Earth Hour 2009

This is a pretty cool collection of before-and-after pictures as cities around the globe turning off their lights to mark Earth Hour 2009. Talk about energy saving!

Money Illusion

What would you prefer: a three per cent wage rise at five per cent inflation? Or a two per cent wage-cut with stable prices? Many people, faced with this choice, would take the first option, although the true purchasing power of their income sinks in both cases by exactly the same amount, namely two per cent. Researchers at Bonn University and thhe California Institute of Technology have now discovered the cerebro-physiological cause underlying this so-called "money illusion".
***
The results achieved by these scientists in Bonn demonstrate that as far as the brain is concerned money is represented as being "nominal", and not only "real". In other words: people like to be seduced by large numbers. This is of great practical relevance as the money illusion explains, for example, why the economy allows itself to be reflated by expansive financial policy. It also offers an explanation for why nominal wages rarely sink, whereas true wages, in contrast, fall in value in periods of inflation. Many economists also see the money illusion as an explanation for speculative bubbles, such as those in the property or shares markets. Armin Falk declares: "Even minor departures from rational behaviour, i.e. a "little money illusion" can have major economic consequences". [EurekAlert]

(via Prof. Brad DeLong)

Technology: Mobile Payments

But the bigger opportunity for Obopay and mobile payments in general is not in the U.S. It is in India and other parts of the world where a large portion of the population don’t have bank accounts. These are the so-called “unbanked.” There are billions of them and their relative spending power is on an upwards trajectory. Obopay CEO Carol Realini says:

There are four billion phones, and only one billion bank accounts. Our view is you have to have a way for both the banked and the unbanked to participate in the mobile payment system. [SeekingAlpha]

This is a technology to watch, I think. If you can do many things with your mobile, then you won't need your computer that is more expensive to buy and to connect. However, I don't know if I trust this technology yet. It took me a while to trust wireless routers, and I still don't use my mobile phone for anything involving money (e.g., checking bank balances, etc.) I know it can be done. People have told me that it's safe. I'm just... scared. I feel like I've become a dinosaur... no longer up-to-date on technologies. Well, let this technology penetrate other markets first. May be then I'd buy off on it.

A Marketing Move by Col. Sanders

In an unusual cause-marketing push, KFC is tackling the pothole problem in Louisville, Ky. in exchange for stamping the fresh pavement with "Re-freshed by KFC," a chalky stencil likely to fade away in the next downpour.
***
"This program is a perfect example of that rare and optimal occurrence when a company can creatively market itself and help local governments and everyday Americans across the country," said Javier Benito, exec VP-marketing and food innovation at KFC.
***
In addition to the Louisville project, KFC has issued an open offer to U.S. mayors to tell them about the state of their city streets and request assistance. The chain will select as many as four more cities at random for pothole assistance.

The restaurant has not yet been contacted by the city of Chicago, but has received request from Austin, Texas; Somerset, Texas; Chattanooga, Tenn. and Greenville, Miss. [Crain's Chicago]

New Math

Pretty cool site - a new way to think about how things are related. Some of my favorites:

Good meeting = (time saved/time wasted) + snacks

Bad meeting = (time wasted/time saved) + snacks

(via Freakonomics)

The Burden of the Debt Clarified

An excellent post by Prof. Mark Thoma. It's a bit dated, but the theory still holds. It's also long, but it sheds a good light on the on-going debate over the proposed budget and current/projected deficit. The bottom-line is summarized well by Robert Frank on his blog post:

The consensus is that short-run deficits help end recessions, and that whether long-run deficits matter depends entirely on how government spends the borrowed money. If failure to borrow meant forgoing productive investments, bigger long-run deficits would actually be better than smaller ones. [NYT]

Also, watch an excellent investigative piece on Frontline this week called Ten Trillion and Counting.

"Just arm yourself with $100 bills"

According to a new study to be published in the Journal of Consumer Research, shoppers are less likely to spend their dough if they are carrying cash in large denominations. This so-called "denomination effect" can be a powerful predictor of consumer spending habits. Through a series of experiments, the study shows that if people have an equivalent amount of money, say $100, the folks with a Ben Franklin in their pockets might not part with it, while those carrying Andrew Jacksons and George Washingtons more easily give up that cash.
***
From a recession-fighting perspective, however, self-control is Satan. The U.S. government is desperate for consumers to start spending again. So maybe the Obama Administration is approaching the economic stimulus the wrong way. Forget about tax cuts and grants to state governments. Just give the people a bunch of $1 bills. [Time]

No Payment Necessary

Isn't this how we got ourselves in so much trouble now?:

Thornton Place, a big, new project near Northgate with cinemas and a creek, is offering prospective condo buyers a layoff-protection plan in hopes of spurring sales in this sour market.

Buy a condo, the developers say, and if you lose your job within a year they'll make your mortgage payments for up to six months.
***
There's plenty of fine print in the offer. It's limited to 27 condos that are the targets of a new marketing campaign that launches this week. They start at $299,950 for a 595-square-foot one-bedroom unit.

The developers will pay no more than $2,500 a month, principal and interest only. The condo must be the buyer's primary residence. [The Seattle Times]

I understand why the developers are doing it, but what happens if the buyer can't find a job in six months, which is a highly probably scenario in this economic environment? Won't we have more foreclosures? I know that additional 27 condos is not a lot considering the number of foreclosures out there, but what if other developers decide to follow? I don't know about this... Am I missing something?

U.S. Consumer Spending Up in February

Personal consumption expenditure rose by 0.2 per cent, in line with economists’ expectations, according to commerce department figures released on Friday. The February rise followed a revised 1 per cent increase in January, which broke a record streak of six consecutive declines.
***
Incomes fell back in February, with personal income declining by 0.2 per cent for the second consecutive month. The drop was largely due to rising job cuts, pay freezes and eliminated bonuses.

The commerce department’s closely watched gauge of prices rose 0.3 per cent in February, the same rate as in January, and showed a 0.2 per cent increase excluding food and energy for the second month running. Year-on-year core prices are up 1.8 per cent.

That should ease fears that the US downturn could lead to a deflationary trap. The labour department’s February consumer price index rose by 0.4 per cent on higher energy prices.
***
Such conditions kept consumer sentiment, as reported on Friday by the University of Michigan’s index, depressed this month. Sentiment rose to 57.3 in March from a revised 56.3 the prior month, in a reading that was slightly more optimistic than analysts expected. The index bottomed at 51.7 in 1980. [FT]

Letters to POTUS

One of the real letters to Pres. Obama:

Dear Mr. Obama,

I wish you could give me money and buy me a Nintendo DS and a DS game. Mr. Obama, are you rich?

One of the fake letters to Pres. G.W. Bush:

Dear President Bush,

I want a Super Soaker and Rollerblades and an X-Box 360 with lots of games. Mom says I should write to Santa Claus instead, but he’s just some fat Swede and you’re the leader of the free world. It’s no contest!

(via The Morning News)

Feds Revels New Fuel Efficiency Requirements

The U.S. Transportation Department will unveil the first increase in passenger car fuel efficiency requirements in 25 years -- the first step in what will be sweeping reform for the nation's car and truck fleets.

Passenger cars will have to average 30.2 mpg and light trucks 24.1 mpg for 2011 model year vehicles, which hit the market in September 2010. The rule will save an estimated 887 million gallons of fuel and eliminate 8.3 million metric tons of greenhouse gas emissions. [The Detroit News]

A move in the right direction. From what the rest of the article indicates, I think 2012 models might have more stringent requirements.

How the Fed Makes Decisions

South Park style:

(via Andrew Sullivan)

Shoes Designed to Grow with Feet

Very cool concept: instead of changing kids shoes as they grow, you adjust the insoles.

Postal Service Could Go Bankrupt

The Postal Service will run out of money this year unless it gets help, the postmaster general, John E. Potter told Congress on Wednesday as he sought permission to cut delivery to five days a week.
***
Mr. Potter first raised the possibility of delivery cutbacks in January, but the idea has not been warmly received in Congress. [NYT]

Going five days instead of six would save the USPS $3.5 billion annually. I don't know of a reason why it shouldn't be able to reduce the days to five. I don't necessary need my mail on Saturday. Most businesses are not even open on Saturday to receive mails. But I want to throw a question out there: What would be the real consequences of eliminating postal service? Can we privatize the service? If so, how much do you think the postal rate would go up by (you know, it WILL go up)?

China Stimulates Domestic Consumption

No long will it rely on other countries to consume to keep its economy afloat for now:

Facing slumping demand for Chinese goods overseas, China's government is trying to stimulate consumption at home — spending $2.25 billion to subsidize discounts on made-in-China fridges, washing machines, mobile phones, TVs and cars for its rural residents. But Chinese citizens' tendency to save their cash could prove to be a hurdle.
***
"I saved 70 or 80 percent of my salary in a bank account," says MBA student Sherry Zhao, illustrating this trend. When she was working in a bank, she earned twice as much as her friends, but she lived at home. She was saving for her studies, but also because, she says, that's what Chinese people do.
***
Zhang Jun, economics professor at the China Center for Economic Studies at Shanghai's Fudan University, says as people have gotten richer, they have saved more.

"What we see in the last 10 years is a declining share of consumption spending relative to GDP."

And when it comes to the national savings — which include savings by businesses and governments — according to Chinese figures in 2007, China saved the equivalent of 49.9 percent of its GDP. This has contributed to huge global trade imbalances: Chinese savings have in effect been funding American spending. So, according to Zhang, stimulating Chinese consumption can only have a limited effect. [NPR]

Good News Bubble Deflates

Updated data showed US gross domestic product contracting at an annualised rate of 6.3 per cent in the fourth quarter of last year, compared with last month’s estimate of 6.2 per cent. That previous 26-year record came after an overly optimistic January projection that the economy contracted by just 3.8 per cent in spite of anecdotal evidence of a more severe downturn.

Economists predict that the impact of the $787bn government stimulus package will not be felt until the second half of this year and that the economy could contract by another 6 per cent in the second quarter before flattening. The US government’s 10-year budget outline unveiled last month projected that the economy would contract by 1.2 per cent in 2009 before rebounding to 3.2 per cent growth in 2010. The Congressional Budget Office, however, found those estimates to be exceedingly hopeful.

Meanwhile the number of people continuing to claim unemployment benefits through the second week of March rose by 122,000 to 5.56m, the highest total since tracking began in 1967.

But:

In spite of Thursday’s grim data, recent figures have shown signs that the US economy could be starting to stabilise. On Wednesday the Mortgage Bankers Association said that applications for US mortgages surged last week as banks lowered borrowing costs after the Federal Reserve’s decision to buy Treasuries pushed interest rates to record lows. Meanwhile sales of new homes rose for the first time in seven months in February as falling prices began to lure buyers to the market and companies increased spending on durable goods. [FT]

[Update:] From Tyler Cowen:

I do not believe the rosy scenario, as I think there are still other "shoes to drop," most of all internationally. I also think we will see a double-dip or triple-dip recession, as the Fed must eventually withdraw some of new money from the system. Good news is then, in fact, simply a sign that some bad news is on the way, sooner or later.

Regulating Wages on Wall Street

Nate Silver has interesting idea:

My hunch is that the financial services sector has been artificially limiting its labor pool by confining its hiring to an extremely high number of elite undergraduate and business schools, such as the Ivy League, the U. of Chicago, Stanford and M.I.T. Maybe the reason that Marvin is an investment banker and Melvin an engineer is because Marvin went to Yale and Melvin went to Purdue, and the bank only recruits at Yale and not at Purdue. Indeed, while the participation of Ivy League graduates in leadership positions in non-financial companies has been decreasing, the same has not been true at investment banks. One can easily imagine, moreover, how this trend could be self-perpetuating. You get a bunch of Harvard, Yale and Stanford grads in management positions at investment banks, and they're probably going to be predisposed to hire other Harvard, Yale and Stanford grads.
***
That is, the excessive wages paid by Wall Street not only lures talent away from other parts of the private sector, but also from the public sector, where employees are subject to government wage controls. The very people who might be the most capable of enforcing regulations on the banks instead wind up working for them.

Isn't there some truth to what Nate Silver is saying? The private sector (as well as citizens) criticizes the public sector all the time on how inefficient the government is or how lazy the government employees are, for example. But no one steps up in fixing the government, may be because the talents are being drawn elsewhere? I know that the answers are not clear-cut, but it's still thought-provoking. The question itself is not new. It certainly has been discussed before.

Replacing the Dollar

I don't have much opinion on this issue yet, but I'm gathering information. My first impression is no, considering what we have learned from the gold standard. However, there seems to be many good reasons for a new global currency:

A U.N.-appointed international panel led by Nobel laureate economist Joseph Stiglitz has urged a replacement of the dollar as the global currency, doing away with the Group of 20 financial organization, a global restriction on the size of banks, and a limit on bank transactions with tax havens.

The Stiglitz-led U.N. Commission of Experts, appointed in October to recommend how to overcome the global financial crisis, also proposed tight limits on financial risks that banks can assume. The group's report is to be issued Mar. 26, but a shorter, preliminary version has already been distributed.

Many economists agree that in the coming decades the dollar will become less central to the world economy as China continues to grow. But the suggestion assumed the appearance of something imminent. One worry is that, if it loses its status as holding the pre-eminent currency, the U.S. will have far more difficulty financing its deficits. Stiglitz said, "No one thinks it would happen overnight." [BW]

Animal Looks

Every gal should have a pair of animal-print pumps and a handbag -- just don't wear them together. [WSJ]

I don't have them, nor do I have any animal-print clothing. I guess I'm not hip enough (do you still even say "hip" anymore? (sign)).

No Stomach for It After All

As global commodity prices have plummeted and several of China’s African partners have stumbled deeper into chaos, China has backed away from some of its riskiest and most aggressive plans, looking for the same guarantees that Western companies have long sought for their investments: economic and political stability.

Today, China’s quest for commodities has not stalled. State-owned companies are bargain-hunting for copper and iron ore in more stable places like Zambia and Liberia. But Chinese companies are now driving harder bargains and avoiding some of the most chaotic corners of the continent. African governments facing falling revenues are realizing that they may still need the West’s help after all. [NYT]

Too bad for Africa, especially when things are starting to take off in some countries.

To Toss or Not to Toss

I had many "debates" with my husband re when food in the fridge can be thrown out. Well, here's a website created by a retired food safety expert to tell you how long you can keep food safely. I haven't checked out all the advices (there are many!), but here's a crucial piece of info that I'd like to share with the love of my life:

After eggs are purchased, they may be refrigerated for 3 to 5 weeks -- the "sell-by" date on the package, if one exists, will usually expire during that storage period, but the eggs will remain safe to use.

(via Curious Capitalist)

Revenge of the Nerds

We're baa-ck! All it took was the financial meltdown:

Some heartening news on the tech front: Enrollment in undergraduate computer science and engineering programs is up in the U.S. and Canada for the first time since the dot-com bust.

The number of students majoring in computer science was up 8 percent in the 2007-2008 academic year over the previous one, according to data collected by the Computing Research Association (CRA) from departments at 192 universities. The trend marks the first time total enrollment increased in six years. [SciAm]

Banking with Car Companies

For even as car sales slump, German savers are pulling money from their safe, but staid, savings banks and entrusting it to their racy—if ropy—carmakers.

BMW Bank’s deposits have jumped by almost 70% over the past five months. Those at Mercedes-Benz Bank have doubled over the same period and Volkswagen’s financial-services arm ended the year with deposits up by about a third. Banking with car companies is nothing new in Germany. Some big carmakers have been holding money for their customers for over a decade, using the cash to finance car loans and leases. But the recent surge in deposits is a peculiar consequence of the credit crunch in Germany.

Niels Nauhauser of the consumer-protection agency in Baden-Württemberg reckons that car companies were paying depositors up to 5% in December, more than double the average of 2.2% on cash deposits at savings banks.

But even those prices work out cheaper than raising money from banks or the capital markets. For that, the automakers have regulators to thank. When the German government offered retail-bank customers a guarantee on deposits last October to stabilise the banking sector, it included deposits held with car-company banks, making them no more risky than even the most pedestrian savings bank. Lenders in the capital markets, however, have no such guarantee. They are more influenced by the credit ratings of car-company banks, and many of those face potential downgrades on concerns that a slowing economy will lead to increased bad debts on car loans and a fall in the value of second-hand cars sold at the end of their leases. [Economist]

Seems like a good idea, especially if the deposits are guaranteed by the government. Win-win situation. Would it work here in the U.S.?

Power of Music

A team of London neuroscientists is claiming that playing Kenny Rogers songs for stroke victims speeds their cognitive recovery. [Freakonomics]

"Gambler" was so appropriate. "You got to know when to hold em, know when to fold em, Know when to walk away and know when to run."

$5 Tax on Prostitution Proposed

A key state lawmaker has proposed a $5 tax on acts of prostitution in Nevada, where brothels operate legally in some areas, and a counseling agency for sex workers that would be funded by part of the tax revenue.

... by [Senate Taxation Committee Chairman Bob Coffin's] estimate would raise at least $2 million a year from sex acts in the legal bordellos.

SB369 would impose the $5 tax on anyone who pays for or collects money for services of a prostitute. The money would help pay for a state ombudsman for sex workers who would work in the state Department of Employment, Training and Rehabilitation. One of the ombudsman's main tasks would be to help sex workers find other types of employment. [NPR]

A counseling agency for sex workers? I feel like the article is describing a world I don't know anything about. So, the purpose is to tax sex workers in order to pay for social service to place sex workers in other occupations? Hmmm.

"Way to Hell"? Harsh Words!

Transatlantic tension over the handling of the global economic crisis intensified on Wednesday when the prime minister of the Czech Republic, which holds the European Union presidency, described the U. S. stimulus measures as the “way to hell.”

Addressing the European Parliament in Strasbourg, France, Prime Minister Mirek Topolanek argued that the Obama administration’s fiscal package and financial bailout “will undermine the stability of the global financial market.” [NYT]

Ouch! Well, the reason for the harsh words could be because many European countries had been resisting financial stimulus. Also, if you read the article further, Czech's economy is holding up pretty well. Of course, they don't understand why American economy would need to hand out financial stimulus, which pressures the European governments to follow. However, some European officials seem to be critical of the comment made by Mr. Topolanek.

"When reality stinks, write fiction"

But as stock markets tank, newspapers go bankrupt, and city services vanish, the humble, bracingly personal act of trying to write fiction - preferably with the support of a writers' workshop - appears more popular than ever. [The Philadelphia Inquirer]

Is it because writing gives you a good outlet for your emotions and thoughts? It's a low investment with potential of big pay off? Thoughts?

"Make It Fast"

A CBS News/New York Times poll revealed Tuesday that Americans are split into three separate camps when it comes to the growing national frustration: Those who think everything is taking too long; those who think everything is taking too goddamn long; and a third fringe group that believes everything is taking fucking forever.

Several thousand respondents hung up their telephones before answering all of the poll's questions.

At a press conference, President Obama offered little comfort to the impatient nation, claiming that the number of things that take all freaking day is only expected to rise.

"I've spoken to leading scientists and efficiency experts and unfortunately we're just going to have to deal with this," Obama said before staring down at his watch, drumming his fingers on the podium before him, and muttering something inaudible under his breath. "Look, in my opinion, these press conferences take way too long. But am I going to flip out just because some dumb reporter asked a bunch of pointless and infuriating questions? No, of course not. And do you know why I'm not? Because this is a goddamned civilized society. That's why." [The Onion]

Durable Goods Orders Increase

A piece of good news (even if a temporary one):

The Commerce Department said Wednesday that orders for durable goods — manufactured products expected to last at least three years — increased 3.4 percent last month; private economists had expected a 2 percent drop. It was the first advance since July and the strongest one-month gain in 14 months.

Last month's strength was led by a surge in orders for military aircraft and parts, which shot up 32.4 percent. Demand for machinery, computers and fabricated metal products also rose.

Still, the rebound may be temporary given all the problems facing the economy, and a large drop in orders in January was revised even lower. [NPR]

Our Reading Habit

A study of reading habits showed almost half of women are 'page turners' who finish a book soon after starting it compared to only 26 per cent of men.

The survey 2,000 adults also found those who take a long time to read books and only managed one or two a year were twice as likely to be male than female.

The only similarities between the sexes came among those who have two books on the bedside table at once and who start one book on the middle of reading another, switching easily. Twelve per cent of women were in this category – exactly the same number as men. [Telegraph via Marginal Revolution]

And Here's to You, Mrs. Robinson

Earlier this month, the journal PLoS Medicine analyzed data from a study of over 50,000 pregnant women and came to a simple but stunning conclusion: Older fathers have dumber kids. The more geriatric the dad, the dimmer the progeny, on measures including “thinking and reasoning, concentration, memory, understanding, speaking, and reading.” (Luckily, geezer offspring had no problems with motor skills, making them ideal for wheeling around their elderly dads.)

It was another unsettling addition to the growing pile of evidence that men have their own biological clocks, with older fathers also producing higher rates of schizophrenia and autism. But what really caught my eye was the secondary finding, which was that older mothers were associated with smarter children. [NY Mag via Andrew Sullivan]

Good to be cougars?

Food Trucks Profit Using Twitter

This is such an awesome idea:

[Chuck] Chun found the truck with the help of a tool that has become the necessity of any serious foodie these days — a Twitter account.

"You've got to go on Twitter to get the most up-to-date news on what kind of specials they have that day or where they are," Chun explains. "They actually got here late — that's what they announced on their Twitter."

It's so 2009: Customers instantly know where the truck is, even if actually getting the food takes hours. [NPR]

They Want Blood!

Stephen Colbert joked about leading a pack of angry mobs to bring down A.I.G. But, was it really joking? Behind every joke, there is a hint of truth. Felix Salmon raises a concern over the very topic today:

Now, of course, that dream is shattered -- and, what's worse, it turns out that very overclass is responsible for the working class's own present straits. While the talking heads in New York and Washington throw around their millions and billions and trillions before commuting home to their comfortable middle-class-and-better lifestyles, the rest of the country is mad as hell, and ain't gonna take it any more. They're not interested in constructive solutions or in leveraging private capital or in the sanctity of contracts: fuck that shit. Those days are over. They want to see jail time, confiscatory policies, and worse.

As inequality grew in America over the past 30 years, there was always the risk that it would snap back violently and dramatically. That day is not yet here, but it's closer than it has ever been, and its possibility cannot be discounted. Barack Obama smells the public mood, and is trying to respond to it in a grown-up and non-incendiary way. Congress smells it too, and is being rather less grown-up about things. And Wall Street still largely remains inside its bubble, watching the tour buses on the outside with fear and incomprehension. But unless some very senior executives start smelling the coffee sharpish, they might end up facing the biggest tail risk of them all.

I really don't think the CEOs get it. My husband pointed out a quote from a news report of JP Morgan chase to spend millions on new private jets:

But on March 11, the chairman of JPMorgan Chase, Jamie Dimon, said he could not understand why corporate America has such a bad image.

"When I hear the constant vilification of corporate America I personally don't understand it," Dimon said.

"Congress Forced to Watch Training Video About Bipartisan Cooperation"

While an up-tempo synthesizer track plays in the background, [Sen. William] Proxmire teaches the bitterly divided congressmen to look at each other, open their minds, and work together instead of relying on threats and walkouts.

Another scene revolves around a heated appropriations dispute, and encourages lawmakers to always "S.H.I.N.E." by using the five steps of legislative cooperation: "Show respect, Hold back anger, Identify common ground, Nation first! and Emerge with compromise." [The Onion]

Quote of the Day

The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right — but it comes with real responsibilities, and that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization. And the measure of that greatness is not the capacity to destroy, it is your demonstrated ability to build and create.

Pres. Obama in his recorded video message to Iran in honor of the Nowruz holiday

Fight Off Recession Blue with A Little Romance

From Romance Writers of America:

Romance fiction: $1.375 billion in estimated revenue for 2007
Religion/inspirational: $819 million
Science fiction/fantasy: $700 million
Mystery: $650 million
Classic literary fiction: $466 million

Can it be true that romance fiction is the romance fiction is the best selling fiction category in 2007? The same site also said that one if five Americans reads romance novels. So, a whopping 20% of population generated $1.375 billion in sales? I find it hard to believe, so I searched for the cited survey, Business of Consumer Book Publishing 2008. I couldn't get all the results of the survey unless I was willing to give them $3,000 for the report, but I found that there were more categories in the survey. So, it could be that the Romance Writers of Americas was cherry-picking categories to compare the romance fiction to? Hmm... But it seems that Freakonomics is willing to say that romance fiction stands up well against fiction. Is it really though?

Visual Aid in Imagining How Much $1 Trillion Looks Like

Let's start with a billion:

Now, a trillion dollar:

Check out how "big" a pile of $1 million is just for kicks. (Pagetutor.com via TheMorningNews)

"If you ain't got much, you ain't got much to lose"

A good article on costs of inequality to the society:

Economists across the political spectrum have turned the logic of laissez-faire around, emphasizing that rational economic agents are easily tempted to misbehave. Jack Hirshleifer, a highly respected mainstream economist, has called attention to “the dark side of the force” — crime, war and politics. Why participate in the market if you can do better by engaging in theft or fraud?

To paraphrase Bob Dylan, if you ain’t got much, you ain’t got much to lose. On the other hand, the more you got, the more you got to protect. Richard Wilkinson’s new book, “The Impact of Inequality,” summarizes evidence from comparative studies that violence is greater — and trust and cooperation lower — in more unequal societies. (He also argues that inequality is bad for health, a topic I’ll return to in a future post.)
...
As incomes mushroomed at the top of the corporate ladder, neither the numbers nor the salaries of government-paid regulators kept pace. Large firms often hire accountants who are financially dependent on them and reluctant to blow whistles. The growing divergence in economic, cultural and political power may have undermined regulatory efficacy.

In the single largest fraud case of the year, Bernard Madoff is said to have robbed investors of about $50 billion. Robert Allen Stanford has reportedly made about $8 billion disappear. The losses attributed to these two men exceed the $51.7 billion that states devoted to prisons, probation and parole in 2007.

"Russia's Economic Rescue Plan: Go on a Diet"

The ministry says the diet, which is heavy on hearty Russian foods like porridge, cabbage salad, sour cream, mashed potatoes, vegetables, whole grain bread and fish, will cost just $77 a month. "The aim of the diet is so that the people don't panic and know that in any situation there is a way out, including through nutrition," a spokeswoman for the Ministry told TIME. (See pictures of what makes us eat more food)

Officials are worried that if the price of food keeps rising too fast it could prompt widespread social unrest. The pensions of millions of retired Russians continues to hover below the poverty line and thousands of workers are losing their jobs. At a Communist rally in central Moscow in late February, the increased number of riot police detailed to monitor proceedings was telling of the government's growing fears. [Time]

Quote of the Day

As the governor of a great economy described as “emerging”, what I can say is what sort of society I hope will emerge from this crisis. It will reward production and not speculation. The function of the financial sector will be to stimulate productive activity – and it will be the object of rigorous controls, both national and international, by means of serious and representative organisations. International trade will be free of the protectionism that shows dangerous signs of intensifying. The reformed multilateral organisations will operate programmes to support poor and emerging economies with the aim of reducing the imbalances that scar the world today. There will be a new and democratic system of global governance. New energy policies, reform of systems of production and of patterns of consumption will ensure the survival of a planet threatened today by global warming.

But, above all, I hope for a world free of the economic dogmas that invaded the thinking of many and were presented as absolute truths. Anti-cyclical policies must not be adopted only when a crisis is under way. Applied in advance – as they have been in Brazil – they can be the guarantors of a more just and democratic society.

As I said at the outset, I do not give much importance to abstract concepts.

I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings. [FT]

Luiz Inácio Lula da Silva, the president of Brazil

"This is a time of upheaval"

I had a pleasure of attending a presentation by Martin Wolf, the associate editor and chief economics commentator at the Financial Times in London, last week at University of Chicago's Gleacher Center. His main focus of the presentation was promoting his book, which discussed the state of global finance pre this crisis. There were many warnings signs, which he talked about in his book. Even though I'm not a fan of his nor can I agree with most of his economic viewpoints, it still was a good presentation.

Yesterday, Mr. Wolf has written another good article in FT about the future of capitalism as a result of this financial crisis. A must read if you get a chance.

The financial system is the brain of the market economy. If it needs so expensive a rescue, what is left of Reagan’s dismissal of governments? If the financial system has failed, what remains of confidence in markets?

Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalisation itself may founder. This is a time of upheaval.

Quote of the Day

Nate Silver:

Nobody is going on CBNC and saying: "You know what, our bad. We had a lot of good and honest disagreements with the Bush administration's policy. We have a lot of good and honest disagreements with the Obama administration's policy. There are a lot of things we couldn't have anticipated. We were trying the best we could. But we also gave you a lot of bad advice. And that advice cost you a lot of money. And for that, we're sorry."

Why can't anyone on Wall Street man up and do that?

I've been wondering the same thing...

I Had to Laugh Out Loud

The Onion: Obama Outfitted With 238 Motion Capture Sensors For 3-D Record Of Presidency

Added Reinke, "It's like actually watching the presidency unfold."

Reinke explained that Obama will be required to wear the motion capture device at all times during his presidency, barring a few minutes each day to shower and change into a fresh bodysuit. In addition, the president has been instructed to refrain from performing any activities that might cause the sensors to malfunction, such as running, breathing heavily, or letting his core temperature rise above 99.4 degrees Fahrenheit.

Sources at Vicon also confirmed that members of Obama's Secret Service detail will have to carry a large green-screen background behind the president at all times.

Considering how obsessed we've become over this president, this is really funny!

$30 Pillow? Who are They Kidding?

A good op-ed article in the NYT today about the author's experience roaming around Home Depot's now-near-extinct Expo:

What I saw: $300 faucets, $2,000 carpets that don’t fly, $30,000 “wine enthusiast” kitchens. Floor tiles, knobs, basins, dryers, lamps, chandeliers, drapes, carpets, pillows. Pillows! Surely I could afford a pillow! I picked up a wine-colored pillow. I looked at the price tag.

Thirty dollars! Are they crazy? At 40 percent off? No way am I spending $30 on a pillow.

It dawns on me that a universe kept this Expo going. All of it predicated on the notion that there existed an infinite appetite for overpriced pillows.

And there’s the rub: credit is dead and rich ladies don’t grow on trees. And how many times a year did the rich ladies of Atlanta ever need to buy a pillow anyway? It was impossible for the finite number of wealthy housewives of Atlanta to keep the pillow industry afloat. Why would a company speculate and order more and more seasonal pillows when they knew they would never sell them? How could everyone supporting this system, from the foam manufacturer to the seamstress to the salesperson, think this great big pillow shuffle would last? For this kind of system to be sustainable, a society would either have to make more rich ladies or fewer pillows.

I put the pillow back and I left. I felt bad about it. I wanted to help, but are they kidding? Thirty dollars? Really?

My thought exactly. It's almost psychological. One day you're paying $30 for a pillow. The next thing you know, a pillow costs $60. But because you're used to seeing $30 for a pillow, $60 may not be that off the mark. After all, there's a demand for it out there...

Like a Ray of Sunshine over the Recession

The Time has five (actually four) reasons to be optimist about this recession:

1. The stock market is no longer overpriced
2. The government is on the case
3. Consumers are adjusting to the new economic reality -- and fast
4. Reinvention and change are what the US is all about

I think I have mentioned number 1 and 3 on one of my posts a while back. It's a painful time to live through, and there is a lot of unfairness out there. Job prospectus is not looking so good... especially for someone like me who's looking for a job. There is a fierce competition out there as more and more people are unemployed. But I also believe that we will overcome this hardship. Some good things are bound to happen as the results. We'll just have to wait and see.

Auto Sales Still Down

Not that it's a big surprise, but here's an update on auto sales:

January car sales were down 42% from January 2008, while February was down 44% from '08:

These low levels of sales are unsustainable in terms of fundamental dynamics on both the demand and supply side. On the buyers' side, Calculated Risk noted that current sales levels would be consistent with a constant stock of vehicles only if Americans plan to hold onto their cars for a quarter century. Even if Americans don't want more cars-- and eventually we will-- there is clear potential for a very significant rebound on the demand side. It's just a matter of when.

And on the supply side, with the auto industry's huge fixed costs, sales at these levels imply horrific cash outflows which the U.S. automakers simply have no means on their own to ride through. The U.S. Treasury may dole out emergency funds on a month-to-month basis, but eventually that game is going to be up. That seems just a matter of when, too.

So the question is, which when is going to come first? [Econbrowser]

[Update:] From Marginal Revolution:

Hyundai is gaining market share:

Besides the Genesis, Hyundai is also benefiting from a novel scheme, launched in January, in which it offers to buy back cars from customers who lose their jobs within a year of their purchase. (The company essentially offers a smaller discount and then uses the money to buy an insurance policy.) This has proved so successful in stimulating sales that General Motors said on March 3rd that it was considering a similar scheme.

Geithner Offers Rewards for First One to Solve Banking Crisis

Pepsi Headquarter Goes Green

If you've passed by the intersection of Jefferson and Monroe recently, you probably noticed a new addition.

Atop Pepsico's Chicago headquarters are wind turbines that catch wind to produce electricity. Solar panels harness the sun to generate more power. [ABC7]

I'd seen the building; I just didn't know it was the Pepsi building. It was pretty cool, and I thought it was a good idea. However, if I recall correctly, I don't think there were a lot of turbines. Just a few. And they were small (however, they were spinning really fast when I saw them). You could also see the solar panels from the street level. I wonder how much energy they all generate. I think that information would be interesting to see. Did Pepsi put up a few wind turbines and solar panels for PR, or it actually wants to make renewable power replacing most of their current and future energy uses?

More Athletes from Smaller Towns

Interesting correlation:

Abernethy, who is also attached to the University of Queensland's School of Human Movement Studies, said however place of birth is unlikely to be the critical factor in developing sports expertise.

Rather it is "a proxy for describing different types of developmental environments, experiences and opportunities."

Abernethy points to the virtuous circle created for talented sports people growing up in a small town.

"It is much easier to be the best 13-year-old hockey player if you are living in a town with a population in the thousands, then it is in Sydney or New York," he said.

"If you have early success it changes your self-concept -- you believe you have talent."

Abernethy said this belief is nurtured because the talented regional athlete is picked in all the representative teams and gets more attention from coaches.

Their success also encourages them to practice more, which enhances their skills. [Discovery.com]

Half of Foreclosures Occurs in Just 35 Counties

The worst-hit counties are home to about 20% of U.S. households, but accounted for just over 50% of the nation's foreclosure actions last year, driving most of the national increase. And even among those places, a few stand out: Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation's foreclosures last year.

In more than 650 other counties — about a fifth of the nation — the number of foreclosure actions actually dropped since 2006. [USA Today]

Crazy.

OMG of the Day

Michael Jackson announces London concerts

Headline of the Day

Wall Street's Worst Invention Ever: Credit Default Swaps

Agree!

Bento Boxes Fit for All Life Stages

This is a pretty cool site about Japanese bento, or lunch boxes. It reminds me of when I was young and had similar Japanese lunch boxes and matching utensil cases. I can't recall which cartoon characters or figurines were on my lunch boxes though. Regardless, Japanese seems to consider bento almost as an art form. Pretty neat.

Not Everyone is Slashing Dividend

[Wal-Mart] raised its annual dividend by 15 percent.

... the world’s biggest retailer, reported today that sales at U.S. stores open at least a year increased 5.1 percent in February, better than its prediction for 1 percent to 3 percent growth in the three months ending May 1. An increase in customer traffic drove the gains, Wal-Mart said in a statement. [Bloomberg]

F&@# You!

Here's another great segment from the Daily Show with Jon Stewart last night, when he goes off on CNBC. The best part comes at about 7:09 mark when Carl Quintanilla of Squawk Box is interviewing Sir Allen Stanford:

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

[Update:] I think it will be hard for a lot of investors to trust Wall Street again for a while yet. If investors still have any money left, they might start investing again if someone was held accountable or that there are signs that Wall Street is to be trusted again. Banks were running scams and inventing money on money (which is just paper, by the way). All these "financial gurus" were also help fuel and inflate the bubbling economy. I'm not saying that crime can be found necessary, but someone needs to be held accountable. I at least need apologies. I know I won't get them though.

Jon Stewart is Better at Journalism than Most News Reporters

Seriously. He's suppose to do satire, but he ends up being one of the best journalist out there. He asks the right questions and not afraid to probe into to all sides of our political parties. The video is his interview of Joe Nocera, a business columnist of the NYT. These are the questions that the typical news reporters should have been asking... especially those big mouths at CNBC. Bravo to Stewart!

The Daily Show With Jon StewartM - Th 11p / 10c

Joe Nocera

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Unintended Consequence of Airlines Slashing Costs

Latest cost-lowering scheme:

On Feb. 27, O’Leary told the BBC that Ryanair was considering charging passengers to use the toilet in flight. O’Leary says the airline has looked at the idea before and is investigating it once again. “We’re thinking of putting a coin slot on the toilet so people may have to spend a pound to spend a penny,” O’Leary told the BBC Breakfast show. [BW]

And as a commenter puts it:

I say pee in cups during the flight and spill them over after the plane has landed. Let their employees clean up the mess.

I don't know how that is going to lower costs. You still would have to clean the toilet regardless of whether one or ten passengers have used it.

[Update:] The story doesn't make too much sense when you're seeing headlines such as this one: "Airlines Slash Fares to Fill Up Empty Seats."

High School Popularity Leads to Higher Earning?

A post in Freakonomics today discusses an interesting report about how high school popularity may lead to higher earning later in life. Not by much, but still higher according to the study. There are a few caveats with the study, of course. I'm sure that we have heard stories of at least a few high school geeks and nerds who are making millions. (Wasn't Bill Gates a high school nerd?) However, it's still an interesting.

They find that each extra close friend in high school is associated with earnings that are 2 percent higher later in life after controlling for other factors. While not a huge effect, it does suggest that either that a) the same factors that make you popular in high school help you in a job setting, or b) that high-school friends can do you favors later in life that will earn you higher wages.

This is a very interesting study, especially when put side-by-side with Roland Fryer’s work on the “acting white” phenomenon among African-American teens. Roland finds that — unlike whites — among African-Americans, the students who are most successful academically in high school are punished by their peers when it comes to popularity. That finding has inspired Roland to institute a number of programs in the New York schools to try to make it “cool” to do well in school.

Probability of Winning Lottery

From the FT's Undercover Economist, a reader asks what would be the best "strategy" in playing lottery--whether to stick with the same numbers or let the machine pick--given the low probability of winning. And the answer is:

With almost 14 million combinations to try, this would take, on average, seven million attempts – about 67,000 years if you play twice a week. Success would be guaranteed after 135,000 years. If you choose your numbers at random, however, success is never guaranteed, and tame mathematicians tell me that the average time to strike lucky is also longer – perhaps 100,000 years or so.

But whether you can shave 35,000 years off is beside the point. The lottery machine is not trying to find your number. It has no memory of previous combinations, and is equally (un)likely to pick any of the 14 million. Pick at random, write down your birthday … it makes no difference to your chance of winning – although if you write down unusual numbers, it will minimise the likelihood that if you win, you’ll have to share your prize.

Funny Comment in Freakonomics Blog

Steven Levitt has a post today about how Tropicana OJ will save 100 sq ft of rain forest on your behalf. The catch is you have to buy its OJ and type in a code located on the carton. Sounds good, doesn't it - saving the world? Well, a comment from one of the readers is as follows:

So, unless if you don’t type the code Tropicana destroys 100 sq feet of rain forest, you still have an incentive to free-ride…Good.

I guess from this perspective a more effective campaign would be: any time you don’t buy our juice, we kill a panda.

Ha! I totally get a kick out of it!

Quality Over Quantity

Something to try: guidelines for better quality of workday.

Starstruck GOP

A light story for Monday:

After his address to Congress last Tuesday, the same House Republicans who had decried his stimulus plan as the work of just another tax-and-spend liberal crowded around him like starstruck tween girls at a Jonas Brothers concert, all just to get his John Hancock on their copy of the speech.

Members of Congress have always gotten autographed photos of themselves with the President from bill signings and other events — keepsakes that are then prominently displayed in their offices. It is unusual, though, for representatives and senators to cross the aisle. None of the Democrats I spoke with had anything signed from President Bush — except for Connecticut Senator Joe Lieberman, who has five large framed photos of Bush in his office, which probably speaks more to his strained relationship with his own party than any Bush popularity. [Time]

Flight of Skilled Immigrants

The very thing Tom Friedman is afraid of:

Why should we care? Because immigrants are critical to the country's long-term economic health. Despite the fact that they constitute only 12% of the U.S. population, immigrants have started 52% of Silicon Valley's technology companies and contributed to more than 25% of our global patents. They make up 24% of the U.S. science and engineering workforce holding bachelor's degrees and 47% of science and engineering workers who have PhDs. Immigrants have co-founded firms such as Google (GOOG), Intel (INTC), eBay (EBAY), and Yahoo! (YHOO). [BW]