This morning on Bloomberg Surveillance, Nobel winning economist Joseph Stiglitz discussed that it may be necessary to breakup the euro-zone, with a German exit being the preferred way to go. In an interview in July, Stiglitz expanded on his discussion of the problems in the euro-zone. Watch that interview below. … [Read more...]
The Monday Melee: Economics of the Olympics
Olympic Costs Explode It's no revelation that the Olympics have become an increasingly extravagant event, with costs and revenues ballooning in tandem to the games' size and importance as a signal for the host country's own wealth and status. But it's less well known how this came to be. James McBride explains the economics of hosting the Olympics. The 1970s marked a turning point, writes Andrew Zimbalist, author of Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. The games were growing rapidly, with the number of Summer Olympics participants almost doubling … [Read more...]
How Much is Your $100 Worth?
How much is that Benjamin in your pocket really worth? If you live in New York or California, it may be a lot less than you think in relative value terms. But no surprise, your money is worth least in Washington D.C., where the relative value of $100 is a mere $84.67. Meanwhile, in Arkansas and Mississippi, your $100 gets stretched thanks to the low cost of living to $114.29 and $115.34 respectively. These numbers from The Tax Foundation are based BEA data. Alan Cole explains it here. Regional price differences are strikingly large; real purchasing power is 36 percent greater in Mississippi … [Read more...]
Bob Lutz on the Auto Industry
I saw this interview with Bob Lutz in the September 2016 issue of Car and Driver. C/D: Because automakers eat so much capital, will we eventually see only four or five remaining? BL: It's likely. With autonomous cars, you're gonna see more consolidation. Once we have transport modules, you order off the phone and brands won't matter anymore. When brands don't matter, the auto industry ends. It's got another 20 years. Bob Lutz On Where The Auto Industry is Headed … [Read more...]
Boomer Retirements Pull Down Productivity
Think about the concept of retirement for a minute. A person works their entire life, gains massive amounts of valuable experience, becomes extremely productive, and then checks out at the peak of their career. Odd is it not? But given expected life spans, and what it costs to save for the Golden Years, this is how it's done. The problem today is, the Baby Boomer generation is such a big, productive part of the economy, that as these older workers retire, they leave a massive skills and productivity gap in their wake. Research from RAND Corp. says Boomer retirements will even lower GDP … [Read more...]
The Monday Melee: What Can Trade Tell Us?
Mixed Results at American Ports Since the financial crisis, traffic at America's largest ports has a mixed record. Pacific ports in Long Beach and Los Angeles are still below their volumes at the end of 2006. The big East Coast ports in Savannah and New York have shown strong growth, but look like their volumes may be rolling over. Meanwhile, in Virginia and Houston, decent trends have flattened out but aren't dropping, yet at least. Will TPP Kickstart Pacific Trade? How Will TPP Impact U.S. Automakers? … [Read more...]
Velocity, there is None
At one time, velocity, the speed at which the monetary base is spent (measured as GDP/M2), was a reasonably reliable indicator of America's position in the business cycle. More often than not, if velocity was tanking, it was a good bet the country was in recession. Today though, after years of unconventional monetary policy, velocity is no longer a reliable business cycle indicator. If you're not an economist or don't work in the world of finance, you may be asking, "so what?" There are a number of practical reasons you might pay attention to velocity. For one, when velocity ticks up it can … [Read more...]
Brexit a Pension Fund Risk?
I've written in the past about the threat that low market yields and returns pose to pension funds, where managers are setting expectations too high (see here). Now managers face a new threat, the fallout from the Brexit. The Wall Street Journal reports: The retirement savings of tens of millions of people have come under new threat since the surprise U.K. vote to leave the European Union, thanks to a plunge in global interest rates. A post-Brexit scramble for safer bonds pulled yields lower and upended global markets just as many public pension funds wrapped up their fiscal year on June … [Read more...]
Puerto Rico Bond Default?
Puerto Rico’s potential bond default could be an owner’s manual for overburdened U.S. states. Two days before a potential historical default, Puerto Rico Governor Alejandro Garcia Padilla made it clear that the commonwealth won’t pay bondholders even as Congress votes on a bill allowing the island to restructure its $70 billion in debt. “On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island’s senior credits protected by a constitutional lien on revenues,” Garcia Padilla wrote in a editorial posted on a CNBC website. The lapse will mark … [Read more...]
These are the Guys in Charge of the Economy?
Jim Bullard, the President of the St. Louis Federal Reserve Bank, and one of the Fed members calling for rate hikes as recently as March (and just last month said he was considering one in June) has moved from hawk to uber-dove. Mr. Bullard now thinks the Fed should stay on hold for two and a half years. It would seem that a single weak employment report was the catalyst to drive Mr. Bullard to change his outlook and model for the U.S. economy. He now says the economy is in a new regime. It is more than a little concerning that the guys in charge of the economy are basing their decisions … [Read more...]
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