Deficit Projections: An Unsustainable Path

We've Come A Long Way... Cool Video.

World Poverty

Tyler Cowen of George Mason University and economics blog marginal revolution (below, on the right) has some excellent insight on world poverty. Check it out!

The Minnesota Timberwolves "Recession" Season Ticket Package

It looks like the Timberwolves have a very interesting marketing gimmick to sell some tickets. If you buy season tickets for the 2009-10 season and lose your job, you can get a full refund on all unused tickets. But then, as Rick Reilly says, you still have to watch the Timberwolves. The T-Wolves also cut prices on 95% of their seats. Of course the T-wolves would see an increase in the quantity demanded of tickets as they lower the price of tickets; however the demand curve could also shift to the left, decreasing demand, and reducing the advantages of this sale to the T-Wolves due to their continued futility.

... but then again, if Latrell Sprewell were still playing, how would he feed his family with this decline in revenues.

It's Getting Better All The Time

Here is what the average teenager could have bought, after a summer of work in 1949, at the minimum wage of 40 cents per hour in 1949, assuming a 12 weeks of 40 hours of work per week. This work would have generated $192 in total summer earnings (ignoring taxes). Using a Sears catalog for retail prices, $192 would have only purchased the following 4 items in 1949:
At the mimumum wage of $7.25 today, full-time summer job will generate about $3,500 this year, which would be enough to purchase the following list of 28 items (click to enlarge):
Economics professor Mark Perry says the following: "Teenagers today can afford things like cell phones with cameras, digital cameras, GPS systems, CD players, DVD players, laptop computers, and iPods that even a billionaire couldn't have purchased 20 years ago. As much as we might complain, just by being alive in the 21st century America, even if you're earning the minimum wage, you've "won first prize in the lottery of life."

Inside the Fed: Hope Those Robots Don't Spend All That $

Watch CBS Videos Online

Big Ben Bernanke: The 60 Minutes Interview - Parts 1 and 2

The first interview with a Fed chair in 20 years...

Watch CBS Videos Online

Watch CBS Videos Online

First Wall Street...Now Sesame Street

It appears no one is immune from the current recession. According to the San Fransisco Chronicle...

"The crisis on Wall Street is plaguing Sesame Street.

Sesame Workshop, the nonprofit producer of "Sesame Street" and other kids' programs, is cutting about one-fifth of its work force because of the economic downturn.

The New York-based company said Wednesday that it's eliminating 67 of 355 staff positions.

Declaring it is "not immune to the unprecedented challenges of today's economic environment," the company pronounced a need "to operate with fewer resources in order to achieve our strategic priorities."

JR: It looks like a possibility to introduce economics to my 3 little kids at home.

Economics Battle Royale: Mankiw vs. Krugman

Mankiw's best selling textbook. Krugman's text.
Two authors of best selling textbooks, Greg Mankiw of Harvard and Paul Krugman of Princeton have been arguing, via their columns and blogs, about the very rosy economic forecast over the President's budget. Mankiw challenged Krugman to a bet, some of his Nobel Prize million, that GDP growth will not be as large as the President's budget predicts. Krugman called Mankiw "evil" and yet has not responded to the wager. My money is on my facebook friend Mankiw.

Here's the Washington Times today: "Harvard economics Professor Greg Mankiw thinks that Mr. Obama's growth forecasts are overly optimistic and that the federal deficit will be a lot larger than Mr. Obama thinks. He was chastised by Princeton's Paul Krugman, a Nobel Prize winner in economics, who on his New York Times blog claims that Mankiw can only make the predictions that he does because of "more than a bit of deliberate obtuseness." He titled his post on Mankiw, "Roots of Evil."

Last Wednesday, Mankiw responded to Krugman's attacks by suggesting: "Well, Paul, if you are so confident in this forecast, would you like to place a wager on it and take advantage of my wickedness?" Krugman has still not responded. It seems even a Nobel Prize winner isn't willing to lay money on Mr. Obama's rosy projections."

Another $1 house in Landlord Nation.... Detroit

DETROIT – Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more. In extreme cases, homes are on sale for $1 or less (home pictured above is listed for $1 here), which has enticed investors to Detroit from as far away as the United Kingdom and Australia.

"In the past few months, I've picked up 10 new clients from out of state that are buying in bulk," said Mike Shannon, a suburban Detroit real estate agent. His office specializes in foreclosures in a city that's among the national leaders.

"They're coming to us, saying `Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."

Despite a stagnant retail housing market, real estate sales of foreclosed homes are booming. Shannon regularly fields calls from eager prospects, and recently sold 30 homes in one day to one buyer. A trio of U.K. investors has bought a half-dozen and plans many more.

HT: Carpe Diem

SNL on Treasuary Secretary Geithner and The Banking Crisis

Unemployment Rate Now 8.1%, Worst in 25 Years

The Unemployment Rate now has reached it's highest point in 25 years, 8.1%. Anyone want to guess how bad the news will be when the March unemployment numbers come out on April 3rd? Well... maybe the video will help out.

One Economic Bright Spot - Used Car Repair Shops

Used car repair services would be considered an inferior good or service, where as incomes fall, demand increases. So, this actually is not a positive sign for the economy, or GM and Ford. But business is good for repair shops, as people fix up their old cars, rather than buy new. Read more here.

Gun Control Articles

From Economist John Lott here and here.

And here is a very good article, on a college professor calling the police after a students gives a presentation claiming guns reduce crime.

The Latest Blue-Chip Penny Stocks

Here’s a short list of only the highest quality, bluest of blue chip, penny stocks:

• AIG (39 cents)
• Citigroup (98 cents)
• Fannie Mae (39 cents)
• Freddie (39 cents)
• Unisys (37 cents)

Now, for the not-quite-penny stocks:

• Ford ($1.83)
• GM ($1.83)
• Las Vegas Sands ($1.97)
• MGM ($1.99)
• Bank of America ($3.15)
• Wells Fargo ($7.95)
• New York Times ($4.00)
• News Corp ($6.15)
• GE ($6.75)
  

HT: The Big Picture

And after my students have studied personal finance, hopefully they know more about stocks than The Pres.

Freakonomics Article on the Death Penalty... and more.

See Freakonomics article, with several additional links here.

Also here you can find an article from economist and my Facebook friend John Lott.

A Couple Economics Students Got Game

Projected Deficits Under Obama

Please Click to enlarge.

Markets Hit 1997 Level

Live Blogging From The SCSU Winter Institute Economic Outlook Presentations

5:04 - Several panelists, including Tom Stinson, MN State Economist, are unable to attend due to the weather. It looks like the weather tonight will be as gloomy as the economic outlook for 2009. Still, and excellent panel of Economists.

5:10 - Remarks from the SCSU President: Yada Yada

5:15 - Rich MacDonald, Macro Prof at SCSU is speaking

5:19 - Unemployment expected to hit 9% by end of 2009 - Ouch...and I should note that this outlook "could deteriorate very rapidly"

5:25 - MacDonald asks "When will this thing (recession) end? He says if you ask 10 different economists, you will get 10 different answers. Either way, 2009 will be a rough year."

5:28 - Just to point out how economic forecasts can differ greatly, in January 2008, people predicted the U.E. rate would be 5.2% as of January 2009. Yeah, they were only off by over 2 million jobs, and the current U.E. rate is 7.6%.

5:30 - At least by 2010 should be better, (or check previous post at 5:28 to see how accurate predictions on the economy are).

5:32 - The AP syllabus and the McConnell text state that there are 3 tools of monetary policy... and MacDonald says now there are 11. So we will study 3 in class this year.

5:39 - Big banks created this financial crisis, and small banks who managed their businesses well are affected very much affected by the mistakes of the biggies.

5:50 - SCSU Prof and blogger King Banaian is now at the mic. Already cracking jokes -- about what he said last year and how wrong he was. See 5:25 above for how accurate forecasts are.

5:55 - St. Cloud has the worst economy since 1989, and King adds "it will get much worse"

6:02 - Minnesota went into a recession in February, 2008.

6:09 - The credit crisis has hit St. Cloud, just like pretty much everywhere else in the world. The average family in the St. Cloud area has seen their net worth go down over 30%. No wonder consumption (the biggest component of GDP) has fallen here and eslewhere.

6:13 - "It is raining outside for us economically" says King.

6:14 - While the Stimulus package will increase Aggregate Demand, citizens are very worried about the huge deficits, and 1.75 Trillion in 2009. So people may not spend and save, conteracting the fiscal stimulus goals... they know someone has to pay for this debt, a day of reckoning will come... and I see their point.

6:20 - Rocky and Bullwinkel are on the last slide

6:21 - Alright. I am out the reception, where the food is not free, but of no financial cost to me.

Law of Demand At Work: Chinese Scoop Up SoCal Foreclosurers

This video is a great example of market correcting forces. A demand curve tells us when the price of a product decreases, the quantity demand increases. While housing prices, especially in California, have fallen dramatically, eventually the price decreases will attract buyers in the US... and in China

The Crash of 2008: Causes and The Aftermath

Here is a great article I heard about at my economics conference today at SCSU. This may help my regular economics class students with their paper regarding the housing crisis.

The economist I am listening to today, Rich MacDonald, from SCSU, is on the Minnesota State Board of Economists, and has a quite dire prediction for the US economy in 2009. In his eyes, the recession will last until at least 2010.

Here is another description about the Credit Crisis, a powerpoint in PDF format.

The Dow Jones: Down 47% in 16 months.

Ouch.

PBS Special: The Financial Meltdown

1980's vs. Today

Unchartered Territory

Cartoon of The Day

Value of Education

According to the BLS, there now over an 8% difference between employment rates of people who have not finished high school (12%) vs. college grads (3.8%).

More on "Buy American" Proposals

Paul Krugman, Princeton economist and Nobel Prize winner has previously written about trade wars. Unfortunately, he claims that a trade war is one where no one can win. Krugman claims that a trade war is one where both countries use their ammunition to shoot themselves in the foot, with the lower standards of living than inevitably result from decline in trade. To put it another way, British Prime Minister recently said that "protectionism protects nobody, least of all the poor."

In todays Wall Street Journal, Princeton Economist Burton Malkiel, writes about the negative, unintended consequences that a trade war would have.

Malkiel writes: "This Buy American momentum is bad economics, and by threatening to destabilize trade and capital flows, it risks turning a global recession into a 1930s-style depression. Asked about Buy American on Tuesday, President Barack Obama told Fox News that "we can't send a protectionist message." He said on ABC News that he doesn't want anything in the stimulus bill that is "going to trigger a trade war." He's right.

Suppose that we did not allow free trade between the 50 American states. Citizens like me in New Jersey would be far worse off if we could not buy pineapples from Hawaii, wine and vegetables from California, wheat from Kansas, and oil from Texas and Louisiana while we sell pharmaceuticals to the rest of the country. The specialization that trade makes possible allows all of us to live better.

The situation is the same with respect to world trade. Both we and the Chinese are better off if we can import inexpensive clothing from China and sell them large-scale computers and data storage equipment.

To be sure, such trade does not make everyone better off, and that is why free trade is often a tough sell, especially during times of hardship.

If I am a textile worker whose job is lost because Chinese imports have caused my factory to close, I feel the pain far more acutely than consumers feel the benefits of cheap clothing. The pain tends to be localized while the benefits are spread broadly. No one person's benefit can compare with the loss felt by the textile worker. But the total benefits do exceed the costs. And competitive markets have spurred the innovation revolution that has made the U.S. the economic powerhouse that it is.

The solution for the displaced worker is job retraining and adjustment assistance, and to improve the safety net available to displaced workers during the transition period. We also need to revamp our educational system so that it prepares workers for the jobs that are available today -- and imparts the flexible skills that make our citizens ready for the future jobs that we cannot even imagine."

Smoot Hawley II? Say It Ain't So.

For those who remember their history, it was the Smoot - Hawley Tariff act that led to a dramatic decline in global trade during the Great Depression in the 1930's (See picture above). Most economists believe that this misguided policy put the "Great" in the Great Depression. In fact, a recession is a time to increase commitment to trade. Unfortunately, as quoted below, our Government not only as called for reduced trade disguised as "Buy American," but also angered our major trading partners as well.

From the New York Times, Monday, May 5th, 1930
From BBC NEWS: "The EU has increased its pressure on the US to reconsider the "Buy American" clause in the $800bn (£567bn) economic recovery package now before Congress.

The clause seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill.

A European Commission spokesman said it was the "worst possible signal" the Obama administration could send out.

The EU will launch a complaint with the World Trade Organisation (WTO) if the clause remains, the spokesman said."
The Cato Institute has even claimed this act to be Smoot - Hawley II. "For all practical purposes there is no difference between the Smoot-Hawley tariff bill of 1930 and the “Buy American” provisions in the $819 billion spending bill that passed the House Wednesday.

Smoot-Hawley was the catalyst for a pandemic of tit-for-tat protectionism around the world, which helped deepen and prolong the global depression in the 1930s. “Buy American” provisions will no doubt inspire similar trade barriers abroad and will have the same effect of reducing global trade—and therefore prospects for economic recovery. It is not unreasonable to say that U.S. policymakers are on the verge of taking us down that same disastrous path."

Here is more from the Washington Post: "The stimulus bill passed by the House Wednesday contains a controversial provision that would mostly bar foreign steel and iron from the infrastructure projects laid out by the $819 billion economic package. A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.

Proponents of expanding the "Buy American" provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas. Opponents, including some of the biggest blue-chip names in American industry, say it amounts to a declaration of war against free trade. That, they say, could spark retaliation from abroad against U.S. companies and exacerbate the global financial crisis. "

UPDATE: Obama backs down on the anti-trade, protectionist "Buy American" clause: Good Move. Read more here.