Buzz Words

If I had the chance I would punch Wendy in her cheeseburger-loving cartoon face. Not just because of her asinine categorization of meat-lovers as "meatetarians", which is reason enough, but more so for reckless attempt to hop on the bandwagon and throw around some buzz words.

Today's Buzz Word.... Economics. Go!

You sure aren't an economist Wendy, and neither are the writers for Wendy's commercials. Your 99cent double bacon grease burger is not appreciating in value. A rational individual would trade the burger for a dollar and simply buy another burger and be 1cent richer. However, it's obvious that the characters are on a lunch break, which makes it likely that the time spent and transportation cost to acquire the second sandwich would be greater than the marginal revenue of 1cent from selling your 99cent sandwich for 1 dollar. Making the sale unprofitable. Not to mention, a persons individual utility for an item, say a cheeseburger from a fast food chain, is subjective.

How can your dollar be worth less today? Well maybe it's because of the current account balance. I'm talking capital account surplus + current account deficit, and the US is so entrenched in foreign finances that to begin to balance the US current account US citizens would have to tilt their consumption toward domestic products and this dynamic would have to simultaneously play out in reverse the rest of the world over. Maybe it has something to do with the fact that Macroeconomic theory clearly states that running a twin deficit for any extended period will cause a dollar decline. Ignorance isn't cute, Wendy. Maybe instead of spewing your ill-informed opinions about economic stimulus packages you should pick up an econ 101 textbook.

MIA

I've been missing in action for the last few months. What can I say... it's summer. I will have more posts coming soon.

Apologies to the two readers I have.

While I'm At It...

Natasja - Op med ho'det


She has an album in english too, kind of... if you understand a little lyaric.

I'm Breakin' My Back, But It's All Good

Lykke Li, Swedish indie singer:

I'm Good, I'm Gone



She dances too.

Little Bit

I Feel Summer Creeping In...

And by that I mean it snowed this morning... just like it did last year. Snow until the first day of May, Bless Ohio.

There is a lot of interesting news out there. Unfortunately, I haven't had a lot of time to touch on it. The Fed cut rates today and rates will probably stay put for awhile. Consumer confidence is still pretty lousy but there is some reason to believe the worst is over.

In the mean time, play the hand you're dealt. My suggestion, play in commodity futures, as long as you do it well.

Peace! I will hopefully return to more regular blogging after I graduate.

The World Beyond My Text Books is Bright and Scary

I have 3 weeks until I walk across the stage and finish my undergrad work. It's a little overwhelming to think about, especially because once I graduate I can no longer keep my cushy office job with KSU with an OPERS retirement plan. What is worse is my dream job is nowhere to be found thus far.

I guess this is growing up. I think I'm going to miss school in the year I take off before I start my grad work. I'll have plenty of time to read something other than text books at least.

This is Who I Am. This is What I Do.

I was just looking through some old notes and I stumbled upon a quote that I have always liked. I don't necessarily agree with all of Keynesian theory, but this summarizes economics pretty nicely.

"The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessors to draw correct conclusions." - John Maynard Keynes

BOOM BOOM BOOM DaDaDa DaDa Da

Okay, I will admit... this made me want to vote for Ron Paul.




Maybe not really, but it's still pretty awesome.

Hmmm....

Check out the way independent males surveyed... especially when Hillary makes a Saturday Night Live reference about Obama.

Ohh You Got Me There!

I had seen this before, but forgotten all about it. Megan McArdle links to this in her blog.



I find principles 2 and 4 and their translations particularly accurate, but as a Macro-oriented person I would have liked to see a little more focus on the last 3.

Check Out This Weeks Free Will

On this week's Free Will on Bloggingheads, Will Wilkinson discusses behavioral economics with Dan Ariely, author of Predictably Irrational. It is an interesting discussion, and it addresses some topics that I think are somewhat confusing for those who aren't economic-minded.

One topic (among many others) they mentioned are the limitations to the economic axioms. One being full information.

Dan Says:

"When we design things like healthcare policies and insurance policies and so on, we almost seem to assume that people can do all these computations instantly and basically be infalable."

He goes on to illustrate by asking Will to compute the optimal mortgage payment he should take on. Will responds with the quick and dirty computation of a mortgage should be no more than 1/3 of your annual income. Which Dan says is exactly the problem. People simply can't make the actual computation that would include the time value of money, opportunity costs and so on, and they are forced to use a rule of thumb.

Okay, Lets Get Serious

I've been neglecting my blogging duties a bit lately, but I think this is worth mention. NPR briefly discusses the Bankruptcy Bill and how Lenders say it will hurt homeowners. [listen here]

This is tricky. The bill would give Judges the ability to rewrite the mortgages of those who are about to go into bankruptcy. My outlook may be a little pessimistic, but the only outcome I can see coming from this is disaster. It's one of those sitcom-like situations where something goes awry and every goofy elaborate plan to make things better snowballs into a bigger mess, and when the credits roll we've all learned a valuable lesson about dealing with the consequences of our actions from the get go.

Maybe it is time to say enough is enough, but I don't think Judges are the right people to make these decisions. Our court systems have more pertinent problems. The thing is, foreclosure (especially now) will hurt everyone. Lenders are going to lose money on foreclosed upon property, and it's obviously a negative outcome for the homeowners. I think flexibility is going to be a major factor in how the housing market will bounce back. HUD has given incentives for lenders to mitigate losses on foreclosures. Most lenders are willing to be flexible, but home owners need to approach them for help. One of the problems is most home owners don't do this. I'm sure all the stat-spewing and scaremongering doesn't give someone in financial trouble a lot of hope, but even aside from the HUD's role, Lenders have reasons to not want to foreclose.

One reason would be that most often, when a mortgage is signed, it is immediately sold and repackaged as an equity. The mortgage payments goes toward a pool that is payed out in dividends and a piece of the cash flows go to the holding firm as compensation. When a home is foreclosed on, this stream of cash flows is gone. Another reason is the fact that, even if a Lender doesn't resell the mortgage note, they will face a loss on the value of the home. It is not a sellers market right now, so when a bank forecloses they often end up reselling the property at a loss, not to mention the fact that they have to endure expenses such as maintaining insuring the property until it is sold.

If I could give the Dems that are pushing this bill a word of advice it would be patients. There is no quick fix and it needs to be understood that this problem will be burdening the economy for some time. There isn't much sense in further complicating the issue and trying to manipulate markets with no idea of the unintended impact it may have. Some measures may help in lessing the severity of the problem, but it isn't going to just disappear. If anything, it would be helpful to keep home owners from walking away from their mortgages and realizing that Lending Institutions are most likely willing to work with you. And for those watching from the outside while biting your nails, just remember this too will pass.


Update: Megan McArdle mentions Fannie Mae's 3.6 trillion fourth-quarter losses and the Office of Federal Housing Enterprise Oversight's announcement to lift the caps on its portfolio. Check it out.