Tide Detergent as a Currency. Sounds good but I think getting change back could be a little messy. Read about it here...

I posted about this a couple of weeks ago---Tide Detergent has become a currency within the drug trade in many parts of the country.  Below is a much better, extended analysis of Tide-as-a-Currency and how it has become a de facto currency--perhaps a lesson for policy-makers.  It represents everything a fiat currency represents: A medium of exchange, A unit of account, and A store of value. Worth a read to make you think about the value of our own currency. 

Tidequistadors In Search of Sound Money: A laundry soap has developed as much legitimacy as the dollar to serve as currency. What's going on? (Source: Reason Online)

Over the past few months, the police force in Prince George’s County, Maryland has been dealing with a strange rash of robberies. Thieves have been going into grocery stores and drug stores, loading their carts up with stacks of money, and then rushing out the door where they have a get-away car waiting. A sane man may ask why CVS and Wal-Mart are stocking piles of cash where the peanuts and greeting cards should be. But these thieves are not taking U.S. legal tender—they’re stealing Tide laundry soap.

It turns out that the detergent is not just good for making your clothes brighter than the imitation brand. It’s also street currency for buying pot and cocaine. Briefcases full of cash are being cast aside in favor of blaze-orange containers of laundry soap. Yes, there’s liquid gold in dem dar bottles

There is some debate over whether this is a new trend, and perhaps our more nefarious readers might enlighten us to the commonality of this practice. But reports suggest the Tide thefts are a nationwide phenomenon. And a former FBI agent explained to ABC why it might make a good commodity for barter: "Tide is highly recognizable," said Brad Garrett. "It's very difficult to trace and it's easily resold."

Tide, as the money gods would have it, carries nearly all thecharacteristics of sound money.
To start, it is widely used. Tide detergent is sold in every major city and most places in between. It can be found in the laundry room of both Upper East Side penthouses (the ones where residents don’t just throw away their dirty clothes to buy new ones) and “quaint” fixer-uppers of the South Bronx.

I found a bit of interesting news in today's job report that illustrates a continuing trend in inequality---however, it is something you can do something about.

I clipped this from todays jobs report because I thought it noteworthy for students.

The numbers in the Blue Box show the number of new private sector (not counting govt jobs) SERVICE jobs created last month (March). I see continuing "inequality" in the addition of new jobs. By that, I mean by education AND skill level. 

In general, there are large positive numbers in "Business/Professional, Education/Health Services, and Financial Activities".  Some of these jobs may NOT require advanced education but most will.  The exception to this is in "Leisure and Hospitality" but these presumably low wage/skill jogs are off-set by a large decline in "Retail" jobs.  This has been the trend and I don't see it reversing any time soon.

Service jobs in many sectors of  economy are the main destination for those without advanced education/skills. Those jobs are slowly(?) tapering off due to technology adoption and other efficiencies in business. 

Please stay in school and/or seek ways to upgrade your skills at all times. Your standard of living depends on it.

Here is concise explanation how the unemployment rate is calculated and some of its pitfalls. Also links to todays report and analysis.

Below is an easy to read summary from the WSJ of how the unemployment rate is calculated and some of the "myths" associated with its calculation. Here is a link to the report released today.  HERE is a link to a website that gives nice, short, objective summary of various economic reports and releases.
All the statistics the government collects on macroeconmic activity (i.e. GDP, Inflation, Unemployment, etc) are subject to constant revision and interpretation. In laymens terms, they have literal and figurative holes in them big enough to drive  Mac Trucks through.
To get a better understanding of the economic situation you MUST go beyond the "headline" number touted by the media and look closer at the compostion of the actual published reports.  There IS gold in them thar' reports. 

FourCommon Unemployment Myths

Economists and non-experts alike pore over the government’s jobs numbers each month for hints about where the economy is headed. But confusion about how the statistics are calculated has led to some myths about the report and what it shows.

 

First, the basics: Every month, the government conducts surveys of households and employers, which form the basis of the main employment statistics. Under government definitions, which date back to the Great Depression, people count as employed if they’re doing any work for pay at all, and as unemployed if they aren’t working but are trying to find a job. People who aren’t working but also aren’t trying to find work aren’t considered part of the labor force at all.

Four common unemployment myths:

I don’t receive unemployment benefits, so the government doesn’t count me as “unemployed.” The official unemployment rate is based on a survey of about 60,000 households, not on unemployment benefits, which are administered by the states. The unemployment rate includes people who aren’t eligible for benefits, such as people who quit their jobs voluntarily, people who are entering or re-entering the work force (after graduating from high school or college, for example, or after taking time off to raise a child), and people whose benefits have expired. But it also might not include some people who do qualify for benefits: Someone doing odd jobs while collecting unemployment benefits will qualify as “employed” in government statistics.

More comfort for those of you pursuing Non-Technical degrees...YOU are in BIG Demand!! Learn here how to take advantage of it.

I encourage you to read the whole article below.  Not everyone can be (or wants to be) an engineer, scientist, or mathetician OR business major.  Commerce is increasingly becoming competitive and global.  Businesses need people who can look at scarce resources in new and innovative ways.  They need people who can connect with people across borders, cultures, religions, etc.  I think a well rounded education in Economics does this best but there are many other Social Science and/or Liberal Arts majors that can do the same thing. 

Pursue your degree agressively but keep your head up and look for opportunities.  Do not say NO to any opportunity to network or to learn something new.  You never know how that contact or new knowledge might help you down the road in the near or far future.

Wealth or Waste? Rethinking the Value of a Business Major

"...Companies say they need flexible thinkers with innovative ideas and a broad knowledge base derived from exposure to multiple disciplines. And while most recruiters don't outright avoid business majors, companies in consulting, technology and even finance say they're looking for candidates with a broader academic background....

...Such changes should appease recruiters, who have been seeking well-rounded candidates from other disciplines, such as English, economics and engineering. Even financial companies say those students often have sharp critical-thinking skills and problem-solving techniques that business majors sometimes lack...."

Nice Graphic showing the Continent of Europe at night in 1992 and 2010. People see lights. Economics students see Opportunity Costs!

A map of the continent of Europe at Night (HT: Carpe Diem).  Watch carefully. The image transitions from 1992 to 2010. It is interesting to note the areas that have much more light (by light I mean produced by electricity). The spead to the former Soviet Block countries after the fall of the Berlin Wall is pretty obvious.  Also, if you look at some of the central cities like Paris and Madrid.  There is definitely a pattern of "Urban-to Suburban Sprawl".

This suggests two things---(1) Europe got much richer over  the last 20 years in order for infrastructure to be built (and paid for) to support new economic activity. (2) They consume much more energy, in total, from fossil fuels (and Nuclear) which contributes to environmental problems that concern most Europeans...Can anyone say Opportunity Costs?  Hate those opportunity costs--they always get in the way and make you think!

Nice article illustrating Opportunity Costs, the PPF and Supply and Demand in Agricultural Markets...

Farmers’ corn push to hit soyabeans (The Financial Times)

Food commodity prices rose after US farmers signalled plans to sow the most corn in 75 years, taking away land from soyabeans, which are facing a fall in supplies due to droughts in South America.
A US government survey of 84,500 farm operators indicated they would plant 95.9m acres (38.4m hectares) with corn this spring, 4 per cent more than last year, the most since 1937 and above expectations. Plantings of soyabeans, often rotated with corn, would fall 1 per cent from last year to 73.9m acres (29.6m hectares), with declines in such fertile states as Iowa, Missouri and Nebraska.

The US is the world’s leading exporter of corn and vies with Brazil in soyabean exports, so decisions made there are vital to global food markets. A growing world population and rising incomes in emerging economies have driven greater appetites for the crops, used in products from pig feed to vegetable oil.

Oilseed traders are increasingly on edge after a severe drought hurt the current soyabean crop in South America. The US Department of Agriculture’s annual Prospective Plantings report sent related canola and rapeseed futures markets higher in Canada and Europe. China buys three of every five bushels of the world’s soyabean imports.

“This is the annus horribilis for South American grain production. La Niña hit all the wrong places. For soyabeans, it makes the US all the more important,” said Nick Higgins, commodity analyst at Rabobank, the Dutch bank that is one of the biggest lenders to the agribusiness industry.

The US also said stocks of domestic corn left over from last year’s harvest totalled 6bn bushels on March 1, down 8 per cent from a year ago. The number was slightly lower than anticipated and suggested very low inventories before this year’s harvest begins.

CBOT May corn, which reflects the old crop, rose 6.6 per cent to $6.44 a bushel in Chicago. December corn gained just 3.1 per cent.

CBOT May soyabeans added 3.5 per cent to reach $14.03 a bushel, while soyabeans for November delivery rose 4.1 per cent. ICE May canola rose 3.2 per cent to C$622.50 a tonne in Winnipeg, touching the highest price since the global food crisis of 2007-08.

Corn peaked at a record of almost $8 a bushel last June as growers sought to meet demand from livestock producers and the US ethanol industry. If farmers follow through with planting intentions and yields are good, this year’s crop could break records, helping ease concerns about food prices.
The USDA also said that farmers intended to plant 13.2m acres of cotton, 11 per cent below last year.
Wheat acres are growing 3 per cent from a year ago to 55.9m acres.

Excellent article on the "Pizza by the Slice" price war in NYC. Illustrates perfect competition, Substitution Effect on Demand, and Elasticity of Demand. A gold mine for a basic Economics class...

Nice article on the "Pizza by-the-slice price War" taking place in a NY City neighborhood.  Competition is good for the consumer. It forces the producer to offer the best product for the lowest price. It also requires the producers of subsitutes to look at their pricing. 

Sandwich shops, and other nearby establishments offering quick meals,  may have to lower their prices to keep relative prices (Substitution Effect) between their product and pizza more competitive so customer are less likely to move to the less expensive alternative.  Of course they have to consider the Elasticity of Demand for their food as well...


In Manhattan Pizza War, Price of Slice Keeps Dropping

In the amped-up war of commerce and 75-cent pizza on the Avenue of the Americas in Midtown, a perilous moment is approaching. Circumstances suggest that ravenous New Yorkers might soon witness 50-cent pizza, 25-cent pizza or, yes, free pizza.

It is that caustic. Neither side is willing to yield an inch — or a cent. Escalation seems imminent.

As so often happens in twisty New York stories involving wallets and food choices, who is being picked on and who is attacking vary in the telling. Convenient facts get omitted from the narrative.

It’s best to start at $1.50 a slice.

That is what pizza was selling for about a year ago at a family business that is a combination vegetarian Indian restaurant, candy store and pizza parlor on Avenue of the Americas (also known as Sixth Avenue), between 37th and 38th Streets. It is called Bombay Fast Food/6 Ave. Pizza.

Then a Joey Pepperoni’s Pizza opened near the corner of 39th and Avenue of the Americas, offering pizza for $1, a price that has in recent years been favored by a number of New York pizza establishments.

So Bombay/6 Ave. Pizza shrank its price to $1 too.

All was good until last October, when a third player entered the drama.

A 2 Bros. Pizza, part of an enlarging New York chain of 11 shops that sell slices for a dollar, opened virtually next door to Bombay/6 Ave. Pizza. The only separation is a stairwell that leads up to a barbershop and hair salon.

Price stability at a buck all around persisted until eight days ago, when both 2 Bros. and Bombay/6 Ave. Pizza began selling pizza for the eye-catching price of 75 cents a slice, tax included — three slender quarters.

Nice graph showing dollar amount of currencies traded in the Foreign Exchange Market---Impress your econ teacher or your Professor!!

I knew lots of currencies are traded in the Foreign Exchange Market on a daily basis, but I did not know how much in dollar terms. This graph (HT: The Conversable Economist) gives a pretty good idea--in the $4 Trillion dollar range.  Nice for teachers to show students and great for students who want to impress their economics teacher!! :

Source: The Conversable Economist

China is now our 3rd largest EXPORT market. Nice interactive graphic showing each US States share of those exports. This is a growing market for US goods and services. We can either fight it or benefit from it.

If economic expansion does not cause China's political system to implode, the opportunities to do business there are in their infant stages. US companies and entrepreneurs must get on board with looking to "The East" for opportunities. Students should also be aware of this and figure out how to take advantage of it as well. It is a growth area where there seem to be few.

Go HERE to the US China Business Council website and you will see the interactive graphic below.  Click on your state and see an overview of exports to China from that state.

 Keep in mind the percentage change will be dramatic because exports to China started at a low base number---exports to China on a larger scale are a relativly new thing.  None the less, China is now are 3rd largest export market, behind Canada and Mexico. 

Source: USCHINA Business Council

HT: Carpe Diem for link

The "Opportunity Cost" of getting rid of "Pink Slime"---No one seems to be defending this product. Guess I will give it a shot...

On employment and environmental grounds, it may be worth re-considering our aversion to this product.

One persons gross Pink Slime is another persons paycheck...It is worth noting that at least 650 jobs have been lost in the near term and I am sure more will happen down the supply chain.  Not sure where those people will end up, other than the unemployment line. That is one big negative created by this issue.

It is also interesting to note another side effect.  The filler will presumably have to be replaced by "real meat". The article notes that an additional 1.5 million head of cattle PER YEAR will be needed fill the gap that Pink Slime filled.  That is quite a short term increase in demand that cannot be filled in the near term---the cows gotta be born and grow up!!.

This will create conditions for higher beef prices, higher cattle feed prices, more food commodities diverted to beef production resulting in higher prices for OTHER foods, environmental problems (more water and other resources consumed) with that much increase in beef production, etc, etc, etc.  I am SURE I am missing some other "unintended consequences". Are we ready for higher prices in the food supply?

Weighing the costs (there are no known health problems associated with "Pink Slime"--other than the "gives me the willies" feeling) and benefits of Pink Slime, it is worth it to get this product off the market?  What do you think? 

Below is the article I base the above comments on.  Worth a read...

Pink Slime Production is Suspended at Plants

A major producer of a ground-beef additive said it is closing three plants after a growing number of supermarkets dropped the product in recent weeks. 

Beef Products Inc. said Monday its decision to suspend production of a ground-beef filler at plants in Amarillo, Texas; Garden City, Kan.; and Waterloo, Iowa, would affect more than 650 employees. Its plant in Dakota Dunes, S.D., where the filler is also produced, will continue operating.

The decision came as social networks teemed with concerns about the product, nicknamed "pink slime" because of its appearance.

"The derogatory term has trumped all science, all facts, all history," said Rich Jochum, corporate administrator for Beef Products, which took out a full-page advertisement last week in The Wall Street Journal defending its product. The company didn't indicate for how long production of the filler would be suspended.

When oil prices rise the first cry from politicians and other scoundrels is "IT'S THE SPECULATORS!!". But is it TRUE?

This research paper surveys  published papers on the topic of speculation in the oil trading commodity markets. Speculation is the "knee-jerk" response of politicians when it comes to increases in oil prices. (Is it not funny that speculation does not get blamed for LOWER oil prices??) Here is the Abstract from the paper:

"A popular view is that the surge in the price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to regulate oil futures markets. This survey reviews the evidence supporting this view. We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets."

 Find paper HERE.  (HT: Econobrowser for link)

http://www-personal.umich.edu/~lkilian/milan030612.pdf

Rock meet Hard Place: If young adults left home the economy would get better. Can't leave home because the economy is not better. How do we break this deadlock??

The number of "children" (young adults) living with their parents for longer periods of time has increased in the last 10 years, and has accelerated in the last 4 years. Certainly understandable with the severity of the recent recession.

""This generation of young adults has sometimes been labeled the “boomerang generation” for its proclivity to move out of the family home for a time and then boomerang right back. The Great Recession seems to have accelerated this tendency. The Pew Research survey found that among all adults ages 18 to 34, 24% moved back in with their parents in recent years after living on their own because of economic conditions."" (Pew Research)

Source: The Economix

However, surveys from The Pew Center showed an increasing number of these young adults (and I assume the parents) are ok with this trend:

78%: Percent of 25-34 year olds who have lived with their parents and are satisfied with the arrangement.

This puts our recovery in between a rock and a hard place.  If a good portion of these young adults were to leave home and form their own households it would create demand for lots of goods and services. That would be good for the economy.

But, presumably, they are not leaving

Leave home and the economy will get better faster. Can't leave home because the economy is not producing jobs in the quantity and quality needed. 

Rock meet Hard Place....

Baseball Fans: A little on the business side of the game---Nice chart showing each teams Debt to Equity Ratio. Easy question: Who has the most equity and smallest debt? Hint, it is the same team.

Notice the Key: The BLUE bar is the teams Debt. The RED bar is Equity, or in laymans terms, the portion that is "Free and Clear" owership of the team for the franchise owners.

Notice the tiny sliver of Blue  and the large chunk of Red for the Yankees. Very unbalanced and gives the Yankees a competitive edge over just about everyone else.  Very little debt to finance and lots of equity they can leverage to "buy" the best talent on a consistent basis.

Does this guarantee a "winner"? No, but it certainly gives them a better chance to win every year, whereas many other teams have a "one and done" (sometimes for decades) shot at winning a World Series.

Source: EconPic

Nice example of Entreprenuership and using technology to solve a market problem. See a need, meet that need.

Nice example of how entrepreneurship can create an opportunity for one person to solve a problem for another.  However, it is not enough just to come up with the idea or solution. You must doggedly pursue it, as long as it has merits.

"“energy and persistence conquers all things”--Ben Franklin

This Man Turned Small Business Headaches Into An Opportunity

Nearly a decade ago, Eric Remer had a big idea for a new business.

He noticed that small businesses were suffering because they simply couldn't efficiently get their customers to pay them on time. Most of the existing payment processing options were geared toward larger businesses and the small, family-owned ones couldn't keep track of everyone who owed them money.

"Small business owners don't typically have the time or the resources to follow up with unpaid invoices," Remer told us. "Maybe a while ago that would be okay, but in today's economy, it's definitely not."

So Remer decided to launch PaySimple. It would be a platform that included features, such as recurring billing, electronic invoicing and telephone payments. And customers would be able to choose what payment option works best for them, whether that be auto-recurring billing, electronic check processing or direct debit. If the business didn't have a web site—and they often did not— PaySimple would create one for them.

Nice map of Oil and Gas Pipeline Infrastructure in the US. They are EVERYWHERE! Is there room for one more??

Here is a map and key for existing pipeline infrastructure in the US.  The debate over the Keystone pipeline makes it sound like this is a new development breaking new ground and territory.  I look at this map and ask "Where is there NOT a pipline already?"...

Source: Econbrowser