Thursday's Video Conference: Founder of Microcredit Website KIVA: Matt Flannery

Click Here for the website kiva.org, to read more about how you can help empower some of the world's poorest people.

Biggest Dow Jones Point Drop Ever

Here are today's headlines from the Wall Street Journal and the New York Times. The Dow fell 777 points, mainly on news the U.S. House of Representatives defeated the proposed $700 billion financial rescue package.

The Dark Bailout

Students Talking Free Trade

"Business is Booming On College Campuses" ... according to the StarTribune

PHOTO: University of Minnesota's Carlson School of Management's Hanson Hall, a new 47.9 million dollar building.

Business is Booming in the classroom, according to this article written by the Minneapolis StarTribune.

Some stats:

1. 4,000 high school students applied for 450 spots for admittance into the U of M's Carlson School of Management.

2. 40% of University of St. Thomas students major in a business related degree.

3. University of Minnesota-Duluth's Labovitz School of Business has gone from 1,200 students in 1998 to 2,000 now, and is building a new $23 million building.

And of course a great incentive for students to major in business/economics, is the pay; see here for a previous Redonomics post on this.

Have Change For A Quadtrillion?

This actual check from Zimbabwe, 1.027 Quadtrillion, is worth about $27 US Dollars. I previously blogged about the world's worst hyperinflation here, here, here, and here.

Detroit House Sells For $1

This house could have been all yours... for $1. Read here from the Detroit News.

DETROIT -- "One dollar can get you a large soda at McDonald's, a used VHS movie at 7-Eleven or a house in Detroit.

The fact that a home on the city's east side was listed for $1 recently shows how depressed the real estate market has become in one of America's poorest big cities.

And it still took 19 days to find a buyer.

The sale price of the home may be an anomaly, but illustrates both the depths of the foreclosure crisis in Detroit and the rapid scuttling of vacant homes in some of the city's impoverished neighborhoods.

The home, at 8111 Traverse Street, a few blocks from Detroit City Airport, was the nicest house on the block when it sold for $65,000 in November 2006, said neighbor Carl Upshaw. But the home was foreclosed last summer, and it wasn't long until "the vultures closed in," Upshaw said. "The siding was the first to go. Then they took the fence. Then they broke in and took everything else."

The company hired to manage the home and sell it, the Bearing Group, boarded up the home only to find the boards stolen and used to board up another abandoned home nearby.

Scrappers tore out the copper plumbing, the furnace and the light fixtures, taking everything of value, including the kitchen sink.

"It about doesn't make sense to put the family out," Upshaw said. "Once people are gone, you're gonna lose the house in this neighborhood."

Tuesday, the home was wide open. Doors leading into the kitchen and the basement were missing, and the front windows had been smashed. Weeds grew chest-high, and charred remains marked a spot where the garage recently burned.

Put on the market in January for $1,100, the house had no lookers other than the squatters who sometimes stayed there at night. Facing $4,000 in back taxes and a large unpaid water bill, the bank that owned the property lowered the price to $1."

Update On My Friends In Georgia

Below, you can see a picture of our wonderful host in Batumi, Natia, an economics professor, and her son Lasha, during my visit to Georgia. I received the e-mail below a few days ago from Natia. Lasha, a banker, has now gone off to fight with the Georgian army.

Hello!

I was very glad to hear from you. For this moment the general condition in Georgia is very dangerous. Lasha is in the center of conflict region and it makes all of us anxious. I pray everyday for him and hope he'll return back safe. Our country doesn't want any conflict, it only needs to be free. We are so grateful to USA for it's helping and proud of our closest friends we have there.

Thank you for your attantion. Best wishes to your family,
I hope we'll have chance to meet eachother again in our countries.

Best regards
Always,
Natia

Map of Russian Attacks, Checkpoints in Georgia, and The Economic Impact On Georgia

Now back from vacation, here are a few comments on Russia's invasion, and lack of withdrawal of Georiga. Russia's president claimed to begin pulling out of Georgia on Monday (8/18), yet observers on the ground say Russia is doing excatly the opposite. NATO is meeting today and hopefully will have a strong response to Russia.

The Georgian people are very fond of America, and according to this report feelings still remain strong towards the US. The Georigan economy has come so far since 2003, improving the lives of every day Georgians, and I saw this first hand on my visit to Georgia in March of this year. Georgia was the world's World Bank's #1 Economic Reformer for 2007. Unfortunately, the Russian invasion will have a serious impact on Georgia's economic progress. Investors are wary of investing when the Russian forces may invade again. The Georgian infrastructure has been destroyed in much of the country, making it difficult to trade and transport goods.

Here the Wall Street Journal goes into detail on how the Russian forces are attempting to strangle the Georgian economy:

"Events in Poti, a Georgian town on the Black Sea coast, also suggest Russia has used the conflict to draw a noose around Georgia's economy. Though hundreds of miles from the fighting in Georgia's separatist province of South Ossetia and clearly not a military asset, Poti's huge commercial port was targeted 10 days ago in a Russian bombing raid that killed 10 people and wounded 40. The town itself has seen daily incursions by Russian troops who have looted stores, trashed offices and systematically destroyed military infrastructure, according to Georgian officials. Some looting has been captured on local television.

"The Russians deliberately targeted commercial operations to inflict economic damage on Georgia," says Alan Middleton, the English head of Poti Sea Port Corp. "Dropping bombs on Poti port, killing people -- I don't see how you can connect that with South Ossetia."

The container terminals of Poti's commercial port are now operating normally again, but the trading relationships that underpin Poti's success are in peril. The only functioning road to Azerbaijan and Armenia via Georgia now is an unpaved dirt track through mountain passes and hilly farmland southwest of Tbilisi. It is impassable for big, articulated vehicles of the kind that normally ply their trade between Poti and points east. After the weekend bombing, all rail links are cut, too.

Poti's port isn't the only Georgian economic asset that has come under threat. Russian-backed rebels in the country's second breakaway region, Abkhazia, have moved south to grab a big hydroelectric power station near the Inguri River. Russian planes have also dropped bombs on the Heidelberg cement factory near Gori, and near the BP PLC-run Baku-Tbilisi-Ceyhan pipeline, which carries 850,000 barrels of oil a day to the Mediterranean, according to Georgia's government. Russia denies targeting them."

Zimbabwe Hyperinflation Hits A New Low....or High

I have written about Zimbabwe and dictator Robert Mugabe's incompetent economic management here and here. But Zimbabwe has hit a new low, now printing the 100 billion dollar bill, worth about one US dollar. However, this bill has been sold on e-bay in the US for as much as $71 dollars (see here), presumably to be used in a rap video... and I thought my one million Turkish bill was cool.

Above, an article from the economist about the world largest bills. Believe it or not, Zimbabwe has a long way to go to reach the Hungarian Pengo note, which had 19 digits! Anyone know what you would call that bill?

$150 For a Movie Ticket? Supply and Demand At Work

It's opening weekend for Batman's The Dark Knight," and tickets are going for over $100 on Craigslist in New York City. The predictable result of a high demand and a limited supply is of course a high price. My cost/benefit analysis is $10 or less, see the movie; over $10, its Netflix. The movie's reviews have been very favorable, and I look forward to seeing it...just not this weekend.

Increase Competition and The Consumer Benefits

Where in the world is the most economic output produced?

Check out this map of global economic output here.

Think That New Sports Stadium Helps Create Jobs and Higher Incomes? Think Again...

Check out reason TV here for an economist's take on publicly funded sports stadiums. Above, a rendering of the future Twins stadium.

Zimbabwe Introduces the New 500,000,000.00 Bill

HARARE, Zimbabwe (AP) - "As stores opened for business Wednesday in Zimbabwe, a small pack of locally produced coffee beans cost just short of 1 billion Zimbabwe dollars. A decade ago, that sum would have bought 60 new cars. Inflation has been over 1,000,000 percent over the last year;" read more here.

Also, from BBC News: "The central bank has issued a 500m Zimbabwe dollar banknote, worth US$2, to try to ease cash shortages amid the world's highest rate of inflation. The previous highest denomination note was for Z$250m, issued 10 days ago. Prices are now doubling every week instead of every month and it is hard to see how we can survive to the end of June or how an election will be feasible at all if things continue to deteriorate at this pace," said Harare economist John Robertson, according to the AP news agency.

This is the fourth set of new banknotes to be introduced this year. At independence in 1980, one Zimbabwe dollar was worth more than US$1."

Above you can see the 10 Million Zimbabwe dollar, introduced earlier this year, and written about on Redonomics previously here.

Want 200-300 Miles Per Gallon? Check Out These Rides

Above is the Aptera, a cool 300 MPG. You can reserve one now for $500, and the car will cost you $27 - $30 K.

Volkswagen will sell this 230 MPG car beginning in 2010. Read more here.

Visual: The Economic Stimuls Package

Check Out This Ford Factory (In Brazil)... And Why The UAW Opposes It

From the Detroit News:

"This state-of-the-art manufacturing complex in the northeastern Brazilian state of Bahia is not only the centerpiece of Ford's Brazilian turnaround plan, it is also one of the most advanced automobile plants in the world. It is more automated than many of Ford's U.S. factories, and leaner and more flexible than any other Ford facility. It can produce five different vehicle platforms at the same time and on the same line.

Ford sources said it is the sort of plant the company wants in the United States, were it not for the United Auto Workers, which has historically opposed such extensive supplier integration on the factory floor."

And don't miss this video of the Ford plant.

Indian Expansion: Four of the World's Richest Eight People Are From India

The Wall Street Journal India writes here about India's billionaires. Are they robber barons or are they helping improve the lives of Indians? In the article, Mark Perry and Madhukar Angur say...

"First, it should be recognized that in the process of creating personal fortunes, India’s billionaires create vast amounts of wealth for others, including thousands of employees. Consider Azim Premji. At the age of 21, he took over Wipro in 1966, and helped transform it from a vegetable oil and soap company with $2 million in annual sales into a $5 billion global IT giant.

Premji obviously couldn’t have orchestrated the explosive growth of Wipro without the help of others. Wipro currently has a staff of more than 73,000, and most of those jobs are in India, and most of those jobs are relatively highly paid. The Wipro example is not unique. In almost all cases, billionaires amass personal wealth by creating large organizations that generate millions of jobs.

And these large billionaire-led organizations typically create employment opportunities across the board, from the lowest unskilled positions to highly paid executives. It has been estimated that India’s top 10 billionaires have collectively created more than one million jobs in their companies.

India is a much more prosperous country today, and has a much larger middle class with its abundance of billionaires, than it was 10 years ago, when billionaires were scarce. When the Forbes list of world billionaires comes out next year, India should aspire for many more on that list since it will be a sure sign that more wealth is being created for everybody."

"

Colbert On The Gas Tax Proposal

The Grass Is Not Greener...On The Other Side Of The Atlantic

Here is some historical gas price info from the EIA. In March of 1999, gas was $1.10 a gallon!

Good Sales Pitch... But Is There Really A Recession?

Here is Gray's Papaya Hot Dog's in New York City. However, a recession is generally defined as two consecutive economic quarters (6 months) of negative GDP stats. GDP was up .6% in Q1 2008 and has not had a negative reading since 2001

Believe it or Not. Cubans Are Now Allowed to Have Computers!

Cuba's Communist leaders finally figured out there are normal people in the world with computers. The decided to let their people legally buy a computer. Here, from Wired Magazinge "Cubans are getting wired. The island's communist government put desktop computers on sale to the public for the first time Friday, ending a ban on PC sales as another despised restriction on daily life fell away under new President Raul Castro.A tower-style QTECH PC and monitor costs nearly US$780 (505 euros). While few Cubans can afford that, dozens still gawked outside a tiny Havana electronics store, crowding every inch of its large glass windows and leaving finger and nose prints behind (see picture above)."

The World's Most Worthless Currencies

Think you'd be rich with a few of these in your pocket? Actually the 10 million Zimbabwe bill is worth about $4 US dollars.

• Want to buy a roll of toilet paper in Zimbabwe? That would be $145,000 dollars, about 69 US cents.

• The smallest bill in circulation in Zimbabwe is $500. Read more here.
  

2008 Starting Salaries for College Grads

So the job market for 2008 grads is not that bad after all. The average salary is up 4% and the number of job offers is up 8%. Read more here from CNN.

That Was Only 22 Years Ago?

Here are some stats from last week's USA Today. In 1985, 8% of people considered and AM/FM Radio or CD Player "essential" and that number is 95.8% in 2007. Wants, it seems, do turn into perceived "necessities" over time. Sure, you could really survive without that AC in your car, that luxury that only 15% considered a necessity in 1985.

Also, the former Communists in Russia have different tastes in cars than us, it seems. Prof. Mark Perry writes here in his Carpe Diem blog about some interesting car preferences of the Russians:

"On Tuesday in Togliatti, Russia, I toured the production facility of the Chevy Niva (pictured above), a joint venture between GM and Russia's AutoVAZ. The vehicles are one of the best-selling SUVs in Russia right now, and there is a 3-month waiting list to get the vehicles. This situation is somewhat unique to the Niva, most other vehicles in Russia are available immediately. The Nivas sell for about $16,000 and there are only two models and one option: with A/C, or without A/C. Also, there are NO radios available in either model, although the Nivas come radio-ready, with wiring and everything except the audio equipment. It seems that in the Russian market, consumers prefer to purchase their own radio/stereo equipment as an after-market option. It might also be the case that some customers prefer radio only, others prefer audio cassette tapes, and some others prefer CD players.

When in Moscow today, I asked the President of GM Russia why GM/AutoVAZ didn't raise the price of Nivas to reduce the 3-month waiting list, and she said that Russian Niva consumers would easily tolerate a 3-month wait, but many would NOT tolerate a price increase. Go figure."

And please note, I was, amazingly, able to mention Russia without taking shots at Czar Putin's incessant meddling with the wonderful people of Georgia.

Why the "Rich" Are Getting Richer...according to Professor Greg Mankiw

Harvard Economics Professor Greg Mankiw writes in The New York Times today about the wealth gap in America Today. Mankiw says...

the superrich have been getting an increasing slice of the economic pie. In 1980, the top 0.01 percent of the population had 0.87 percent of total income. By 2006, their share had more than quadrupled to 3.89 percent, a level not seen since 1916.

Part of the explanation for the growing wealth gap, according to Mankiw, is education, or lack there of. Mankiw states that while technology continues to progress rapidly, America's educational achievement has not...

According to Professors Goldin and Katz, for the past century technological progress has been a steady force not only increasing average living standards, but also increasing the demand for skilled workers relative to unskilled workers. Skilled workers are needed to apply and manage new technologies, while less skilled workers are more likely to become obsolete.

For much of the 20th century, however, skill-biased technological change was outpaced by advances in educational attainment. In other words, while technological progress increased the demand for skilled workers, our educational system increased the supply of them even faster. As a result, skilled workers did not benefit disproportionately from economic growth.

But recently things have changed. Over the last several decades, technology has kept up its pace, while educational advancement has slowed down. The numbers are striking. The cohort of workers born in 1950 had an average of 4.67 more years of schooling than the cohort born in 1900, representing an increase of 0.93 year in each decade. By contrast, the cohort born in 1975 had only 0.74 more years of schooling than that born in 1950, an increase of only 0.30 year a decade.

A Global Boom in Commodities Has Negative Side-Effects - In MPLS

MINNEAPOLIS--As copper prices surge above $4 per pound (see chart above), thieves in Minneapolis are ransacking house after house in search of copper they can sell to scrap dealers for as much as $20,000 a month.Thieves most often hit foreclosed homes, but not always. They broke into Keili Mac's Minneapolis home while she was out of the country and took copper gas pipes. They left the gas on, the house exploded and the city demolished it. The victim returned to find her house gone.

The "Freakonomics" of Inner-City Gangs

Steven Levitt, famous author of Freakonomics, talks about the economics of the Gangster Disciples A researcher from the University of Chicago, (now Harvard), sociologist Sudhir A. Venkatesh, lived with the Gangster Disciples, and found out most intimate details of the gang (and now has a new book detailing his experiences). Over a four-year period in the late 1980s and early 1990s, a former gang member kept careful records of his gang's profits, passing the information to Venkatesh on looseleaf sheets copied from the gang ledger. Levitt then created an economic model based on the gang's general expenses and its revenue from drug dealing and membership dues. For safety reasons, Levitt and Venkatesh chose to keep confidential their sources and the now-defunct gang's whereabouts and members. What you will find is the Gangster Disciples were run much like a corporation, most of the profits went to those at the top of the organization.

FOOD COSTS RISING AT THE FASTEST RATE IN 17 YEARS

There as various reasons for the rapid rise in food costs, and it boils down to supply and demand, as usual. Experts are worried about social upheaval in many developing countries. This picture, from the Wall Street Journal, shows riots in Haiti over food prices, which led to the resignation of Haiti's prime minister. Many people are blaming trade barriers and tariffs, as well as biofuels, as written about in a previous post. Here's this from the WSJ.

"During informal conversations and interviews, ministers mainly agreed that the U.S. policies on biofuels were especially harmful. U.S. ethanol is made from corn, which, ministers said, could be exported to feed the hungry, and benefited from tariffs that block Brazilian ethanol, which is produced much more efficiently from sugar cane." You can read more here.