Investing Curiouscatblog

Category: Economics

  • Income Inequality in the USA

    The Great Wealth Transfer by Paul Krugman

    The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years.
    …
    The share of income received by the top 0.1 percent of Americans is twice the share received by the corresponding group in Britain, and three times the share in France. These days, to find societies as unequal as the United States you have to look beyond the advanced world, to Latin America.

    This article obviously is strongly against the rising inequality. The article can go perhaps too far in some claims but overall is a worthwhile read on an important topic. My opinion is that too much income inequality is a danger sign for an economy. I also strongly appose huge inherited wealth and obscene CEO pay. But people doing well for themselves is not necessarily bad. The USA is better off for having Warren Buffett, Larry Page, Micheal Dell, Sergey Brin, Jeff Bezos… and I see nothing wrong with them amassing large sums. See more articles on the topic:
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  • Manufacturing in Florida

    Nurturing an industry:

    About 20 years ago, the Tallahassee area was home to only a few manufacturers, said Nancy Stephens, executive director of the Tallahassee-based Manufacturers Association of Florida. “In the last five years, it has been growing. We’re now attracting manufacturers here,” she said. “You get synergies between manufacturers that require the same type of vendors. Once you get a core group here, you start to see a snowball effect.”
    …
    The universities are good resources, producing numerous engineering graduates, and there are people here with advanced research skills suitable for research and development, Stephens said. Syn-Tech needs electrical engineers, software engineers and engineering technicians, he said, adding “we have had very good luck attracting (engineering technicians) locally.”
    …
    Florida manufacturers employ more than 399,000 Floridians. The state Agency for Workforce Innovation reported that manufacturing employment was up to 394,700 in June 2005, a gain of 3,200 jobs over the previous year.

    Related: Manufacturing Jobs Data: USA and China – Engineering the Future Economy – The Future is Engineering

  • More Government Waste

    Dairy Industry Crushed Innovator Who Bested Price-Control System by Dan Morgan, Sarah Cohen and Gilbert M. Gaul:

    That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga’s initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

    Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga’s experiment — all without a single congressional hearing.
    …
    Most U.S. dairy farmers work within a government system set up in the 1930s to give thousands of small dairies a guaranteed market for their milk and to even out prices for consumers. Farmers who participate in regional pools operated by the federal government or the states deliver raw milk to cooperatives or food processors. They get a guaranteed price, whether the milk ends up in a gallon jug, cheese, butter or ice cream. In Arizona and other federally regulated regions, the Agriculture Department uses a formula to set the price processors pay for raw milk, issuing “milk marketing orders.”

    Developed for a bygone era of small dairies and decentralized milk plants, the system lives on when 3,000-cow dairies are not uncommon and huge cooperatives and food companies dominate the business. Business groups, fiscal conservatives and some dairy organizations have called for Congress to overhaul the complex system of protections and subsidies, which they say is costly to taxpayers and consumers. A recent USDA study acknowledged that “dairy programs raise the retail price” of milk. The watchdog group Citizens Against Government Waste estimates that the programs cost U.S. consumers at least $1.5 billion a year.

    These programs are effectively taxing everyone to pay special benefits to a few. Now perhaps you believe in this case milk production and purchase should not be part of the capitalist market system. That is a possible opinion. Somehow I doubt the politicians that take huge payments from huge dairy cartels to stop competitors from selling milk are doing so because they believe the market is incapable of delivering milk just as it delivers soda, water, hamburgers, cereal, pizzas, soup… Regulation is needed in various ways in the market. The problem is every special interest tries to claim the market needs to be regulated in a way that gives them benefits and the correlation to market needs and action seems to be very clouded by money received by politicians.

    It just seems more likely they are willing to do what they are paid to do. But others can see it differently. Certainly the whole political system seems very beholden to special interests to pay rather than to making decisions that are best for the country. That could change if political leaders choice to lead but a majority doing that is unlikely. More likely it will continue until the voters don’t allow special interests to reap huge rewards on the backs of the general public through congressional action. Remember last year when Congress forbid the Medicare system (with a law) from negotiating for lower drug prices?

    Related: Estate Tax Repeal – China and the Sugar Industry Tax Consumers – DC Paying Out Money it Doesn’t Have – Pork Sugar

  • Cracks in US Economy?

    Learning about the economy is not required to learn about investing but it helps to get the basics. One of those basics is that it is not easy to know what is actually going on today, or to predict what will happen in the future (other than the fairly accurate “close to what it was last year”). So when reading about the economy you have to accept that there often is plenty of room in the data to allow for differing opinions. Here is one opinion: Cracks widen in U.S. economy:

    “Industry is clearly going through a rough patch” that few anticipated, said Daniel Jester, analyst at Moody’s Economy.com. Outside housing and autos, the Federal Reserve had expected business to pick up rather than decline this fall, supporting a so-called “soft landing” in the economy.
    The weakness in manufacturing started with autos, was compounded by housing, and recently has spread to big-ticket capital goods such as technology and telecommunications equipment, Mr. Jester said. In addition, a broad array of manufacturers are cutting back because of an unexpected buildup of inventories this fall that has to be worked off, he said.

  • Europe and USA Housing Price Boom

    The booms in Spanish and Irish real estate make the US real estate boom look timid

    Central banks are concerned that recent pursuance of housing price growth in both countries wasn’t supported by fundamentals. The Irish national Bank stated in its latest financial stability report that the 2006 price surge wasn’t expected. In Spain, the Central bank has already issued some warnings regarding credit risk monitoring. The IMF Directors noted “that an abrupt correction cannot be ruled out” in Ireland.

    Cotis from the OECD has acknowledged that several big countries are at risk of a housing downturn: with the USA, France and the UK topping the list. But, given the extreme dependence of both Spain and Ireland on housing, both countries are even more exposed to a sharp correction.

  • Pork Sugar

    A good article from the New Yorker – Deal Sweeteners:

    But American sugar producers aren’t satisfied with supplying the most sweet-hungry population in the world. They’ve relentlessly sought—and received—special favors from the federal government, turning the industry into one of the most cosseted in America today. The government guarantees producers a fixed price for domestic sugar and sets strict quotas and tariffs for foreign sugar. Economically speaking, this has many obvious bad results. It keeps sugar prices in the U.S. at least twice as high as the world average. It makes it harder for companies that use lots of sugar to do business here—in the past decade, an exodus of candy manufacturers from the U.S. has eliminated thousands of jobs.

    Related: China and the Sugar Industry Tax Consumers

  • The Value of the Public Domain

    The Value of the Public Domain by Lawrence Lessig:

    Taxes are awful, but necessary. Let’s have them where necessary, but only when necessary. And so why not have them to extend the term of an existing copyright? BECAUSE THIS IS A TAX THAT CANNOT “INCREASE THE BOUNTY.” The work is already produced. No matter what we do today, Elvis is not going to produce any more recordings in 1957. So it is a tax that benefits some plainly (those who get almost twice the term they originally bargained for), but benefits society not at all. I.e., a very bad tax.

    Exactly right. Lessig mentions an interesting article, The Value of the Public Domain by Rufus Pollock that goes into this area in more detail.

    Related: Innovation and Creative Commons – Estate Tax Repeal

  • Click Fraud = Friction for Google

    Fraudulent web click are friction in Google’s business. Fraudulent clicks ad costs to the system without a benefit to the performance of the system. Google’s profit is derived from improving the system (of finding customers for advertisers) and taking a cut of the profits that their system creates. Google makes a great deal of money because their system of matching advertisers with dollars to spend to customers. Google does this through ads on their search results pages and on third party web sites. Google engineers will do whatever they can to find ingenious ways to reduce that friction.

    There have been many stories over the last few years about click-fraud. But none I have seen explain the simple idea that Google is the company with the most to gain by eliminating it (and Yahoo next). They often point to companies suing Google about fraudulent clicks instead.

    Companies like Google run ads on web sites and charge the advertisers for each click (anywhere from a few pennies to several dollars for each click). Advertisers want to get potential customers when someone clicks on their ads, obviously they don’t want to pay when there is no chance the “visitor” is going to become a customer. Obviously, fraudulent clicks are bad and those that engage and encourage such behavior are acting unethically and immorally and should be stopped and punished.
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  • China Exports Exceed USA Exports

    You might think that China has been exporting more than the USA but you would be wrong. As Brad Setser discusses in, China tops the US — at least in the goods exporting league table, in August (which is a bit misleading – USA exports are seasonally adjusted, China’s are not) China exported more than the USA. He predicts that next year China will export more than the USA for the first time.

    Suffice to say that if you asked me in the fall of 2004 if Chinese exports would be growing at a 30% y/y rate in the fall of 2006, I would have said no. And if you asked me in the fall of 2004 if China could double its reserves – China will soon reveal that they have increased from around $500b at the end of q3 2004 to about $1,000b at the end of q3 2006 – and also bring its inflation rate down, I would have said no.

    That calls into question my credibility. China has a great capacity to surprise.

    He is right, China continues to surprise. However, don’t forget that the USA is still by far the largest manufacturer in the world (more than double China). And Japan still manufactures more than China too (though that is probably getting very close).

    Related: Manufacturing Value Added Economic Data – Manufacturing Jobs Data: USA and China

  • Washington Paying Out Money it Doesn’t Have

    Aid Is a Bumper Crop for Farmers

    The lawmakers voted to use $8 billion in new taxpayer subsidies to help farmers buy crop insurance to protect them against losses. The insurance would replace the disaster payments and reduce government costs.
    …
    One week before the presidential election, it passed a new $1.8 billion disaster bill to assist farmers hurt by bad weather. Two others followed in subsequent years, totaling more than $6 billion. Today, after a searing drought in the Plains, farm-state legislators are pushing for billions more in aid.

    The result is that farmers often get paid twice by the government for the same disaster, once in subsidized insurance and then again in disaster assistance, a legal but controversial form of double-dipping, a Washington Post investigation found. Together, the programs have cost taxpayers nearly $24 billion since 2000.

    Some politicians talk as though they respect capitalism. They claim to reject taxing people just to give that money to others. Yet they continually increase the debt (taxing our children and grandchildren) and make payments to corporations, farmers and others for no reasonable purpose, other than buying votes. In addition to payments to farmers the government pays those who build million dollar beach house when the predictable storm knocks them down. No rational capitalist or economist would support such behavior (a political consultant might if when voters reward those that buy votes with taxpayer money, which seems to be the case now).
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