Thursday, March 29, 2012

House Advantage - Product Design - Banks That Bundled Bad Debt Also Bet Against It -

That exam was hard

My top 5 responses to a student that complains my exam was too hard:

1. You're in college it's suppose to be hard.

2. Clearly you have not taken calculus. Now that is hard.

3. I really do enjoy making your life miserable.

4. Wait until you take the final, you'll think this exam was easy.

5. Really? Did you study?

Sunday, March 18, 2012

Whatever Happened to the Free Market

Oil prices are determined in the global market. The Economists does a nice job summarizing the recent spike in oil prices. Many supply and demand factors will help determine the price of a barrel of oil. The demand side largely is influenced by US drivers, the rise of Chinese and Indian economies, and oil speculators purchasing futures contracts in hopes of driving prices higher. On the supply side comes down to OPEC and right now the concerns over a war with Iran. The POTUS has no influence on oil prices, but somewhere along the lines Republicans believe gasoline should be $2.50 per gallon. If you believe in the free market, you will quickly realize gasoline will never be $2.50/gallon. Of course the Republicans did not blame George W. Bush when gasoline prices reached $5/gallon in the summer of 2008. So what can we take from this, Republicans believe in the free market, that is until it is inconvenient to do so.

Saturday, March 17, 2012

In the Long Run...

This article is a perfect example why journalist should not inject their opinion on an economic debate. In the long run it is all macroeconomics, not micro. We care about the efficient allocation of resources to increase living standards, minimize unemployment, and alleviate poverty. If we didn't have macroeconomic goals then we wouldn't care about microeconomics.

Thursday, March 15, 2012

The Villain

Bernanke has found himself in the crosshairs of a debate between the left and the right over whether he is doing too much or too little to stimulate the economy. All this, while the debt troubles in Europe have threatened to compound America's problems and snuff out the recovery before it takes hold.

Wednesday, March 7, 2012

Why the IS/LM model is still useful

Still the go to model for understanding the usefulness of policy.

"But economists who knew basic macroeconomic theory – specifically, the IS-LM model, which was John Hicks's interpretation of John Maynard Keynes, and at least used to be in the toolkit of every practicing macroeconomist – had a very different take. By late 2008 the United States and other advanced nations were up against the zero lower bound; that is, central banks had cut rates as far as they could, yet their economies remained deeply depressed. And under those conditions it was straightforward to see that deficit spending would not, in fact, raise rates, as long as the spending wasn't enough to bring the economy back near full employment. It wasn't that economists had a lot of experience with such situations (although Japan had been in a similar position since the mid-1990s). It was, rather, that economists had special tools, in the form of models, that allowed them to make useful analyses and predictions even in conditions very far from normal experience.

"And those who knew IS-LM and used it – those who understood what a liquidity trap means – got it right, while those with lots of real-world experience were wrong. Morgan Stanley eventually apologized to its investors, as rates not only stayed low but dropped; so, later, did Gross. As I speak, deficits remain near historic highs – and interest rates remain near historic lows.

Tuesday, March 6, 2012

Looking for a 'super' low unemployment rate? - Economy

8% is the magic number. If the unemployment rate is below 8% by November Obama will be reelected.

Federal Reserve under attack ... again - Economy

Ironic, I was just having the conversation today in regards to Ron Paul. I said if anything those against the Fed should focus on the dual mandate and eliminate the goal of output stability. The reality, inflation is under control, the Fed has announced a firm inflation target, is publishing their forecasts, and has opened to the media. I don't see a single mandate of inflation targeting changing the current position of the Fed.

CBO | Comparing the Compensation of Federal and Private-Sector Employees

Why it pays to have a federal job, well as long as you don't have a PhD.

American manufacturers importing workers

Why we need better skills training programs in high schools: