World Population Graph---Amazes me everytime I look at one.

Source: EconomicsHelp

Watch one of the worlds only professional economist-comedian (no, that is not redundant)

HT: Greg Mankiw

Frederic Bastiat violation!! Attention Broken Window Fallacy fans!!

Destroying perfectly good signs for no good reason. Ok, they cite a reason, but really, is it a good one??...I guess it will "stimulate" the economy by providing jobs for the sign makers, and the crews who will take down and then install the new signs...

""NY Daily News -- New York City will change the lettering on every single street sign - at an estimated cost of about $27.5 million - because the feds don't like the font. Street names will change from all capital letters to a combination of upper and lower case on roads across the country thanks to the pricey federal regulation (see photo above).  By 2018, MADISON AVE. will become Madison Ave. and will be printed in a font called Clearview, the city Department of Transportation says. The Federal Highway Administration says the switch will improve safety because drivers identify the words more quickly when they're displayed that way - and can sooner return their eyes to the road." (Source Carpe Diem)

Perhaps the authorities should  read a little ditty called "The Broken Window" by Frederic Bastiat...

""Now, if James Goodfellow is part of society, we must conclude that society, considering its labors and its enjoyments, has lost the value of the broken window. From which, by generalizing, we arrive at this unexpected conclusion: "Society loses the value of objects unnecessarily destroyed," and at this aphorism, which will make the hair of the protectionists stand on end: "To break, to destroy, to dissipate is not to encourage national employment," or more briefly: "Destruction is not profitable."""

A short lesson on how US Treasury's work---It is very "interest"ing...

     The US government (all governments for that matter) finance spending through (1) tax receipts and/or (2) issuing promissory notes, called bonds, securities, Treasury notes, Treasury Bills ("T-Bills"), or some combination thereof.  All these names have significance but for this blog entry I will refer to Treasury Bills (T-Bills) or more simply as "Treasury's". 
     Treasury's are "marketable securities" and are very short-term in length (4weeks, 90 days, 180 days, 365 days).  They are considered debt instruments and are traded in secondary markets world-wide.  As such, they are subjected to the laws of supply and demand and each Treasury has a price attached to it. How is that price determined? Glad you asked. 
     Let's assume the government wants to raise some money from the market-place instead of printing it.  To do this they issue a Treasury Bill (or Note) with a face value of $100.  No one is going to pay $100 for a $100 dollar Treasury so the government has to sell it for something less than $100.  Assume the marketplace has determined the current market price for a $100 face value US Treasury is $90.  See the graph below:

     If I purchase this Treasury for $90 and can redeem it sometime in the future for $100 then I have made $10 on the transaction.  If you convert this gain into a rate of return, or interest rate, we have a percentage gain of 11.11%! ($10 gain divided by my investment of $90 times 100 equals 11.11%).  So my Treasury is priced at $90 and has a potential gain of 11.11%.  Good enough...But we are not done.
     Because Treasury's are traded in secondary markets world-wide, the price of the Treasury is subject to change. Assume there is economic uncertainty in other developed countries and their markets are in turmoil.  Investors look not only for high rates of return, but stability and some level security for there money. THE safest investment is US government debt, i.e. Treasury's and is considered a safe-haven to park financial capital.  The turmoil in foreign markets creates an increase in demand for Treasury's.  See graph below to see the effect on the market for US Treasury's:

     Notice the Price of Treasury's has increased to $95 (I made the new price up) relative to the previous price of $90.  NOW the $100 face-value Treasury is priced at $95.  So now the owner of this Treasury can redeem it for  $100.  His profit would be $5.00.  Converting this into an interest rate, or rate of return, we can see the effective interest rate is now 5.26% ($5.00 divided by $95 times 100 = 5.26%). This is considerably less than the previous effective interest rate of 11.11%. 
     IMPORTANT observation:  As the price of the Treasury INCREASED the Interest Rate earned from it DECREASED!  There is an inverse relationship between the price of a Treasury and the Interest Rate it earns.  Repeat that to yourself---it is important. 
    Currently there is significant demand for US Treasury's because they are seen as a safe-haven investment, and it is driving the price of them up and decreasing the yields (rate of return).  The Federal Government can borrow money at a VERY low interest rate (click HERE for latest rates).
   IF investor confidence improves and stocks and/or other investments become more attractive then the demand for Treasury's will decrease, the price will decrease and the interest rate will increase.  This is a negative for the Federal Government because they will have to offer higher interest rates to attract money to finance deficit spending. This will increase the interest payment outlays in the federal budget.
    Hopefully you learned a little bit of how Federal debt instruments work.  If is understood by the few, but it affects the many...

Employing you costs much more than the wage you are paid---find out what the TRUE cost of hiring you is

How Much Does It Cost to Employ You?
I can't import this calculator into the blog, so you will have to visit the site. Insert your wage and other compensation you may receive and get the total price to hire you.  A great way to see how much it ACTUALLY costs an employer to employ you.  Their cost is NOT just the wage they pay you. There are many other costs/taxes associated with hiring you.  Go to the link and you can see them! Very enlightening...

Employer Cost Calculator

Segway company owner dies---after driving a Segway over a cliff---you can make this stuff up and it is NOT an onion creation

This is soooo Paul Blart, Mall Cop sounding and I can't get the visual I have created for myself  out of my mind...

Tycoon who took over Segway firm dies in freak accident after riding one of the machines off hillside and into a river

""The multi-millionaire owner of the Segway company died in a freak accident yesterday when he rode one of the high-tech two-wheel machines off a cliff and into a river.



Former miner Jimi Heselden, 62, plunged into the River Wharfe while riding around his West Yorkshire estate in Boston Spa on a rugged country version of the Segway.


He bought the firm last December and was using one of the machines - which use gyroscopes to remain upright and are controlled by the direction in which the rider leans - to inspect the grounds of his property.""

Here is the deal--I will borrow a dollar from you and pay you interest. I will then give you the dollar back and borrow it again from you and pay you interest..AGAIN...I am such a dealmaker!!!

    If we ran our households like this a bankruptcy judge or a personal finance counselor would shake their head and we would feel shame...We actually give foreign aid to China! It is only $68 million dollars but...REALLY??  $68 million dollars would give 6,800 students $10,000 each for college scholarships.

""It's almost as if Japan (Or the U.S.) gives aid money to China, but then finances this charity by taking a loan from China, then paying interest to China on the charity it provided... to China. Yes the world is a complex place, but it's just an extremely peculiar arrangement here.""

    If I thought for ONE MINUTE that raising taxes at this time would actually improve our federal budget situation, I would support it...But can anyone who is reflectively in favor of increasing taxes, honestly say with a staight face they believe the extra revenues will be spent in a responsible manner by members of EITHER party?  We cannot operate in a vacuum and only think about increasing revenues. There are two sides to the equation and I don't believe the spending and/or debt side is being addressed in any serious way.  Please read the above excerpt again before answering...I am not anti-government or pro-government--I just want fiscally responsible government that follows basic accounting rules and is transparent.  I am certain we are getting neither...Tell me where I am wrong--I am open to ideas...Extra credit for students for helping me out...

Is there a relationship between tourism and the value of the dollar worldwide? After viewing these graphs you make the call.

     The first graph below is from Carpe Diem  and shows the ups and downs of tourism for the last 12 years.  Professor Perry used this data to show an improvement over the last year in tourism spending (see the tail end of the data line to the far right).  In class right now we are covering the foreign exchange market and how appreciation and depreciation of the dollar can affect various interested parties.  The tourism industry depends not only on US consumers but foreign ones as well.  This got me to thinking: How does this graph compare with the value of the dollar over the same time span? See the second graph below BUT, in your mind, shift it over to the right a little bit to aline it with the graph above it.  Keep in mind, the downward slope of the line means the dollar is depreciating against a measured basket of other currencies and an upward slope means it is appreciating.  If the dollar depreciates in value, then US goods and services become relatively less expensive for foreigners. This assume their currency is one that appreciated in value relative to the US dollar.  US vacations become cheaper for foreigners OR they can purchase more vacation (stay more days, stay in fancier places, etc).  

Source: Carpe Diem



Source: HERE

I don't want to suggest that correlation is causation, but there seems to be a relationship.  The only thing left to do is to see, in real terms, if the increase in tourism is from foreign or domestic  sources.  Have you been to a National Park or DisneyWorld in the last few years, or decade? What do you think? Hmmm...

4 out of 20 of the Smartest Professional Athletes have degrees in Economics...Just sayin'...

Sporting News names Smartest Athletes and some background on each of them...It pays to major in Economics...

SN names the 20 smartest athletes in sports

George Parros, F, Anaheim Ducks
• Age: 30
• On-ice accomplishments: One of hockey’s top enforcers: 694 career penalty minutes in 289 games.
• Alma mater, major, GPA: Princeton, economics, 3.18
• SAT score: 1250
• Languages: “English and Spanish. I don’t really speak Greek—I just think I can.”
• If I weren’t a professional athlete, I’d ... “Most likely (be) a business consultant. Either that or some sort of trader on an equity desk. ... In junior (hockey) I took a job as a runner at the Chicago Board of Trade to see if I liked it.”
• Nerdiest thing about me: “I do crosswords on the road and take some heat for that. I hate the New York Times one. USA Today is good for me. The New York Times one, it annoys me because they’ve got 16th century poets and stuff.”
• Smartest teammate I’ve had: “(Ducks goalie) Jonas Hiller. He can speak five languages or something.”


Ryan Fitzpatrick, QB, Buffalo Bills
• Age: 27
• On-field accomplishments: 2004 Ivy League MVP, first Harvard quarterback to rush for more than 1,000 career yards. In 2005 with the Rams, became the fifth quarterback in NFL history to throw for 300-plus yards in his debut.
• Alma mater, major: Harvard, economics
• SAT score: 1580
• Off-field/intellectual interests: “I’m an Apple technology junkie.”
• If I weren’t a professional athlete, I’d ... “Probably (have) done the Wall Street thing for a few years and then maybe branched out a little bit. But finance is what I’d be involved in.”
• Nerdiest thing about me: “That’s probably a better question for my wife. But I love Scrabble. I’m playing Scrabble on my iPad constantly.”
• Smartest teammate I’ve had: “Corey Chavous. The amount of knowledge that dude had about any football player in the locker room was crazy. He knew the name of my high school and my high school coach. He remembers everything about everybody.”


Matt Birk, C, Baltimore Ravens
• Age: 34
• On-field accomplishments: 6-time Pro Bowl selection
• Alma mater, major: Harvard, economics
• ACT score: 34
• What I’m reading now: “I just finished Band of Brothers. I never saw the miniseries, but I just read the book by Stephen Ambrose. It was unbelievable.”
• If I weren’t a professional athlete, I’d ... “I was offered a job out of college to do Wall Street and that whole thing, but then football came along, so I figured I was just delaying Wall Street for about six months. I didn’t think I’d even make the team. Everything happens for a reason.”
• Nerdiest thing about me: “I absolutely cannot dance. (But) just because I can’t doesn’t mean I don’t.”
• Smartest teammate I’ve had: “Robert Smith was pretty smart, and Pete Bercich with the Vikings. He and Robert used to have crazy discussions about physics, the fourth dimension. They might as well have been speaking another language.”


Alex Smith, QB, San Francisco 49ers
• Age: 26
• On-field accomplishments: 2004 Mountain West player of the year, 21-1 record as a college starter. 2005 No. 1 NFL draft pick, recaptured the 49ers’ starting job midway through last season.
• Alma mater, major, GPA: Utah, economics, 3.74. Graduated in two years.
• Languages: “A little Spanish. I wouldn’t say I’m fluent, but growing up in San Diego, I can get by.”
• Off-field/intellectual interests: “Traveling. This offseason alone I went to the Dominican Republic, London, France, Italy, Prague and Maui.”
• If I weren’t a professional athlete, I’d ... “One of my aspirations was to go to law school. I’m not totally sure I would’ve practiced law, but I wanted to get my J.D.”
• Nerdiest thing about me: “My teammates would probably say the reading. I mean, I read a lot. I’ve got a lot of random, useless knowledge.’’
• Smartest teammate I’ve had: “(49ers center) Eric Heitmann. He’s just a bright guy, a Stanford grad.”

Dollar Depreciates as Federal Reserve signals more money is on the way to the marketplace...

Dollar Slides in Wake of Fed Statement

The dollar stumbled broadly Tuesday after the Federal Reserve said it stood ready to kick-start a slowing U.S. economy.
The euro rose sharply, racking up gains of more than 1.5% against the dollar, while the greenback wilted against the yen, briefly dipping below 85 yen, considered by some analysts to be Japan's threshold for the currency's strength after last week's market intervention.
"What we see is the door being kept open to further quantitative easing," Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said of the Fed's possible fresh round of economy-stimulating asset purchases.
"Quantitative easing is broadly viewed to be corrosive to a currency's value, and so with the increased probability of easing measures, the knee-jerk reaction in the market is to sell the dollar," he said.

Here is a video explaining the concept of "quantitative easing"...hang with it for a few minutes.  The first part is just an introduction but it gets better. I promise!!

Don't worry about the price of tea in China, BUT you better care about the price of cotton in China---that is if you wear clothes...

This is the second day in a row I have an entry concerning China and its impact in commodity makets. Today it is the market for cotton....

Cotton Tops $1 a Pound ""Cotton prices breached the $1-a-pound level for the first time in 15 years as delayed harvests and booming demand in Asia are cutting into supplies, putting clothing makers on edge...Prices have surged 33% since the beginning of the year due to bad weather in China, which is both the world's No. 1 grower and importer, and the flooding that has washed out Pakistan's fields. Global cotton inventories are estimated to fall 22% from a year ago as demand outstrips supply, according to the U.S. Department of Agriculture....""

The first graph shows the Market for Cotton at equilibrium price and quantity "A".  

 

 Delayed harvests as described above serve to DECREASE the supply of cotton on the world market. This is shown be the shifting of the supply curve to the LEFT ("Supply 1") and movement along the demand curve to a new equilibrium price and market quantity at "B".

 Compounding the problem is the "booming demand" from Asian clothing manufacturers.  This is illustrated by the shifting of the demand curve ( from Demand* to Demand 1) to the RIGHT  and movement along the supply curve to another new equilibrium price and market quantity at "C".  The article suggests there is still have shortage of cotton on the market so we don't quite return to market quantity "Qe". 

There is potentially good news, however:

""High prices are a boon for producers in the U.S., which is the world's biggest cotton exporter. The U.S. is shipping at a torrid pace to keep up with demand. Exports sales have already exceeded half of the 15.5 million bales the U.S. is expected to produce, Ms. Johnson said. The U.S. cotton harvest is running ahead of normal, a situation that could potentially damp prices. The USDA on Monday said 13% of the cotton crop was harvested as of Sunday, ahead of last year's 7%.""

Markets for most commodites are not static and they dont recognize "ceterus paribus" (hold all varibles constant except for the one you are testing).  Many factors effect demand and supply constantly. Some natural, like the weather, and some more concrete, from scarcity to market manipulation.  Change is inevitable, so it provides opportunities for me to make blog entries and create supply and demand graphs...Does life get any better??? :)

Price of Steel rises---Can't be China's fault, can it? Dang it! It is...see nifty graphs illustrating this change!!

China increasingly is able to influence the price of raw materials in the world-wide marketplace...

Steel-Price Rise Defies Forecasts

Despite predictions that world-wide steel prices would remain weak for the rest of 2010, they have started to climb for several types of the metal used in products ranging from ships to tin cans, appliances and oil pipelines. The recent increases, which follow a summer of soft prices, are as high as 12% and as low as 1%, depending on the kind of product and the location. They reflect cutbacks in China as steel producers there lower output to meet the government's year-end energy-savings target.

The first graph represents the steel market in equilibrium...

This second graph illustrates the highlighted portion from the quote above.  The supply curve shifts to the LEFT ("Supply 1") representing a decrease in SUPPLY.  We know the supply curve shifts to the left because as a result of the Chinese action, at EVERY price there is going to be LESS quantity supplied RELATIVE to the quantity supplied on the original supply curve.  As the supply curve shifts left, we move upwards and to the left ON the demand curve until we reach a new market equilibrium at P1 and Q1.  The market quantity is less than it was and the market price is higher than it was. 

How much are prices going to rise? The graphic below gives you some idea of how spot prices in the steel market have been affected...Please note that the prices COULD be affected by other varibles in the market, but this article suggests that the decrease in production by the Chinese plays a significant role.

Wall Street Journal

Cartoon for Social Studies Teachers---BUT better for Math teachers... :)

Source: HERE

Thanks, Califorinia---we will take your cast-offs---Texans LIKE jobs!!

If you increase the cost of doing business, you will increase the loss of business. Businesses do need to pay taxes and follow regulations, yes, no doubt, I get that. But when taxes and/or regulations become too onerous or unnecessary then you will have business flight, not only at the margin, but deep into the core. Options abound--another state or another country...I am not a lackey for business--I am a lackey for economic recovery and prosperity.  Gotta have businesses to do that---As you were, California, continue---we in Texas are happy to pick up you throw-aways... (HT: Carpe Diem and Joseph Vranich)   

"California is in serious trouble because many people refuse to admit to one of our big problems - the flight of businesses, capital and jobs to other states and nations. Businesses are shrinking their California footprint because high taxes and intense regulation damage their ability to compete.



The top states gaining our businesses since January 2009 show Texas in the top spot, followed by Arizona, Colorado, Nevada, Virginia and Utah. Also, companies have moved functions to Taiwan, Mexico, Brazil and Chile. The jobs include R&D, which used to be a California hallmark. Now we're seeing unusual losses."

It IS possible to tax your way into prosperity!! No, really it is! See enclosed to find out...

    Well, it only works if you are a criminal or an organized crime figure.  Get your state legislature to enact high taxes on a product that is legal, but people just have to have.  Tell the legislators that it is good for the people AND it will raise LOTS of money for the state government.  Then you smuggle the product into the state and sell it for less than any business can sell it for because of the high taxes that the store must collect. Obviously this outcome was not the intention of lawmakers, but it is one of the "unintended consequences" that Frederic Bastiat warned would emerge from the "bad economist". I am certain Bastiat was not actually referring to economists, but politicians who played one on the floor of the legislature. I have no problem with taxing cigarettes, BUT the rate of taxation has to be rationally determined not just for the revenue it might raise, but for the additional PREDICTABLE results such as the one described below. 

Trade In Black-Market Cigarettes: Hot, Dangerous

Black-market cigarettes are costing many states hundreds of millions of dollars a year in lost tax revenue. And the lucrative, illicit trade is attracting violent criminal gangs that can be lethally ruthless.

Criminals buy cigarettes in bulk, in states with relatively low taxes such as Virginia or North Carolina. They load the cigarettes into tractor-trailers or rented trucks and drive them north, for example, to New York. They follow the same routes they would use to traffic illegal drugs.

Police say a carton that costs less than $40 including tax in a store in Virginia goes for more than $100 in a store in New York City.

Because of high taxes in the city, selling contraband cigarettes at rates even slightly lower than their value in the store can mean big money for criminals.

"They can be sold from ... the back of a van on the corner. They can be brought in through big trucks across the border and taken to warehouses and distributed from there," Gore says