random thought . . . . no random walk

ron paul and michele bachmann are marginal candidates

noreply@blogger.com (RB) — Mon, 22 Aug 2011 23:25:00 +0000

Jon Stewart and others have wondered why the media is ignoring Ron Paul. It is easy. He is a very marginal candidate with little chance of being nominated. Michele Bachmann is only marginally better as a marginal candidate.

This is not my opinion. It is in the polls and it is what the smart money is saying.

Check the Real Clear Politics poll summary shown above (click image to enlarge). Even though Bachmann is getting all the press, she is way down in the polls at 9.6%, way behind Romney (20.2%) and Perry (18.4%) and even trailing non-candidate Sarah Palin (10.0%). Bachmann is barely ahead of non-candidate Rudy Giuliani (9.3) and the rightfully overlooked Ron Paul (8.8). Ron Paul's support has been in single digits, steady, and not growing. Not a good trend. These folks are the minor candidates with Bachmann at best being the pick of a bad litter.

I do not pay much attention to political polls. If I want a good gauge of what is likely to happen, I go to the prediction markets. These markets are forward looking, in that they show what people bet will happen rather than looking backward to what potential voters were thinking last week. In prediction markets, people are putting their money where their mouths are, rather than just answering the phone and giving their opinion. Prediction polls have a much better track record of predicting outcomes than public opinion polls.

The smart money has Bachmann and Paul as even bigger losers. The bets at Intrade.com predict Perry has a 35.3% chance of winning the nomination with Romney following closely at 31.0%. Sarah Palin is a very distant third at 7.6%. Jon Huntsman is fourth at 5.8% followed closely by Bachmann at 5.3% Where's Ron Paul? At a lowly 4.0% and in sixth place.

You think your know better? Then put your money where your mouth is. If you are so smart then you can make a profit, but only if you are right.

integrity of the scripture: is what we have now, what they wrote then?

noreply@blogger.com (RB) — Thu, 04 Aug 2011 18:43:00 +0000

I love reasoning tested by evidence. I guess it is part of my training as an economist. That is why I love the following 48 min. video of a lecture by Daniel B. Wallace of Dallas Theological Seminary. He is one of the world's leading experts on NT textual studies -- trying to figure which, if any, of the current NT writings are accurate.

This lecture was presented to a lay audience so even I could understand it!

Guest Speaker :: Daniel Wallace from Antioch Church on Vimeo.

not nostalgic for jesus

noreply@blogger.com (RB) — Tue, 26 Jul 2011 18:11:00 +0000

If you could travel back through time and could visit one historical person, who would that person be? If you are a Christian, you would be expected to say Jesus. As a believer, what historical figure could be more important?

Personally, I would not want to go back in time to be with Jesus. I also think I have Scripture on my side in not wanting to go back to be with him.

[Okay. I think it would be really cool to go back and witness the Resurrection on that first Easter morning. But that would be merely a form of historical tourism. However, I would not want to stay there. I really don’t wish to go back to be with Jesus.]

Think of those who were with Jesus before the Accession, before he in his glorified physical body went to heaven (Mark 16:19; Luke 24:51; Acts 1:9). Those who were closest to him, those who walked with him, they celebrated. Even after they came down from the adrenaline rush of witnessing Jesus disappearing in the clouds, they never looked back.

Something I find interesting is that there is no record of Jesus’ disciplines pining for the time they spent with Jesus in the flesh. Not even a hint of it in any NT writings. In John’s first epistle he starts out by recounting that he heard, saw, and even touched Jesus in the flesh (1 John 1:1-3) but this is just a statement of fact. A witness to something experienced, not something yearned for. Yet John was the apostle closest to Jesus, “the one whom Jesus loved” (John 13:23; 19:26; 20:2; 21:7, 20). If anyone would have missed Jesus, it would have been John. Neither John nor anyone else seems to have been nostalgic about having been with Jesus.

Why didn’t they miss the good old days with Jesus? Because they had something better after Jesus ascended. At least they did after a ten-day wait for Pentecost (Acts 2:4). They had the Holy Spirit.

The Holy Spirit is better than physically being with Jesus? That is an idea that is very strange to most Christians. This is despite many having read of Jesus actually telling his disciples that it was to their benefit that he leave so that the Holy Spirit could come (John 16:7). What most folks now experience does not seem to come close to being better.

This disconnect between the Word of God and our personal experience is something that should be quite disturbing. Was Jesus lying? Maybe he was hyping the coming of the Holy Spirit so that his leaving earth would be more palatable for his friends and disciples? Jesus isn't supposed to lie so maybe the whole thing is all a lie then?

Maybe these promises were for the first century only and have ceased? Some Christians cite 1 Corinthians 13:8 to support this explanation. However, this only makes sense if the verse is taken out of context. There is nothing in Scripture to indicate the promises of God concerning the Holy Spirit have expired and are not valid anymore.

Rather than something being wrong with Jesus, or that his promises had an expiration date, an alternative explanation may be that that we are missing out. If we are not experiencing what the Bible promises then maybe we are missing out on something God has for us that is really big and incredible? Maybe our expectations for God are much less than what He wants for us? Maybe we should start seeking His gifts?

There are numerous verses concerning the Holy Spirit in NT writings which promise joy, comfort, wisdom, knowledge, personal transformation and more. They are too numerous, or rather I am too lazy, to mention or even cite. There are examples in these writings of people realizing these promises. The historical record since is also replete with such examples.

Maybe we should search the Scriptures for those promises and to seek something better?

Maybe it is time to dump the nostalgia? The good-old days with Jesus may have indeed been good, but they are not supposed to be better. I am grateful for what I have, but if there is more, then I want it. Come Holy Spirit. Come.

Be Blessed!
RB

magic is no blowhard

noreply@blogger.com (RB) — Tue, 14 Jun 2011 13:36:00 +0000

The usual "analysis" on sports shows includes a lot of yelling and opinions, almost all of it negative. All heat and little light, analogous to blue flame of flatulence ignition.

I watched this ESPN post-game "analysis" of the Mavs winning the NBA championship. It has the usual blowhards looking for someone to blame and put down (as if that takes any analysis). However, Magic Johnson is not the usual ESPN, loud-mouthed blowhard. He actually analyzes what went wrong and offers constructive advice as to how the Heat and James can move forward.

BTW, the Dallas head coach is a North Country boy! Rick Carlisle hails from from Lisbon, New York.

make plans for shakespeare in october@slu

noreply@blogger.com (RB) — Fri, 10 Jun 2011 18:54:00 +0000

American Shakespeare Center

2011-2012 Almost Blasphemy Tour

SCHEDULE OF PERFORMANCES

All performances at 7:30 p.m. except where otherwise noted

VENUE: Eben Holden Hall @ SLU

Monday, October 24– The Winter’s Tale

Tuesday, October 25 – A Midsummer Night’s Dream

Wednesday, October 26 - ‘Tis Pity She’s a Whore

(Thursday – day off)

Friday, October 28 – A Midsummer Night’s Dream

Friday, October 28/29 – ‘Tis Pity She’s a Whore – MIDNIGHT

Saturday, October 29 – The Winter’s Tale

Sunday, October 30 – A Midsummer Night’s Dream – 1:30 p.m. Matinee

driving while female

noreply@blogger.com (RB) — Fri, 10 Jun 2011 17:35:00 +0000

Just just coincidence? From Wronging Rights:

Re-ignition of protests against the female driving ban in Saudia Arabia occurs right around the same time as the re-ignition of a certain Summer blockbuster series. Will the history books cite the Arab Spring or Diesel Summer as inspiration?

When viewing note the gender inclusiveness of vehicle operation:

The 20% female participation rate is radically high by Saudi standards!

the economy sucks -- get used to it

noreply@blogger.com (RB) — Thu, 09 Jun 2011 17:30:00 +0000

The 2012 elections are on the way and the economy will be the big issue. Economics and politics do not mix very well. I take that back; they mix too well. However, what you usually get is a concoction sort of like bad bathtub gin. It feels good but rots your brain.

So what’s going on?

The recession is over and the economy is recovering slowly;
We’re still in a slump;
There’s not much government can do right now to get positive results in the next year or so.

On Tuesday, Federal Reserve System (Fed) Chair Ben Bernanke made a speech stating the obvious and restating the above:

“Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is…frustratingly slow;”
“the economy is still producing at levels well below its potential;”
“In this context, monetary policy cannot be a panacea.”

Translation: Things still suck and the Fed can’t do anything about it.

This should not have been a surprise to anyone who remembers a little undergraduate macroeconomics and who has been paying attention. Monetary policy works by lowering interest rates to stimulate spending. The problem is that interest rates cannot be pushed much lower by monetary policy. Interest rates do not go below zero. (Like a banker is going to offer to lend $100 and only want to be repaid $98?) There is nothing the Fed can do to stimulate the economy.

(BTW, I found it interesting that the stock market declined Tuesday afternoon on news of Bernanke stating the obvious. The market has since gone back up. In the meantime, some traders needed only a little bit of knowledge to make a quick buck.)

Okay, monetary policy is out and the Fed is benched. Should we try fiscal policy? Time to bring in the President and Congress and see what they can do?

The usual principles-of-economics fiscal policy prescription is to cut taxes to increase household and business spending and/or increase government spending. Economists disagree on the efficacy of this policy and it is controversial. However, let's assume for the sake of argument that the theory behind the policy is correct. Go with me on this.

We've been there, tried that, screwed it up, and don't have another shot at it.

The Obama fiscal stimulus plan of 2009 attempted to implement the policy noted above. Martin Feldstein, chair of the Council of Economic Advisers in the Reagan administration, is also an adherent to the basic model underlying the fiscal policy prescription. In yesterday's Wall Street Journal (June 8, 2011, p. A15), Feldstein outlined how the 2009 stimulus plan mucked the whole thing up:

The administration's most obvious failure was its misguided fiscal policies: the cash-for-clunkers subsidy for car buyers, the tax credit for first-time home buyers, and the $830 billion "stimulus" package. Cash-for-clunkers gave a temporary boost to motor-vehicle production but had no lasting impact on the economy. The home-buyer credit stimulated the demand for homes only temporarily.

As for the "stimulus" package, both its size and structure were inadequate to offset the enormous decline in aggregate demand. The fall in household wealth by the end of 2008 reduced the annual level of consumer spending by more than $500 billion. The drop in home building subtracted another $200 billion from GDP. The total GDP shortfall was therefore more than $700 billion. The Obama stimulus package that started at less than $300 billion in 2009 and reached a maximum of $400 billion in 2010 wouldn't have been big enough to fill the $700 billion annual GDP gap even if every dollar of the stimulus raised GDP by a dollar.

In fact, each dollar of extra deficit added much less than a dollar to GDP. Experience shows that the most cost-effective form of temporary fiscal stimulus is direct government spending. The most obvious way to achieve that in 2009 was to repair and replace the military equipment used in Iraq and Afghanistan that would otherwise have to be done in the future. But the Obama stimulus had nothing for the Defense Department. Instead, President Obama allowed the Democratic leadership in Congress to design a hodgepodge package of transfers to state and local governments, increased transfers to individuals, temporary tax cuts for lower-income taxpayers, etc. So we got a bigger deficit without economic growth.

If I may add to this critique, Obama had no real plan for spending. He handed over the spending decisions to Speaker Pelosi and Congress went on a spending orgy, targeting pet projects rather than targeting those things most likely to stimulate the economy. We could have had more bang for the buck.

2009 was our one big chance to use expansionary fiscal policy. Any further tax cuts or increases in government spending will increase the deficit. "The national debt has jumped to 69% of GDP this year, from 40% in 2008. It is projected by the Congressional Budget Office to reach more than 85% by the end of the decade, and to keep rising after that" (ibid.). Expansionary fiscal policy was mucked up. Now with the national debt levels so high with S&P and Moody's threatening to downgrade the ratings for U.S. government bonds, we can't do it again.

What is needed is a credible plan to reduce government deficits. This would reduce uncertainty about the future and help economic growth over the long haul. However, despite a reduction in uncertainty, these polices will still reduce spending in the aggregate and won't help the economy recover in 2012. They are needed over the long haul but they are no quick fix.

There will be the usual snake-oil-salesman politicians and pundits who will promise a quick fix. Even if the policy is good, don't be conned into expecting good results immediately.

Be blessed.
RB

reviewing books

noreply@blogger.com (RB) — Sun, 29 May 2011 18:19:00 +0000

After clearing out my files and storing records, I ended my spring semester. This past week I have determined to do nothing productive. That is, take a vacation of sorts. What I like to do when doing nothing is read. I have quite a backlog of titles, mostly gifts, that I haven't had time for in the past year.

I started with Niall Ferguson's The Ascent of Money: A Financial History of the World. Despite its grandiose title, it is accessible to the general reader and written in an interesting fashion. If you could read only one book on the financial/banking crisis, this would be the one. It takes the reader by the hand from the beginning of modern financial markets less than four hundred years ago to the present, explaining how financial markets are inherently unstable. By the end you are not too surprised but still impressed by what happened in the past few years.

After this I purposed to stay away from anything having to do with economics. After all, I am on vacation. I started a recommended Indian (South Asian) novel, which will remain nameless. I read one hundred pages before I gave up. If it hasn't got you by then it is unlikely to ever do so. My wife also had a similar reaction. However if you want a real page-turner of an Indian novel, try Rohinton Mistry's A Fine Balance (an Oprah's Book Club selection).

On Thursday I grabbed off the shelf an unread book given as a gift, Robert Moore's On Hallowed Ground: The Story of Arlington National Cemetery. A great read and I didn't even realize when I started that I'd be finishing it over the Memorial Day weekend!

I'm about to pick up another given-some-time-ago-as-a-gift-but-still-unread book. I'll let you know how it goes.

Be blessed!
RB

P.S. Tired of reading, last night we watched a very good film, End of the Spear. It is available on Netflix, DVD and on hulu.com.

shuck and tyler: give us your huddled masses of engineers - wsj.com

noreply@blogger.com (RB) — Sat, 14 May 2011 03:29:00 +0000

This argument not only applies to engineers but to any foreign student studying in the USA.

Wall Street Journal, 13 May 2011.

Give Us Your Huddled Masses of Engineers:
Why are we educating the best and the brightest, only to turn them down for visas?

By PETER H. SCHUCK AND JOHN TYLER

President Obama devoted almost all of Tuesday's speech in El Paso to the problems raised by illegal immigration: border and workplace enforcement, the need for a fair legalization process, and, almost apologetically, deportation. Only briefly did he mention our interest in attracting more high-skilled immigrants to work in the upper reaches of our economy.

"Today, we provide students from around the world with visas to get engineering and computer science degrees at our top universities. But then our laws discourage them from using those skills to start a business or a new industry here in the United States," Mr. Obama said. This "makes no sense," he added. The president is right.

The critical question is what to do about it. Finding an answer is urgent because the market for these workers is increasingly competitive—and the U.S. is no longer the only powerful magnet. Indeed, new studies from the American Enterprise Institute and the Kauffman Foundation find that we are losing ground in this competition.

Our current policy is plain stupid. Of the more than one million permanent admissions to the U.S. in 2010, fewer than 15% were admitted specifically for their employment skills. And most of those spots weren't going to the high-skilled immigrants themselves, but to their dependents.

The H-1B program that allows high-skilled immigrants to work here on renewable three-year visas, which can possibly lead to permanent status, is tiny. The current number of available visas is only one-third what it was in 2003. Plus, the program is hemmed in with foolish limitations: Visa-holders can't change jobs, and they must return home while awaiting permanent status.

Thus, many employers find the H-1B program useless. Many high-skilled workers prefer to go to more welcoming countries, like Canada and Australia, or to stay home where their economies are now often growing faster than ours. The U.S. does have a program to attract job-creating investors, but it is more limited than some of our competitors' investor programs. In 2010, we granted fewer than 2,500 such visas, down from the 2009 total although higher than in earlier years.

We're shooting ourselves in the foot. Research shows that high-skilled immigrants, particularly those in the so-called STEM (science, technology, engineering and mathematics) fields, enrich American society in many ways. These workers are notably innovative at a time when the U.S. is in some danger of losing its competitive edge. Not only do they apply for patents at a disproportionate rate, but the government grants their applications two to three times as often as with comparably educated Americans. Even if we limit the comparison to scientists and engineers, high-skilled immigrants in those fields still receive 20% more patents than their American counterparts.

In addition to being more innovative, high-skilled immigrants tend to be more entrepreneurial. They start and grow the kinds of new firms, such as Google, that account for the bulk of job creation. Research consistently shows that they start at least 25% of the STEM companies, which is double the percentage of all legal and illegal immigrants in the U.S. population.

So what can be done? Even without increasing the total number of permanent visas, we can redress the imbalance between admission categories to increase the proportion of those that are highly skilled. Two existing allotments merit low priority and should be granted instead to high-skilled workers: the 50,000 "diversity" visas granted at random to applicants who need only have a high-school education, and the 65,000 visas given to siblings of U.S. citizens. A lottery for the low-skilled is an absurd way to select future Americans, and sibling relationships today are readily sustainable through tourist visas and Skype.

A second reform would move to a point system for most would-be immigrants except for immediate family members, in which skills, entrepreneurship, English fluency, and other factors would count as well as close family ties. Third, we should grant permanent visas to any foreigner who receives a graduate degree from a qualified U.S. university. Finally, we should liberalize the H-1B program, perhaps moving from the current bureaucratic approach to an auction of the visas to employers who would bid for the skills they need, but also allowing for more job mobility for workers after a certain period.

Attracting more of the world's best talent should be a no-brainer. It should not be held hostage to the much harder problem of illegal migration.

Mr. Schuck, a professor at Yale Law School, is visiting at NYU Law School. Mr. Tyler is general counsel of the Ewing Marion Kauffman Foundation.

Editor's Note: An earlier version of this article wrongly stated that India is subject to the same H-IB visa ceiling as Iceland. India is in fact subject to the same permanent visa ceiling as Iceland.

wanna see my great nephew?

noreply@blogger.com (RB) — Fri, 15 Apr 2011 22:05:00 +0000

My sister's grandson is graduating from Shiloh Christian and he played Saints football for three years there and they won three state championships. Troy is #58 (6'3" 270#) and his best friends are Sam Harvill #53 and Kiehl Frazier #15. They are all great kids from good families. All three and one more received Division 1 football scholarships. Not bad for a school of 300 with 40 boys on the football team. This is Troy's highlight video:

An hour-long FRONTLINE show about H.S. football and head injuries aired earlier this week. Sure it had its slant, but I got to see my nephew. A shorter segment on QB Kiehl Frazier is below:

Watch the full episode. See more FRONTLINE.

Here is the complete hour-long show is HERE.

the magic washing machine

noreply@blogger.com (RB) — Tue, 22 Mar 2011 17:00:00 +0000

This explains in an interesting manner what economic development is about:

[ht: him]

no-fly zone buzz kill

noreply@blogger.com (RB) — Sun, 20 Mar 2011 19:08:00 +0000

I find it hard to see how the no-fly zone over Libya is going to drive Colonel Muammar al-Gaddafi from power. Maybe a couple of weeks ago it would have made sense, but since then pro-Gaddafi forces have recaptured most of the rebel-held cities. The no-fly zones won't help those folks. Even if Benghazi is not retaken, Gaffafi has control over most of the country and will stay in power.

This military strike does not seem to have been thought through. No wonder DOD Secretary Gates opposed the no-fly zone. Most military people do not relish the thought of putting their people in harm's way, to spend hundreds of millions on armaments that kill, to merely send a message.

Think I'm wrong about the no-fly zone? Well you can put your money where your mouth is. At Intrade.com, a prediction market (i.e., an Irish betting site), you can buy "stock" in Muammar al-Gaddafi to no longer be leader of Libya before midnight ET 31 Dec 2011. The current price is $6.67 to get $10 if Gaddafi is gone. If you are correct then you would make a 50% profit!

As you can see from the chart below (red marks price), a week ago the price was $4, but after yesterday's hoopla over tomahawks being fired, the price soared up to $8. Of course, the smart money is moving in and the price is falling. I suspect it will be back to $4 or less in a week or so.

Will I put my money where my blog is? Nah. It is illegal and therefore too much trouble to get money to and from Intrade.com.

Be blessed.
RB

spring break

noreply@blogger.com (RB) — Sun, 20 Mar 2011 00:42:00 +0000

RB spent seven weeks getting caught up at work. Then Spring Break! Problem: RB gave tests in all his classes just before break. Why not? It is the halfway point in the semester. A logical time for evaluating learning. More on that later.

Nine days of break. The first three days began with the #1 grandson visiting us. Oh yeah, his parents were here as well. The next three days was spent traveling to and from Boston with a day and half in between looking at apartments for my #3 offspring (#1 daughter).

After visiting potential apartments, mostly overpriced, very old, flats with were once chopped up from 100+ year old housing, we made an offer on the first apartment we saw.

It was the biggest, nicest apartment we visited and at a rent below what we expected. That is, just exorbitantly expensive rather than outlandishly exorbitantly expensive.

No undergrads, a quiet, well-maintained, well-built building, an outstanding management company on the premises, on a safe street, with a T-station (Boston trolley) at the corner. Near stores and other businesses. No need for a car but parking if you have one. In short, a real, big-time blessing.

Friday, the seventh day of break, I slept in and then watched an NCIS marathon. Georgetown later lost big time in the NCAAs.

The highlight of this weekend, the last two days of break, is a visit by our #1 granddaughter.

However, I must spend all tomorrow afternoon, and well into the evening, grading tests. Last day of break will not be the best of the nine days.

Be blessed!
RB

killing bunnies

noreply@blogger.com (RB) — Sun, 13 Mar 2011 20:14:00 +0000

[ht: him]

international security threat levels

noreply@blogger.com (RB) — Sat, 26 Feb 2011 15:18:00 +0000

Below is a compendium of security threat levels from various countries. Although RB received a forwarded email attributing this to John Cleese, a careful scholarly inquiry (i.e., searched "clesse terrortist therat" before Google automatically corrected for misspellings, but RB did not use Wikipedia), indicates that John Humberstone seems to be the primary original author, with useful additions provided by various reader comments.

Here are the threat levels with minor editing:

The English are feeling the pinch in relation to recent terrorist threats and have therefore raised their security level from "Miffed" to "Peeved." Soon, though, security levels may be raised yet again to "Irritated" or even "A Bit Cross." The English have not been "A Bit Cross" since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from "Tiresome" to "A Bloody Nuisance."

The last time the British issued a "Bloody Nuisance" warning level was in 1588, when threatened by the Spanish Armada.

The Scots have raised their threat level from "Pissed Off" to "Let's get the Bastards." They don't have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.

The French government announced yesterday that it has raised its terror alert level from "Run" to "Hide." The only two higher levels in France are "Collaborate" and "Surrender." The rise was precipitated by a recent fire that destroyed France's white flag factory, effectively paralyzing the country's military capability.

Italy has increased the alert level from "Shout Loudly and Excitedly" to "Elaborate Military Posturing." Two more levels remain: "Ineffective Combat Operations" and "Change Sides."

The Germans have increased their alert state from "Disdainful Arrogance" to "Dress in Uniform and Sing Marching Songs." They also have two higher levels: "Invade a Neighbor" and "Lose."

Belgians, on the other hand, are all on holiday as usual; the only threat they are worried about is NATO pulling out of Brussels.

Canada has also raised its threat level from "No problem, eh?" to "That's not nice and please stop." They may still raise the level further to "Apologize to terrorists we offended by asking them to stop." Of course the top level is painting signs on rooftops with arrows pointing south saying "U.S. THAT WAY."

The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.

Australia, meanwhile, has raised its security level from "No worries" to "She'll be alright, Mate." Two more escalation levels remain: "Crikey! I think we'll need to cancel the barbie this weekend!" and "The barbie is canceled." So far no situation has ever warranted use of the final escalation level.

testing communist cars

noreply@blogger.com (RB) — Fri, 04 Feb 2011 18:45:00 +0000

In this morning's introductory economics class we discussed the practical, inherent problems with centrally planned socialist economies -- like the former Soviet Union and Eastern Europe in the bad old days before the Berlin Wall fell.

A colleague told me about the following video and now I'm having my students watch it. It is from the British TV show Top Gear. I do find it a bit ironic that these two smart-alecks make fun of Communist cars, given that the Brits during the 1960's made some of the free world's worst cars. You probably have never heard of most of the British car models mentioned. They were all bad, very bad, and these guys know it; their viewers know it. However, that is part of the humor. So this clip could be titled "Best of Communism v. the Free World's Worst."

(Vocab lesson: biro is a British term for a ball-point pen.) BTW, my favorite part is the drag race.

william on the lunar rover

noreply@blogger.com (RB) — Mon, 17 Jan 2011 19:48:00 +0000

We spent the weekend in NH. A good time to visit since Friday was William's six-month birthday. The kid has more stuff than I ever had. It is also way cooler. Among his impressive equipment, as pictured here, is what I call his lunar rover.

William's mom is a lecturer at Dartmouth this semester. Her office is in a wing off the Baker Library and is in the nicest office suite I have ever seen. Picture 80-year old real-wood paneled offices with 14-foot high, or more, ceilings, off a room filled with books, leather uphostered chairs, and a gorgeous conference table.

Come to think of it, don't try to picture it. It is nicer than you can imagine. I told William's dad that no matter how high he climbs the corporate ladder, he will never have as nice an office as his wife now has.

Be blessed!
RB

merry christmas

noreply@blogger.com (RB) — Wed, 22 Dec 2010 15:46:00 +0000

Click image to to enlarge
[source]

what if the us$ was not the world's reserve currency?

noreply@blogger.com (RB) — Mon, 13 Dec 2010 22:48:00 +0000

A friend asked me,

What is your take on if the U.S. dollar loses its reserve status as the world's reserve currency? In today's economic environment and the government's incessant use of QE, what are the chances of the U.S. losing this status, and if we do, what does that look like for the American people the next day when they wake up after it happens?

There are a few questions there. I may oversimplify too much, or too little, for some but let's take them one at a time.

Q. What will happen if the dollar is no longer the world's reserve currency?

A. Not much. Maybe interest rates on U.S. government bonds would be a little higher.

Why? Countries like China or oil-rich Arab states do not hold excess cash but buy Treasury bonds with their excess cash. (U.S. bonds do not pay much in interest but it is more than the zero return on holding cash.) If the foreign demand for U.S. Treasury bonds goes down then the federal government would have to pay a bit more in interest to sell its bonds.

The British pound was once the major reserve currency in the world and started losing ground to the U.S. dollar after WWII. Britain is doing just fine. Being a reserve currency is not a big deal. It just means there is a larger demand for government bonds which are denominated in the currency.

Q. If the dollar stops being the reserve currency, what would it look like the day after it happens?

A. It won't happen in a day. It would happen over years. It will not happen soon.

Individual countries decide how they hold their reserves. We see some diversifying their reserves now rather than holding everything in dollars. Putting all the eggs in one basket is not a good idea.

What would be the substitute for the U.S. dollar? The euro? The Chinese yuan? Well, the euro is the most likely alternative. However, given the financial crises in various European countries, no country would choose to load up on euros for their reserves right now. The yuan is not a convertible currency so it can not be used as a reserve currency yet.

Q. Will QE (quantitative easing) hasten the loss of reserve status.

A. In all likelihood, no.

There are several ideas and issues implicitly embedded in this question:

First, if U.S. inflation is much worse than another countries, then the dollar is losing value faster than other currencies. This would tend to cause a flight out of dollars as countries would rather hold reserves in other currencies. (Even this might not happen if the interest rates on U.S. bonds were high enough to offset the expected higher inflation in the U.S.)

Second, QE (quantitative easing) is the Federal Reserve System (a.k.a. the Fed) buying up government bonds in the open market. They create money by doing this, and more importantly, create the potential for even larger increases in the money supply as banks could create additional new money. (A very long, complicated story as to how and why. I'll spare you.)

Third, a large increase in the money supply can set off inflation, thus QE may cause the U.S. dollar to look relatively unattractive as a reserve currency.

However, the above chain of reasoning is not happening and is unlikely to happen. The money supply is not growing, as it would with QE in normal times, and therefore is not causing rising inflation rates.

The money supply is not growing because so many banks are in trouble or afraid of getting into trouble. Banks are holding huge amounts of excess reserves -- funds in excess of what they have to hold to back up deposits -- funds they could loan out and create new money. Banks are not making loans, money is not being created. To give you some idea of the magnitude, a couple of years ago, in more normal times, commercial banks had $8 billion in excess reserves. Now they have well over $800 billion in excess reserves.

That is a lot of potential money creation that ain't happening. Something like this has not happened in the U.S. since the 1930's. If the fears of bankers subside and they start creating new money, the Fed can reverse QE by selling their holdings of Treasury bonds and reducing the excess reserves.

A similar QE happened during a banking crisis in Sweden during the 1990's. When normalcy started to return the Sveriges Riksbank, the Swedish version of the Fed, put QE in reverse and wound the whole thing down without inflation.

Finally, inflation is low. Inflation is below the Fed's target rate of 2%. Yes, some commodity prices are rising but that is due to the increased demand from China and other emerging economies that have expanding economies right now.

Is anyone still with me?

There are a lot more scarier things out there than the dollar not being the world's reserve currency. And even if there are:

"Peace I [Jesus] leave with you; my peace I give you. I do not give to you as the world gives. Do not let your hearts be troubled and do not be afraid" (John 14:27, NIV).

an economist's chanukah

noreply@blogger.com (RB) — Thu, 09 Dec 2010 16:01:00 +0000

Eight days of the Festival of Lights (Chanukah, Hanukkah, or whatever) is ending so I offer these four items:

#1 The principles of economics explanation of the miracle of Chanukah
[HT: him | Source ]

#2 The Econ Chanukah Song
(With Apologies to Adam Sandler)
[Source: the original post on December 4, 2007]

Put on your yarmulke
Here comes Chanukah
Lots of Economica
Celebrates Chanukah
Chanukah is the festival of lights
Avoid diminishing returns with eight crazy nights

When you feel like the only kid in town without Christmas utility
Here’s a list of economists who are jewish just like you and me
Paul Samuelson lights the menorah in the evenin’
So do Solow, Stiglitz and the late Milton Friedman

Guess who eats together at the Fed reserve deli
Alan Greenspan and Chairman Ben Bernanke
Akerlof’s part jewish, Herb Simon’s part too
Bundle them together, what a fine econ jew

You don’t need jingle bell or a yule log
cause you can spin a dreidel at the Becker/ Posner blog- both jewish

Put on your yarmulke
It's time for Chanukah
the author of Freakonomikah
Celebrates Chanukah

Robert Mugabe, not a jew! Or an economist!
But guess who is? Nobel prize winners Ken Arrow and Simon Kuznets too
We got Herb Stein and his son’s Ben’s money
David Ricardo was born jewish- but went Quaker for his honey

Some people know that Paul Krugman is
He hasn’t won a Nobel prize
but three others did --- This YEAR!
So many jews are econ wiz kids
Greg Mankiw isn’t, but I heard his book agent is

So study your Economica
It's time to celebrate chanukah
I hope I get published in Econometrikah
Oh this lovely, lovely chanukah

So find your equilibriah
And check your heteroskedisticas
If you really, really wannakah
Have a happy, happy, happy, happy chanukah
Happy chanukah!

#3 Jewish Economists: the list

#4 Jewish Nobel Prize Winners in Economics: the list
(42% of world total, 55% of US total)

Be blessed!
RB

tummy time on thanksgiving

noreply@blogger.com (RB) — Fri, 26 Nov 2010 06:16:00 +0000

William, Henry, and Koufax

model un participants view of history

noreply@blogger.com (RB) — Thu, 25 Nov 2010 17:47:00 +0000

SNL clip on Model UN participants view of history [HT: wronging rights]

directions2canton

noreply@blogger.com (RB) — Wed, 24 Nov 2010 22:02:00 +0000

directions2canton

housing hangover: don't hold your breath on a speedy recovery

noreply@blogger.com (RB) — Wed, 24 Nov 2010 07:35:00 +0000

Despite the protestations of some acquaintances who were once in investment banking, this is going to be a long and slow recovery. The Fed's efforts (QE2) to lower mid- and long-term interest rates, even if successful, will have limited impact.

Why? Housing.

Increased housing construction has historically been important in recoveries from recessions. It won't be this time. It won't be even if mortgage interest rates fall.

Why? Housing.

Historically, housing construction is the most interest-rate-sensitive component of spending in the economy, but not this time. The housing construction boom of a few years ago left us with a lot of houses. Speculation and low lending standards led to a lot more than the usual number of new houses being built. Now we are stuck with the surplus. Since houses wear out rather slowly, we'll be stuck for a long time.

The first chart with the blue bars shows how the inventory of unsold houses has skyrocketed from the early part of the past decade.

The second chart's red line puts the existing housing inventory in terms of the number of months it would take to sell them. 11 to 12 months of inventory is a lot. This is not a good sign.

Even if the houses sold, we would still have an awful lot of houses selling at low prices. Prices that will stay low for years. Lowering mortgage rates won't cause people to desire to pay for new houses if the supply of existing houses is large.

A Policy Proposal. What can the government do? A three-step process: 1) Speed up foreclosures; 2) have the Fed buy up about eight or nine months of the inventory of unsold houses; and 3) then burn those houses to the ground.

A modest proposal, yes?

Without that happening, don't expect a quick rebound from the Great Recession.

Be blessed.
RB

[ Source for charts]

currency wars

noreply@blogger.com (RB) — Tue, 23 Nov 2010 17:03:00 +0000

This pretty much explains it. Enjoy!

[HT: Wronging Rights]