Nice graphic showing Financial Capital Inflows into select countries...A great resource for Macroeconomics OR to impress your teacher/professor...

We just completed a unit on the Foreign Exchange Market in AP Macroeconomics last week. This week we are going to look at how the government tracks international flows of currency through "The Balance of Payments".

This interactive graphic shows the Financial Capital Inflows to select countries and the corresponding effects on the currency exchange rates with the US dollar from 2001 and 2011. It will be very helpful when we learn about the Financial/Capital Account side of the Balance of Payments.

Go HERE for the interactive. What do you notice about the relationship between financial capital inflows and the relative value of the currencies of the respective countries?

Source: Wall Street Journal

Where's the Beef? Well, it could be in a number of places if competition is not hindered by "rent-seekers"...

This is an excellent example of how the market responds (even if slowly) to consumer demands in the fast food industry. 

Entrepreneurs with a good idea and executed with persistence can build their own niche brands and, as an unintended consequence, influence the behavior of the large chains in the restaurant buiness.

This article focuses on the "tween" burger business (not fast food and not casual dining, i.e. Chilis, TGIFridays, etc) and how their success has impacted the big boys in the fast food business.

As long as we have economic freedom and maintain conditions where competition is not limited/hindered, we will have more and better quality products available to choose from.


US burger chains beef up to keep up

""Top US fast-food restaurant companies are beefing up their hamburgers to keep up with an onslaught of competition from “better burger” chains, which have been gaining market share by offering premium meat and high-quality toppings.

McDonald’s started offering Angus beef hamburgers on fluffy buns, promising more thickness and juiciness. Rival Wendy’s now sells an eight-ounce hamburger, made from North American beef that is never frozen. And Burger King, trying to capitalise on greater health consciousness, is cooking “California” Whoppers, topped with fresh guacamole and ripe tomatoes.

Competition from better burger chains, which account for only about 3 per cent of the market, is good for the industry, according to Sara Senatore, restaurant analyst at Bernstein Research, because it gives consumers a new option priced between fast-food and casual dining. The focus on quality meats and toppings has forced industry leaders to sell healthier food.

“I think, given the demand environment, offering a premium-priced burger could make you raise your eyebrows a little bit, but it shows a continuing trend toward improved food quality,” Ms Senatore said. “All of the chains have ratcheted up the quality.”...

The writing is on the wall (or E-Reader) for the book publishing industry. Nice graphic showing price/profit differences between the two mediums.

Creative Destruction is working its way through the publishing industry, via technological advancement and book readers willing acceptance of the change.  The bottom line is, well, the bottom line $$: E-books are more profitable on a per unit basis.

You better go take a picture of your local bookstore to show to your grand kids someday---"Really, Grandpa/ma, they had buildings JUST for books?--That's crazy!"...(Don't laugh--when was the last time you went to a video store?)

Source: Wall Street Journal

World's Largest Employers (with governments included)...Do you see a trend here??

Source: The Economist

Who are the world's biggest employers?
ONE of the biggest headaches for policymakers in many rich countries has been how to create jobs during a period of fiscal austerity and anaemic growth. The private sector has been slow to generate jobs, and government-spending cuts usually end up cutting jobs. And governments employ a lot of people: in our chart of the ten biggest global employers, below, seven are government-run. America's defence department had 3.2m people on its payroll last year, equivalent to 1% of the country's population. China, the world's most populous nation and a big military spender, employs 2.3m people in its army. And the number of people working for the National Health Service in England is equivalent to over 2.5% of the country's population. The three private companies are Walmart, McDonald's and Taiwan's Hon Hai Precision Industry Company, a subsidiary of which is Foxconn, a secretive electronics manufacturer.

If you have never viewed on of my charts, this is THE one---"Pie Chart" of Girl Scout Coookie Sales...

Source:Wired.com

Here is my short take on why we are in between the proverbial rock and a hard place in terms of the economy...I think this is a worthy two cents...

I can see alot by looking at numbers. One source of our economic problems can be seen in just looking at one key government statistic.

Gross Domestic Product (GDP) is the sum total of a nations domestic output of finished goods and services. There are four major categories of expenditures: Personal Consumption Expenditures (what you and I purchase), Gross Private Investment (what businesses buy AND residential housing), Govenment Expenditures (what Federal, State and Local govts purchase) and Net Exports (exports minus imports). These categories are totaled below in (2), (7), (22) and (14). 

The recession officially started in the first half of 2008. Starting from left and going right, look at line 1.  Notice how total GDP declines, then recovers.  We are back to square one---Almost.

Look at the number in 2008 III and 2011 II.  Three out of the  four categories ARE back to 2008 levels or better.  How can that be and we have 9.1% unemployment vs 5% in 2008?

Source: Bureau of Economic Analysis (BEA)

Category Gross Private Investment is still in the red by approx. -$220 billion. Look at the subcategories on this line.  Non-residential structures (factories, office buildings, etc) and residential---the housing industry are still in a funk.  There is an acute lack of spending in these critical, job creating industries.

There is what is called "Excess Capacity" in the system---too many existing idle resources (factories, buildings, houses) in place that prevent new spending by businesses. In the simplest terms, we appear to have too many "structures chasing too few productive uses".

 If I own a business and want to expand, due to cutbacks in the last two years, I probably have extra space in my own  building or there is an empty one nearby.

Until this excess capacity is absorbed or becomes depreciated beyond productive use, seems we will be in slow period for an extended period of time. 

Need more useless but interesting info in your head? See here why carrots are orange...

Why are carrots orange? It is political

""No, the image above does not some show some collection of freshly genetically designed hypercarrots in various colors of the rainbow. This is the spectrum of colors carrots used to have – and in some regions of the world you can still find white, yellow, red and purple carrots. In most countries however, carrots tend to be orange nowadays. Why is that?

They’re orange for entirely political reasons: in the 17th century, Dutch growers cultivated orange carrots as a tribute to William of Orange – who led the the struggle for Dutch independence – and the color stuck. A thousand years of yellow, white and purple carrot history, was wiped out in a generation.

Although some scholars doubt if orange carrots even existed prior to the 16th century, they now form the basis of most commercial cultivators around the world. Presumably crosses between Eastern (purple), Western (white, red) and perhaps wild carrots led to the formation of the orange rooted carrot sub species. Turkey is often cited as the original birthplace of the hybrids (or mutations) of the two groups.

Whatever the origins, the Long Orange Dutch carrot, first described in writing in 1721, is the forebear of the orange Horn carrot varieties so abundant nowadays. The Horn Carrot derives from the Netherlands town of Hoorn in the neighborhood of which it was presumably bred. All our modern, western carrots ultimately descend from these varieties. Hypernature avant la lettre.""

Chart of all charts for young people---the transition of economic power from the 1800's to 2030...Is it inevitable?

A look at the past, present and future or economic power in one easy graphic. Some rise and some fall. Is our fall inevitable or can we stop it? 

Source: The Economist

""A NEW book, discussed in this week's Economics focus, by Arvind Subramanian of the Peterson Institute for International Economics argues that China’s economic might will overshadow America’s sooner than people think. Mr Subramanian combines each country’s share of world GDP, trade and foreign investment into an index of economic “dominance”. By 2030 China’s share of global economic power will match America’s in the 1970s and Britain’s a century before. Three forces will dictate China’s rise, Mr Subramanian argues: demography, convergence and “gravity”. Since China has over four times America’s population, it only has to produce a quarter of America’s output per head to exceed America’s total output. Indeed, Mr Subramanian thinks China is already the world’s biggest economy, when due account is taken of the low prices charged for many local Chinese goods and services outside its cities. China will be equally dominant in trade, accounting for twice America’s share of imports and exports. That projection relies on the “gravity” model of trade, which assumes that commerce between countries depends on their economic weight and the distance between them.""

Two headlines, two different conclusions. Who to believe: Economists or people that actually produce something useful?? :)

Two headlines, two different conclusions. Who to believe: the Theorists or the people who actually produce something?

Many economists say Obama jobs plan will help (USA Today)

Employers Say Jobs Plan Won’t Lead to Hiring Spur (NYTIMES)

US Exports at an All-Time High! Yes, we still do make stuff in the US. Why do we see trade with the rest of the world as a problem instead of an opportunity?

The Red Line represents total imports and the Blue Line total exports. Subtract these two and you get our trade deficit in goods and services with the rest of the world (imports are greater then exports).  The last point on the blue line (exports) is higher than it has ever been. 

Source: Calculated Risk

This second graph shows the impact of ONE good on our trade deficit, Oil---and it is large.  The total trade deficit was $44.8 billion for July and oil imports accounted for roughly $25 billion of the deficit. Need I say it again---we must either "drill, baby, drill" or become less dependent on the stuff. 

I prefer the latter, but the former would create lots of jobs quickly AND send a signal about future supply which would tend to decrease the price of oil today. 

Source: Calculated Risk

Do you play games produced by Zynga? Of course you do. Nice article here on how they use your gaming behavior to, well, game your behavior...

Here is a fascinating look into business side of the "free" online gaming industry. The focus of the article is Zynga, the creator of many popular games that you play or at least tried to play (in my case).  When you play their games you are part of a larger experiment in behavioral analysis and marketing.  They ARE watching every move you make....

 Virtual Products, Real Profits

""To understand why Zynga Inc. is among the tech industry's hottest companies, consider how it gets people to buy a bunch of things that don't exist.

Last year, Zynga product managers for a videogame called "FishVille" discovered something intriguing while sifting data that Zynga collects when people play its online games. Players bought a translucent anglerfish at six times the rate of other sea creatures, using an imaginary currency people get by playing the game.

The "FishVille" managers had artists whip up a set of similar imaginary sea creatures with translucent fins and other distinctive features, says Roger Dickey, a former Zynga general manager who left the San Francisco company recently. This time, they charged real money for the virtual fish, and players snapped them up at $3 to $4 each, says Mr. Dickey.

Just five percent of Zynga's dedicated fans are contributing to nearly $600 million in revenue last year. Nick Wingfield explains the allure of the imaginary economy sustained with real life dollars.

Zynga is transforming the game industry. Traditional videogame companies create games they think players will like, then sell them. Zynga offers free games through Facebook Inc.'s social network, then studies data on how its audience plays them. It uses its findings to fiddle with the games to get people to play longer, tell more Facebook friends about them and buy more "virtual goods." At the heart of the whole process is Zynga's ability to analyze reams of data on how players are reacting to its games.

"We're an analytics company masquerading as a games company," said Ken Rudin, a Zynga vice president in charge of its data-analysis team, in one of a series of interviews with Zynga executives prior to the company's July filing for an initial public offering.

Over 95% of Zynga's players never spend a nickel on its games. But its audience of 150 million unique monthly users is so large that the small percentage that buy $5 imaginary chickens in "FarmVille" and $3 imaginary skyscrapers in "CityVille" generate big bucks for the company. Some players spend hundreds or even thousands of dollars a month—they're called "whales" inside Zynga, the same term casinos use for high rollers...."" Read the Rest HERE

My two cent, two sentence analysis of Republicans and Democrats in regards to the latest jobs bill...

Republicans are NOT supporting job creating proposals they normally would support because they come from a Democrat (if the Pres was a Republican they would be elated with this proposal). 

Democrats ARE supporting job creating proposals they normally would not support because they come from a Democrat, but mostly because they are not supported by Republicans (if the Pres was a Republican they would be aghast at this proposal).

This jobs bill is in for a rough ride, I believe...

Yes, kids, we are in trouble...

Show me the Spending! Nice graphic showing where the President proposes to spend money to create jobs. I would add one more to the list...

The Presidents job initiative in graphic form.  A little demand-side, a little supply-side.  I do like the school modernization part. This would be MUCH more labor intensive relative too other infrastructure improvements like roads/bridges, which are much more capital intensive. 

What is missing is an intiative to utilize the nations extensive network of community colleges that are vital to re-training workers who have been without work for an extended period of time. It is great (I suppose) to offer companies tax credits for hiring workers out of work for more than 6 months, but if they don't bring skills with them, then it makes it that much harder for companies to hire them---gonna cost more then the $4,000 credit for advanced training...

Source: Washington Post

One of the Presidents proposals: Continue the Payroll Tax Cut---nice graphic here showing what that might mean to YOU!

Go here for my explanation of the payroll taxes (Social Security and Medicare) YOU pay on your wages. Currently you enjoy a 2-percentage point temporary cut in the Social Security tax, normally 6.2%.  The President has proposed this cut continue for at least another year. As a result, you get an additional $2.00 for every $100.00 you earn.

The graphic below shows how much in additional taxes wage earners would pay if the tax cut is not extended. This appears to be a dubious tax cut. If you divide the number to the right by 12 months, then by 4.3 weeks in a month, the amount is relatively small.

 At most this acts as a stabilizer ("saves/maintains jobs") and is not stimulative.  We shall see.

Source: Jared Bernstein

Nice example of Complementary Goods---HD TV and Make-up Artists..

Today in class we started our unit on the basics of demand and supply.  I always do demand first because intuitively it is easier for students to understand---they are mainly consumers at this point in life. 

We covered briefly the definition of Complements---two goods that are separate and distinct but are most often used in conjunction with each other.  In general, there is as inverse relationship between the price of one good and the demand for the complementary good.  Below, from the Freakonomics Blog, is a timely reference to complementary goods that is a bit unusual---HD TV and Make-up artists.
Because of the high resolution of HD, every imperfection in skin and hair is magnified.  It has created a surge in the demand for make-up artists.

The price of HD TV (both to broadcast and the price of the TV's) has decreased as it saturates the marketplace. As more broadcast outlets adopt the format more of the goods and services, like make-up artists, that complement it will be in greater demand...

Does HDTV Increase Demand for Make-up Artists?

"A major technical change in TV has been the introduction of HD broadcasting and receivers. For the same price you get higher quality, so this can be viewed as a rightward change in supply. This change has affected a surprisingly related market—that for make-up artists.

Now if you’re on television, as I discovered, every single “flyaway hair” is visible. Most of my hair flew away many years ago, but what’s left might still stick out and need careful laying down by a specialist. A make-up artist tells me that demand for her services has been helped tremendously by the introduction of digital broadcasting and HD receivers."