A More Private Alternative

The new body scanners and enhanced pat downs may not have had a great effect on airline ticket sales over the holiday weekend, but ElJet, a private jet charter out of Los Angeles, boasts a 30% increase in bookings over the Thanksgiving holiday compared to last year by advertising a "pat down alternative." If you feel the new security measures violate your civil rights, or if you simply want to avoid the additional hassles, you can team up with other travelers and charter a private jet. Finances permitting, private jet charter can be a more convenient and logical substitute to long-distance commercial flights when compared to the other alternatives of going by rail, boat, or automobile.

The private jet industry has also experienced economic gains acting as a substitute to corporate jet fleets. According to an article in Business Day, many large companies are faring better economically but are still reluctant to invest in their own corporate jets and choose instead to use chartered jets to fly their executives to multiple meetings while avoiding the hassles of commercial flights.

If the body scanners and enhanced pat downs are here to stay, the demand for private jet charters might increase as consumers are given more time to adjust their flight plans; however, complacency with the measures may result in a decreased demand in the long run. The use of chartered jets should increase as the economy improves, but the use might decline as corporations recover enough to reestablish their own fleets.

Google’s Android Beats Out Apple in U.S.

Apple has the App Store, Google now has the Android Market. Apple has been a hit this past decade in the music, movie, and communication industries. Apple’s iPhone has been untouchable since the inception of hot applications that allow one to do a variety of uses from tracking favorite sports teams, checking weather/stocks/bank accounts, using a helpful flash light, a tip calculator, or thousands of other useful and/or pointless applications. Google has wised up to this act and has created their own platform with many of these same awesome/useful/sometimes pointless applications and made it even more available by using more cellphone providers than just one. Verizon has landed the newest Google phone, the Android, which according to an article in August of the Bloomberg Businessweek titled Google’s Android Passes Apple Among New U.S. Users, has been able to outperform Apple in sales for the very first time. Thanks to this new platform called “the market” the Android System is finally able to rival and marginalize the almighty Apple. The article points out that the Android will not only succeed in the U.S., but hope to capture the global market share from Apple stating that “Android’s U.S. success may mean Google will overtake Apple’s iOS globally earlier than previously expected.” Might as well go get one now!

Chinese Competition in the Aircraft Industry

As Americans seem to focus more and more on the present, along with its quarter to quarter short term results, China continues to invest in long-term projects. China has teamed up with Western suppliers such as Honeywell and GE to start a state-owned aircraft design and production industry. China knows that with its growing economy and increased demand for air-travel that it is projected to order more and more aircraft from Boeing and Airbus. That is unless it can supply that demand through its own state-owned aircraft industry as this article in Bloomberg points out, “China Takes Aim at Boeing and Airbus”. The Chinese being a competitor in the aircraft industry is becoming a reality as Western suppliers of Boeing and Airbus are on board. I wonder if this increased competition will bring down the price of both commercial and private aircraft. I am also curious if this will affect the price of air-travel.

Portugal and Spain in Trouble

Treasury prices rose today because of increased buying of U.S. bonds by European investors. These investors are searching for a safe haven for their money as crisis builds in Portugal and Spain. The Federal Reserve also stated today that as apart of the $600 billion that it will spend in bonds it will be purchasing bonds everyday this week. The move by the Fed to buy bonds is being scrutinized by sceptics claiming that the move will devalue the dollar. It is interesting that European investors are buying U.S. bonds as a "safe haven" when it appears that the dollar is anything but a safe haven right now. Portugal and Spain are both headed in the same direction as Greece and Ireland. This article speculates that it would be more wise for the EU to assist Spain rather than Portugal, because if a bailout of Portugal is accomplished there might be no more money left to bailout Spain. I think that we will start to see more and more contentious behavior in countries as governments start realizing that difficult decisions are going to have to be made concerning government programs, pensions, social security programs etc.

Ireland in Trouble

In this article, "The victims of Ireland's economic collapse," the author spells out how bad economic conditions have become in Ireland. The article states that the budget deficit is 14.3% and is even higher than Greece. Ireland, like Greece, has borrowed their way into economic disaster. The interesting dynamic that Ireland faces is that of mass emigration. The article states that in the 1950's five hundred thousand people left the country because of poor economic conditions. This same thing happened in the 1980's on a smaller scale, but the effects crippled the economy for "decades." It will be interesting to see what happens after this years economic burst. The article states that one hundred thousand people are estimated to leave the country next year. In dealing with the financial bubble-burst cycle that country after country seem to be facing I think that Robert Kuttner got it right. 1) regulate financial institutions if they are involved in bank-like activities, 2) Limit Leverage 3) Police conflicts of interest.

Utah DWR License Pricing Structure

The pricing for hunting and fishing licenses in Utah encorporates several forms of bundling. The most obvious form of bundlng is the fishing or small game hunting license. The one permit lets you hunt or fish for a variety of species. Another form of bundling is the small game/fishing combination license. When purchased seperately, the total cost for the two permits would be $52.oo. However, the combination permit is only $30.oo. This seems like an amazing savings, but the DWR probably makes much more money overall because the price is low enough to get people that may never fish, or may never hunt to buy the other license just in case. The last form of bundling I want to discuss is that they don't allow you to buy a big game permit without purchasing the small game permit. This is kind of a form of mixed bundling. It's interesting to see how this occurs in government agencies as well as in the private sector.

Your Paycheck is About to Shrink....

In the article, "Your Paycheck Is About To Shrink,"  Blake Ellis reminds us of a tax credit that will expire on January 1, 2011 unless it is renewed.  The Making Work Pay tax credit has saved between $400 and $800 dollars a year for single or persons filing jointly.  This tax credit has been in place for the past two years and has been forgotten or at least not top-of-mind for most Americans.  The author states that it has been ignored because of the focus on keeping the high wage earner portion of the Bush tax cuts from being renewed.  However, the author points out that 90 percent of Americans have been the beneficiary of the Making Work Pay tax credit and many are not in the position financially to have their paychecks increase. 

Ellis does explain that if the tax is not renewed it would cut the cost of government by $60 billion dollars.  However, Ellis points out that the same $60 billion dollars could be used in spending to generate jobs and strengthen business. 

I believe Ellis is right is his view that the $60 billion dollars would be put to better use in spending and not in government cost reduction.  A negative change in income will shift the entire demand curve to the left.  Because the tax credit is affecting people at all income levels except the top 10%, all levels of purchasing will be affected.  Also, a change in income on the demand curve is very different from a change in the price of goods.  A change in the demand curve by income is much more elastic than the change in price.  I hope more people learn of this 'forgotten' tax credit and our representatives can get it renewed.

Black Friday

Black Friday is a good indicator of how well the economy is doing. The article “Retailers happy with black Friday Turnout” claims that this Thanksgiving had more shoppers than the previous two years. Economists estimate that this is a good indicator that Utah is pulling out of its recession.

Many retail stores analyze the turn out on black Friday as an indicator how the remaining year will go. One reason why consumers are out spending more could be that they have more money to spend. It could also be that people have less uncertainty or fear of the economy. However, the article also claims that other factors also increase retail spending, such as the snowy weather. Snowy weather can create a mood of Christmas which will send more consumers Christmas shopping. The increase in spending is more likely a factor of money available to spend as well as people’s perception of how well the economy is doing.

Regardless of what factors send people out shopping on black Friday; this acceleration in shopping is a great boost to the economy. Analyzing Black Friday compared to previous years can be a great way to measure how well the economy is doing.

Are regulations good or bad?

Prior to reading the article Seven Deadly Sins of Deregulation - and Three Necessary Reforms I would have said that I am more for deregulation than for regulation. From a simplistic viewpoint, I believe in the invisible hand and in free market economics. However, I know that theory and practice are two separate items. I understand the theory is sound but its implementation is far more complex. Selfishness and self interest may make one prosper, but at whose expense? Without some form of regulation, business owners etc. would have free reign to exploit others without fear of retribution. Thus, for the sake of safety and fairness, I have to agree that complete deregulation is not a wise action. Rather, regulations must be in place to protect the uninformed and unwise. For without some form or regulation, “moral hazard” would prevail and businesses would take too many risks without bearing the full consequences of their actions.

To tax or not to tax, that is the question.

Business Week’s article, The Next Home Buyers: Ozzie & Harriet, depressed me as I read it. This article provides an overview of the U.S. economy in relation to home prices and interest rates and explains how the next few years will continue to be difficult. Although interest rates are at historically low prices, potential buyers are not yet willing to purchase homes because prices are still expected to fall and the government is considering removing mortgage interest tax deductions. I understand why home prices are falling as the supply of houses is shifting rightward with increased foreclosures but I do not understand why the government is considering removing mortgage interest tax deductions. I assume the government believes it will make more money in increased tax revenue but if this is their reasoning, I believe it is flawed. If homeowners must now pay more money to the government in increased taxes they will have less discretionary money for consumer spending. If consumer spending deceases, businesses will make smaller profits and will pay fewer taxes to the government. The question now becomes, will the government make more money by taxing home owners or will they make more money by collecting money from successful businesses? I believe the latter.

Google's Human Capital

As companies mature there is often a period where supernormal growth is superseded by a lower level of constant growth. This is often problematic because despite the consistency of this trend and expectation that eventually it will happen no one actually wants it to happen. So companies will do everything in their power to prevent it and companies often have a significant amount of unnecessary upheaval and restructuring when it does occur. The real question is why does this happen? Why can't a larger version of the original continue to come up with new and winning ideas and carry on its success? Google is one company that has carried on this supernormal growth for longer than most and in doing so seemed to be a company that could beat the expectations. Recently many are starting to suspect that Google has indeed reached the end of its supernormal period. One answer as to why that may be despite Google's fervent efforts to be creative and develop new ideas is the loss of a portion of its most talented human capital. Google's as well as many other companies’ huge growth can be attributed to new and groundbreaking ideas with values far exceeding the cost of their implementation. But as Google has grown many of the creative visionaries who pioneered these are leaving to newer and smaller companies despite lucrative monetary inducements and offers of greater freedom to work. It begs the question what does the most productive portion of our society value as reward for its work: money, freedom, success, or something else?

Upsides to the recession

I wish I had read Robert J. Samuelson’s article when it was originally published. He excellently predicted what we are now experiencing in today’s economy. He clearly elucidated that the usual side effects of a recession are higher unemployment, weaker profits, and you nailed it—more stress! Sounds like my job. He then breaks down a major benefit of a recession: it dampens inflation. He noted that a US recession might also reverse the upward spiral of oil prices and trigger a faster, and healthier, drop in home prices—which it has done both. At the end of 2008 and through the 2nd quarter of 2009 we were paying well under $2.00 for a gallon of gas at Costco, and about that time a number of people were getting into some pretty inexpensive houses after the marketed crashed. This decline in housing prices has continued the slump in the real estate market, but it has introduced more people to the market that previously could not afford a traditional mortgage at the inflated prices. I think that these are the smarter people who did not jump into the housing market with ARMs and all the other exotic mortgages. Now, here we are: over built and where are all those titles? I only see the situation getting a lot worse in the next few years before it can ever start to get better.

You might want to wait until next year to buy an LCD TV

Black Friday has come and gone this year, and if you did not purchase a big-screen LCD, then you’re an informed consumer or you already have one. Better deals are expected to come later on this holiday season and into the beginning of 2011. This quarter, the average price for a 42” LCD TV is approximately $626. However, the price is expected to drop below $600 by the first quarter of 2011 and prices for 52” LCD TVs are expected to decline by about $120. Why the drop in prices you ask? Well, the TV market has been relatively sluggish and there are really no indicators signaling a comeback anytime soon. Sales for LCDs have been declining for six consecutive months, so I guess you could say we’re experiencing an LCD TV recession. Economists are saying the scarce demand for LCD TVs is somewhat attributable to an increased saturation of flat screen TVs in homes across the country. Over the past five years, sales for flat-screen HDTVs have surged, and now about 56 percent of households in the US have at least one HDTV. Since most people already have an LCD TV, there is less motivation to purchase new ones, even with tremendously low price tags on the most monumental shopping day of the year. So instead of TVs, was projected that Apple’s iPad and Microsoft’s Kinect for Xbox 360 will be the hottest items for this year’s Black Friday extravaganza, the numbers will be reported soon.

Movie theatres charging a higher price and succeeding?

The movie theatre industry is making some big changes to the way you watch movies and it's worked so far. They are giving people more options in the movie theatre instead of just your typical movie going experience. You can now sit in seats that shake or a "no-kids" zone for adults to enjoy movies. These changes are having a positive effect on sales so far even though they cost a little more. In the short-run these prices will stay high, but in the long-run the demand for these more expensive amenities will drop causing the price to drop and stabilize. I think that this will help the movie industry (which isn't hurting that bad anyway) and it can also revolutionize the way we watch sports or any other forms of entertainment.

Are leaked Black Friday ads a positive or negative externality?

The leaking of Black Friday ads have become quite a problem for many business over the past few years. Somehow people are getting a hold of Black Friday ads before they are released and posting them online, but business are unaware of how this happens. Wal-Mart, though, has been taking the initiative to correct this by pursuing legal action against the people who post these ads without their permission. They claim it to be a negative externality because other companies can steal their strategic plan. Companies have taken marketing approaches to fix this issue like Home Depot only releases their ads on the Wednesday before Thanksgiving.
I believe that it can be a negative externality when their ads are leaked, but I also believe that it can be a positive externality for companies. I am a bargain shopper and I am attracted to the "low price" and the "great deal" ads on Black Friday. I also know that I start looking for those ads at least a week in advance. My wife and I knew we wanted a TV and we know which TV that we wanted from Wal-Mart before the ad was sent to us in the mail. I believe that the positive externalities of this issue outweighs the negative. I believe that consumers like having that information early to plan and evaluate their Christmas budget. I don't believe other stores have enough time to copy a competitor's strategy if the part of the ads are leaked a week in advance. The positive benefits and extra sales that companies see on Black Friday due to leaked ads outweigh the costs.

Chinese Cotton on the Rise

Chinese cotton prices are rising due to labor, real estate and demand. The world is spending more money on clothes and Chinese factories are behind in production, again. This movement in the demand curve, coupled with higher prices in production of cotton clothing AND the smallest stockpile of cotton in 15 years will cause the price of clothing at retailers like GAP, J.C. Penney and Wal-Mart to increase.
Chinese suppliers have to see if they can pass the increased cost to U.S. retailers. I don't think that will be too difficult seeing as how cotton suppliers are in a very good position. With demand surpassing supply and cotton stockpiles diminishing, the cotton suppliers should be able to fetch a fair price.

Proposition 19 – Legalization of Marijuana

Should marijuana be legalized? According to 46% of California’s voting citizens, the answer is yes! For these voters, they believe that the legalization of marijuana will “cut law enforcement costs, raise tax revenue, and make it harder for children to get marijuana.” From an economic perspective, I have to agree with them. However, I don’t think their argument is complete as I believe they have failed to factor new negative externalities which I believe will emerge if it were legalized. For example, what added social costs will emerge? By what percentage will productivity decrease with more employees missing work by either forgetting to go or by needing increased medical treatments?

This is an interesting topic for examination as I believe it has numerous discussion points. For example, in regards to the price of marijuana, I believe that if it were legalized we would see an increase in price in the short-run with supply remaining the same and demand shifting rightward. Then, in the long-run, I can see the price falling with both a rightward shift in demand and an even greater rightward shift in supply. If the government’s only purpose in legalizing marijuana was to make the price drop and make it safer for consumers (FDA would be involved) then the legalization of the drug makes sense.

However, if the government’s intent is to save money by decreasing law enforcement costs and raising tax revenue, then I believe their argument is flawed as externalities in addition to hard costs need to be considered.

Although the California citizens voted against the legalization of marijuana, I believe that the topic will continue to resurface until it eventually passes.

Troubled Asset Relief Program Update

This article is interesting as an update and overview of the Troubled Asset Relief Program (TARP) initiated during the Bush administration. It will be interesting to see the effects of the money the Government has been injecting into the economic arena. Most likely the dust won’t settle for at least a few more years, and perhaps then we will have a more concrete idea of how effective these huge sums of money were in stabilizing the economy. Of course the trouble is we will never know what would have happened if the government had not intervened. The course of the Economic playing field in the United States and the world for that matter has been forever altered.


http://marketplace.publicradio.org/features/bailout-follow-the-money/

The Click and the Dead

The article, The Click and the Dead, talks about how the internet has changed the consumer market. “Everywhere people bemoan the replacement of the local and the quaint by outposts of big, homogeneous chains. But how true is the notion that the internet in particular has hastened the demise of some retailers, and that those it hurt were overwhelmingly small?” Before the internet and e-commerce, people would have gone to a couple stores and maybe called a couple more before buying a product. Nowadays people can shop online and, as predicted, people have become pickier in their selection-making process. Price has become a much greater issue because people can gather more information about products before buying. Competitive pricing has resulted in less efficient companies going out of business. If price is becoming more of an issue because of the internet then, in theory, companies that can achieve economies of scale have a better opportunity to survive because they can lower costs more than competitors. More often than not these are bigger companies or chains. There is hope for smaller retailers, however. If they can effectively market themselves as someone that provides a unique product they can meet very specific customer needs creating a better chance of success. Hopefully smaller companies can find a way to compete to ensure better products and lower prices.

Wal-Marts Strategic Move for Black Friday

Wal-Mart recently announced that it will be matching its competitors’ Black Friday Ads.

I think this strategic move by Wal-Mart is very smart and economically beneficial. The move will increase the amount of shoppers who enter Wal-Mart over the holidays. Even if most shoppers are only at the store for a price-match, Wal-Mart will benefit from the additional foot-traffic, and they must feel that they will make up any losses occurred through price-matching with an increase in the number of shoppers coming into their stores. This strategic move by Wal-Mart will insure control of much of the market during this busy holiday shopping season. So far, Wall Street seems to like the decision made by Wal-Mart as referenced in a steady increase in stock price since the announcement of the strategy.

New Rules in Health Care?

Federal rules were issued today as Washington moves forward on Health Care reform. The new regulations are aimed at dictating how insurance companies allocate revenues. Many insurers will now be required to spend more on medical care and less on overhead, expenses, and profits. These regulations could lead to fewer companies in the health care coverage industry. Wouldn't this actually be worse for consumers in the long-run? Less competition in an industry usually leads to fewer available options for consumers and higher prices. To combat this, the government will likely have to take further actions that would eventually lead to a government ran system. Is more regulation really the answer to the Health Care crisis, or is it just another band-aid being created by Washington?

Falling Oil Prices

Is there any wonder why oil prices are falling with Ireland now joining Greece as the second European country requiring “bailout” assistance? According to an Associated Press article, “traders and investors are concerned [that Ireland will not be the last country requesting bailout assistance as] heavy debt burdens in Spain, Portugal and Italy may lead to other bailout packages.” In light of this news, it is apparent that in the near future the global economy will continue to slow and thus demand for oil will also decrease. These economic conditions are causing a “change in demand” by shifting the demand curve for oil leftward and thus prices are falling.

Ireland, the latest country to be bailed out?

Ireland, once deemed the "Economic Superstar of Europe" is the latest country in need of a international bailout. This bailout is surprising since Ireland had recently been considered a world economic leader as late as 2007. Similar to the US, Ireland's economy was spurred on by real estate and development growth. This growth turned out to be unsustainable and now the "loose" lending practices are coming under further scrutiny by the governement.

The other economic factor that led to Ireland's demise is that of "Supply Side Economics". The basic principle of supply side economics is that by removing, decreasing, or controlling barriers such as taxes, regulations, and monetary policy, increases incentives for individuals and businesses. When those individuals and businesses have an incentive for business, benefits will trickle back down to the people and the government. Case in point, some large American corporations went to Ireland due to their relatively lower corporate tax rate of 12.5%.

Ireland's tax cuts and tax rates were very attractive in the short run and benefited the country for many years in many different ways. Now the country is experiencing budget deficits and debt issues that it doesn't look like it will be able to recover from. I believe supply side economics can be a very wise strategy for stagnant or flat growth economies in the short run. If used as a long-term solution, the country will have to deal with debt and deficits that will surely come.

Netflix Raises Prices, Hulu and Redbox Compete

Netflix has decided to raise their prices on various services they offer, and they have decided to being offering an internet streaming-only option. This is probably due to the increase in popularity of free online services such as Hulu. Hulu has recently added a new subscription based service called Hulu Plus which allows users to access to a great number of past seasons of TV shows and movies online. Redbox continues to increase in revenue and options - next year they will be adding an option to rent movies on the web.

With all the options, it will be interesting to see where the market settles with regards to price and which options will remain viable in regards to consumers desires. It will also be interesting to see which company's strategy will be the most successful. I personally utilize all three of these companies, depending on the viewing options available. It will also be interesting to see if any of them will go the way of Blockbuster, which has filed bankruptcy and continues to struggle to survive in the marketplace.

Torn Over Taxes

I usually align myself with the conservative republican way of thinking; however, on the subject of extending the Bush tax cuts I am torn. Both sides of the debate make their arguments using “facts” and “polls” which contradict each other making me lose confidence in their respective arguments. In fact I find much of their remarks to be misleading. On this issue I could really use some sound input from Dr. Tufte, especially in regards to the tax cuts for higher income individuals. As far as the lower and middle income individuals I am sure that extending their tax cuts and increasing their discretionary income will translate into increased spending. This increased spending or sustained spending will benefit the economy and help struggling Americans feel more secure and less mad at the government in contrast to what they would feel if their taxes increased. The arguments get more jumbled when it comes to high income individuals, which is considered over $250,000 in their arguments. One side says these individuals represent in many cases owners of small businesses and by taxing them more they will hire less and may even downsize more which would kill the economy and increase the unemployment rate. The other side says that these individuals represent a small percentage of small business owners and in most cases are not owners at all. It is argued by Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress, that these high income individuals don’t need the tax break which will increase the federal deficit with very little identifiable economic payoff. I would suggest a compromise which would allow high income individuals tax cuts to expire while offering specific tax breaks or incentives to small businesses, of arbitrarily say 100 individuals or less, for hiring new workers or making part time employees full time. In this way tax revenues would increase and the tax incentives that are provided would have a direct impact on employment which is the overarching issue of the current debate.

Dish Network Preventing Product Cannibalization?

Several weeks ago, in response to the high prices for my previous cable television supplier, I began to shop shop around for less expensive options. It was interesting to me how much planning went on in putting together each company's different channel lineups. Each company offered several different plans, with different channels and different combinations of high and standard definition. Obviously the prices reflected the desirability of the individual plans. I soon realized that the channel lineups were arranged in ways to prevent product cannibalization. I will use Dish Network as an example. On "America's Top 120" plan they offer CNN, CNBC and Fox News, but not MSNBC. They offer TV Land, but not The Hallmark Channel. They offer many sports channels, but do not include CBS C, The Golf Channel, NFL Network or SPEED. It seems as if they will give everyone a taste of what they want, but not completely satisfy them. I believe that this is done in order to preserve their higher priced products, and insure that people with higher disposable incomes aren't being satisfied with a product targeted to people with lower disposable incomes.

The Decline of the U.S. Dollar?

In the article, The Dollar: Soon to Swooth, the author quotes Mohammed El-Erian who is the head of the world's largest bond fund. El-Erian states that the dollar is destined to decline and lose its status as the world's reserve currency. El-Erian also states that the most serious risk is a "disorderly decline." This may be true from his point of view, but from the point of view of Americans the most serious risk is the decline itself. The article states that in the 80's there was fear that the dollar "was loosing out" to the Japanese Yen. This fear was squashed, however, through the 90's by strong growth in the U.S., and by narrowing the deficit. It is interesting that the growth in the 90's occured only after strict fiscal policies were adhered to by the Reagan Administration. In this article, Warren Buffet, is quoted saying that the future of the dollar is in the hands of Congress. It is good that the majority in the House has been regained by potentially more fiscally conservative republicans. The deficit must be reduced for the U.S. dollar to remain as the world's leading currency.

Are Lower Interest Rates the Gas to Fuel the Economy?

The article, "Stable Home Prices, Low Mortgage Rates Could  Gas Economy", suggests the possibility that stronger home prices and further reductions in interest rates, could be what is needed to push the economy in the right direction. 

The author, Stephanie Armour, presents the facts that 30 year loan rates are at 4.17%.  Median home prices in the 3rd quarter were up in 50% in metro areas whereas last year they were only up in 20 of the same metro areas.  Also, the Fed says that it will be putting 600 billion into long term treasuries by June 30th of 2011.  Since May of this year, 30 yr. rates have been below 5% and improvements in home prices have been made even though home purchases fell after the Fed canceled the home buyer tax cuts.

The drop in long-term mortgage rates will entice many more people to refinance drop the cost of their mortgage.  This could increase discretionary income and therefore further spending by the population on the whole.  This could help jumpstart the economy or at minimum give it a boost.

The biggest problem getting the boost to the economy that is needed is that many in the position to need refinancing have poor credit or little equity.  These factors will limit the ability of some to qualify to refinance.  I feel that the lower rates do and will entice people to refinance.  Refinancing will give people more cash to spend getting caught up and possibly ahead in their finances.  Looking at the whole situation from a realist point of view, I'm not confident that there will be enough qualifying individuals to achieve the level of refinances necessary to have a large enough impact.  Therefore, the effect will not be enough fuel to get this economy rolling.

Engineer Shortage

According to a Duke Study the United States is in fact still generating high quantities and high quality engineer graduates compared to China and India. This is contrary to the often reported stat that the United States has a major shortage of Engineers. The study pointed to the conclusion that companies are outsourcing these high tech jobs based on cost. The survey indicated that companies recognize the higher quality of engineer graduates in the United States, but choose to outsource based on the cost savings. This raises significant concern for many of these highly technical jobs in research and development leaving the United States, and implications on the United States being able to stay competitive as the world leader.

Link to the NPR interview with the Duke professor:

http://www.npr.org/templates/story/story.php?storyId=9910492

Retailers: The Bipolar Holiday Sales Season

The surveys are in and the verdict is...bipolar. Retailers are expecting a holiday season with heavier spending in the luxury market and lighter spending at chain stores. Consumers with an annual income under 50k are expecting to spend 1.2% less than last year. +50k income earners are expecting to spend 2.9% more than last year. This increased demand forecast is pushing luxury retailers like Coach and Nordstrom to stock their shelves a little deeper this year. The chain stores like Wal-Mart and J.C. Penny are having to fight a little harder for their business this year. I don't know what strategies we are going to see this holiday season from the chain stores, but they are going to have to do something more this year to coax consumers.
This sounds like a good topic to research for a comment or another post...

Big Boost from Dollar Decline

In the article, Big Boost from Dollar Decline, it indicates that the U.S. economy may experience a boost in growth from the dollar's decline in value. Bernanke signaled that the Central Bank was going to pump more dollars into the economy and the dollar fell by 4.8%. With this devaluation the trade deficit will decrease, which is an equivalent of 0.5 percentage point of growth each year. Applied in context in a real-life example, one could say that the U.S. needs to import less and that China needs to import more. When one country purposely devalues its currency then other countries want to do the same. Some countries do not like it when another country purposely depreciates its currency. China has warned the U.S. not to depreciate its dollar. I find this interesting because China does the same thing with its currency. When a country pursues this strategy it makes that nation's exports cheaper to other countries and other nations' imports more expensive to the devaluing country. Economic growth results from this principle, due in large part, because countries are spending less on expensive imports and are busy producing large quantities of exports that are bought by other nations. It makes sense for China to purposely devalue its own currency because it is known world-wide for its enormous volume of exports. MADE IN CHINA is a phrase that most Americans have seen for a long time on the products they buy.

Creative Destruction

Dean and Sobel report that the universal belief that Walmart drives “mom-and-pop” shops out of business is statistically unsupported. Their research suggests, that while Walmart does cause some directly competing small businesses to fail, those particular failures are completely counterbalanced by the entrance of new small businesses through the process of creative destruction. This article presents a different side of how the entrance of Walmart actually affects a community. Walmart’s entrance into an economy actually spurs innovation by driving out old inefficient businesses, leaving newly vacated commercial real estate available at lower prices. More affordable rents decrease the barriers to entry for new and more innovative businesses and these new companies have to be more specialized because of their proximity to Walmart. Overall, with the entrance of a new Walmart store into a community, entrepreneurialship is stimulated, businesses become more efficient, and consumers save more.

The Costs of Drilling for Oil

As attention has drifted from the oil spill in the Gulf of Mexico the Obama administration has lifted the ban on deep-water drilling. Many oil companies are looking to expand their extraction efforts into drilling in the Arctic Ocean. A recent report by the Pew Environmental Group has been released in an attempt to prevent such drilling. The report notes that the risks of drilling in the Arctic are far greater than those in the Gulf of Mexico, especially the greater difficulty in responding should a spill occur and the more delicate nature of the ecosytem. This report and similar concerns could likely lead to a great deal of additional regulation for Arctic drilling. These facts bring to mind the negative externalities of such a new spill. The expense of cleaning up a spill in the Arctic could be far greater than was seen in the Gulf due to transportation difficulties alone. Oil companies are well aware of the negative PR consequences as well and are actively engaged in advertising campaigns and new research and stricter guidelines to reassure the public and decrease the risk. Despite that additional regulation could very likely be enacted as a safeguard. All of this translates into increased oil costs. An even more worrying fact that is being over looked is the steadily increasing replacement cost for new oil as easily accessible reserves are exhausted. As of yet the cost of these negative externalities haven't translated into higher gasoline prices but in time the consumers will be forced to bear these costs.

Spice

In some Utah counties the sell and production of Spice is illegal. It is expected that the drug will soon be banned state wide. Spice is a drug that gives a marijuana like high from a mixture of herbs. According to the article “Bill banning spice being prepared for legislative session” spice currently sells for $13 to $26 a gram in smoke shops.

Illegalizing this drug will greatly increase its price. First, supplies will only be willing to sell the drug at a much higher price because of the added risk of getting caught. Second, in the short run demand might be more inelastic because of the strong dependence on the drug. People will be more willing to pay the higher price because of their dependence.

However, in the long run demand will greatly be reduced because of alternative options. Spice is currently a supplement good to Marijuana. The current demand for Spice is high because it is legal and at a relatively low price compared to Marijuana. Now that Spice is illegal the demand for Marijuana will go up.

Utah looks to cut back on deer hunt

Baseball may be America’s pastime, but for many Utah residents, hunting deer is a way of life. However, a recent news release from the Utah Division of Wildlife Resources (DWR) indicates that Utah hunters may find it more difficult to draw a hunting tag for bucks next year.

This new policy is being considered due to the relatively short supply of bucks found within the deer population. If Utah continues to harvest bucks at its current rate, authorities fear that the deer population will greatly decrease as too few bucks will remain to sustain the population.

Thus far, it appears that the DWR is only contemplating reducing next year’s available tags by 7,000 (94,000-87,000). The reduction in tags may cause an amount of upheaval amongst residents as completion for said tags may become fierce.

Another idea which the DWR may want to consider is raising the price for tags. As explained in supply and demand graphs, when the price is raised, all other things held equal, the demand will decrease.

I believe that if the herd ratio is the true issue, the DWR may save itself some problems if it merely raises the price for tags. Thus, residents not willing to pay the higher price will self select out and while those who truly value the hunt may still participate.

Wine Prices are on the Decline!

Wine prices are on the decline and now is a perfect time to grab a bottle. The wine industry is experiencing an excess supply currently in the market and it's causing prices to drop. It's interesting to see that wine prices in America are dropping even though our consumption rate is increasing. We are currently second on the list of the top wine drinking countries and we should be passing France sometime in the future. The falling prices in the U.S. are seen as a result to the falling consumption rate in other countries. We should see this pattern continue unless America's consumption rate increases even more, or other countries consumption rates start to rise instead of fall. This would eliminate the excess supply and drive prices back up to equilibrium, but until that day arrives go enjoy a cheap bottle of wine because it may not last too long!

Justin Bieber at Wal-Mart for Christmas!

Justin Bieber has announced that he will be releasing a CD exclusively at Wal-Mart the day after Thanksgiving. By decreasing the availability of his CD, Bieber will be lowering the supply and will have the potential to increase the price on his CD. However, the question remains as to how that would work with Wal-Mart being so focused on low-cost. Will Wal-Mart manipulate the price of the CD and keep it arbitrarily low in order to get people in the store for "Black Friday"? Or will they decrease the supply of the CD, thereby creating a vacuum in the supply for millions of heart-broken little girls (personally, the guy makes me want to vomit, but I suppose 31 year old men are not his target market), and keep releasing small quantities of the CD to maintain a constant stream of shoppers throughout the Christmas season?
Many retailers have also started to slash their prices in October in a desperate attempt to get people into their stores for the Christmas season. These decisions by major retailers may change the way Christmas shopping is done for a couple years, but I see the attempts eventually backfiring as people get more and more fed up with the insanity of shopping so early in the Christmas season.

Transfer Pricing

A recent Bloomberg article talked about Google and their incredible success at using transfer pricing. Transfer pricing is more than just shifting costs from one division to another. Creative use of transfer pricing allows multinational corporations to use tax haven countries to shelter profits from restrictive tax laws. Through a system of shell companies and creative pricing structures, Google is able to move it's profits to countries like Bermuda where there is no corporate income tax. It takes a complicated system of in-house accountants and bankers to keep all of the money accounted for and keep the transactions legal. However, all the extra time and effort is well worth it as a company the size of Google can literally save billions of dollars in tax liability. These practices are very common among large corporations. In fact, it is estimated that it costs the U.S. about $1.4 trillion in lost revenue. The fact that the U.S. has such high corporate tax rates is the reason that companies are motivated to go to such lenghts to avoid corporate taxes. It might be time for the U.S. to reevaluate its corporate tax structure to try to capture some of these lost revenues.

Fed's Move Considered Coventional Monetary Policy

Federal Reserve Chairman Ben Bernanke stands behind the Fed's decision to purchase treasury bonds. He argues that despite critics, the move is just a "conventional monetary policy conducted with different tools." The article goes on to suggest that former Federal Reserve Chairman Alan Greenspan is partially to blame for the financial crisis that occurred. Suggesting that his laid back style of controlling monetary policy created the "perfect storm of financial disaster." I argue that the Fed's current move is the correct step to get the economy moving in the right direction, and that inflation should be a long-term issue rather than a short-term concern. Steps to stimulate the economy should be done incrementally, as to not over correct the problem and create some sort of super-inflation. I would also like to defend Alan Greenspan on his policy not being the cause of our financial crisis, but rather it was lending institutions' willingness to over lend to unqualified borrowers. Americans should have calculated what their financial abilities were prior to borrowing amounts of money that they were unable to pay back. Banks should have known better than to have extended credit on such ridiculous ideas as "stated income." We must simply sleep in the bed we made.

Patents Constrain Innovation and Preserve Monopolies

Apple continues to bully its competition to preserve its monopoly, not that there’s anything wrong with that, other than the fact in highly innovative industries patents constrain innovation.

This past Friday, Apple filed two lawsuits against Motorola declaring that its Android Smartphone infringes upon six of their patents.

The problem is, tech companies can file extensive claims against one another because patents exist for every new innovation, like: mobile e-mail, syncing e-mail and calendars, and multi-touch etc.

So now the basic idea of competition in the market for Smartphones, and other computing devices, is up to the decision of the courts…prepare for maximum inefficiency.

When it comes to software, there’s a variety of solutions to every problem, that’s why Dana Blankenhorn believes patents “should cover how things are done, not the act of doing them.”

The duration of a patent in any tech industry is terribly inclusive and would last longer than the life of the rapidly changing market. If the courts enforce such patents, then without a way to side-step their decisions, innovation will decay.