Crash

Recently I’ve been finding all I’ve learned about economics turned on its head. As someone recently graduated from a university undergraduate program, I am not too far removed from economic abstraction. How economics should work, an ideal if you will.  Real world effects either confirm or confuse what’s been learned in the classroom. One such effect is to see how two accepted economic models react to a recession. On one side, we have the microeconomic model of the firm and it’s pathway to success, and on the other, the macroeconomic model of growth of a domestic economy. I accepted both of these models from lesson one. Now I see how one can work against another.

A Recession Fallout (Nuclear Winter?)

Credit Card Fallout?

If you really want to think about how scary this recession will be, consider this: Everything individuals and families were doing with their credit cards and homes, businesses were doing on a much larger level. Cheap credit pervaded every facet of the economy. From Construction to the Federal Government, expansion was fuelled by credit. Credit through low interest bonds, finance companies, and government debt selling. So how much of this credit-fuelled bubble is going to be around after this is all over? After this heavy recession and possible depression, how many companies will be left?

Why an Afghan Surge Won’t Work

As I watched Daily Show yesterday, Dana Perrino pointed out an important statistic in gauging the success of Iraq and Afghanistan. According to UNICEF, the adult literacy rate in Iraq is around 74% for the years 2000-2005. In other words, 3 out of every 4 Iraqis have basic reading skills. In contrast, consider Afghanistan who has a literacy rate of 28%. This is nearly the polar opposite of Iraq; it appears about only 1 out of every 4 Afghans have basic reading skills.

You may say so what? What does reading ability have to do with recovery? As a former soldier in the US Army, I’m not sure how much I could have learned if I couldn’t read. With these two statistics, one can see the uphill battle the United States and NATO will have with restoring peace to Afghanistan.

Cost of War

“War is the reciprocal and violent application of force between hostile political entities aimed at bringing about a desired political end-state via armed conflict.” – Wikipedia

What is it about America that sets this country apart? We’ve never warmed to metric systems or soccer. There is a real sense of American Exceptionalism. We are different, we like different things than everyone else. So what it is it? Why are we so different from the rest of the world?

Perhaps it is because we have not had a major national conflict occur in the continental United States since 1865. We have not suffered the destruction of war as Europe and Asia has.

Please don’t stimulate my economy…

Country Politician - George Bingham

In my other recent blog, In Defense of Capitalism, I argued that increased government activity would exacerbate this crisis. I argued that, in the long-run, investment will fix itself. As I read the news, I hear good and bad things. I cringe when I hear that the government is going to spend $850 billion for a stimulus package. But, I am encouraged when Barack Obama wants to cut taxes to stimulate the economy. I fear that government spending, on this scale, is bound to be inefficient and may makes things worse. But, I also know that tax cuts tend to stimulate economies in the long run. When people can spend their own money, they tend to benefit an economy. Money is invested wisely, looking for returns. The government is a bureaucratic mechanism that is extremely slow to work. When it does finally work, it tends to lend and trade favors not always for the social economic good. Governments tend to overspend on shotty merchandise. You need only look at the J. Edgar Hoover building to see how poorly the American government spends its citizens’ money. What makes you think they will use $850 Billion any wiser?

The Secret Service Legacy: Can they Protect Obama?

President McKinley falls prey to an assassin's bullet

One thing I have noticed when I talk to people about President-elect Barack Obama, is their fear for his safety. It seems like every person I talk to about the President-elect brings up that same fear. I must admit, I have had the same worries. As most people no doubt remember, the last President we lost to an assassin’s bullet was John F. Kennedy. Unfortunately, many people relate Obama’s vivacity and charisma to one JFK. So it is not too unreasonable that people worry that Obama will share Kennedy’s fate.

Money Supply Blues

Up up and away!

As I hear more and more about this economic crisis, the pundits and politicians’ voice begin to merge and it becomes a sort of white noise. There isn’t much sense to be made out of most the reports, so as a statistician I prefer to look at data and see what the real story is. Data sometimes lies, but to be frank it lies a lot less than politicians and businessmen scrambling to keep their jobs. I went to the Bureau of Labor Statistics (BLS) website for some graphic interpretations of various economic data. As I had said back in March, the United States is in a recession, perhaps the worst in a very long time. But what does the data say about this? Inflation is currently at 3.7%, not much different from last year. The unemployment rate (6.7%) increases every month, but we’re still nowhere near where we were in 1982 when the rate was around 10 percent. What really worries me is not the labor indicators, it’s the monetary indicators. Check out the latest data and you will see what worries me.

Bush says Goodbye…

"I want you all to myself, you big bunny!"

Oh, you disappoint me President Bush. After all the shenanigans with starting a war, raising terror alerts, huntin’ down evil-doers dead or alive, you would think he would have one more trick up his sleeve. I truly thought that there would be some major terrorist attack before the election and President Bush would declare himself President for a “little longer.” I dreaded the election because I really thought something tragic was going to happen. Fortunately it turned out okay (so far), we just have a bit of an economic crisis. George gave up so easily, he is just coasting out of power with all the cares of a rich, retired ranch man. Why is this President unlike so many others?

Why hasn’t George Bush done what Robert Mugabe has done in Zimbabwe?

Where were you?

This was a moment like few others. In so few moments in our lives, do we remember the places we were when we heard the news. So many times it’s tragic news that tattoos our memories forever. Americans seem to all remember where they were when they heard of John F. Kennedy’s assassination, when the Challenger space shuttle exploded, and where they were on that horrific Tuesday morning in the autumn of 2001. For once, Americans can now happily remember the exact time and place when they heard that America had elected it’s first black President.

Despise not foul speculation

As any oil-watcher has noticed, the barrel of oil’s price has dropped dramatically in the past couple weeks. This afternoon, the barrel fell to $120. Considering at the beginning of July, the barrel was $147, that means is that in a little under a month, the price of a barrel of oil has dropped nearly 20%. To me, it shows how bidding in the market will usually overshoot equilibrium before moving back, much like a pendulum. What worries me is that this price drop has occured amidst cries of foul speculation, and proposed taxes on windfall profits. Who makes these cries and propositions? Politicians do, and since these events have occured simultaneously, I am afraid those same politicians will claim these asanine policies brought the price of oil down. Nothing could be further from the truth.