Nice Infographic showing why Chinese consumers pay more for imports of certain foreign goods. See here how I link it to the Foreign Exchange Market. Gives an interesting perspective.

Here is a comparison of the price differential of certain "luxury goods" sold in China and the US.

The items below give the prices in the Chinese currency Yuan.  This shows, at the prevailing exchange rate (more on that a minute) how much the good is locally in China and how much that same good would cost the Chinese if they could exchange their currency and buy it in the US. In other words, how much Yuan are they giving up to buy the good in each place.

The current exchange rate between the US Dollar and the Yuan (CNY) is $1.00 = 6.23 CNY or the reciprocal 1 CNY = $.16.  ($1.00 "buys" 6.23 CNY or 1 CNY "buys" $.16).

To put each of the CNY numbers below in perspective, divided each of the numbers you see below by 6.23 CNY. This will give you the US Dollar equivalent.   Note: you can also multiply 22 CNY by $.16 and get the same result.

Example: In China 22 CNY for a Starbucks coffee would be (22CNY/6.23CNY) $3.53. In the US it would be (12 CNY/6.23 CNY)  $1.95.

Do the same math for the other goods to get a dollar to dollar comparison.  This is too much fun not to share! Hope you liked it.  :)

[Infographic by East-West-Connect.com] [Original Chinese version by Sohu.com]

Nice and Concise article on the concept of Opportunity Cost. I encourage you to read it. Besides, what else do you have to do today?

See what I did there??? :)

Thinking in terms of Opportunity Cost can change how you make decisions.  I believe for the better.  It provides a framework to filter your choices through and may (or may not) help you arrive at a more beneficial outcome.  If nothing else, it causes you to pause and think about a decision from many angles and prevents rash decisions you might regret later.

Here is an excellent (and short) article on this important but lightly stressed concept in Economics by are "real" economist, Emily Oster.

She suggests understanding Opportunity Cost will help you not just in personal decision making, but in how others make decisions regarding THIER opportunity costs relative to YOURS.

""Applying opportunity-cost theory won’t always change your behavior but can simply be a useful tool to understand why things are the way they are. When I was pregnant and visiting my OB every few weeks, I waited for the doctor every single time. Sometimes for as long as an hour. I was furious. Didn’t they know my time was valuable? But consider this: Because of the way appointments like this work—because they are unpredictable in length—someone will have to wait. Either the doctor schedules long appointments and sometimes she waits for you, or she schedules short appointments and sometimes you wait for her. Doctors are very highly paid, and, therefore their opportunity cost is very high. For most of the rest of us, our opportunity cost is lower. If someone has to wait, it’s efficient for it to be the person with the lower opportunity cost. In other words, you.""

 The article has several other example of Opportuntiy Cost(s).  I encourage you to read the whole thing. 

Nice, short video primer on what the Debt Ceiling is. An informed citizenry is, well, rare...

If you are not sure what the Debt Ceiling is all about, here is a good place to start.  As always, the devil is in the details and the issue gets way more complicated.  However, this will give you a jumping off point (by that I don't mean the nearest bridge) to learn more. :) 

David Wessel, Wall Street Journal

Interesting chart showing the Gender Gap in obtaining College Degrees and the disciplines those degrees are in. Eye-opening!!

Numerically, women earn significantly more college degrees than men do.  However, there is some disparity in the nature of those degrees.  Below this graphic is a brief analysis from Mark Perry at Carpe Diem.

From Carpe Diem:

The table above is based on the most recent data from the Department of Education on bachelor’s degrees by academic discipline and the sex of the graduating students for the college class of 2011 (most recent year available). Here are some observations:


1. Women earned 57.2% of all bachelor’s degrees in 2011, which also means that there were almost 134 women in that year’s graduating class for every 100 men.

2. For the College Class of 2011, women significantly outnumbered men in 15 academic disciplines, men outnumbered women in nine academic fields, and there was approximate gender parity in five disciplines.

3. For bachelor’s degrees in health professions (primarily registered nursing), 566 women graduated in 2011 for every 100 men, for public administration there were 446 female graduates for every 100 men, for education there were 391 women for every 100 men, and for psychology there were 334 women for every 100 men.

4. In the most unbalanced academic fields favoring males, 481 men graduated in 2011 with a bachelor’s degree in engineering for every 100 female graduates, and 467 men earned a degree in computer science for every 100 women.

5. As much as we hear about female under-representation in STEM (science, technology, engineering and math), women outnumbered men for bachelor’s degrees in biological and biomedical sciences by a ratio of 144 females for every 100 males. Women also earned more than 43% of all bachelor’s degrees awarded in mathematics in 2011, and more than 44% of the degrees in general mathematics (the most popular of the 12 sub-disciplines in math). For general chemistry (another STEM field), women earned almost half (48.8%) of the bachelor’s degrees awarded in 2011.

Is student debt a new form of birth control? Maybe this is the only one that is truely effective!!

Behind the falling US birthrate: too much student debt to afford kids?

Karen Hu of Oakton, Va., is 28, married, graduated from law school – and thinking about babies. But that's as far as she and her husband, a software programmer, have gotten: just thinking. What's holding them back?

For one, Ms. Hu is finding it a challenge to land a good job in the post-recession economy.

For another, her student debt – some $164,000, with a monthly payment of $818 – is forcing the couple to think hard about taking on the additional expenses that come with having a child. "Children just don't fit into that scenario," Hu says.

I am feeling a little put upon by NPR. My first name is not valid in their eyes..

This was a what the heck moment for me.  I tried to sign up on National Public Radio so I could comment on an article on their website, but got into this loop.

Is "Gene" such an outmoded name?

 I just googled "famous people named Gene" and got THIS list.  Most are dead. 

Nevermind.  My comment was going to be lame anyway... 

Who knew? Manti Teo's fake girlfriend had a fake father who was a fake economist. (Is that last comparison redundant?)

The Fake Economist Who Conned A Nation

""As an ex-presidential consultant, a former adviser to the World Bank, a financial researcher for the United Nations and a professor in the US, Artur Baptista da Silva's outspoken attacks on Portugal's austerity cuts made the bespectacled 61-year-old one of the country's leading media pundits last year.

The only problem was that Mr Baptista da Silva is none of the above. He turned out to be a convicted forger with fake credentials and, following his spectacular hoodwinking of Portuguese society, he could soon face fraud charges.

Mr Baptista da Silva's comeuppance began when the UN confirmed to a Portuguese TV station last month that he did not work for the organisation, not even as a volunteer, as he later alleged. Further media investigations uncovered his prison record and fake university titles...""

"French and Malian Forces Retake Timbuktu"--I never thought I would live long enough to see this headline. See here a photo of a cherished possession I received while serving there and my own short personal comment on the situation

 French and Malian Forces Retake Timbuktu

In the early 1980's I served as a Marine Security Guard at the US Embassy in Bamako, Mali. I visited several areas in Mali, including Timbuktu.  It was like stepping back in time.  It truly is a sad thing that buildings, structures and a unique culture that have been in place for centuries are under attack, physically and spiritually, by outsiders with an radical agenda.

Have you EVER ever heard of Mali before?  Probably not. The Mailian people are generally the most kind, polite, sincere and peaceful people on the planet and I was the recipient of those virtues in large doses on many occasions in the time I spent there.  Malians find ways to thrive in conditions that make subsistence an everyday challenge. 

The photo above is a cherished possession of mine. It is a decorative bag that local workers in the Embassy motor pool chipped in to purchase for me as a going away gift when my tour of duty was over.  I remember to this day (31 years ago) the feeling I got when they presented it to me.  They could not afford to do this, but they did it anyway. 

This generosity is typical of Malians. They don't deserve the tribulations that are being visited upon them.  I pray it stops soon before before a full scale humanitarian disater occurs.

The time I spent there STILL pays dividends for me as a citizen and as a teacher.  The lessons of hope amidst extreme poverty I learned so long ago are not lost on me to this day.  I never would have known that if I had not served there.

God Bless the people of The Republic of Mali. 

The economy can't recover fully and Government can't get smaller unless we address the issue of the Long Term Unemployed. Everything else is unproductive commentary. See here why...

A very nice discussion and summary, in this Bruce Bartlett column at the The Economix,  of two major classifications that people can be slotted into in terms of their unemployment status---Cyclical and Structural Unemployment.  The third category, Frictional Unemployment is not explicitly identified.

Below I excerpted an important part of his posting that I think is important.  There are two different afflictions that conspire to affect the same group of people, the long(er) term unemployed. 

The first is time---time not engaged in productive work, especially in the area the worker specializes in.  Skills erode and unless the he/she can update those skills to remain current in the field, they can become less relevant to an employer the longer they are idle.

The second is the employment of capital to automate "routine skills and procedures" that effectively render a workers previously relevant skills obsolete. 

So, time and technology are the crux of the problem for hundreds of thousands (if not millions) of workers.  What are these folks to do? They are not going away.  I venture to say MOST want productive work but they are caught in between the proverbial rock and a hard place. They are either going to be absorbed by the market place or by government programs of some sort.

I encourage you to read the whole article. It connects lots of dots to the study of Unemployment in an Economics class.

Outsourcing, Insourcing and Automation

"...If the central problem is a lack of aggregate demand, then the vast bulk of the unemployed are jobless through no fault of their own. This macroeconomic problem requires a more expansive monetary and fiscal policy.

But if the problem is structural, increasing aggregate demand is unlikely to reduce unemployment and is more likely to raise the rate of inflation.

Structural unemployment is much more difficult to deal with. Workers may require extensive retraining because the businesses and industries that employed them no longer exist, and their skills no longer have the value they once did.

The distinction between cyclical unemployment and structural unemployment is further complicated by something called hysteresis, which, basically, is the process whereby cyclical unemployment is converted into structural unemployment.

The longer someone is out of work, the less likely that person is to find a job. Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.

Another factor that contributes to structural unemployment is automation — the replacement of human labor with machinery, computers and robots....

HOLY COW!! Bovine smuggling from India to Bangladesh has increased dramatically. Read here what "the beef" is between these two countries...

When quantity demanded of a good is greater than quantity supplied of a good the price of that good tends to increase, especially if there are supply-side exogenous variables that prevent a re-balancing to the previous market equilibrium price.

Bangladesh loves beef.  They love it so much that they consume all they can produce domestically and STILL want more. 

Neighboring India has cows every where.  However, they are sacred and it is illegal to export them across the border.

A vibrant smuggling industry has popped up to transport cows from India to Bangladesh.

Because the trade is illegal, those suppliers (smugglers) engaging in the activity are incurring significant "transaction costs" for each smuggled cow over and above the cost if the trade was legal.

They have to pay bribes along the way PLUS they need to be compensated for the risk they are taking by engaging in an illegal activity. 

Hence the cost of each additional cow (the Marginal Cost) smuggled over the border is going to be significantly higher than a legally traded cow.

So, the additional cows brought over the border, over and above the ones already supplied domestically in Bangladesh, are going to require a higher market price to make it worth it for the smugglers.

If enough consumers (Demanders) of beef are willing and able to pay a higher price for the beef, smugglers are willing and able it increase the quantity supplied at that higer price.

Smugglers were not willing (although they were able, I suppose) to supply more cows at the lower price--too much risk, little reward.

There was movement ALONG the Beef Supply curve in this market in response to the increase in demand. The Quantity Supplied of Beef did not increase at the previous price, which would have indicated an increase in the Supply of Beef and a shifting of the supply curve to the right.

Now I want a Cheeseburger. Gotta go get some lunch...

Cow smuggling ... it's how Bangladesh gets its beef

Beef is a delicacy in Bangladesh, but Hindu-majority India refuses to sell their sacred cows. The demand is so high, however, that a dangerous $920 million cow smuggling trade has popped up

The country's meat producers estimate that slaughterhouses need up to 3 million cows every year to feed Bangladeshi appetites, and to help meet demand, Bangladesh is eyeing neighboring India. Cows are everywhere in India, but the cow is considered holy in the Hindu-majority country. In fact, slaughtering cows is banned in many Indian states, and New Delhi refuses to export them.

That refusal hasn't done much to deter the demand for beef in Bangladesh, however. In fact, say officials in Dhaka, beef has become so valuable it's spurred a dangerous cow smuggling trade across the India-Bangladesh border.

More than 2 million cows are smuggled from India to Bangladesh every year and most of the illegal trade takes place through the Indian border state of West Bengal, says Bimal Pramanik, an independent researcher in Calcutta, India.

“Bangladeshi slaughterhouses cannot source even 1 million cows from within the country. If Indian cows do not reach the Bangladeshi slaughterhouses, there will be a big crisis there,” says Mr. Pramanik

Here I explain in 10 easy steps how US corporations shelter profits in "overseas" or "off-shore" accounts. Funny thing is, those profits are hiding in plain sight all around you! See here why...

Interesting article that details how US corporations can book some of its profits on US sales of goods/services into overseas (or "off-shore") subsidiaries and how those profits are NOT subject to taxation in the US.

Here how it works in 10 easy steps:

1. I produce a high tech product, oh, say, a Smartphone and I sell primarily in the US market.

2. I develop and patent a new technology that improves the Camera in my Smartphone and it will add tremendous value to the phone!

3. I set up a legal subsidiary (really just an office with a secretary) to my company in, oh, say, the Cayman Islands or some other country that is VERY friendly to foreign corporations.

4. I sell ALL THE LEGAL RIGHTS to my new technology to this foreign subsidiary for $1.00 (I get a little revenue from this transaction).  This technology won't produce all my profits, but it will produce a good portion of them.

5. The foreign subsidiary now "offers" to sell me the right to use the technology in my phone for, say, $11.00 (I GOTTA have it for my phone!!). 

6. I pay $11.00 for the technology, now an EXPENSE for me, and the foreign subsidiary of my company makes a profit of $10.00 ($11.00 in revenue minus the $1.00 they paid me).

7. I declare to the IRS the $10.00 in profit "earned" by my sudsidiary will "permanently" stay overseas (off-shore).  IRS says "fine", it is not subject to US taxation!

8. My subsidiary has $10 that they can now (1) invest locally or (2) get this (!), INVEST in the US, whether that be in US Stocks, Bonds (Govt or Private), or other financial or physical assets. Also, if I play my cards right, my subsidiary COULD put that money in a US bank (earning interest) and I could go to the same bank and get a loan for $10.00!! 

9.  So, I could end up borrowing my own money (earning and paying myself interest) on profits that were never taxed in the US.

10.  The point of this?  All those profits the media reports that are "hiding" in Foreign banks accounts are really, for the most part, here in the good ol' USA!

SWEET!!! This is a simplistic example, but read the whole article below and you will see the structure of my example holds some water.

Also, look at some of the biggest offenders--the maker of some of yours and mine favorite products/services.  Feel a little unclean now that you know this?

Firms Keep Stockpiles of 'Foreign' Cash in U.S.

There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas: A lot of it is actually sitting right here at home.

Some companies, including Internet giant Google Inc., GOOG +6.17%software maker Microsoft Corp. MSFT +1.47%and data-storage specialist EMC Corp., EMC +1.77%keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions.

In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas. As long as it doesn't flow back to the U.S. parent company, the U.S. doesn't tax it. And as long as it sits in U.S. bank accounts or in U.S. Treasurys, it is safer than if it were plowed into potentially risky foreign investments.

Gallup Poll that nicely illustrates the divide in the US as to who people blame for our various woes--Government or Corporations. Where do YOU fall in this poll?

Latest Gallup poll showing the differences between Republicans and Democrats regarding their respective view of Government and Corporations.   I modified the results to illustrate the extremes on both sides. An almost perfect Venn Diagram would overlap the silent majority---Independents, and implicitly identifies the REAL PROBLEM---Crony Capitalism.   This is where I reside. How about you???

Crony capitalism is a term describing an economy in which success in business depends on close  relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of dirigisme.^[1] Crony capitalism is believed to arise when political cronyism spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.

 


"Where the U.S. gets its oil imports, in one map"

Where we get our imported oil to fuel our economy is largely dictated by geography and close proximity to the source.

Canada is our largest source: 2.3 million barrels of oil per day, especially for a large section of the Mid-West.  Mexico, Saudi Arabia, and Venezuela (primarily in the South/South West) are next in line bunched up at around 1.3 millions of barrels per day (each).

(Please see the article that accompanies this graphic HERE  (hence the title of this posting). It is very interesting and has some links to learn more about this issue)

Source: Wonkblog at Washington Post

It is suggested in the article cited that the completion of the Keystone Pipeline (below) will bring an estimate 1.5 millions of additional oil to the South, potentially displacing oil we currently get from the above mentioned countries and then some. 

 

Good thing? Bad thing? Or is it just a thing?

 

 

What do a bad movie and Jets QB Mark Sanchez have in common? They both give you that Sunk Cost feeling. Read here the connection...

 

Here is an excellent article merging an economic concept and a solid real life example---an NFL quarterback and "sunk costs".

The Jets made a large, multi-year, multi-million dollar financial committment to a player, Mark Sanchez.  He has not worked out so well, but they are contractually committed to paying him for a few more seasons. 

Should this finanical committment keep the Jets from playing him and replace him with someone else who might produce a better outcome for the team, or should they play him and pay him is millions even though they are pretty certain he is not going to be "the guy" that gets them to the next level?

In other words, should the past (and ongoing) investment they have in a failing Mark Sanchez be considered a "sunk cost" and have no bearing on what they should do going forward to improve the team? 

All leads back to Opportunity Costs, of course...

That Sunk-Cost Feeling

""...The Jets have stumbled into a classic economic dilemma, known as the sunk-cost effect. In a purely rational world, Sanchez’s guaranteed salary would be irrelevant to the decision of whether or not to start him (since the Jets have to pay it either way). But in the real world sunk costs are hard to ignore. Hal Arkes, a psychologist at Ohio State University who has spent much of his career studying the subject, explains, “Abandoning a project that you’ve invested a lot in feels like you’ve wasted everything, and waste is something we’re told to avoid.” This means that we often end up sticking with something when we’d be better off cutting our losses—sitting through a bad movie, say, just because we’ve paid for the ticket. In business and government, the effect pushes people to throw good money after bad. The quintessential case of this is the Concorde. There was never a convincing business case for the supersonic airliner, and there were numerous attempts to kill it. But those attempts all failed, in large part because of the billions that had already been spent....""

Read more: http://www.newyorker.com/talk/financial/2013/01/21/130121ta_talk_surowiecki#ixzz2ILHtsBs5

Nice graphic showing the 2012 Federal Budget and historical trends in spending and revenues. Are things getting better???

Nice graphic showing the 2012 Federal Budget.  The left graphic shows the major categories of spending categories (mandatory and non-mandatory) and revenue sources.  The box above the revenues shows the shortfall---the Budget deficit for 2012.

The graph on the right shows Federal Spending and Revenues as a percent of GDP overtime. Historical average for Federal spending is 20.5% of GDP and Tax Revenues average 17.9% of GDP over time. 

You can see at any point in time where actual spending and/or revenues are relative to the long term average.

 The Gray Bars represent periods of Recession---notice, in general, spending increases and revenues decrease during recessions.  Automatic Stabilizers (unemployment compensation, Food Assistance, other Income support programs, etc) and discretionary Fiscal Stimulus Plans (roads, bridges, and other infrastructure projects) are implemented, at the same time when tax revenues are decreasing. 

Budget deficits increase during recessions and, hopefully, decrease when recovery occurs.

You be the judge.

Source: The Big Picrture Blog