Just because you are in "the Big House" does not mean you can take a first-time homebuyers tax credit...But we do appreciate our prison poplulation taking ownership of their cells...

Inmates Get Home-buyer Tax Credits: Gov't Report

""Nearly 1,300 prison inmates wrongly received more than $9 million in tax credits for home buyers despite being locked up when they claimed they bought a home, a government investigator reported Wednesday...The investigator said 241 of the inmates were serving life sentences...Nevertheless, 1,295 prison inmates were able to get $9.1 million in credits, in part because the IRS does not keep up-to-date records of who is in prison, the IG's report said. None of the inmates filed joint returns, so the claims could not have been for purchases by spouses""....(read rest of story HERE)

Federal Government maintains website to debunk conspiracy theories regarding...THE FEDERAL GOVT!! Shhh---Dont tell anyone!

Once again, something you can't make up.  The Federal Government is spending Federal Tax dollars to maintain a website to refute/debunk conspiracy theories about the, well,  the Federal Government...I hear if you click on the above link you will get audited by the IRS!!!! Is THIS a conspiracy to take our attention away from_______? Hmmm....(cue X-Files Theme Music)...Here is a video from Mel Gibson's "Conspiracy Theory" to put you in the mood...

Would you buy this "sound system" for $2,327?

Would you buy this "sound system" to the left for $2,326?? (that is how much $379.00 is in 2009 dollars)

There are many ways to measure living standards--some measured on an explicit level and some more implicit.  For instance, the way we calculate GDP is a measure of social welfare (largely explicit) but so is GNH (Gross National Happiness) which includes implicit welfare (i.e.environmental degradation/enhancement)...Below is a simple comparison of a product(s) produced in 1964 and 2010 contribute(ed) to leisure and the number of hours  it took(takes) the "average" person to work to purchase that item.  Were the "good ol' days" so good? I wonder how this hourly wage relative to the price/quantity of a good/service holds up over a broad range of goods and services (food, education, health care, etc). This is assuming that things today had some semblance of something produced 40 years ago...(HT: Another GREAT and relevant post from Carpe Diem)

In 1964, here's what the average American consumer could afford after working 152 hours (almost a full month) at the average hourly wage then of $2.50: a "moderately priced, excellent stereo system" from Radio Shack on sale for $379.95.

In contrast, the typical consumer today working 152 hours at the current average hourly wage of $19 could afford this "cornucopia" of electronic goods:

Link HERE

Cant think of clever tagline today---But interesting post on why you may not be able to find a job...

    Why has job growth, as we come out of recessions, been so tepid? Don't business need employees as demand picks up? Well, yes and no.  It depends on the type of industry and the changes going on in the economy even as we experience a recession.  In large part, technology advancement has not taken a "break" as a result of recessions as far back as the early 1990's.  It seems to have flourished very well, overall (think phones, computers, tele-communications, transportation, etc) in spite of overall economic conditions.
    As firms start to recover with smaller workforces their first instinct is to not over-commit in terms of hiring people. People are expensive! At the margins, they look for a competitive edge that will reduce the cost of producing as they ramp up production again.  The first place to realistically look is at technology.  A question an entrepreneur may ask themselves: What technology has emerged since my last big investment that may help me (1) reduce costs or (2) increase my productivity? Basically they are looking for ways to efficiently replace labor (L) with some sort of technology (in economics we call that Capital or "K" for Kapital). 
     If there is adoptable technology available, and it meets the above two requirements, then the prudent business owner will "substitute "K" for "L"  Those workers who previously held those jobs and were laid off one or two years ago will re-enter the job market to find the job they performed is no longer available---time and technology has passed them by.  If the new technology becomes widely adopted, then workers cannot move ANYWHERE to find their "old job"--it has been automated out of existence.
    This is the definition of someone who is "structurally unemployed" (defined further below).  They must re-train/re-educate to find other job. For example, re-train to produce/maintain the technology that REPLACED them at their previous job (irony?). 
   If structural unemployment is the dominate form of unemployment then it is much more difficult to solve then simply spending money to increase demand for goods/ services and assuming employers will hire to meet that new demand.  Policy makers should read between the lines to determine what is really going on with the workforce and propose policies that will address the root problem...

Update on Structural Unemployment

One key question in considering demand-side economic policies, such as fiscal stimulus and other deficit spending, is whether the elevated unemployment rate is a product of cyclical or structural forces. If unemployment is cyclical, then boosting aggregate demand would mean that employers would re-hire workers earlier and save the economy a lot of pain. If it's structural, though, meaning that the economy is undergoing significant changes and there is now a substantial mismatch between workers' skills and the kinds of skills needed throughout the economy, measures aimed at increasing short-term demand might not do much to help out the unemployed.
    In 2003 the NY Fed published a paper examining whether the 1990-91 and 2001 "jobless recoveries" were caused by structural factors. The authors, Erica Groshen and Simon Potter, found evidence that these recessions, compared to past recessions, featured more "permanent relocation" of workers among industries. In other words, when the recessions were over and recovery had taken place, more industries were net gainers or losers of employment. Some industries were left permanently smaller than they were before the recession, meaning that workers couldn't return to those sectors even when demand and GDP had recovered.
     Menbere Shiferaw and John Robertson, economists at the Atlanta Fed, have replicated one of Groshen and Potter's key graphs depicting unemployment in the 2001 recession:

***The one outlier in the top right corner, if you can't make it out, is the "federal government" industry. It gained jobs during the recession and has gained jobs far faster than any other industry during the recovery

Do you like Seafood? Do you think prices will rise? There is good news for you!!!

I had no idea that we imported this much seafood to meet domestic demand and so little of our domestic demand is met with Gulf seafood...

Impact on Seafood Prices Is Limited

""The Gulf of Mexico oil spill is pushing up prices for shrimp and oysters from those waters but having limited impact on the larger U.S. seafood industry.

  Here's why: The U.S. imports about 83% of its seafood and just 2% of domestic supplies come from the Gulf. 
 That's no comfort for Gulf fisheries, of course, which have been devastated by the spill that has gone on for two months now.  The average wholesale price of Gulf brown shrimp has jumped by more than half since before the spill as fishing restrictions have closed down large swaths of the once-prolific fishery. Oyster prices are up 33% over the same period, according to Urner Barry, a company that tracks commodity prices, including seafood..But because imports dominate the market, consumers and retailers will not likely see dramatic changes in pricing or availability unless they are specifically looking for Gulf products, Mr. Gibbons said. Case in point: 90% of shrimp is imported and prices for those should decline as production is expected to increase through June and July.." Rest of story HERE

Does the Yuan make 'You Yawn"? Well, WAKE UP and "Appreciate" it!!

When we (US) buy something from China, somewhere along the line a currency exchange has to take place. We exchange US Dollars for Chinese Yuan (click HERE for its current value relative to the dollar) so we can buy their stuff.  Because we buy much more than they buy from us, the net flow of dollars is towards China to buy the yuan.  This SHOULD increase the value of the yuan because demand for it has, on net, increased.  However, it does not  because the Chinese maintain a FIXED exchange rate with the dollar.  If they see the yuan appreciating in the international markets, they intervene by BUYING dollars and SUPPLYING Yuan to the international market, thereby preventing the YUAN from appreciating in value.  They want a relatively "cheap" Yuan because after the currency exchange takes place it makes Chinese goods less expensive.  If the yuan appreciates then when we exchange our dollars for yuan then we have to give up MORE dollars to buy the same amount of yuan we did before, ergo, making Chinese goods relatively MORE expensive.  This would happen if the Chinese let the yuan "float" in a flexible exchange rate regime.  In other words, if they let the fundamentals of supply and demand do its work then the yuan would appreciate and the dollar would depreciate against each other. 
     This is a major trade and political issue.  The Chinese today signaled that they will let the Yuan appreciate in a "slow, orderly" process.  We will see...Because they are export focused, this will be difficult for them to do....Below is a list of the winners, losers and uncertainty  with an appreciating yuan...IT DOES AFFECT YOU!!!!

Who cares about the Chinese yuan?

THE WINNERS:

•Global trade, and all those involved in it, may be able to breathe a collective sigh of relief. Although at this stage the Chinese announcement is woefully short on detail, it should go some way to silencing the growing drumbeat of trade war emanating from Washington DC and elsewhere.
•Foreign manufacturers that compete with Chinese imports will be smiling - think of toymakers and clothes makers in the US. Also, other big exporting countries such as Japan, Korea, Taiwan and Germany will gain a competitive advantage over their Chinese rivals.
•Foreign companies (particularly in the US) that export to China will become more competitive. These include carmakers, technology companies and engineering firms. The price of their goods in yuan will be cheaper, and the money they earn in China will be worth more in their home currency.
•Chinese companies that have borrowed in dollars will find the cost of their debt falls. Big winners here will include the Chinese airlines.
•Long-suffering Chinese consumers will benefit from cheaper imports. However, households in China will continue to suffer from artificially low deposit rates, which mean they earn very little return on their savings.
•Speculators who anticipated the central bank's announcement borrowed in dollars and bought Chinese assets, including property and Chinese shares. Others speculated on currency forward contracts, which have jumped in value on Monday.
•Central bankers in China have been lobbying the government to let it do more to combat rising inflation in China. They have been fighting over policy with export industry lobbyists. A stronger yuan will help by lowering export prices and cooling the Chinese economy. The move will also make it easier for other Asian central banks, who face rising inflation, to raise interest rates and let their own currencies appreciate. 

THE LOSERS:

•Chinese exporters, including foreign companies that own factories in China, will become less competitive. These companies pay wages in yuan, but set export prices in dollars and euros. Some, such as Toyota and Honda, are already facing strikes by Chinese workers to raise their wages. Many exporters operate on very thin profit margins that could be wiped out by the yuan's rise.
Foreign consumers, especially in the US, will have to pay more for goods made in China.
•A rising yuan could be bad news for the environment, as it will make it cheaper for China to import raw materials and energy resources. The country's heavy industries are already widely criticised for poor standards of air, water and soil pollution. China is also the world's biggest growing producer of carbon emissions.
•The People's Bank of China will be a big loser, even though its bankers may be happy about the policy change. Because of the central bank's currency policy, it has borrowed billions in yuan and invested it in US treasuries. The value of those treasuries in yuan is now set to fall, causing the central bank hundreds of millions in paper losses. 

UNCERTAIN:

•Europe may not benefit from the new yuan policy as much as the US. The yuan is currently pegged to the dollar, so any "flexibility" will directly impact US competitiveness. Indeed, the eurozone and the UK may actually lose out if Beijing decides to start linking its currency more closely to the euro and the pound. If the Chinese central bank starts buying these currencies, it will push their value up, making Europe less competitive.
•Chinese heavy industry will need to pay less for the commodities - particularly metals and energy - that they import. For companies that focus on exports, this will go some way to alleviating their loss of competitiveness. But for companies that focus on the domestic Chinese market, cheaper raw materials are an unmitigated plus.
•Commodities exporters such as Russia, Australia and Brazil may find demand from China - their most important customer - cools, as the demand from Chinese exporters cools. Alternatively, demand may pick up, as China can buy more raw materials at a cheaper price for their domestic markets. Commodity markets took the news very well so many clearly predict the latter. •The new yuan policy may prove a pyrrhic victory for the US politicians who have lobbied so much for it. There will after all be no immediate rise in the yuan. But the congressmen currently preparing a retaliatory trade sanctions bill against China may find the wind taken out of their sails. The US Treasury Secretary, Timothy Geithner, had started talking tough ahead of the G20 summit in Toronto later this month, but may now revert to quiet diplomacy.

Education = Earning Power. More education = More Earning Power. Nice graph illustrating this for you...

"In 1980, an American with a college degree earned about 30 percent more than an American who stopped education at high school. But, in recent years, a person with a college education earned roughly 70 percent more (see chart above). Meanwhile, the premium for having a graduate degree increased from roughly 50 percent in 1980 to well over 100 percent today. The labor market is placing a greater emphasis on education, dispensing rapidly rising rewards to those who stay in school the longest""...See Carpe Diem for more

One of the primary reasons we have income inequality gap in the US is because we have an education gap.  In general, more education translates into more income from the creation of new/improved goods and services.  Doubt it? If you are of a certain age think back to when you were young---is there more new "stuff" than there was before? Is it of better quality and less expensive, relative to amount of income you make today? Higher education converging with significant technological breakthroughs (made possible by higher education?) creates more wealth opportunities for the educated. If one is not advancing their skills through advanced training or other formal education then you will be left behind...GET YOURSELF SOME!! :)

I know it is shallow and out of vogue, but sometimes basic economic principles work out---who would have thought?...

"The curious task of economics is to demonstrate to men how little they know about what they imagine they can design"--F.A. Hayek

Within the fist 150 pages, or so, of ANY introductory Economics textbook you will find instruction on the effects of price controls by the government.  The two primary price controls are Price Ceilings and Price Floors.  The two articles below are excellent examples of Price Ceilings and their predictable consequences.  Price ceilings are government set prices of goods/services that are below the current market equilibrium prices of said goods/services, which were presumably determined through the market mechanism of supply and demand.  Price ceilings tend to create shortages in the market place because (1) the price is not high enough for producers to supply the market profitably therefore the quantity supplied to the market decreases or (2) there is ample supply but suppliers with-hold the goods because they can get a higher price on the "black market ", which is a subset of the informal economy as it is referred to in more board terms.  The second reason may be the culprit in the short run as suppliers do their best to keep adequate inventory or meet the market price in the informal economy (be "greedy", if you will).  However, the debilitating effects of a price ceiling in the long run will be to effectively create chronic shortages of a good in the market place.  If the private market price, where supply equals demand, REALLY reflects the cost of producing a good and the government deems that too high and mandates a lower price, then it is a prescription for decreases in the quantity supplied hence shortages of the good. 

Hugo Chavez Spearheads Raids as Food Prices Skyrocket

""Mountains of rotting food found at a government warehouse, soaring prices and soldiers raiding wholesalers accused of hoarding: Food supply is the latest battle in President Hugo Chavez's socialist revolution....Much of the wasted food, including powdered milk and meat, was found last month in the buildup to legislative elections in September. The scandal is humiliating for Chavez, who accuses wealthy elites of fueling inflation and causing shortages of products such as meat, sugar and milk by hoarding food...Food prices are up 41 percent in the last 12 months during a deep recession, government figures show, despite the government's growing network of state-run supermarkets that sell at discounts of up to 40 percent and are popular with his poor supporters...."We are bringing order to prices," Trade Minister Richard Canan told Reuters during the Catia raid. "There are traders who are taking these products to the black market ... That is a crime and our government will continue to target these stores."

Philippine Price Controls Hamper Rise of Generics

The Philippines recent embrace of drug-price controls to lower the cost of life-saving medications is creating some unexpected problems—including crimping the supply of inexpensive generic drugs. The country's president, Gloria Macapagal Arroyo, was eager to reduce the cost of pharmaceuticals in a nation where a third of its 95 million citizens live on around $2 a day. Last August, she used new regulations to cut the cost of five widely used medications, including Pfizer Inc.'s Norvasc hypertension drug and GlaxoSmithKline PLC's Augmentin antibiotic.  Facing mandatory price cuts, drug companies in the Philippines cut the prices of an additional 16 drugs, and in February agreed to slash the prices of frequently prescribed medicines
Industry analysts and executives said the price caps have unintentionally knocked the wind out of a nascent generic-drugs industry that had sprung up here. Lower-priced brand- name drugs are pressuring these low-cost producers, and creating a policy challenge for President-elect Benigno Aquino III, who takes over at the end of June.


Edward Isaac, executive director of the Philippine Chamber of the Pharmaceutical Industry, said price controls and the threat of more caps have lowered the cost of some brand-name drugs to near those of generic competitors. Pfizer's Norvasc was cut to about 22 pesos, or 47 cents, for a five milligram tablet, from over 44 pesos.
"What's happening now is that when the price of Norvasc, for example, is cut, the generics have to slash their own prices," Mr. Isaac said.
Declining profits have some drug retailers putting expansion plans on hold. "We've not opened any new stores since the price controls were introduced," said Leonila Ocampo, vice president of Manila-based MedExpress. The drugstore chain has seen sales volumes drop since the price controls were introduced. "Our margins are under pressure, and if there's no profit, I don't know what will happen," said Ms. Ocampo.
Another drug store operator, Florecita Intal of Stardust Drugs & Medical Supplies Corp., said lower revenues from the branded-drug price caps restricts her ability to expand and offer less expensive generics. She fears smaller retailers might not survive.

What do Fathers Day and Watergate have in common? Alot, believe it or not...

Who is Father's Day founding father?

""Father's Day was born in 1910. But not until the 1970s did a US president issue a proclamation declaring the third Sunday in June as an official day to honor fathers...The holiday’s popularity built slowly over the years. In 1957, GOP Sen. Margaret Chase Smith of Maine blasted her congressional colleagues for ignoring Father’s Day, saying that to single out one parent (Mom) while ignoring the other was “the most grievous insult imaginable.” But it was not until 1971 that Congress passed a bill in favor of making Father’s Day a national holiday.  That’s where Dick Nixon comes in. At the time, his reelection campaign was ratcheting up, and we’ll bet this looked like a political no-brainer. In response to Congress, on April 25, 1972, he issued a proclamation that officially made the third Sunday in June “an occasion for renewal of the love and gratitude we bear to our fathers.”  But in the Nixon household, that year’s Father’s Day was not happy. First of all, America’s first dad was familyless. He was in Key Biscayne, Fla. His wife was in Los Angeles. His daughters were elsewhere. (Press accounts of the day note that the girls called.)  This was probably just as well. Sunday, June 18, 1972 – the first government-sanctioned Father’s Day in United States history – was the day news broke about a burglary the previous night at the Democratic National Committee office in the Watergate complex. 
The secrets of Watergate would eventually spill out and doom Nixon’s presidency. Here’s hoping that on that fateful Father’s Day, someone at least gave him a card or a nice tie.

Cute picture of the day---baby owl falls into lions den---this can't be good, can it???

See story here---From BBC

"China exports every six hours what the US exported in ALL of 1978"

A fact from this book. WOW! My, how has trade changed...

AFTERSHOCK

HT: Marginal Revolution

40 Great Inspirational Speeches from movies mashed into one Great Speech

Go HERE to see more mash-ups on a variety of topics...Mucho entertainment and a little education to boot!!

Do you self correct?? If so, then your sign is Microeconomics. If not, then it is Macroeconomics...Here's your sign...

Microeconomic and Macroeconomic Excess Supply

A rather simple (by that I mean in layman's terms) explanation of how markets clear, or don't clear, in a Microeconomic vs Macroeconomic sense from Professor Brad Delong.  The writer is suggesting, in a microeconomics sense, markets clear pretty well on their own as business and workers adjust to changes in market conditions, whether it is from creative destruction, out-sourcing, off-shoring, etc.  Resources (land, labor, capital, entrepreneurship) shift to production more desired by society through the mechanism of supply and demand. 
  

""...Overall unemployment may rise a bit or for a while as this process of adjustment takes place--it depends whether entrepreneurs and producers in the expanding industry where excess demand emerges are more or less on the ball, keen-eyed, and keen-witted than those in the industry where excess supply emerges and where businesses shrink. But the process of adjustment, even with frictional unemployment while it takes place, is a good thing--it makes us all richer. Attempts to stop it in its tracks or short-circuit its mechanisms are counterproductive and harmful. The end of the process comes and excess demand and supply are eliminated when there are more people making the things that are wanted more and fewer people making the things that are wanted less...."""

However, he suggests as you move to the Macroeconomic level this relationship breaks down.

""...But in macroeconomics things are different. The excess supply is economy-wide--throughout all commodity markets, producing supply in excess of demand for goods, services, labor, and capacity. Producers and entrepreneurs respond to an aggregate demand shortfall just as individual producers respond to a particular shortfall of demand for their products: they hold sales to liquidate inventories, they cut prices, they cut wages to try to preserve margins, they fire workers. In the macroeconomic case, the dynamic process that leads to the elimination of excess supply and its counterbalancing excess demand in the microeconomic case gets underway--or, rather, half of it gets underway.
The problem is that the set of industries that are shrinking is made up of pretty-much-everybody. There are no industries that are expanding. The excess demand is not for the products of a goods-and-services producing industry that can rapidly ramp-up production by employing lots more labor. The excess demand is in finance: for means-of-payment, or safe high-quality assets, or for long-duration sales vehicles. There is a rise in unemployment from the flow out of goods-and-services producing industries where the excess supply has appeared. But there is no countervailing flow out of unemployment. How do you put large numbers of people to work making more Federal Reserve notes or increasing the supply of liquid assets that are means-of-payment that are the reserve deposits of banks? How do you shift the flow of production to instantaneously raise the stock of long-duration assets, of claims to wealth that are shares in companies with secure long-run prospects that are vehicles for moving purchasing power across time from the present to the future? You can't...""

In microeconomics, the market "self-corrects" when the economy is expanding and there is room for resources and labor to move to a new level of product/service mix with no net decrease in overall employment.  However in a macroeconomics view when WHOLE industries (vertically and horizontally) experience a slow-down there is no where for productive resources to go---sort of in a holding pattern. and remain idle  He does not come right out and say it, but his premise, I believe, is that the macoeconomy does not "self-correct" and that when the "free-market" (interaction between buyers and sellers) breaks down, then the only other game in town is for government to step in to "prime the pump" with spending, and perhaps an industrial policy (i.e. alternative energy), to get things moving again.

YES!! Coffee reduces heart disease! Up next: Omellettes and Cinnamon Buns and I will be good to go...

Tea and coffee 'protect against heart disease'

Drinking several cups of tea or coffee a day appears to protect against heart disease, a 13-year-long study from the Netherlands has found. It adds to a growing body of evidence suggesting health benefits from the most popular hot drinks. Those who drank more than six cups of tea a day cut their risk of heart disease by a third, the study of 40,000 people found. Consuming between two to four coffees a day was also linked to a reduced risk. While the protective effect ceased with more than four cups of coffee a day, even those who drank this much were no more likely to die of any cause, including stroke and cancer, than those who abstained.

BP CEO is off the hook as most hated man in the US...for a while, anyway...

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