Investing Curiouscatblog

Category: Economics

  • Estate Tax Repeal

    The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.

    Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.

    Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don’t have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.
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  • 2006 Nobel Peace Prize to Economist

    The 2006 Nobel prize has been awarded to Muhammad Yunus and Grameen Bank (which he founded). Trickle Up has long been my favorite charity. It is based on a model similar to the Grameen Bank where small micro-loans help people help create an economic future for themselves out of poverty (Trickle Up makes small grants instead of loans).

    Trickle up and Grameen bank are amazing studies in financial literacy. They provide both seed capital and training to help people create businesses and have an absolutely amazing track record. Interview on the Noble Prize web site:

    Question: Is there any particular message you would like to use the opportunity to get across?

    Muhammad Yunus: The one message that we are trying to promote all the time, that poverty in the world is an artificial creation. It doesn’t belong to human civilization, and we can change that, we can make people come out of poverty and have the real state of affairs. So the only thing we have to do is to redesign our institutions and policies, and there will be no people who will be suffering from poverty. So I would hope that this award will make this message heard many times, and in a kind of forceful way, so that people start believing that we can create a poverty-free world. That’s what I would like to do.

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  • 2006 Nobel Prize in Economics

    The 2006 Nobel Prize in Economics (technically, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) has been awarded to Edmund S. Phelps, Columbia University for his analysis of intertemporal tradeoffs in macroeconomic policy. In other words he won for his work exploring the trade offs between short term and long term effects of macroeconomic policy. The Nobel foundations does an excellent job of providing additional information on the work of prize winners to the pubic:

    Phelps’s contributions highlighted the importance of analyzing how future possibilities of reaching the goals of stabilization policy are affected by today’s policy: high inflation today means higher inflation expectations in the future, thereby rendering future policy choices more difficult. A policy of maintaining low inflation can therefore be regarded as an investment in low inflation expectations, enabling more favorable combinations of inflation and unemployment in the future than would otherwise be available.

  • New Blog for Investing and Economics

    We are still experimenting with how best to arrange our blog posts. We have decided to setup a new blog for posts most purely related to investing and economics. The Curious Cat Science and Engineering Blog has quite a few posts related to economics and science and engineering. I would foresee those post in the future still being made there. The Curious Cat Management Improvement blog also has economics and investing related posts. In the future I would imagine most of those posts would now be made in this blog – expect those that tie closely to both management and economics or investing.

    We also will be posting more frequently on general investing and economics topics. And we will be providing posts linking to interesting articles we find.
    The Curious Cat Investment Glossary defines investing terms and includes links to related online resources. The Curious Cat Investing Library includes links to selected investing and economics online articles and the Curious Cat Investing Bookstore highlights books we feel are of value to investors.

    I have also added the posts on investing and economics that were originally posted on the other blogs here (that way they will be returned in searches of this blog and be seen when browsing the category listings).

  • Manufacturing Jobs Data: USA and China

    Originally posted on our Management Blog.

    Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper – July 2005) by William Ward, Clemson University:

    Manufacturing productivity growth from 1990 to 2004 should have taken away 7.5 million of the 17.7 million manufacturing jobs that existed in the US in 1990, while GDP growth should have added back (at the new productivity levels of 2004) 5.7 million manufacturing jobs-for a net loss of 1.8 million. In fact, the US economy lost 3.3 million manufacturing jobs during that period
    …
    I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.

    In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing – including China). (more…)

  • 30 Year Fixed Rate Mortgage Rates

    Fairly frequently I am asked, by friends, for investing advice. One topic I am asked about frequently is mortgages (locking in rates, etc.). Often they are concerned about what a Federal Reserve decision to raise or lower rates will effect the 30 year fixed mortgage rate. Essentially the decision by the Fed won’t have any predictable impact (this is not the complete truth but close enough for the question being asked – this article has more, though it still just provides a cursory view of the situation).
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  • Our Only Hope: Retiring Later

    Our only hope: retiring later by Jim Jubak

    Jim Jubak is definitely worth reading for anyone interested in investing. This column touches on the economic problem of the aging population.

    My solution is based on common sense and my observations of what people actually do in retirement: They work. It’s based on a belief that we’d fix the so-called crisis if we could just get more productive work out of older workers, by improving their jobs so they’d voluntarily stay on at work, or by giving them resources and support to start post-retirement careers.

    That pretty much has to be part of the solution. While the United States is rich even we are not rich enough to have people work for 40 years and not work for 40 years. Retirement at 65 was set when most people died before or soon after that date. It just is not realistic to think we can live at the standards of living we expect and only work from 25-65.

    If people want to cut the standard of living during the 80 years they live that would be one tradeoff they could make. I don’t believe his contention that savings is not a reasonable significant part of the solution (if that is what he means by “The whole world is getting old pretty much all at once, so saving more and investing at higher returns won’t do the trick.”

    The issue of how to deal with the economic consequences of aging population is an important issue to consider today. It is something I need to continue to study. But we also need to be taking action now on things like increasing the full retirement age for Social Security, increasing the saving rate, decreasing the current yearly federal deficit (and private pension liabilities), providing ways for those in their 60’s and 70’s to participate in the economy that work well (probably part time, more flexible work arrangements, etc.).

  • China and the Sugar Industry Tax Consumers

    China to Raise Tariffs On Clothing Exports, from the Washington Post:

    The Chinese action would raise export duties on 74 categories of Chinese clothing from token amounts announced late last year to a range of 12 to 48 cents per garment, starting June 1.

    If the Chinese government must reduce the amount of the world textile trade that their country is taking, or face retaliation from other countries, this is a very smart move. Essentially China gets to tax the United States, Europe, etc. and be thanked for doing so by the governments of those countries. Such is the odd nature of international trade these days.

    The Chinese government is going to tax textiles being exported by China. Therefore when an American picks up a shirt at the mall it will include a new tax to the Chinese government and this is seen as a good thing by the American government. An alternative would be for the American government to tax imports. Then the tax paid by the American consumer would go to the United States government instead. It seems odd that the American government thinks it is better to pay a tax to the Chinese government than to the American government but that seems to be what their policy and statements support.
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  • Beginning of the End of Housing Bubble?

    re: Beginning of the End of Housing Bubble? – Dan Gilmor blog post

    I doubt we are at the end of the bubble. However, financial bubbles are very difficult to time. My guess is the bubble will continue for over a year for most, if not all locations in the USA. And unless the bubble continues and prices reach levels much higher than they are now, the end of the bubble will not be dramatic decline of prices (say an drop in prices of over 25%) in most locations.

    Manhattan (with historically very volatile prices) and certain other locations will likely have dramatic declines. But overall the real estate market will slow down (fewer sales) greatly and may experience say a 5 year period where prices decline slightly (or increase slightly). Real Estate normally does not behave the same way the stock market does when a bubble breaks, but we will see what actually happens.
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