Funny Economics

Some wry observations from me  on the world on economics-

1) 150 years after humiliating their country in the Opium Wars, Chinese mandarins have somehow convinced their leaders and military to park 2 trillion assets in Anglo Saxon debt. If Greece geting a 50% discount on its loan is the new precedent, when will the USA force its lendors to the negotiation table.

2) Income inequality and protests are something the Arabs and Israelis have in common. Besides being the sons of Abraham of course. Note the Persians are not considered the same as Arabs.

3) Advance knowledge of geo-political events can and ensures Western financial dealers have an edge on the sovereign funds in the other hemisphere.  What used to be the playgrounds of Eton has now shifted to the pubs of Boston and So Cal.

4) After spending 1 trillion USD on arms in the past one decade (funded by guys in item 1), the United States military forces is in a much better more advanced position to wage simultaneous war.

5) Can a war in Korean peninsula affect war in the Persian sphere of influence. Just follow the money , baby.

6) Saudi Wahabis continue to fund terror despite losing a lot of money in the economic meltdown in past few years. For every 1 $ increase in Saudi oil revenue, western oil companies ,traders, financiers make more, much more.

7) Demographics is an important key to economics. An aging Japan, and stagnant West is one cause to shift from manpower intensive warfare to cyber warfare. Plus Cyber warfare is good business . Underpopulated Russia and Arabs continue to lack true economic potential.

8) There are new economic incentives to develop tools to disseminate as well as distort information flow in real time in a hyper connected digital world.

 

Credit Downgrade of USA and Triple A Whining

As a person trained , deployed and often asked to comment on macroeconomic shenanigans- I have the following observations to make on the downgrade of US Debt by S&P

1) Credit rating is both a mathematical exercise of debt versus net worth as well as intention to repay. Given the recent deadlock in United States legislature on debt ceiling, it is natural and correct to assume that holding US debt is slightly more risky in 2011 as compared to 2001. That means if the US debt was AAA in 2001 it sure is slightly more risky in 2011.

2) Politicians are criticized the world over in democracies including India, UK and US. This is natural , healthy and enforced by checks and balances by constitution of each country. At the time of writing this, there are protests in India on corruption, in UK on economic disparities, in US on debt vs tax vs spending, Israel on inflation. It is the maturity of the media as well as average educational level of citizenry that amplifies and inflames or dampens sentiment regarding policy and business.

3) Conspicuous consumption has failed both at an environmental and economic level. Cheap debt to buy things you do not need may have made good macro economic sense as long as the things were made by people locally but that is no longer the case. Outsourcing is not all evil, but it sure is not a perfect solution to economics and competitiveness. Outsourcing is good or outsourcing is bad- well it depends.

4) In 1944 , the US took debt to fight Nazism, build atomic power and generally wage a lot of war and lots of dual use inventions. In 2004-2010 the US took debt to fight wars in Iraq, Afghanistan and bail out banks and automobile companies. Some erosion in the values represented by a free democracy has taken place, much to the delight of authoritarian regimes (who have managed to survive Google and Facebook).

5) A Double A rating is still quite a good rating. Noone is moving out of the US Treasuries- I mean seriously what are your alternative financial resources to park your government or central bank assets, euro, gold, oil, rare earth futures, metals or yen??

6) Income disparity as a trigger for social unrest in UK, France and other parts is an ominous looming threat that may lead to more action than the poor maths of S &P. It has been some time since riots occured in the United States and I believe in time series and cycles especially given the rising Gini coefficients .

Gini indices for the United States at various times, according to the US Census Bureau:[8][9][10]

  • 1929: 45.0 (estimated)
  • 1947: 37.6 (estimated)
  • 1967: 39.7 (first year reported)
  • 1968: 38.6 (lowest index reported)
  • 1970: 39.4
  • 1980: 40.3
  • 1990: 42.8
    • (Recalculations made in 1992 added a significant upward shift for later values)
  • 2000: 46.2
  • 2005: 46.9
  • 2006: 47.0 (highest index reported)
  • 2007: 46.3
  • 2008: 46.69
  • 2009: 46.8

7) Again I am slightly suspicious of an American Corporation downgrading the American Governmental debt when it failed to reconcile numbers by 2 trillion and famously managed to avoid downgrading Lehman Brothers.  What are the political affiliations of the S &P board. What are their backgrounds. Check the facts, Watson.

The Chinese government should be concerned if it is holding >1000 tonnes of Gold and >1 trillion plus of US treasuries lest we have a third opium war (as either Gold or US Treasuries will burst)

. Opium in 1850 like the US Treasuries in 2010 have no inherent value except for those addicted to them.

8   ) Ron Paul and Paul Krugman are the two extremes of economic ideology in the US.

Reminds me of the old saying- Robbing Peter to pay Paul. Both the Pauls seem equally unhappy and biased.

I have to read both WSJ and NYT to make sense of what actually is happening in the US as opinionated journalism has managed to elbow out fact based journalism. Do we need analytics in journalism education/ reporting?

9) Panic buying and selling would lead to short term arbitrage positions. People like W Buffet made more money in the crash of 2008 than people did in the boom years of 2006-7

If stocks are cheap- buy. on the dips. Acquire companies before they go for IPOs. Go buy your own stock if you are sitting on  a pile of cash. Buy some technology patents in cloud , mobile, tablet and statistical computing if you have a lot of cash and need to buy some long term assets.

10) Follow all advice above at own risk and no liability to this author 😉

 

Analytics 2011 Conference

From http://www.sas.com/events/analytics/us/

The Analytics 2011 Conference Series combines the power of SAS’s M2010 Data Mining Conference and F2010 Business Forecasting Conference into one conference covering the latest trends and techniques in the field of analytics. Analytics 2011 Conference Series brings the brightest minds in the field of analytics together with hundreds of analytics practitioners. Join us as these leading conferences change names and locations. At Analytics 2011, you’ll learn through a series of case studies, technical presentations and hands-on training. If you are in the field of analytics, this is one conference you can’t afford to miss.

Conference Details

October 24-25, 2011
Grande Lakes Resort
Orlando, FL

Analytics 2011 topic areas include:

Love Bytes- a modern Indian play

Review= Love Bytes

I was here in Taj Vivanta,Mumbai India, as a guest and I caught up with a lovely new age play called Love Bytes.

Directed and written by Divya Palat http://www.divyapalat.com  , this play explores the emotional turbulences of the digiterati, the Facebook status changes, and the complete life cycle of the supply chain of love.

From teenage puppy love, to double income 1 kid, to geeky nerd afraid to talk to the beauteous girl in office,and the live in couple with no pressure to marry – this s when Harry met Sally  plus Its Complicated all mashed together with anthemic rock songs between the acts.

I loved the humor and the satire though the second act did drag on my nerves with the puns on African American rappers,  extinct parsis  species, and mild homophobia in father son relationships. One solo act stood out for the funny words..

Welcome brave new world of Bollywood.

Or maybe I should say Bollyway-wood.

The Mommy Track

Wage_labour
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A new paper quantitatively analyzes the impact of child bearing on women. Summary-

Women [who score in the upper third on a standardized test] have a net 8 percent reduction in pay during the first five years after giving birth

From http://papers.nber.org/papers/w16582

Having a child lowers a woman’s lifetime earnings, but how much depends upon her skill level. In The Mommy Track Divides: The Impact of Childbearing on Wages of Women of Differing Skill Levels (NBER Working Paper No. 16582), co-authors Elizabeth Ty Wilde, Lily Batchelder, and David Ellwood estimate that having a child costs the average high skilled woman $230,000 in lost lifetime wages relative to similar women who never gave birth. By comparison, low skilled women experience a lifetime wage loss of only $49,000.

Using the 1979 National Longitudinal Survey of Youth (NLSY), Wilde et. al. divided women into high, medium, and low skill categories based on their Armed Forces Qualification Test (AFQT) scores. The authors use these skill categories, combined with earnings, labor force participation, and family formation data, to chart the labor market progress of women before and after childbirth, from ages 14-to-21 in 1979 through 41-to-49 in 2006, this study’s final sample year.

High scoring and low scoring women differed in a number of ways. While 70-75 percent of higher scoring women work full-time all year prior to their first birth, only 55-60 percent of low scoring women do. As they age, the high scoring women enjoy steeper wage growth than low scoring women; low scoring women’s wages do not change much if they reenter the labor market after they have their first child. Five years after the first birth, about 35 percent of each group is working full-time. However, the high scoring women who are not working full-time are more likely to be working part-time than the low scoring women, who are more likely to leave the workforce entirely.

and

Men’s earning profiles are relatively unaffected by having children although men who never have children earn less on average than those who do. High scoring women who have children late also tend to earn more than high scoring childless women. Their earnings advantage occurs before they have children and narrows substantially after they become mothers.

America's Data Book: Census Abstract 2011

U.S. Census Bureau Regions, Partnership and Da...
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An excellent summary of 2011 Census Statistical abstract was given by NYTimes at

http://www.nytimes.com/interactive/2011/01/07/us/CENSUS.html?hp

Like more white people now enjoy jazz than black people now (presumably who have got rap music), but not details enough on ahem country music

The Data book is at http://www.census.gov/compendia/statab/

What is the Statistical Abstract?

The Statistical Abstract of the United States, published since 1878, is the authoritative and comprehensive summary of statistics on the social, political, and economic organization of the United States.

Use the Abstract as a convenient volume for statistical reference, and as a guide to sources of more information both in print and on the Web.

Sources of data include the Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, and many other Federal agencies and private organizations.

Tables of Interest

1060 – Shopping Centers–Number and Gross Leasable Area [Excel 31K] | [PDF 59K]

1170 – Flow of Funds Accounts-Liabilities of Households and Nonprofit Organizations [Excel 41K] | [PDF 66K]

1172 – Amount of Debt Held by Families-Percent Distribution [Excel 29K] | [PDF 66K]

1173 – Ratios of Debt Payments to Family Income [Excel 857K] | [PDF 64K]

327 – Law Enforcement Officers Killed and Assaulted [Excel 34k] | [PDF 468k]

From the last table you can see , while the number of officers killed or feloniously killed decreased by 20% in past five years, the number of officers assaulted by firearms grew by 20% in the same period.

Checks in the mail more effective checks to your pay

Paycheck (film)
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NBER (whose excellent monthly newsletter I subscribe to- among others) http://www.nber.org/ in a recent paper claims that cheque in mails (one time) sare better spent than monthly pay increases.

I wonder what this conclusion can be used for in designing annual bonuses versus higher pay in private sector compensation- but people do seem happier receiving a bigger one time boost than 12 small mini boosts.

 

http://papers.nber.org/papers/w16246

Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered?

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Claudia R. Sahm, Matthew D. Shapiro, Joel Slemrod

NBER Working Paper No. 16246
Issued in July 2010
NBER Program(s):   EFG ME PE

An NBER digest for this paper is available.

Recent fiscal policies have aimed to stimulate household spending. In 2008, most households received one-time economic stimulus payments. In 2009, most working households received the Making Work Pay tax credit in the form of reduced withholding; other households, mainly retirees, received one-time payments. This paper quantifies the spending response to these different policies and examines whether the spending response differed according to whether the stimulus was delivered as a one-time payment or as a flow of payments in the form of reduced withholding. Based on responses from a representative sample of households in the Thomson Reuters/University of Michigan Surveys of Consumers, the paper finds that the reduction in withholding led to a substantially lower rate of spending than the one-time payments. Specifically, 25 percent of households reported that the one-time economic stimulus payment in 2008 led them to mostly increase their spending while only 13 percent reported that the extra pay from the lower withholding in 2009 led them to mostly increase their spending. The paper uses several approaches to isolate the effect of the delivery mechanism from the changing aggregate and individual conditions. Responses to a hypothetical stimulus in 2009, examination of “free responses” concerning differing responses to the policies, and regression analysis controlling for individual economic conditions and demographics all support the primary importance of the income delivery mechanism in determining the spending response to the policies.

This paper is available as PDF (176 K) or via email.

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