So which is it America? In the Budget Deficit debate this is not Burger King---You can't have it your way.

The first poll shows 50% of Americans want the deficit reduced through spending cuts "only or mostly". The second one shows most Americans want to maintain the level of benefits for THE MOST costly Federal govt programs (look at the brown shaded portion of the pie charts). After these two polls is a pie chart of the Federal Budget and where money is actually allocated...Do you see any contradictions? Most want to cut spending, but not on the programs that disproportionately cost the most and cutting them would actually have the most impact on the deficit. 

Source: Gallup Poll

Source: Pew Research



Source: The Fiscal Times

 The parts of the Federal Budget that are considered mandatory spending programs---Social Security, Medicare, the Interest on the National Debt (this MUST be paid FIRST when bills are paid), "Security Discretionary" is National Defense/The Military. These three programs alone are 61% of the budget. It seems they are sacrosanct and immune to budget cuts.  Some of the other items in the chart are classified as mandatory spending, but for the sake of argument, let's leave them ON the budget cutting table. .  What do you cut?

Are you getting mostly "A's" in college? You should be according to this graph...




Source: Economix



""Most recently, about 43 percent of all letter grades given were A’s, an increase of 28 percentage points since 1960 and 12 percentage points since 1988. The distribution of B’s has stayed relatively constant; the growing share of A’s instead comes at the expense of a shrinking share of C’s, D’s and F’s. In fact, only about 10 percent of grades awarded are D’s and F’s."" -----Read the whole thing HERE

Budget Solution: "Cut Spending AND Cut Tax Expenditures!" I understand the first one, but what does the second one mean? You are going to hear it a lot. I try to explain it here for you...

There is a two word phrase that has been used a lot recently in the Federal budget debate-- "Tax Expenditures". It has been used like this: "We need to reduce government spending AND reduce tax expenditures in the tax code". The first one is self-evident and needs no explanation.  However, the second one I think passes by people and most believe it is a similar in meaning or related to reducing govt spending.

When the Congress taxes your income it is tax revenue for them.  If Congress decides to grant a tax deduction, your taxable income decreases by the amount of the allowable deduction. As a result the tax revenue to the Federal govt will be less than it otherwise would have been...Quick Simplistic Example:

Assumptions: You are single and rent an apartment.  You do your taxes and you calculate you have a taxable income of $150,000 . Using the  IRS tax tables for 2010 you would owe $35,709 in Federal income tax.  Write your check and be done with it.

Now assume you are still single BUT you own a home and last year you paid $10,000 in interest on the loan you took out to buy the house.  As the tax code is presently written, when you do your taxes you can now subtract that $10,000 from the $150,000. Your taxable income is $140,000.  NOW, your Federal tax bill will be $32,909---$2,800 LESS because of the interest deduction you were allowed to take.

Congress considers this $2,800 a "Tax Expenditure"---tax revenue they otherwise would have received if the interest deduction did not exist.  Instead of being revenue for them to spend, they are "expending" it back to you.

When a politician/pundit talks of reducing "tax expenditures", they are referring to eliminating (or reducing) various tax deductions or tax credits that are currently allowed.  In effect you would be paying a larger tax bill--$2,800 in our example.  BUT your TAX RATE did not increase by eliminating this deduction, only your income that is subjected to tax increased.

Reducing or eliminating the interest you pay on a home mortgage is just one area Congress is looking at to raise more revenue without raising taxes. 

Whether you agree or disagree with how the term is used/interpreted, I hope this brief explanation helps you better understand it when you hear it.

The nation's trade deficit increased in May. The "why" is shown in two easy line graphs...

The US trade deficit increased last month from the prior month. A trade deficit occurs when a nation's exports are LESS THAN its imports. This means its Net Exports (N(x)) are negative.  Look at the right-most tips of the lines on the graph below.  The BLUE line shows the US had a total trade (goods and services) deficit of roughly $52 Billion dollars just for the month of May. The import of crude oil (BLACK Line) is roughly $32 Billion of the total trade deficit, or 62% (32/52=.615)!! The difference between these two lines is represented by the RED line. What are we doing to minimize our dependency on this stuff? Rhetorical question--we all know the answer...

Source: Calculated Risk

It is not because of a lack of effort on the export side of the equation (goods and services we make and sell to foreigners), as shown in the graph below. Our exports are recovering nicely (RED line) and almost back to a historical high.  As we recover, we are either consuming more oil overall (domestic production + Foriegn imports) OR we are producing less domestically, hence importing more. I am not sure which it is, to be honest....Any ideas???

Source: Calculated Risk

How Hot is it?? Surface heat map of the US...CODE RED, CODE RED! No, I cannot handle the truth.

Source: NOAA

The "Carry-Trade" explained---Short lesson on how to make money in the Foreign Exchange Market. Don't try this at home!

Here is a quick lesson on the "Carry Trade". In its most simplest terms, this is borrowing money in one currency (i.e. US dollars) at a low interest rate and investing it in another country that currently offers savers/investors a high interest rate (i.e. Brazil--currency called the "Real").  I will use Brazil because it does in fact offer relatively high interests rates to savers/investors.  Of course, we will have to exchange our dollars for the foreign country currency in order to do this so we have to take into consideration the prevailing exchange rate for the two currencies.

There are 2 ways for the holders of dollars to make money--(1) the difference on the spread between the interest rate at which you borrowed the money and interest rate you received from the investment you put the money in (assume the exchange rate stays constant), and (2) IF the foreign currency you currently have the money invested in APPRECIATES in value during the time you hold the investment. 

Look at the first scenario first.  Right now it is "cheap" to borrow money in the US and the interest rates that Brazilian banks offer savers in relatively high.  I am going to use ballpark numbers because, well frankly, the math is easier.  Assume I can borrow money in the US at a 5% interest rate for one year.  If I borrow $1,000 I will have to pay the bank back $1,000 plus $50 after 1 year ($1,000 times 5% = $50)) for a total of $1,050.  I am going to invest this $1,000 in a bank in Brazil because it offers 10% interest rate to savers. 

First, I have to exchange my US Dollars for Brazilian Reals. Assume today the exchange rate is $1.00  = 1.76 Reals. With my $1.000 US dollars I can "purchase" 1,760 Reals. I put those Reals in the bank and start earning my 10% interest.

After one year I will have 1,936 Reals in my Brazilian bank (1,760 + 176 (10% of 1,760). I must withdraw this money so I can pay back the US bank for the money I originally borrowed.  ASSUME the exchange rate did not change at all (it did, but more on that in a minute).  To go from Reals to Dollars, I have to calculate the reciprocal of the exchange rate. The reciprocal of $1.00 = 1.76 Reals is 1.00 Real = $.5681 cents.   If we multiply 1,936 Reals by $.5681 we get $1,100 (rounded). We now take $1,050 of this and repay the bank what we owe them.  We have $50 left over! In real life, we would have to pay a fee for the currency transaction when we bought and sold, so we would have to subtract that from our $50.  BUT, you can see how you can make money by borrowing in one currency and saving/investing in another.

Now, what if the exchange rate changed while you had your money in the Brazilian bank? The exchange rate I used above for the Real was the exchange rate from July 12, 2010, one year ago.  TODAY the exchange rate is $1.00 = 1.58 Reals.  Now $1.00 US buys FEWER Brazilian Reals which means the inverse is true---The Brazilian Real buys MORE US Dollars than before (1.00 Real =$.6329 cents). Let's use this to see how our investment fared.

If today we exchange our 1,936 Reals for dollars we get 1,936 times $.6229 cents = $1,225 (rounded). NOW, when we pay back the loan plus interest of $1050 we will have $75 left over (minus fees).  We have an additional $25 just because to the change in the exchange rate between the Dollar and the Real. Easy money, right???

The trick to this is to (1) find a country where the interests are higher relative to the US, (2) it is stable enough to invest in, and (3) the currency appreciates while it is earning interest.  Of these number 3 is the most risky and difficult to predict. If the Real had DEPRECIATED in this time period, you could have lost not only the interest you earned BUT some of the principle as well.

Even if the exchange rates stay relatively constant, you can see how you can make money in the "carry-trade". The appreciation of the Real was a bonus.  However, this strategy is risky and is not recommended by professional financial advisers unless your investment portfolio can withstand the risk.

A Man gets disability payments from the Swedish Govt for listening to Heavy Metal music...As Chris Rock says "I don't agree, but I understand"...

I wonder if listening to Zamfir will get me the same benefits as this Swedish man...

""A Swedish heavy metal fan has had his musical preferences officially classified as a disability. The results of a psychological analysis mean that the metal lover can now count on having his income supplemented by state benefits.

 Roger Tullgren (Photo#1, Photo#2, Photo#3, Photo#4, Photo#5), 42, from Hässleholm in southern Sweden, has just got a new job as a dishwasher at a local restaurant.
Because heavy metal dominates so many aspects of his life, the Employment Service has agreed to pay part of Tullgren's salary. His new boss meanwhile has given him a special dispensation to play loud music at work.
"The fact that I am so into music has affected my work situation to the extent that I have had to quit some jobs," he said.

[Watch video footage of Roger Tullgren talking (in Swedish) about his heavy metal addiction at this location.]

Roger Tullgren first developed an interest in heavy metal when his older brother came home with a BLACK SABBATH album in 1971.

Since then little else has mattered for the 42-year-old, who has long black hair, a collection of tattoos and wears skull and crossbones jewelry.

Last year the ageing rocker claims to have attended almost three hundred shows, often skipping work in the process.

Eventually his last employer tired of his absences and Tullgren was left jobless and reliant on welfare handouts.

But a series of sessions with a psychologist soon led to a solution of sorts: Tullgren signed a piece of paper on which his heavy metal lifestyle was classified as a disability, an assessment that entitles him to a wage supplement from the job centre.

The manager at his new workplace allows him to go to concerts as long as he makes up for lost time at a later point. He is also allowed to dress as he likes and listen to heavy metal while washing up.

"But not too loud when there are guests," said Tullgren.

The Local spoke to an occupational psychologist in Stockolm who admitted to being baffled by the decision.

"I think it's extremely strange. Unless there is an underlying diagnosis it is absolutely unbelievable that the job centre would pay pay out.

"If somebody has a gambling addiction, we don't send them down to the racetrack. We try to cure the addiction, not encourage it," he said.

Henrietta Stein, deputy employment director for the Skåne region, is also puzzled by the move; "an interest in music" is not usually sufficient to qualify for wage benefits.

"Certain cases are confidential but in general there is always a medical reason that is well-documented," she said.

Tullgren currently plays bass and guitar in two rock bands (including SILVERLAND; MySpace) and says that he tends to get a lot of positive reactions for daring to be himself.

"Some might say that I should grow up and learn to listen to other types of music but I can't. Heavy metal is my lifestyle," he said. ""

3D Printing---Am I the last to know about this? This is going to change the way we make stuff dramatically...Two short videos here to give you the what-for's and how-to's. AMAZING!

I have heard of this technology called "3D Printing" but had no idea of how it worked until I viewed these two videos.  As a non-techie but someone who can see potential, this is amazing!  It is in its infancy, but I believe we will all see this in the near future. It will change the nature of how manufacturing and how we make stuff. There will be more control at a end user level. HT: Carpe Diem)

The first video shows an example of 3D Printing. The second one is a slightly more technical explanation of the process. You WILL be fascinated!

"I am going to a meeting on Capitol Hill to discuss a terrorist plot. Oh, reallly? Where are you going to park? I can't tell you that---it is a secret!"...

I am convinced that many things labeled "Secret" by the Federal government are done so not to sheild the information from "enemies, foreign and domestic", but to keep information from the general public because, well, it is convenient to do so for a variety of reasons. The term "national security" is used as a guise to keep certain policies/decisions secret that would subject agencies to scrutiny they would just assume not have to deal with. The amount of parking available to elected officials and their Capitol staff seems to be an example of this. Abuse of  power??...(HT: Matthew Yglesias)  

How Much Parking Is There at the Capitol

""The public isn't allowed to know.

Seriously: After taking note of the many expanses of concrete available for Hill staffers across the Capitol complex, I asked the Committee on House Administration how many parking spaces it oversees, and how many permits it hands out (each office gets a certain number to divvy up). Apparently, that information would imperil the security of...I'm not sure what exactly. But something.

My suspicion is that it's a big number. Along with infamous Capitol South metro lot, the U.S. of A. also owns parking lots west and south of the Spirit of Justice park, under the Rayburn building, and below Massachusetts Avenue between 1st and 2nd Streets NE. Some of that would be difficult to build on because of existing rail infrastructure. Most of it, of course, is a massive waste of good land served by some of the most robust transit links in the city.""

Volkswagon making cars in the US to sell in South Korea...Think about that for a moment...

VW confirms plans to export Chattanooga-made Passat to Korea

""Volkswagen’s Chattanooga plant, now producing more than 100 Passats daily, plans to sell the car in South Korea as well as in North America, the factory’s chief executive confirmed Wednesday.

Frank Fischer, CEO of VW’s Chattanooga operations, said the automaker’s sales team determined South Korea “is a very good match” for the all-new Passat.

Volkswagen initially is targeting a modest 4,000-a-year sales goal for the Asian nation, Fischer said. Plans are to start those sales in 2012, he said. In addition to the U.S., VW has said the Passat also will be sold in Canada and Mexico.""

HT: Carpe Diem

A penny for your thoughts...A private market invention is saving the Taxpayers BILLIONS of dollars, or I should say cents...

The next time you pass (or use) a CoinStar machine, give it a wink and a nod and a pat on the head.  It is a nice example of a POSITIVE unintended consequence of bringing an invention to the marketplace. It takes "dead" financial capital (all those pennies, nickels and dimes) in a jar, under your car seat, or under the cushions of your couch, and turns them into financial capital that is "alive" and more likely to be spent. CoinStar then returns these coins back to the banking system to be re-circulated again.  The Dept of Treasury then needs to produce fewer coins to meet existing demand.  Natural and labor resources are conserved, hence fewer tax dollars are spent producing coins. 

How come the inventors of this machine don't win the Nobel Prize in Economics and Greenpeace's award for environmental activism?  A simple invention designed to solve an everyday, unromanticm, unflashy, non-technical problem. THAT is the free market at its best...

Source for this entry is at Economix:

The U.S. Mint produced about 5 billion pennies, nickels, dimes and quarters in 2010, less than one-third of the average annual production over the last 30 years.


Just like paper currency, right? Well, not quite.

People clearly are using fewer coins.

But there’s something else too. Call it The Coinstar Effect.

In 1992, three Stanford University graduate students convinced four Bay Area supermarkets to let them install a new machine designed to count spare change. The concept was rather brilliant, like a slot machine with a guaranteed payout. There’s nothing quite like the sound and sight of money — your money — being counted. And as the company grew, the technology began to change the basic physics of change.

Americans keep vast quantities of coins around the house. “Keep” is maybe the wrong word. Coins gather in the folds of couches and drawer bottoms and coat pockets. They are collected in jars, popped into piggy banks, socked away. And until Coinstar came along, that money mostly just sat there. In keeping with the law of entropy, it was easy to turn bills into coins and difficult to turn coins back into useable money.

And that is exactly what Coinstar made easy.

By the early 2000s, the company’s machines were annually collecting more coins than the U.S. Mint was producing. And the company was putting those coins back into circulation, meeting a growing share of market demand, reducing the need to mint new coins.

There’s another important difference between bills and coins: Coin production tracks the American economy much more closely, because the demand for coins is almost entirely domestic, while the demand for paper currency comes mostly from overseas. (Moreover, the demand for paper currency can rise during a financial crisis, as it did in 2008, because people sought to withdraw their money from the banks.)

Coin production, in other words, is likely to rebound somewhat as the economy recovers. But the U.S. Mint estimates that production still won’t top 10 billion coins a year, so it is shuttering equipment and reducing capacity at its plants in Philadelphia and Denver.

Short video explaining the link between Economic Freedom and Standard of Living. So simple, yet difficult to achieve...

HT: Division of Labour

What are the most popular colors for new cars? You might be surprised...or not...

Consumers are pretty conservative when it comes to the color choice in cars. Why is that? Is it for re-sale value? While I might prefer a different, more off the wall color, I may not be willing to gamble choosing that color because it might limit the number of buyers of it used in the future.  Read about this and more on color choices for your car in this article in Road and Track Magazine...What do you think? (HT: Chartporn)

Source: Road and Track

Source: Road and Track

Steve Jobs and jobs---See how he creates jobs around the world to produce the i-Pad. How would YOU do it differently?

Resources are not unlimited.

Just look at the two top countries, the US and China. If you wanted to have the technological wizardy of the  i-Pad in the marketplace for a "reasonable" price, and you had to divide up the labor to produce it, which combination of jobs would you want available for US workers? You certainly don't trade an engineering job for a production job. That would not make sense. How about a retail job for a production job? Well, can't do that either, because the retail market is in the US.  If we moved ALL(or some) those production jobs to the US, would the i-Pad be a better product? A more expensive product? LESS expensive? OR is everything basically in balance to bring you the magic that is the i-Pad...Perhaps Comparative Advantage works?



Source: The Conversable Economist

HT: The Conversable Economist

Where's Waldo? Likely calling a moving company to book a move to China...Need more evidence that it is in your interest to know more about China? See this graphic, graphic...

We can choose to view China as a problem or as an opportunity. The Genie IS out of the bottle and my advice for young people is to seriously look at what you can to do to prepare yourself for a future with a more prosperous China. Can't ignore hundreds of millions of potential new customers for US goods and/or services.

Below is a graphic from moving company data on international corporate moves. If you are in college, or are about to be, then consider mixing in a little instruction in Mandarin.  Spend a semester there.  Regardless of your major, whether it is medical, technical, business, marketing, etc, it will only enhance your marketability.   



Source: WSJ


Movers Pick Up China Business

""The rising numbers of U.S. workers and students moving to China are a bright spot for moving companies like St. Louis-based UniGroup Worldwide, which has seen domestic business decline.

The closely held company, an affiliate of Mayflower Transit and United Van Lines, handles moves for corporate clients that pay to relocate employees. Between 2008 and 2010, the number of moves from the U.S. to China it handled grew nearly 47% to 396. Meanwhile, United Van Lines saw interstate moves in the continental U.S. decline 26% to 146,837 in the same time period.


China was the third-most common international destination for UniGroup, behind the United Kingdom and Germany, according to the company, which handled more than 15,000 moves last year.

In part to handle the growth in Asia, since 2007, UniGroup has purchased offices in China, Hong Kong and Singapore, among other locations, said president Brian Iles.

Ernst & Young, which has about 9,000 employees in China, has hired more than 1,500 in the last year and plans to hire another 2,000 by next July, said Bin Wolfe, people leader for the company's Asia-Pacific region. Although most of those employees will be native Chinese, Ms. Wolfe said in the last couple years, more employees from the U.S. have sought to get experience in emerging markets such as China.

Chinese students studying in the U.S. are also increasingly moving back to their native country upon graduation, she said.

"There is a lot of competition out there. People with strong experiences and bilingual skills are in high demand," she said.""