Quote of The Day
April 3rd, 2009 6:50 pm
“The desire for success lubricates secret prostitution in the soul.”
Norman Mailer, American Author
Archive
Author Archive
Revenge = (Do Unto Others) – (As You Would Have Them Do Onto You)
April 1st, 2009 11:44 pm
The difference between economics students and finance students is very simple. Those who study finance apply, mechanically, all the genius that is the result of the study of economics. In fact, in a glowing testament to the glory that is economics, Craig Damrauer has launched his site New Math, which brings light to the world every Monday.
The new plan for the auto industry?
Disappointment = Expectation / Reality
Quote of The Day
April 1st, 2009 11:17 pm
“Ask five economists and you’ll get five different answers – six if one went to Harvard.”
Edgar Russell Fiedler, Prominant economist
Secret Economic Indicators
March 30th, 2009 2:03 pm
Indicator of a recovering economy?
My friend emailed me this article a while back. So Elizabeth Strott (author of aforementioned article) tells us about five signs we should look for to tell us if the recession is over, some of which are expected, others unusual.
Of course, she mentions indexes: rising indexes of either prices or quantities reflect a growing economy. No surprise at Strott’s choice here.
Strott then tells us to look at cardboard boxes. How can cardboard boxes tell us anything about the economy? As the economy grows, the cost of shipping becomes more expensive, which means the price of cardboard boxes increases. Read more…
Quote of The Day
March 30th, 2009 1:15 pm
“Any number Wal-Mart gives is tantamount to an economic indicator.”
Jack Ablin, executive vice president and chief investment officer of Harris Private Bank
The Geithner Effect
March 25th, 2009 6:19 pm
Scientific Debate
The world seems to be ambivalent about the new plans proposed by government to tackle current challenges. Yet the evidence that these plans may not work is glaring at us bold in the face. The Dow Jones Industrial Average soared 500 points and the S&P 500 rallied another 50 points since the weekend. That’s a 19% and 21.5% two week gain respectively: the fastest such gain since 1938.
It seems apt that “The areas that fall the fastest are going to recover,” Guy Cecala, publisher of Inside Mortgage Finance, said. “There’s going to be a floor established. Seven-hundred-thousand-dollar houses are $250,000 — that’s what’s bringing people back into the markets.”
This rise has come in light of recent government acts. In particular, Geithner’s plan to buy up huge amounts of toxic assets seems to be giving the economy the kick start it needs. As always, the radical move taken has generated much criticism. Check out this commentary by some of the greatest minds out there.
Side Note: Paul Krugman, Simon Johnson, Brad DeLong and Mark Thoma are all economists. Just saying.
Quote of The Day
March 25th, 2009 10:00 am
“If all economists were laid end to end, they would not reach a conclusion.”
George Bernard Shaw, playwright
David VS. Goliath: The Federal Reserve Against the Economy
March 23rd, 2009 1:38 pm
Federal Reserve Vs. Economy
The Federal Reserve has started to make its moves. In numerous announcements earlier this week, Federal Reserve Chairman Ben Bernanke has laid out his plan. It seems that the Federal Reserve will buy up to $750 billion in mortgage-related liabilities. Furthermore, it will buy as much as $300 billion in long-term government bonds.
By doing this, Bernanke aims to free up the credit market and get it flowing again. The interesting aspect about this approach is that interest rates do not change (staying low at 0% to 0.25%). It must also be mentioned that because of his actions, the value of the U.S. dollar has sharply decreased (which helps to act against the deflationary trap we are facing). The U.S. dollar index (a measure of the value of the U.S. dollar against a basket of other major currencies) has finally begun to come down after climbing steadily for most of the year.
As always, this provides us with a new set of challenges. As the U.S. dollar devalues steadily, assets such as those on Wall Street become less attractive to both international and domestic investors, as evidenced by figures in from Friday: The Dow Jones Industrial Average fell 126.01 points to 7,274.79, the S&P 500 declined 16.96 points to 767.08 and the Nasdaq Composite dropped 32.92 points to 1,450.56. Even commodity prices have started to rise with oil breaking the $50 mark, indicating the economy is moving back towards an inflationary nature.
While it is true that there remains much to be done, and the economy will continue to worsen before it gets better, is the light finally showing?
Quote of The Day
March 23rd, 2009 1:34 pm
“The basic prescription for preventing deflation is straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place.”
Ben Bernanke
Finally A Plan For The Big Three?
March 21st, 2009 12:56 pm
On Thursday the Obama administration said it would provide up to $5 billion in credit to guarantee purchases from companies that supply the Big Three with the raw parts needed to make their cars. With the new found liquidity, both the suppliers and the auto industry will be able to continue operating, preventing a complete collapse of the market (then again, what’s left to collapse?).
The funds would come out of the Troubled Assets Relief Program (TARP), and for the auto industries to participate, they would have to contribute a five percent charge up to $250 million to the fund for suppliers. General Motors Corp. and Chrysler LLC, having already received a total $17.4 billion in loans, have indicated that they will take part in the program. Ford Motor Company, on the other hand, has said that they would not be involved “as we remain viable and expect no issue with continued payments to our suppliers.”
This is the first step in a comprehensive plan that is to be made public by March 31 (personally, all I can think after hearing this is how coincidental it is that April Fools is the day after). The new cash flow is much needed as more than forty prominent suppliers have filed for bankruptcy. These companies enjoy a labor force of a little over a half million.
Since the start of this week, Ford and GM stock values have risen 12.1% showing improved market standing. Perhaps this will set an example of how future stimulus packages should be structured.
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