Tuesday, August 09, 2005

FOMC Meeting Results in an Increase in the Federal Funds Rate

As expected, the Federal Open Market committee (FOMC) raised the federal funds rate by 25 basis points to 3.5% in their meeting today. They believe that their monetary policy is accommodative and "coupled with robust underlying growth in productivity, is providing ongoing support to economic activity." They mention that despite high energy prices, aggregate spending appears to be strong while labor market conditions are continuing to improve. As a result of the increase, they expect price volatility to remain contained and mention that policy accommodation can be removed "at a pace that is likely to be measured."

Sorry I haven't been updating lately. I will try to make a prudent update every day however, I can't guarantee it. As long as there are interesting events happening, it should not be a problem from this end, unless I get too busy with work.

Thursday, July 28, 2005

Music Scandals

Apparently Song BMG has admitted to bribing radio stations to play their artists' songs and has agreed to pay $10 million in fees. Here is the full article. Let's take a look at the economics at play here. The payola that the radio stations receive in return for playing Sony's artists is a cost. A cost that the small record labels can't afford to pay, thus their artists lose exposure.

This cost is just like a slotting fee. No, don't worry gamblers, a slotting fee is not a price discrimination tool used by the casino industry to capture our meager consumer surplus. It is a mandatory fee grocery stores charge food manufacturers to store their products on the shelves. I wrote a nice article on slotting fees in the spring for the University of Oregon's Department of Economics student run newsletter, the Utility Times. You can read the article it here, but I'll summarize it briefly.

Slotting fees typically induce anti-competitive settings and hurt small manufacturers. They raise prices and consumers end up spending over $100 on average more per year. The FTC has said that in some settings they can be counter-productive, but in others they can spur competition (I am still wondering how).

So you can (hopefully) see how slotting fees and Sony's payola are alike. You might say it is just the survival of the fittest, but it is against the law. Thus, I think Sony deserved paying the fine, but this will not stop the problem. The record industry's big players are a bunch of bullies and they pretty much dictate what gets played and who you listen to.

Nowadays, music is being spread via the internet, which I think is a great way for small labels and artists to get recognized. Check out my music here!

Monday, July 25, 2005

Disappointed With Today's Market Performance?


For those who were rather disappointed with the Dow Jones, Nasdaq, and S&P performances today, I present you with a novel index that may cheer you up. The Alcoholic-Beverage-Consumer Confidence index skyrocketed last night finally settling at 94.2 points at last call. Analysts are contributing the blistering performance to higher alcohol content, mix drink innovation, and two-for-one discount offers.

David Watts, a Federal Reserve analyst, claims that "The short-term gains reaped by alcohol consumers can easily lead to an atmosphere of irrational exuberance. Decisions made during this period are historically ill-considered and often sorely regretted. Fortunately, the market often corrects itself within several hours, when alcoholic-beverage-consumer confidence shifts into lethargy, loneliness, and maudlin conversations about relationship troubles. In severe cases, however, these spikes can trigger a depression." Click here for the full article.

Ain't that the truth. I think this would be a good place to tell you all about my matured homebrew. If you are a regular here, then you would remember from a recent post that I was brewing some beer. The IPA has finally matured to both a drinkable and enjoyable state. It is somewhat too carbonated but it still has an exotic and rememberable flavor. Remember, one's beer must be experienced before you can appreciate the full force of its character. The beer must carbonate at goldilock times- not too long, not too short, but juuust right.

Saturday, July 23, 2005

Imbecilic Editors

Recently I submitted a letter to the editor at my local school newspaper and opted not to print my email address. The letter was posted online with my email address, which I chose not to add by clicking a button that said, "don't include email address."

So I wrote an email to the "online editor" asking him to "please fix it". He emailed me back saying and I quote, "If you DON'T want to send[stand?] behind what you wrote you most[sic] NOT really believe it. So I am pulling your post."

This is absolutely ridiculous. How can he logically deduce that I don't "believe" what I wrote because I chose not reveal my email address. Here are a few reasons why I chose not to:

1. If someone wanted to respond, they could do so through the webpage
2. I have a right to privacy
3. There is an explicit option to decide whether or not you want to reveal your email (why have that option?)

So I wrote him back and gave him my two cents. I have both freedom of the press and the right to privacy. Next thing you know they will be asking for your fucking social security number. Ok, here is mine, GO FUCK YOURSELF.

Thursday, July 21, 2005

Incentive Trade-Offs

The other day a brilliant idea occurred to me. I am sure many of you have had to deal with certain constraints such as time or money. This is what economics is all about; observing peoples' behavior subject to some constraint, and tweaking such constraints to observe behavioral changes.

So those who are students have at some point been constrained by a deadline either to turn in homework or a paper. This would be an example of a time constraint. Suppose a group of students have a paper due on a Monday. However, they can turn it in late on Tuesday, but they will have to pay a small fee, say $5. Would this incentive cause more students to turn their papers in on Monday, or is the extra 24 hours worth the $5? Ok, now forget about the incentive for right now.

Suppose the paper was due on Monday yet there was no $5 fee if you turn it in late, but also no guarantee you would get credit. I am sure most of the students would turn the paper in on Monday, yet a few students would try and turn it on Tuesday. These students might have some valid excuse or they may just be slackers, but either way, they would feel guilty about turning it in late. We will call this guilt a moral incentive and a moral cost.

Now suppose we announce the incentive program. If the $5 cost of turning the paper in late is less than the marginal benefit a student receives from having less stress, then the student will most likely turn in the paper on Tuesday. Otherwise, the student will turn it in on Monday.

But something else is going on here. That moral incentive (the guilt) is being traded with an economic incentive (the $5). So how high does the fee have to be to make every student turn the paper in on Monday and how low does it have to be where every student turns it in on Tuesday?

This all depends on each students utility function.

To be continued...

China Un-Pegs The Yuan

If you haven't heard, China has abandoned their decade-old currency peg against the dollar. The yuan (Chinese currency) has since appreciated about 2.1% which many economists claim to be a small rise. So what does this mean for the U.S?

Some say that the dollar will lose value relative to other major currencies and as China stops investing in our debt, interest rates will rise. Rising interest rates means bad news for the housing market- and according to Paul Krugman's latest column, "maybe very bad news, if the interest rate rise burst the bubble."

If you want to hear more about this, here is a Wall Street Journal econblog.

Wednesday, July 20, 2005

Supreme Court Judge David Yaffe


Apparently, I am a federal judge!

"Superior Court Judge David Yaffe blocked Nicole Narain from selling, distributing or displaying the 15-minute tape that shows her and Farrell having sex. The next court hearing was scheduled for Aug. 10."

This is wonderful news indeed. What do you think I should do with my new vehement judicial powers? Hmmm...let's lock up that bastard Karl Rove. If you ever need a "get out of jail" card, let me know : )

Tuesday, July 19, 2005

John Roberts Chosen By Bush

John Roberts, a Washington federal appeals court judge, has been chosen by Bush to take O'Conner's place as a U.S. Supreme Court justice. Roberts will now have to be confirmed by the U.S. Senate before he can officially take his seat.

Bloomberg.com notes that "One issue certain to be scrutinized is a brief he signed, while in the solicitor general's office, that included a footnote calling for the high court to overturn Roe v. Wade, the 1973 ruling that granted women a right to abortion."

Roe v. Wade, the ruling that legalized abortion, is an extremely important right. Stephen D. Levitt, an economist at the renowned University of Chicago, wrote a book recently called Freakonomics. In this wonderful book, we are reminded to question the "conventional wisdom", and he dedicates a chapter to the major drop in crime during the 90's, when many criminologists predicted crime to rise to unforeseen levels. Levitt argues that the markedly drop in crime is a result of Roe v. Wade. He claims that many would be criminals were never born because of the legalization of abortion. Whether you agree with him or not (I do), let's hope that this ruling and pro-choice remains a critical right for women.

An Economic Look at the Iraq War

I'm sure you all have heard enough about the war and have read a plethora of articles that all seem to say the same things. I'm interested at looking at the war from an economic perspective. Putting morals and ideals beside, I would like to see if and to what extent the U.S. is economically better off as a result of the war. Maybe it is too early to tell, but now it seems that the war has cost and continues to cost far more than we or the Iraqis have gained. Oil prices have continued to increase which just baffles me. We are in Iraq and have complete access to their oil reserves yet the price of gas in America is at its highest. Granted, the average American pays far less on average than the average European. This is an analysis I look forward to in the future.

In a relating story, the Gaurdian reports that 25,000 Iraqi civilians have died since the invasion. This is just sickening:

Jonathan Steele and Richard Norton-Taylor
Wednesday July 20, 2005
The Guardian


Nearly 25,000 Iraqi civilians have been killed in the two years since the invasion, and four times as many died at the hands of US-led forces than suicide bombers and other insurgents, according to a detailed study of the human cost of the conflict.

The survey, which calculates the toll of dead and injured since March 2003, also shows that the rate of criminal violence has risen dramatically.

According to Iraq Body Count and the Oxford Research Group, the two independent researchers behind the study, the figures in the report should be regarded as the "baseline of the minimum number of deaths".

It has concluded that:

· At least 24,865 civilians were killed up to March 19 2005.

· 9,270 or 37% died at the hands of the Americans or other coalition forces (86 were killed by British troops, 23 by Italians, and 13 by Ukrainians). Most of these deaths are thought to have occurred during the conflict and its aftermath.

· The second largest cause of death (36%) was criminal violence.

· Anti-occupation forces have been responsible for 2,353 deaths.

· At least 50 babies up to the age of two have been killed;

· 1,281 children aged between three and 17 have also died.

Every death was verified by at least two sources before being included in the research, based on figures from Iraqi mortuaries, the Iraqi ministry of health, and media reports.

One of the many surprises in the survey is the huge surge in crime since the invasion.

The survey points to the criminal murder rate soaring 20 fold since the invasion.

"This is the big untold story," said John Sloboda of the Oxford Research Group.

"There has been a massive breakdown in law and order and almost total impunity for criminals."

The total number of deaths in the study is significantly lower than the estimated 98,000 figure in a disputed study in the medical journal The Lancet last autumn.

"The key point is that all the studies are talking about tens of thousands of additional deaths," said Prof Sloboda. He said yesterday's report provided "an absolutely firm, unshakeable baseline of the minimum number of violent deaths".

He points to an admission by the then Foreign Office minister, Bill Rammell, in a parliamentary answer on January 11: "The Ministry of Defence has not assisted the Iraqi government efforts to collate casualty numbers. We have no methodology which would allow us to produce accurate estimates".

The study shows that more than 45,000 Iraqis have been wounded since March 2003, two-thirds of them by coalition forces.

Almost twice as many civilians (11,351) died in the second year after the invasion as the first.

The report does not cover deaths of Iraqi forces in combat, but it does include deaths among policemen and recruits queuing to join the security forces in an insurgency which appears to have gathered pace in recent months.

The UK government said yesterday there was no reliable or accurate account of the number of deaths in Iraq and that people were now being killed primarily because of the insurgency.

Yesterday, the violence continued, with a Sunni member of the constitutional committee being gunned down outside a Baghdad restaurant.

The committee suspended its work yesterday after news that gunmen had killed Mijbil Issa, who was shot, with two companions, as he left a restaurant in the Karradah district of Baghdad.

Issa was among 15 Sunni Arabs added last month to a committee of parliamentarians in charge of drafting a new constitution by August 15.

The addition of the Sunnis was an attempt to reach out to the once dominant but now alienated minority that forms the backbone of the insurgency.

Two Sunni committee members have already resigned after threats from Sunni militants who violently oppose any dealings with Iraq's new political establishment.

The head of the constitutional committee, Humam Hammoudi, condemned the killing.

"The aim behind the assassination is to hinder the political process, but we will continue our work, and so will our Sunni brothers too, in drafting the constitution," he said, promising to upgrade security for all members of the commission.

A Cruise to Alaska


About a month ago my family and I landed in the port of Seattle from an eight day cruise to Alaska. It was truly an amazing experience that I will never forget. I encourage you all to cruise on up there if possible. Unlike other cruises, our trip was very active. We didn't just lay out on the deck tanning, drinking (well maybe), and eating like gluttons all day. We stopped in four ports:

1. Juneau, AK
2. Sitka, AK
3. Ketchikan, AK
4. Victoria, B.C

In Juneau, we went on a helicopter ride and went dog sledding on a glacier. In Sitka, we visited a rehabilitation center for bald eagles, falcons, and owls. In Ketchikan we flew in a sea plane and landed in a fjord (definitely the highlight of the trip).

Home Brewing

Recently, and for the first time, I've been brewing my own beer (an IPA). Now I know that many of my avid readers may not have an aquired taste for beer, however I must say that the entire experience has been both fun and educational. For those aristocrats who prefer wine (LISA) , you can participate too. You can make both beer and wine in the comfort of your home and save yourself quite a bit of money. I bought a recipe for a little less than $30 that produced 5 gallons of beer. I bottled forty-five 16 ounce bottles. For you math majors out there, that's around $0.66 a beer. And this is fine beer we are talking about. Not your domestics such as Budweiser, Budlight, Coors, etc. I encourage you all to brew your own beer or wine that reflects your personality and character. Here is a link for beer and here is a link for wine. I will let you all know how my beer turns out. I have about one more week before it is ready.

Is Bush Less Trustworthy?

A new poll released by Pew Research Center indicates a growing lack of trust in our (not mine) president. Check out the results here:

"Half of those in the poll taken by the Pew Research Center, 49 percent, said they believe the president is trustworthy, while almost as many, 46 percent said he is not. Bush was at 62 percent on this measure in a September 2003 Pew poll and at 56 percent in a Gallup poll in April. One of Bush's strong suits throughout his presidency has been the perception by a majority of people that he is honest."

I never trusted him to begin with!

Bush To Anounce New Supreme Court Justice

Bloomberg.com reports that Bush has made a decision, albeit probably strategic, on the new Supreme Court Justice to replace O'Conner. Apparently O'Conner was the "swing vote" on rulings such as abortion and affirmitive action which implies that the newly appointed justice will certainly play a critical role. Rumors say that Judge Edith Brown Clement of the New Orleans-based 5th U.S. Circuit Court of Appeals is going to be the next justice. I don't know her record and where she stands on the political spectrum, but let's hope she can put her political views aside and not become another partisan hack. Bush will make his announcement at 9:00 p.m. tonight:


Bush Plans Announcement on U.S. Supreme Court Nominee (Update1)

July 19 (Bloomberg) -- President George W. Bush has decided on his nominee to succeed retiring U.S. Supreme Court Justice Sandra Day O'Connor and will announce his choice in a 9 p.m. televised White House speech, spokesman Scott McClellan said.

McClellan gave no further details. Bush said earlier he had been reviewing candidates from a variety of backgrounds, and refused to comment on possible nominees. Republican activists with ties to the White House are anticipating that Bush's choice will be Judge Edith Brown Clement of the New Orleans-based 5th U.S. Circuit Court of Appeals.

``The fact that this is the name everybody is hearing is a pretty good sign she's the one,'' said Bradford A. Berenson, a former associate White House counsel under Bush.

Clement's office in New Orleans declined to comment.

O'Connor, the court's swing vote on abortion and affirmative action, announced July 1 she will retire when her successor is confirmed. The new justice would be the court's first new face since 1994.

``I'm comfortable with where we are in the process,'' Bush said at a press conference in Washington. ``I do have an obligation to think about people from different backgrounds'' who also share his philosophy and ``won't legislate from the bench.''

Social conservative groups have been urging the president to nominate someone likely to limit abortion rights, gay rights and affirmative action. First lady Laura Bush, meanwhile, said she wants her husband to nominate a woman to replace O'Connor. The only other woman on the court is Justice Ruth Bader Ginsburg.

The challenge for the White House will be to win confirmation in the Senate, where some Democrats may seek to use a parliamentary tactic called a filibuster to block a vote. The outcome may be determined by a group of 14 senators, seven from each party, whose May 23 agreement averted a showdown over a group of Bush's lower court nominees.

Following weeks of retirement speculation, Chief Justice William H. Rehnquist, who is battling thyroid cancer, said July 15 he will continue to serve as long as his health allows.

The Shirtless, Shoeless Fight For Equality

It appears that our nation's shirtless and shoeless marched to Washington, D.C. to protest against the restaurants and convenient stores that refused to provide services to these unfortunate souls. Seriously folks, how many of you have been in that situation before? If I only had a dime for everytime I've been turned away from 7-11 because I was barefoot I would be richer than Bill Gates. Would our founding fathers approve of this blatant discrimination? Back then, the proletariat couldn't even afford shoes, yet they were never refused service! What do you think?

Monday, July 18, 2005

My Music Web-Page

I just wanted to take a moment and provide a link to my music. Even though no one is going to read my blog (I sure hope that isn't true), I thought it couldn't hurt to get some meager yet duly exposure. Now is about the time that I let you readers know what I plan to bore you with in no particular order:

1. Social and Political Comment
2. Economic Analysis
3. Music
4. Comic Relief
5. Interesting Books

This is what I plan to comment on, but it will be interesting to see how this blog evolves over time. That is it for now, but I'll leave you with this link to "America's Finest News Source".