Tuesday, December 23, 2008

Winter Surfing on Lake Superior

Here's a post on folks who travel to Duluth, Minnesota to enjoy surfing under freezing conditions. The video below tells it all!

Saturday, December 20, 2008

The Unusual Economics of Dating

This article by Sedgwick on online dating that appeared in the magazine Best Life brings forward an interesting economic proposition: that people on a date are simultaneously and symmetrically buyers and sellers:

As a consumer proposition, the thing that is so difficult about the Date is that it's a transaction that goes two ways. You and she are both buyers and sellers, simultaneously. It's like buying a house that is also considering buying you. So the whole time, at every stage, from the first tense hello to the final good-bye kiss on the cheek, lips, or air, you're not just thinking, Do I like her, do I like her? you're also worrying, Does she like me, does she like me? So you keep switching from offense to defense: charming, then evaluating, then charming again. All the while pickling yourself in alcohol. It's easier to twirl dinner plates while riding a unicycle across a high wire strung above Broadway.

7th Art: A Tribute to Majel Barrett-Roddenberry

Majel Barrett-Roddenberry, wife of Star Trek creator Gene Roddenberry, passed away yesterday.

Here's a fan's tribute to the First Lady of the Final Frontier.

Tuesday, December 16, 2008

Bob McTeer's Blog

Here's a blog that's essential reading for anyone who wants to know more about macroeconomic policies and the Federal Reserve: Bob McTeer's Blog. Bob is a Distinguished Fellow of the National Center for Policy Analysis, former Chancellor of theTexas A&M University System, and former President and CEO of the Federal Reserve Bank of Dallas. I met him during an Econometric Society Meeting in Chile through a common friend, Bill Gruben, and had the pleasure of reading and listening to his speeches while working at Texas A&M International University.

This is one of his recent interviews on the economic crisis and the Fed:

Friday, December 5, 2008

Hard Drive Crashed on You? Scare It Back to Life with Minnesota Winter!

One of my external backup hard drives crashed today. I guessed that internal heat was not helping it, so I let the unit stand outside on the porch for about 20 minutes, under a temperature of 10F (-12C).

The trick worked fine! I connected it back, and it came back to life for around 30 minutes. The extra time allowed me to recover all files that I had recently stored and had not yet transferred to the secondary backup drive.

The "freezing trick" is known among geeks, see for example this post.

Stuff I've Read Today

WSJ: a new New Deal?
WSJ: another market sell-off.
WSJ: more layoff announcements.
Posner and Becker on the future of conservatism and free-market libertarianism.
Cowen on Krugman's "vertical AD curve" interpretation of the Great Depression.
Rogoff defends inflation to combat the crisis (HT Mankiw).
Tabarrok on diet contracts.
Mankiw on the effects of business cycles on marriage contracts in India.
Wolfers on the effects of the crisis on the market for Ph.D. economists.

Thursday, December 4, 2008

Stuff I've Read Today

WSJ on how Google is coping with the crisis.
WSJ: nobody cares about Minnesota.
WSJ on the once conceived $100 gold coin.
WSJ on the Harvard Endowment losses.
WSJ on ECB rate cuts.
The Economist on American automakers.
The Economist on the price of oil.
The Economist: Chilean economy affected by drop in commodity prices.
Mankiw on aggregate supply and aggregate demand.
McArdle on the automakers.
Boudreaux on the automakers.
Roberts on the automakers.
Perry on the lack of news on the increase in housing affordability.
Perry on the surge in mortgage applications.

Tuesday, December 2, 2008

Mankiw on the Problems with Fiscal Policy

Here's a post by Mankiw on some recent studies that question the effectiveness of fiscal policy as a tool for aggregate demand management. His main point:

The Keynesian model has some clear, practical insights about how to think about fiscal policy during economic downturns. But are those insights true?

One approach to answering this question is to examine the data using the techniques of time-series econometrics without imposing much a priori theory. For monetary policy, there is a large literature that does this; for fiscal policy, the literature is smaller but growing. The results from this exercise, however, do not always confirm the predictions from textbook Keynesian models. ...

I am not sure how convinced I am by these findings. And even if they are correct, I am not sure what model I should use to explain them and to what extent that model would apply to the extraordinary economic circumstances we now face. At the very least, these puzzles should give us reason to pause when using the Keynesian framework for policy analysis. There is still a lot about macroeconomics that remains deeply puzzling.

Stuff I've Read Today

WSJ on the new actions by the Fed.
WSJ on the NBER and business cycle dating.
WSJ on Obama's national security team.
WSJ: NBER says recession started in December 2007.
WSJ on the death of economics blogger Tanta from Calculated Risk.
The Economist on Obama's national security team.
Mankiw on government debt and future generations.
Roberts on subsidizing failure.
Kurdas on the "Predator State" by Galbraith (HT Shikida).
Kling on real and Keynesian business cycles.
Carden on Cartmanomics (very funny)...
Perry: natural gas prices keep falling.

Dubner on the Influence of Economists in the White House

Here's an interesting article on Freakonomics by Dubner on the role of economists in the White House. Here's his concluding statement:

So while I don’t doubt ... that the economists heading to Washington have probably just concluded the best week of their new jobs ... I do hold considerable hope that the best instincts of academic economics can be harnessed to make a positive difference for the U.S. economy and even its political and social structure.

That’s not to say there aren’t a lot of bad instincts too — a certain arrogance that accompanies many economists’ arguments, a willingness to argue the minor points forever while forgetting the major goals in play, etc. — but if the U.S. electorate could choose its first minority president, is it really too much to ask that a little bit of the best economic research could trickle down into the White House?

Monday, December 1, 2008

MarketWatch on Consumer Spending

Hubbard interviews Conference Board senior economist Goldstein:

Stuff I've Read Today

Back to posting...
WSJ: Shlaes on Krugman's recipe for economic depression.
WSJ: Black Friday was better than expected.
The Economist on the appointment of Geithner for the Treasury Department.
The Economist on Sarkozy's state-friendly market economy.
The Economist on Obama's economic team.
The Economist on Russia and Latin America.
The Economist on the Fed and Treasury policies.
Mankiw on Obama's team of economists.
Kling on failing to foresee the financial crisis.

Tuesday, November 18, 2008

7th Art: Star Trek (2009) Trailer

Heading to Rio

Until Sunday I'll be attending the LACEA/LAMES conference in Rio. It'll be interesting to learn how Brazil and other Latin-American countries are dealing with the economic crisis.

Stuff I've Read Today

WSJ: Democrats defend handouts for Detroit automakers, Republicans react.
WSJ: Paulson says new bailouts are unlikely.
WSJ: SEC charges Mark Cuban with insider trading.
WSJ: Citi job cuts.
NYT: no BlackBerry for Obama (HT McArdle).
Kling's metaphors for financial reform.
Cowen on the solution to a liquidity trap.
Sorman on the two Latin Americas (in French).

Bringing the Automakers Up to Speed

KAL's cartoon from magazine The Economist:

Monday, November 17, 2008

7th Art: The Zombie Movie Index

Freakonomics has an article on the correlation between social upheaval and the Zombie Movie Index. Here's the graph:

My Automaker Bailout Proposal

Since the government appears to have got knee-deep in the business of bailing out failed companies (and let me make it clear that I'm against it), then I want to make two suggestions. Before we give taxpayers' money to Detroit automakers and their unions, let's try the following:

(1) Create a voluntary fund. Everyone that thinks that Detroit should be helped would be able to commit by providing cash or signing in as a loan guarantor. No handout through coercive government power. It's a truth-revealing mechanism: whoever thinks that this is the correct way to do it please be the first in line.

(2) If coercion is to be used, then give the money to anyone willing to buy new cars instead of giving it directly to Detroit, let's say, someone like me. After all, I'd not mind having one of these in my garage...

PS: Becker explains why bailing out Detroit is a bad idea (HT Mankiw). See also this comment by Perry (HT Mankiw).

The Onion: Is It Time for the Government to Close the National Money Hole?

An Onion News Network special (HT Perry):

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

7th Art: Blade Runner (1982)

One of the best films ever, directed by Ridley Scott and based on the novel "Do Androids Dream of Electric Sheep?" by Philip K. Dick. Arguably the best sci-fi movie of all times. Never gets old.

This time I watched the "Final Cut" version of 2007, which is however not very different from the "Director's Cut" version of 1992.

Here's one of the most magnificent scenes in the history of cinema: "tears in rain."

Stuff I've Read Today

WSJ on think tanks.
WSJ on Obama and the Detroit bailout.
WSJ: Chinese President warns agaisnt protectionism.
Becker and Posner on bailing out Detroit.
Perry on the pitfalls of concepts such as "fair" and "fairness."

7th Art: Red River (1948)

My grandfather loved John Wayne movies. Every time I watch a classic western, I can easily understand why. "Red River" (1948) is among the best. Directed by Howard Hawks and starring the Duke, it pays homage to the adventuring spirit of pioneers from all latitudes.

The movie explores the economic challenges of cattle herders living in South Texas and the importance of the Chisholm Trail, which connected most of South Texas to the north of the US, and therefore was essential for the economic development of the region.

The movie appeals to me on a personal level. I once lived in the region where the story takes place, and hauled my belongings from the very beginning of I-35 to its very end in Northern Minnesota, having covered therefore a good part of the Chisholm Trail on my way north.

Here are some of the best moments in the movie. Yeehaw!

Sunday, November 16, 2008

Government Failure: Should the Taxpayer Pay for Automakers' Excesses?

This graph from Perry explains it all (HT Mankiw). Should we the taxpayers be helping large companies, powerful politically engaged unions, and overpaid workers and executives, or should it be the other way around? The President-elect gives his answer.

Stuff I've Read Today

The Economist on the China's stimulus plan.
The Economist on the Republican Party.
The Economist: more trouble for Obama.
The Economist on the Senate seats still up for grabs.
The Economist on the bailout plan changes.
The Economist on the European recession.
The Economist on the Obama's government transition.
FOX: Putin's "kind" comments on the President of Georgia.
Forbes on China's trade surplus (HT Oliver).
Hamermesh on the economic obscurantism of incentive haters.
Roberts on the credit crunch.
Banaian on falling wine prices.
Le Monde: France does better than its neighbors during this crisis (in French).
Sorman: anxiety is rising in the Chinese Communist Party (in French).

Government Failure: Crisis Feeds on Uncertainty Created by Governments

Here's an excellent article written by Roberts on how governments exacerbate economic crises by changing the rules of the game (economic incentives) frequently and awkwardly, or, in other words, by acting as a bad referee or as if it's one of the players:

When no one knows how the rules of the game are going to change — and they seem to change from week to week — who wants to take a risk? Who wants to borrow money? Who wants to invest? Business and consumers are hunkering down, waiting for the storm of change to pass.

The problem isn't liquidity.

It's uncertainty.

[Treasury Secretary] Paulson doesn't realize that his erratic attempts at creating liquidity are creating the uncertainty that makes liquidity meaningless. ...

As the TARP spreads, the cost will keep rising. Remember the talk about how the government might even profit from its $700 billion "investment?" (Insert hollow laugh here.) ...

And who's going to pay for all of this? Those who lived within their means, who went with the smaller house, who waited a few more years to get that new car, who took a part-time job rather than borrowing even more money to pay for college. Suckers. You missed out on the thrills and now you're going to be paying the bills. The prudent will be paying for the imprudent for a long time.

Government Failure: When Competence Takes Back Seat

If you think that the President-elect should use competence as the main criterion when appointing government officers, then you won't be happy with what the WSJ has to report. Here's a worrisome extract concerning the Treasury Department:

Perhaps no potential nominee is taking more heat than Harvard University economist Lawrence Summers, a potential pick as Treasury secretary. Mr. Summers served in that post for President Clinton and has moved to a position of prominence in Mr. Obama's economic team. Women's groups are particularly distressed about his possible appointment, recalling comments he made as Harvard president that innate characteristics may prevent women from achieving more prominence in science.

"The American electorate has changed the course of history by demonstrating that an African-American can do anything. We hope that the messages of the Obama presidency will be broader than that -- that any American can do anything. That includes women," said an anti-Summers broadside from the Rosalind Franklin Society, an honors group for women in biosciences.

Labor groups and liberal economists are suspicious of Mr. Summers's free-market principles, which helped guide a deregulation of the financial-services industry at the end of the Clinton era.

"It would be a really bad start to his administration if President Obama picked a Treasury secretary who shares a substantial part of the blame for the bubble economy and the financial crisis," liberal economist Dean Baker recently wrote.

But Andy Stern, president of the Service Employees International Union, took a swipe at Mr. Summers's chief rival for the post, New York Federal Reserve Bank President Timothy Geithner, who, he made clear, is an unknown quantity to labor.

"I always worry about somebody who has spent his whole life at the Federal Reserve," Mr. Stern said, plugging a new name for consideration, New Jersey governor and former Goldman Sachs chairman Jon Corzine.

Friday, November 14, 2008

7th Art: Good Will Hunting (1997)

Finally found time to watch "Good Will Hunting" directed by Gus Van Sant and starring Robin Williams, Matt Damon and Ben Affleck. I expected a lot from this movie, based on good reviews and recommendations by friends that watched it back in 1997.

Well... the movie is watchable, and had the potential to be great, but it's pretentious, unbelievable and even boring, especially when the dialogues try to be political and end up sounding like ivory tower paranoid drivel.

Matt Damon has done a great job in the "Bourne" movies, but here he appears to be over-coached. His depiction of raw genius is not convincing: I couldn't see passion in his handling of knowledge. Great minds, no matter how eccentric and marginal, cannot exist without the fire that props up the search for understanding.

The bar scene below is supposed to be one of the greatest in the movie. For me however it's a perfect example of the problems that I described above.

Government Failure: When the Government Disallows Competition

Heavy-handed federal regulation and red tape makes a victim in Duluth: the government itself, in the form of the US Postal Service. Here is an article (gated) by the Duluth News Tribune on the hopefully temporary wasteful ordeal of USPS managers:

A day after a News Tribune story reported that E-85 gas prices at a Duluth station was 69 cents higher than other stations — and U.S. Postal Service workers were locked into filling their cars there — nothing has changed. ...

“It’s not an option to send them to another route,” he said. “It eats up substantial time, which: A) cuts into the savings of getting cheaper gas, or B) they’re not spending time delivering mail.”

Why not allow carriers to fuel up on regular gas? Nowacky said the Energy Act prevents them from buying regular fuel unless the post office files for a waiver. But Nowacky said by the time it would take to compile the information and data needed to file the waiver, the station probably would have gotten another shipment of E-85 and lowered its prices.

E-85 is a mix of 85 percent corn-based ethanol and 15 percent gasoline. The price of E-85 is normally lower than for unleaded gasoline. The manager of the Interstate Spur said his station’s high price reflects the amount they paid for the fuel.

Stuff I've Read Today

WSJ: Mischief in Minnesota?
WSJ on more bailout foolhardy.
WSJ: finally, some resist to bailout foolhardy.
WSJ: a confusing bailout plan.
WSJ: not so much change after all.
WSJ: Rove thinks history favors the GOP in 2010.
Mankiw gives advices to Obama.
Mankiw: time to buy stocks.
Becker and Posner on depressions.
Guardian on the strange language of the Pirahãs in the Brazilian Amazon.

Wednesday, November 12, 2008

My Interview in the UMD Statesman

I was interviewed by the UMD Statesman on the effects of the economic crisis on the lives of university students. The article is available here.

7th Art: The Life and Death of Colonel Blimp (1943)

A great movie on the adventurous life of Major General Clive Candy, a fictitious British Army officer, directed by Michael Powell and Emeric Pressburger and starring Roger Livesey, Deborah Kerr and Anton Walbrook.

The movie title refers to British cartoon character Colonel Blimp. Colonel Blimp is not Major General Candy, despite some similarities. Major General Candy does not actually die in the movie. The title is a reference to the rise and fall of early 20th century chauvinistic values represented by Colonel Blimp.

The movie was made during World War II, and the directors got in trouble with Churchill, who thought it was not tough enough on the Germans.

Here's one of the many thought-provoking dialogues in the movie:

Monday, November 10, 2008

Silly Job Interview

I hope the economic crisis doesn't bring back job interview techniques such as this one, courtesy of the Monty Python's Flying Circus (HT Galrão).

DRE 700 Wins the Election

The rise of the machines, according to The Onion (HT Shikida).

Voting Machines Elect One Of Their Own As President

Saturday, November 8, 2008

Stuff I've Read Today

WSJ: Obama meets with economic advisers.
WSJ: Pelosi is for more "fiscal stimulus."
WSJ: Fed's Lockhart on the Fed's arsenal.
The Economist on who voted for Obama.
The Economist on Obama's economic troubles.
The Economist on the Senate and House elections.
The Economist: European rates are cut again.
The Economist on the credit crunch in Brazil.
The Economist on Obama and the unemployment surge.
The Economist: American carmakers, in trouble again...
Mankiw on the new draft (very, very bad idea).
Caplan on Krugman's judgmental view of the median American voter.
Sachsida interviews León-Ledesma on the effects of the financial crisis in Europe (in Portuguese).
Constantino explains how government awkward regulation of the credit rating agencies made them irrelevant (in Portuguese).

Friday, November 7, 2008

The Road Ahead

KAL's cartoon from magazine The Economist:

Would the Taylor Rule Have Been a Better Guide than Discretion?

Below is a graph from Cecchetti's Money, Banking and Financial Markets textbook. It begs the question: what would have happened if the Fed would have followed a simple Taylor rule instead of an overly discretionary policy since 2002? Was the Taylor rule pointing in the right direction all this time?
PS: Hamilton wrote this post on the subject on September 2007.

Thursday, November 6, 2008

Stuff I've Read Today

WSJ: Michael Crichton dies of cancer.
The Economist on Obama's victory.
Forbes: Cooley on change he can believe in (HT Mankiw).
Samuelson on the gap between poor and rich (HT Mankiw).
Mankiw on the importance of allowing the GOP to become the party of the libertarian youth.
Lindgren: Summers for the Treasury Department? (HT Shikida).
Seavey on libertarians and Obama (HT Shikida).
Caplan on how economists are smart and smart people think like economists.
Dubner on how video games can be used for the greater good.
Perry: the year in review.

The Onion on Obama's Victory Aftermath

According to The Onion, Obama win causes obsessive supporters to realize how empty their lives are (HT Shikida)...

Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are

Tuesday, November 4, 2008

MIT Panel on the U.S. Financial Crisis

MIT scholars Caballero (Economics), Holmstrom (Economics), Lo (MIT Sloan), Poterba (Economics) & Wheaton (Economics/Center for Real Estate) discuss the financial crisis in the US in this video (HT Andrade).

Stuff I've Read Today

WSJ: Obama defends his plan of action.
WSJ agrees with magazine The Economist in one point: voting for Obama is a gamble.
WSJ: Markowitz criticizes finance professionals for their role in the crisis (HT Selva).
WSJ: credit card losses to rise.
WSJ: Fed's Lacker on government mixed signals.
The Economist: McCain's last salvo.
Becker and Posner on the effects of free markets on moral character.
Mankiw: will radical economists be at the core of an Obama government?
Perry on GRE scores per field.
Cowen on the demand for economic classes after the crisis.
Boudreaux on Mencken and political irrationality (here too).
Lawson makes an interesting point against voting.
Fair Model estimates that Obama will win with 51.91% of the two-party votes (HT Selva).
Sachsida asks: where was the bank run? (in Portuguese).
Sorman: markets are imperfect, the state is even more imperfect (in French).

Monday, November 3, 2008

Tullock: Your Vote Is Irrelevant

Top economist Tullock, one of the creators of public choice theory, talks about the irrelevance of voting in this superb PBS video (HT Tabarrok):

Stuff I've Read Today

WSJ pays homage to McCain.
WSJ's Noonan analyzes the election.
WSJ: state's voting patterns depend on states' economic indicators.
WSJ: ECB recommends more public spending.
WSJ: consumption is down, but saving is up.
WSJ on campaign contributions.
The Economist supports Obama, but thinks "voting for him is a risk."
The Economist on falling consumption in the US.
Sowell criticizes Obama (HT Mankiw).
Mankiw on tax hike bets on Intrade.
Perry on the fall of the ethanol industry, squeezed between higher costs and lower revenues.
Sorman on the challenges ahead for the US (in French).

Sunday, November 2, 2008

Political Irrationality: Stealing Political Signs

As I discussed in this post, Caplan has written many interesting economic pieces on the phenomenon of political irrationality. Here is an interesting example of irrational political behavior, reported by the Duluth News Tribune (gated): a college professor stealing political signs. See a reproduction of the article down in the post (picture HT thinktrain).

The economic question here is: why would anyone engage into an ineffective form of political manifestation that, besides representing an immoral aggression against other people's freedoms, has a high probability of leading to all kinds of troubles? Cost-benefit analysis tells us that this kind of behavior is irrational. The answer is found in Caplan's main thesis: while markets promote rational decisions, politics promotes irrational decisions.

Here is the article, and I'll stress the statements that are particularly relevant to the discussion:

NORTHFIELD, Minn. — A professor has confessed on a national blog to stealing Republican presidential campaign signs in southern Minnesota.

Philip Busse wrote about the thefts on Huffington Post, a liberal news Web site and blog in a post dated Thursday. He is a visiting professor in the theater department at St. Olaf College in Northfield.

In the article titled “Confessions of a Lawn Sign Stealer,” Busse admits to stealing seven McCain/Palin lawn signs along Hwy. 19 near St. Olaf.

In an e-mail to the Northfield News, Busse expressed remorse, saying it was “immature and impetuous.”

But he said he’s surprised at the reactions he’s received for the act instead of his article on the Web site.

“Writing the essay was an opportunity to explore and talk about political speech and the desire that most of us have to express our politics — both in mature and immature ways, and sometimes a mix of the two,” Busse said in the e-mail. “I’m disappointed that most readers seem to have focused on the thefts, and not on the larger thoughts.”

In the article, Busse likened his thefts to an act of civil disobedience and said that stealing the signs was “one of the single most exhilarating and empowering political acts that I have ever done.” The Northfield Police Department says stealing political yard signs is treated as a misdemeanor, but complainants rarely decide to pursue charges.

Bartiromo Interviews McCain and Palin

Bartiromo asks McCain and Palin about their economic plans:



McCain on SNL

Really good sketches!



Friday, October 31, 2008

Halloween Monster of the Year

Mankiw selected some good Halloween political and economic cartoons in this post. Here's an example:

7th Art: This is Halloween



Happy

Halloween!

7th Art: De Gaulle intime (2005)

"De Gaulle intime" (2005) is a documentary about the private life of French general and political leader Charles de Gaulle, based on statements by members of his family.

De Gaulle was a man of the early 20th century, a time when authoritarianism and fascism became the norm across the political spectrum, and the state was seen as the solution to all human problems. De Gaulle, as most political leaders of that time, including FDR, believed that the state should control economic choices. Ordinary people could not be trusted to choose what's best for them.

Sorman describes de Gaulle's political ideas and the problems they created in France in this post (in French). De Gaulle believed for example that the state should direct the economy using central planning and large industrial projects. According to de Gaulle's son Philippe, his father once said that "the French people cannot be trusted; if they are allowed to do things, they will only do what is easy; instead of producing steel beams to make boats, buildings and railways, they will produce key chains, because that is what sells."

A young economist may be shocked by this authoritarian and bizarre statement. After all, we know that central planning doesn't work and we know that it hurts freedom of choice. That's however how government leaders viewed the world back then.

Unfortunately we're seeing some dangerous signs that this kind of ideology is making a comeback. I hope it stays where it should always have been: in the trash heap of history.

Stuff I've Read Today

WSJ: crisis affects college choices.
WSJ on the new swap agreements between the Fed and the Central Banks of Brazil, Mexico, South Korea and Singapore.
WSJ: recovery only in the second half of 2009.
WSJ: the economy is slow, but it's hard to say if it's officially a recession.
WSJ: McCain uses Biden against Obama.
The Economist on Mexico's government war on the drug cartels.
The Economist on the Fed's rate cut and fiscal policy.
Mankiw on how some people in India see the US presidential election.
Hamilton on the risk of deflation.
Hamilton on the weak performance of the GDP and his work with Chauvet. Notice that despite the negative growth in the third quarter, the scenario is for now far from being catastrophic.
Boudreaux: is Obama a socialist?

Thursday, October 30, 2008

7th Art: Jean Gabin Echoes Socrates on Knowledge

The great Jean Gabin echoes Socrates on knowledge in this classic French song (Maintenant je sais): "now I know that one never knows" ("Maintenant, je sais qu'on ne sait jamais").

The first video shows the original French version with subtitles in Portuguese, and the second video shows the English version, both sung by Gabin.



My Interview on the Financial Crisis, in Portuguese

Sachsida asks me about the financial crisis and its effects on Brasil, in this interview in Portuguese aimed primarily at Brazilian readers.

Hyperinflation in Pictures: The Monetary Crisis in Zimbabwe

Here are some pictures from a blog called The Fun Stuff (HT Perry).

Zimbabwe's inflation rate has recently hit more than 231 million % per year! This is what a real monetary crisis looks like:

(1) A restaurant check of more than 1 billion dollars!

(2) Here's how restaurant checks are settled:

(3) Only a few months later, three eggs cost 100 billion dollars...

Other pictures are available here.

Stuff I've Read Today

WSJ: Fed cuts rate to 1%.
WSJ: McCain accuses the LA Times of holding back Obama's video.
WSJ: Calabresi on Obama's "redistribution" Constitution.
The Economist on its presidential endorsements in previous elections.
The Economist on McCain's (small) chances of winning.
The Economist on house prices that keep dropping.
The Economist: Iceland goes to the IMF.
Forbes on the road to Euro-taxes (HT Oliver).
Mankiw on the shared application mortgage (SAM) solution to foreclosures.
Eberstadt on the demographic problems in Russia.
Caplan on DeLong going ballistic.
Perry on the culture of government dependency.

Wednesday, October 29, 2008

LACEA/LAMES: No Visa for Prescott?

Sachsida breaks the news that Nobel Prize winner Prescott won't give a main lecture at the LACEA/LAMES 2008 in Rio due to red tape associated with getting a visa to enter Brazil. Could it be true?

It can be easily confirmed here that the new list of main speakers doesn't show his name anymore:
...
James Powell (University of California, Berkeley)
Matthew Rabin (University of California Berkeley)
...
This post by Costa however has the old list, which showed his name:

...
Rohini Pande (Harvard U)
Edward Prescott (Arizona State U and FED Minneapolis)
Matthew Rabin (UC Berkeley)
...

Well, it's clear that, whatever may be the reason, he'll not attend the conference anymore.

Tuesday, October 28, 2008

Shiff Predicted a Financial Crisis in 2006

Ron Paul's 2008 campaign advisor Schiff predicted a coming financial crisis during a heated debate with Laffer on CNBC's Kudlow & Company in August 2006 (HT Constantino):

Stuff I've Read Today

WSJ: candidates' focus is on the economy.
WSJ on the Fed's coming interest rate cut.
WSJ: Laffer on the end of the age of prosperity.
Becker and Posner on the Milton Friedman Institute.
Mankiw on promoting Bernanke's classic book on the Great Depression.
Mankiw: Summers on the now gone wealth gains by the superrich.
Perry: dollar hits a 30-month high.
Constantino on the Latin-American patrimonialist political heritage and how it hinders regional development (in Portuguese).

Monday, October 27, 2008

Government Failure: Orphanides Criticizes GSEs

In a lucid analysis reported by the WSJ, Orphanides criticizes mortgage government sponsored enterprises (GSEs) for their role in the financial crisis and reminds us that the Senate didn't heed Fed's warnings put forward by Greenspan on the mounting mortgage problems created by government policies:

Mr Greenspan foresaw the problems in Senate testimony as early as April 2005, says Mr Orphanides, highlighting the then-Fed chairman’s warning that: “We at the Federal Reserve remain concerned about the growth and magnitude of the mortgage portfolios of the GSEs, which concentrate interest rate risk and prepayment risk at these two institutions and makes our financial system dependent on their ability to manage these risks. … To fend off possible future systemic difficulties, which we assess as likely if GSE expansion continues unabated, preventive actions are required sooner rather than later.”

But, Mr. Orphanides says, “warnings of the problem were not heeded, and the systemic failure that had been a source of concern at the Federal Reserve materialized.”

In his analysis, Orphanides cites this paper by Calomiris.

Stuff I've Read Today

WSJ: crisis hits the Persian Gulf countries.
WSJ on health care wishful thinking.
WSJ on the effect of the crisis on inequality of wealth.
WSJ on the candidates and your money.
WSJ on how Obama's advisers were once supporters of McCain's health care principles.
WSJ: economists find evidence that DST (daylight savings time) not only is an annoyance but also increases residential electricity demand and pollution.
The Economist on the stock market slump.
Mankiw on economists' sins.
Mankiw explains why Obama's tax policies will make him wish to work less.
Mankiw on the Great Depression.
Kling explains the strength of the dollar (tallest among pygmies).
Caplan on The Onion, Bush and Harding.
Perry: foreclosures drop without AZ, CA, FL and NV.
Somin on Ayers' sudden love for property rights (HT Shikida).
Sorman on Argentina's collective suicide (in French).
Sorman on Sarkozy's "reform capitalism" rhetoric.

7th Art: Wait Until Dark (1967)

"Wait Until Dark" (1967) is a movie directed by Terence Young with Audrey Hepburn, Alan Arkin, Richard Crenna and Efrem Zimbalist Jr, with musical score by Henry Mancini.

Beautiful Audrey Hepburn convincingly plays a blind woman that's involuntarily caught into an elaborate game played by thugs looking for a heroin filled doll. The movie is full of twists and turns that will please fans of Hitchcockian thrillers.

In the trailer below, notice the droll warning about smoking during the movie!

Friday, October 24, 2008

Is Happiness Related to Political Views?

Apparently the answer is yes, according to this WSJ article based on a Pew Research Center survey. Here are the numbers:
The result is even more intriguing when one considers that Democrats are doing well while Republicans are going through one of their worst moments in recent political history.

Naturally there's a question of causality here: does being happier make you a Republican or does being a Republican make you happier?

Cosmos: The Lives of the Stars

In another great episode, Sagan goes from the very small to the very large, from atoms to red giants, from nuclear forces to gravity. In it, he poetically declares:
The nitrogen contained in our genes, the calcium in our teeth, the iron in our blood and the carbon in our apple pie were made in the cosmic kitchen that is the star. Our bodies are made up of the particles that constitute the stars. Indeed, in a very profound sense we are children of the stars.

Stuff I've Read Today

WSJ: Chamber of Commerce supports GOP candidates.
WSJ: Rove on politics and Obama's tax plan.
WSJ on lawmakers and loans.
WSJ on Greenspan grilling.
WSJ on Greenspan's mea culpa.
The Economist on the troubles with emerging markets.
The Economist on China and the crisis.
Miron defends libertarianism from opportunistic attackers (HT Selva Brasilis).
Mankiw: Helicopter Ben to the rescue!
Caplan on Hoover's bizarre statements.
Freakonomics on the decriminalization of prostitution.
Roberts on Waxman and the ghost of Milton Friedman (a Halloween tale).
Roberts on Greenspan the penitent.

NOVA: Quantum Physics and Parallel Worlds

A nice PBS NOVA episode called "Parallel Worlds, Parallel Lives" talks about the life of Hugh Everett III (presented by his own son, musician Mark Everett).

Everett was the creator of the many-worlds interpretation (MWI) of quantum mechanics, a multiverse (parallel universes) theory.

The show does a great job explaining the quantum physics paradoxes that lead to the theory, although it could have been clearer about its drawbacks, especially its bizarre implications to probability theory.

The demonstrations of the duality of matter experiment and of the Schrödinger's cat thought experiment were well done. Multiverses stories are very popular in sci-fi shows, such as in the Star Trek episode "Mirror, Mirror."

The NOVA episode can be watched online (divided in parts) on YouTube. Here's the preview:

Thursday, October 23, 2008

Stuff I've Read Today

WSJ: turmoil in the currency market.
WSJ: Holtz-Eakin and Goolsbee clash on candidates tax plans.
WSJ on the problems with polls.
WSJ: Fed's balance sheet accumulates junk.
The Economist on the Democratic majority in Congress.
The Economist: US, champion of corporate income tax rates.
The Economist on reactions to the crisis in Asia.
Samuelson: are young voters being played for chumps? (HT Mankiw)
Mankiw on Rawls, Nozick and Joe the plumber.
Kling on economists that think they know it all.
Dubner on academic research on the crisis.

Wednesday, October 22, 2008

China's Exports and the Oil Price

In this paper written with Faria, Mollick and León-Ledesma we tried to explain why oil prices are positively correlated with China's exports, a puzzling observation given that oil is an important input in China.

We postulated that, as a result of elastic labor supply and increasing labor productivity, China's exports lead to higher oil prices and at the same time are less affected by higher oil prices than the exports of China's competitors, meaning that China increases its competitive edge when the price of oil increases.

If the predictions of the model are correct, China's exports could fall more strongly than its competitors' exports during a world recession that is accompanied by falling oil prices, causing further reductions in oil prices. In other words, China's competitive advantage could be reduced when the price of oil falls.

This post by Smith indicates that our article's predictions may be validated soon:

One factor that the oil bulls have repeatedly invoked is demand from China. The figure I have seen oft cited is that Chinese demand will continue to rise at 7.8% per annum. ...

Chinese GDP growth and energy demand has fallen off even though exports are still robust. Thus a fall in exports will lead to a further reduction in growth and energy use. And the growth lever that Ting cites, 5%, is already below the 7%+ that was assumed until recently for China.

Stuff I've Read Today

WSJ: Obama increases lead over McCain.
WSJ on the messy state of the real estate market in California.
WSJ: now the problem with credit cards.
WSJ: economist Rubin argues that Obama is dangerous to economic freedom (Caplan hopes he isn't).
WSJ: China's economic pain is worse than most expected (not to my surprise).
WSJ on high school dropout city champions.
WSJ on why performance reviews stink (and I concur).
WSJ: "Bernanke endorses Obama" by supporting his fiscal stimulus plan.
The Chronicle of Higher Education on college dropouts (HT Selva Brasilis).
Mankiw: fewer and fewer people are paying income tax.
Tabarrok and Levitt on Heckman's bizarre behavior.
Caplan on messianism.
Selgin on "Planet of the Apes" and the bailout (HT Boudreaux).
Perry: dollar keeps climbing.
Sorman on IMF's Strauss Kahn scandal (in French).

Argentina's Government Goes After Private Retirement Funds

Argentina works hard to keep its place among the world's most backward economies.

In an unprecedented move, Argentina's leftist government proposed the take over of all private retirement accounts in the country, under the lame excuse that the government is doing it for the good of the rightful but disowned account holders. The proposal will probably have the approval of Congress.

As expected, the government didn't offer any choice to the owners of the accounts regarding the takeover.

Just imagine if the US government would suddenly and unilaterally decide that all private retirement accounts in the country, such as 401(k)s, IRAs, and employer-sponsored retirement accounts, had become property of the Treasury. Well, that's what's happening in Argentina.

Chilean economist Piñera summarized it well:
José Piñera, a former Chilean cabinet minister who pioneered the privatized pension system and has served as a consultant to many other countries that have implemented it, called the nationalization proposal "just another step in Argentina's 100-year 'road to underdevelopment.'"

Tuesday, October 21, 2008

Stuff I've Read Today

WSJ: Dow surges 400 on signs of credit thaw.
WSJ: Fed's Kroszner says better risk management is needed.
The Economist and the economic slowdown in China.
The Economist on TIPS - Treasury Inflation-Protected Securities.
Mankiw on Clinton's 1993 bactracking on tax cuts for the middle class (when reality weighs in).
Hamilton: recession is knocking at the door.
Hamilton: will we bailout commodity speculators too?

Monday, October 20, 2008

"Capitalism Is Dead" Souvenirs and Merchandise

Here's KAL's cartoon from magazine The Economist (HT Constantino):

Anna Schwartz Gives Lessons to Policymakers, Part II

Cowen disagrees with Schwartz's assessment that I presented in a previous post.

I think he's wrong. I believe all efforts should have been directed to banks that are in good financial shape so they stay in good financial shape. There are many banks that behaved in a conservative manner and would qualify for that kind of decontamination.

That would have avoided a domino effect while reducing asymmetric information and moral hazard problems. Easier said than done, but surely the principle that should have been at the core of any government plan.

I don't believe it's good health policy to hide the effects of a highly contagious disease and let the carriers wander around the healthy. We don't save the flotilla by tying all smaller boats to the Titanic while it's sinking.

PS: Kling makes a similar point in this post.

Stuff I've Read Today

WSJ on the coming liberal supermajority, as it hasn't been seen for many decades.
WSJ: Hollywood faces economic difficulties.
WSJ on governmental interference in bank's operations.
The Economist on presidential polls.
The Economist on the presidential debate.
Becker and Posner: is the goose that laid the golden eggs wounded?
Mankiw on Obama's health plan.
Tabarrok on broker's with hands on their faces.
Kling on Cowen and Black.
Wolfers on economic gangsters.
Boudreaux: another example of economic illiteracy.