasing rate.  Rising incomes around the world should not be seen as a problem for us, but an opportunity.  Instead of complaining about the "fairness" of trade with the rest of the world, I would prefer we as a nation welcome them out of poverty and ask if there is anything we can sell them (YES! We do make stuff!) that they would FREELY like to buy from us...THAT is what a competitive country does. 

Surging BRIC middle classes are eclipsing global poverty

The world will, for the first time in history, move from being mostly poor to mostly middle-class by 2022, the Organization for Economic Cooperation and Development projects. Asians, by some predictions, could constitute as much as two-thirds of the global middle class, shifting the balance of economic power from West to East. Already, some analyses of International Monetary Fund data suggest that the size of the Chinese economy could eclipse that of the United States in just five years.


By 2030, the global middle class is widely projected to at least double in size to as many as 5 billion – a surge unseen since the Industrial Revolution. This boom, however, is more global, more rapid, and is likely to have a far different – and perhaps far greater – impact in terms of global power, economics, and environment, say economists and sociologists.

But today's middle-class boom is unlike the Industrial Revolution, in which rising prosperity became a catalyst for increased individual and political freedom. Those in the emerging global middle classes – from an Indian acquiring a flush toilet at home to a Brazilian who can now afford private school to a Chinese lawyer with a new car in the driveway – are likely to redefine their traditional roles, and in doing so, redefine the world itself. 

 "I would expect that as the global middle class gets transformed by the entrance of hundreds of millions of Indian, Brazilian, and Chinese families, the concept of what we see as the middle-class values may change," says Sonalde Desai, a sociologist with the National Council of Applied Economic Research in Delhi (NCAER). "Historically, sociologists have defined 'middle class' as those with salaries…. I think 'middle class' is very much a state of mind."

Electric Vehicles are NOT the answer to energy independence...Why does this have to be so hard???

Resources are not unlimited---this forms the foundation for the definition of economics.  Essential natural resources ("Rare Earth Minerals") used in the manufacture of electric cars come primarily from mines in China. The more electric vehicles we produce the more dependent we become on China for a critical element.  We move to these vehicles to escape dependency from one commodity (oil) and find ourselves captive to another...How come things cannot be easy...

The Rare-Earth Crisis

"...One argument I’ve heard is “national security,” the idea being that electric vehicles would make the United States less dependent on imported oil. Be careful what you wish for, however, because if electric cars become a mainstay, we may be trading one dependence for another that is even more troubling. Ninety-five percent of the world’s output of rare-earth metals today comes from one country: China. By some estimates, demand will outstrip supply within five years. At least with oil we know there are fifty years of oil reserves readily available. Moreover, oil is produced all over the world, limiting the monopoly power of any one country...." Source: Freakonomics

Which vehicles are in the shortest supply right now? With $4.00+ gasoline, that is too easy a question...

Many pundits in the economics  blogosphere have pegged $4.00 a gallon as the breaking point for people to seriously start changing their level of gasoline consumption.  It seems as though it has begun in the car market.  Fuel efficient vehicles are in short supply because of increased demand. Below are the cars that are in the shortest supply.  Next to the name of the vehicle is the "time to turn" or the number of days on average the car sits on the lot before it is sold.  In many cases the cars are sold before hitting the lots. The first number is from April of this year. The second number is what the churn time was last April. What a difference a year makes...

BMW X5 16 ,39

Ford Explorer 19, 48

Hyundai Elantra 12, 79

Toyota Prius 20, 36

Porsche Cayenne 18, 91

BMW X3 14, 32

Audi Q7 14, 18

Chevy Equinox 19 14

Audi Q5 16, 16

Chevrolet Volt 18, N/A

GMC Terrain 19, 14

Fiat 500 11, N/A

Nissan Leaf 5, N/A

Lexus CT 200h 11, N/A

Mini Countryman 16, N/A

       ""Which new cars and trucks are most in demand?

One good measure is to see how fast they are flying off sales lots into the hands of buyers. In the auto industry, it's known as "days to turn." Interesting, though, when you look at the Edmunds.com list for April. You'd think the list would be dominated by Japanese models whose production was stopped or reduced because of the March earthquake. And, sure, some are on the list. But it's actually a pretty mixed bag.

If there anything in common, it is that gas savers prevail. A year ago, more SUVs were in short supply.

As for the vehicle in shortest supply, Edmunds.com says it's Nissan's all-electric Leaf. Since all were preordered, all are claimed as soon as they land. The days-to-turn was only five days. Next is Lexus' sharp CT 200h, a small Prius-like hybrid that just went on sale as the Japanese earthquake hit, causing huge production problems and limited supply for the car. It had only an 11-day wait. So, too, did Chrysler Group's new Fiat 500.

Hyundai's new 40-miles-per-gallon (on the highway, anyway) compact Elantra is down to only a 12-day supply, compared with a 79-day supply for the version it replaced last year. BMW's small, hot X3 and Audi's big Q7 crossover SUV tie at 14 days.

While the list includes models that would have been affected by the shortages arising from the earthquake, they don't necessarily dominate the list."" (USA TODAY)

Panera Bread experiments with "Pay What You Want" pricing...Is this a good idea??

Some restaurants are experimenting with a voluntary payment system for its food---YOU decide how much you want to pay for your meal. Panera Bread is one such chain trying this at select locations. (HT: Carpe Diem)  It is an interesting experiment in behavioral economics.  They find that 80% of customers pay either the "suggested price" for a meal or actually pay more than the suggested price. Only 20% pay less than the suggested prices.

 I think the strategy is interesting. I wonder how the results would change if payment was completely anonymous.  No face to face contact with an employee to make change or process the credit card payment.  I think Panera is well aware that MOST people who visit their stores would not want to appear to be cheap or dishonest in front of another person.  What do you think? Would people, on average, be just as honest or would those percentages flip---only 20% would pay the suggested prices and 80% would pay less?

: USA Today

""USA Today -- "A Pay-what-you-want Panera in Clayton, MO is being called a success. The menu board lists "suggested funding levels," not prices. Payments go into a donation box, though the cashiers provide change and handle credit card payments.


The majority of patrons pay the "suggested funding level" or more. Statistics provided by Panera indicate that roughly 60% leave the suggested amount; 20% leave more; and 20% less. One person paid $500 for a meal, the largest single payment." Source:

"Do you want fries with that?" will soon be a phrase of the past...Is this a good thing???

McDonald's is adopting point of sale technology in it's European restaurants that will reduce the need for labor, at the margin.  Touchscreens for ordering and swipe card technology for payment will be installed.  It is inevitable that in the near future we will order our fast food in this manner.  The writing (or source code) is on the wall for low-skilled labor in this country.  The nature of work is changing and I am not sure as a nation we fully get that yet...

McDonald’s to shake up food ordering system

""McDonald’s is to change the way customers order its meals in Europe, partly replacing cashiers and the use of banknotes at its 7,000 fast-food restaurants in the region with touchscreen terminals and swipe cards.

Mr Easterbrook said that the changes would make life easier for consumers as well as improve efficiency, with average transactions three to four seconds shorter for each customer. McDonald’s European stores serve 2m customers a day.

Weiky Filho, a student enjoying a burger at McDonald’s in Wimbledon, London, was in favour of the changes. “You don’t need to communicate with staff and it would be much quicker,” he said.

But Joe Surkitz, 21, was less convinced. “I’m looking for work and if there’s more machines doing jobs I’ll find it harder. Plus you won’t get service with a smile.”

Why have LCD TV's come down in price so much and so fast? Nice Graphics here showing why...

This graphic shows the change in price of various widths of LCD TV screens since their introduction into the marketplace.  It is quite remarkable how the price of the larger screens have decreased the point where price is somewhat irrelevant. The only decision you face is how big you want your TV to be. 


Source: Wired

The primary reason is illustrated in this next graphic.  Since 2007 the widths of screens, the most expensive component, have increased significantly because of a technological break-through in the production of the LCD screens themselves. Note the dramatic increase in widths during the 2007-09 period:

Source: Wired



""Like multicore computer chips, Android smartphones, and Starbucks coffee, LCD TVs are getting cheaper—and bigger—all the time. Inevitably, your brother-in-law’s new 55-inch TV cost less than the 48-inch model you bought two years ago. Why? Science! See, flat-panel displays are made by machines that print arrays of circuits on sheets of glass and then slice those sheets into screens like high tech brownies. And since 1999, those machines have increased in size by 800 percent. Thus, the Law of Big Glass: The larger the glass printer, the cheaper—or bigger—the TV.

In 1993, the industry-standard tool for “printing” display circuitry, a TFT-LCD deposition machine, could work with glass no bigger than about 18 inches square. Today, they can handle sheets that are 11 feet on a side—the size of a garage door—and just a millimeter thick. A 20-inch flatscreen TV cost $1,200 in 1999; it costs just $84 today.

The law applies to organic LED displays, too—which is great, since they’re brighter and more energy-efficient than LCDs. OLED screens use a related manufacturing process, and right now they’re printed on 4 x 5-foot sheets. But the Law of Big Glass says 55-inch OLEDs will someday go for less than $1,000 at Costco. By then you’ll probably want a tiny, ridiculously expensive holodeck""

Creative Destruction by way of the Smartphone---I am in awe of technology and its potential

Being of "a certain age", I pause everytime I see something like this and think about how technology has changed in a relatively short period of time.  Look at your phone for second and be reminded of the "back story" reason for its existence. It is a simple device---now. But the road to its simplicity is paved with lots of reseach and development, trial and error, labor and other resources.  What used to take many separate devices (TV, radio, computer, telephone, etc) has been condensed down to something you can hold in your hand and store in your pocket. I am not sure if this has conserved resources or not in its totality, but it certainly seems to have been an efficient and desirable re-allocation of societal resources.  What do you think?  If you disagree, then you have to respond to me with a technology that is at least 40 years old.  Don't call me on my home phone--I don't have one!

HT: Carpe Diem

The angst over shopping for Christmas is not a new thing...The more things change, the more they stay the same...

In what year do you think this quote from the NYTIMES was made? (Click HERE to see the answer)

 ""It is astonishing to see what lengths some people will go to in giving presents at Christmas. I am told they will borrow, go in debt, or even steal to gratify their desires. The ladies get the worst of it, of course. It requires great skill to manage the whole business successfully and economically. I was told by a lady friend not long ago that in her exchanges last Christmas one of her friends returned, through a mistake, the gift she had sent to her the year before."" (HT: Division of Labour)

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! :)

Is Cyber-Monday "Creatively Destroying" Black-Friday? I sure hope so...

Although it will make the news a bit more boring if it does. No more video of people shoving each other through doors to get to the "Deals". That always puts me in the Christmas spirit...

'Cyber Monday' Sales Show Strength

Online retailers experienced a sales surge Monday, capping off a holiday shopping week in which more Americans than ever decided to skip the mall and buy on the Web.


Early estimates indicated overall sales gains of about 20% from a year earlier for "Cyber Monday," the nickname for the Monday after Thanksgiving.


..That comes on top of strong online sales growth on Thanksgiving Day and Black Friday. For those two days combined, comScore Inc. reported that online shoppers spent about $1.1 billion, up more than 15% from $913 million a year earlier.


Online shopping is on pace to take even more share away from the rest of American retail. Through the four-day Thanksgiving weekend, a survey by the National Retail Federation reported that traffic to stores and websites was up 8.7%, with the average shopper spending 6.4% more than a year ago.


Driving activity were Cyber Monday discounts of as much as 60% on sites such as Toysrus.com, as well as extensive free shipping offers.