The Lex Column in this past weekend's Financial Times had a thought that put a smile on my face. Since the salmon daily has become much better at (gasp) protecting its content lately, we will reprint the snippet courtesy of theStreet.com:
So Albert Einstein was the class dunce after all, and there really is something that is faster than light. Scientists at CERN, the European nuclear research centre, have been firing neutrinos across the Alps from France to Italy for three years. Now they tell us that these electrically neutral subatomic particles have moved "at a velocity 20 parts per million above the speed of light."
Here's hoping that the boffins are right. Einstein argued, as part of his theory of relativity, that travelling at greater than the speed of light would mean that time is going backwards. So investors will be able to return to the status quo ante: before Lehman Brothers. UBS will not have suffered that $2.3bn loss. The eurozone will not even exist. And it will have turned out that God, all along, has been playing dice with the universe.
Maybe it is the outrageously see-sawing markets (with much more see than saw...or is it the other way around?), the new threats of a government shutdown or the lack of the ability of the Fed to calm markets. Maybe it is just Monday (I only saw it this morning). In any case there is something to be said for a little bit of dark humor done well when things don't seem to be generally going in the right direction.
9.23.2011
Loan Forgiveness = Dem Victory in 2012?
If the volume of traffic that made its way to our recent posting on loan forgiveness is any indication, it is clearly a very hot topic right now. Based on the comments and feedback we received, it is also one that evokes very strong opinions in people. Most notably, some of our readers shared stories about how they have taken decades to dig out from under heavy loan burdens. Some of these readers indicated their belief that the government should step in and do something about these burdens, with outright forgiveness, debt ceilings and maximum payback periods all being mooted as possibilities.
Though loan forgiveness is not something that I would typically advocate for, some of our commenters provided numbers suggesting potential forgiveness programs could be cheaper in real dollar terms than the stimulus plans were (or indeed potential future stimulus plans would likely be). The current state of affairs which sees the federal government owning much of the outstanding student debt also ensures that write-offs wouldn't directly hurt lenders, many of whose balance sheets are just recovering from the financial crisis.
Even many detractors would have to agree that there would be undoubted economic benefits from forgiveness, at least at the individual level. Our original reason for posting about this topic was Professor Wolfers' assertion that any multiplier effect from loan forgiveness would be negligible, a statement we heartily disagreed with (while agreeing with his larger premise that forgiveness wouldn't be a good idea no less!). Many of our readers agreed through personal anecdotes that the multiplier would be much higher than Wolfers believes. Paraphrasing one reader, there is a lot that many of us could do with an extra $800 every month, and I am not referring to putting it in a savings account with a 1% APY.
Though loan forgiveness is not something that I would typically advocate for, some of our commenters provided numbers suggesting potential forgiveness programs could be cheaper in real dollar terms than the stimulus plans were (or indeed potential future stimulus plans would likely be). The current state of affairs which sees the federal government owning much of the outstanding student debt also ensures that write-offs wouldn't directly hurt lenders, many of whose balance sheets are just recovering from the financial crisis.
Even many detractors would have to agree that there would be undoubted economic benefits from forgiveness, at least at the individual level. Our original reason for posting about this topic was Professor Wolfers' assertion that any multiplier effect from loan forgiveness would be negligible, a statement we heartily disagreed with (while agreeing with his larger premise that forgiveness wouldn't be a good idea no less!). Many of our readers agreed through personal anecdotes that the multiplier would be much higher than Wolfers believes. Paraphrasing one reader, there is a lot that many of us could do with an extra $800 every month, and I am not referring to putting it in a savings account with a 1% APY.
9.22.2011
Understanding 'Operation Twist'
Yesterday's 'Operation Twist' announcement by the Fed left markets disappointed. It also left a lot of people on Main St. shaking their heads and wondering what the latest Fed announcement actually means.
At its core, Operation Twist is an attempt to further reduce already historically low lending rates by exchanging shorter-termed securities for those with longer-terms. The Fed hopes that the demand it creates for longer-termed securities will drive down lending rates for things like cars and mortgages and therefore stimulate demand. However, detractors have been quick to point out that with rates as low as they are, there is not much room for the market to move. For more in-depth analysis, readers can click on presentation below which was posted to YouTube by OptionAlpha. It explains what, exactly, the strategy entails and includes charts showing what the Fed hopes to accomplish.
Potential paper jam jokes aside, here's hoping the Fed gets this right; many are predicting that this is the 'strategy of last resort' on the way to another round of quantitative easing.
At its core, Operation Twist is an attempt to further reduce already historically low lending rates by exchanging shorter-termed securities for those with longer-terms. The Fed hopes that the demand it creates for longer-termed securities will drive down lending rates for things like cars and mortgages and therefore stimulate demand. However, detractors have been quick to point out that with rates as low as they are, there is not much room for the market to move. For more in-depth analysis, readers can click on presentation below which was posted to YouTube by OptionAlpha. It explains what, exactly, the strategy entails and includes charts showing what the Fed hopes to accomplish.
Potential paper jam jokes aside, here's hoping the Fed gets this right; many are predicting that this is the 'strategy of last resort' on the way to another round of quantitative easing.
The Legal Job Search in Your Words
In the current economic environment good-paying legal jobs have become a hot commodity. Indeed, there are few better subjects for a website which explores the intersection of law and economics than the out-of-whack supply and demand curves representing the legal job market at this time. For anyone who has not been paying attention, the situation can be described in economic terms as a medium-term glut in labor supply which has outstripped demand. In other words, the past few years have seen far more people chasing jobs than job openings. Being a recently graduated law student in 2011 isn't quite as bad as being a Dutch tulip grower in 1640, but it can certainly feel that way.
With this backdrop, we decided to take on the subject of legal employment. To be clear, we are specifically referencing the lower-end of the market, or those who have been hit hardest by the broader economic malaise (like high-end real estate the market for experienced lawyers is relatively insulated from external factors such as recessions). More narrowly we are focusing on those individuals looking for their first jobs in the legal field.
In writing this post we decided to take a slightly different approach than we normally do. Rather than provide some commentary and links to other blogs and websites, we spoke to recent grads to get their perspectives in their own words. This resulted in a hodgepodge of advice, general thoughts and anecdotes which give what we believe is a very clear picture of the current operating environment. We also spoke to recruiters and experienced lawyers for their thoughts on the best ways to approach the job search. The following is what we received from those we asked along with a bit of our own commentary in italics.
One recent graduate we spoke to was successful in his search. He was able to frame the broader issues and explain why the job market is such a hot topic of conversation currently:
2008 graduates were the last class to have it good in the world of Biglaw. 2009 graduates received summer associateships and offers, but many had deferred start dates. 2010 graduates received summer associateships, but offer rates were much lower than previous years, leaving many hopeful graduates unemployed. Firms readjusted their practices and hired fewer 2011 graduates as summer associates. But those few lucky ones that received summer positions also received offers of employment. Summer classes remained small for 2012 graduates, but it is still left to be seen whether they will be receiving offers to begin working next fall.
With this backdrop, we decided to take on the subject of legal employment. To be clear, we are specifically referencing the lower-end of the market, or those who have been hit hardest by the broader economic malaise (like high-end real estate the market for experienced lawyers is relatively insulated from external factors such as recessions). More narrowly we are focusing on those individuals looking for their first jobs in the legal field.
In writing this post we decided to take a slightly different approach than we normally do. Rather than provide some commentary and links to other blogs and websites, we spoke to recent grads to get their perspectives in their own words. This resulted in a hodgepodge of advice, general thoughts and anecdotes which give what we believe is a very clear picture of the current operating environment. We also spoke to recruiters and experienced lawyers for their thoughts on the best ways to approach the job search. The following is what we received from those we asked along with a bit of our own commentary in italics.
One recent graduate we spoke to was successful in his search. He was able to frame the broader issues and explain why the job market is such a hot topic of conversation currently:
2008 graduates were the last class to have it good in the world of Biglaw. 2009 graduates received summer associateships and offers, but many had deferred start dates. 2010 graduates received summer associateships, but offer rates were much lower than previous years, leaving many hopeful graduates unemployed. Firms readjusted their practices and hired fewer 2011 graduates as summer associates. But those few lucky ones that received summer positions also received offers of employment. Summer classes remained small for 2012 graduates, but it is still left to be seen whether they will be receiving offers to begin working next fall.
9.19.2011
Unemployment Insurance Overpayments Rampant
The Wall St. Journal's Real Time Economics blog recently had a snippet on overpayments in the unemployment insurance system. According to Labor Department data cited by author Sara Murray, over $19 billion, or more than 10% of the total amount paid out in the three years to July, was paid out in error. Though some states count payments made under comparatively innocuous errors (like filling out two job searches rather than three) toward this total, some of the numbers, both absolute and in percentage terms, are nonetheless alarming. To compare and contrast the states, visit the Real Time Economics graphic based on labor department data here. Additionally, the Labor Department provides a heat map here as well as the base data here.
The federal government seems to be as concerned about this problem as many taxpayers are likely to be, and its response has been swift. According to a statement which can be found here, the Department of Labor has established a task force to explore why overpayments have been made and is working with 'high impact' states to 'aggressively address improper payments.'
While the unemployment insurance system has proven critical during the nation's economic downturn, it is important for the government to determine why and how the system has broken down. Overpayments put strain on an already overburdened system and provide ammunition for those who would see the scope of unemployment insurance programs scaled back. It behooves both taxpayers and proper recipients to ensure that the program is being utilized correctly. Here's hoping that the task force is able to accomplish more than meaningless studies.
The federal government seems to be as concerned about this problem as many taxpayers are likely to be, and its response has been swift. According to a statement which can be found here, the Department of Labor has established a task force to explore why overpayments have been made and is working with 'high impact' states to 'aggressively address improper payments.'
While the unemployment insurance system has proven critical during the nation's economic downturn, it is important for the government to determine why and how the system has broken down. Overpayments put strain on an already overburdened system and provide ammunition for those who would see the scope of unemployment insurance programs scaled back. It behooves both taxpayers and proper recipients to ensure that the program is being utilized correctly. Here's hoping that the task force is able to accomplish more than meaningless studies.
Wolfers on Loan Forgiveness = Analytical Fail
Let us start off this post by saying that Justin Wolfers is a very intelligent person. Not that it is 100% dispositive, but the professor has his own page on the Wharton website chock full of fancy titles and publications. And if being a professor at Penn wasn't enough, those perusing his vitals will also note associations with institutions like Stanford, Princeton, Brookings and the Federal Reserve. In short, he is not the sort of individual that we have any business going toe to toe with on economic analysis. However, there is something in his recent Freakonomics post 'Forgive Student Loan? Worst Idea Ever.' that just isn't sitting right from our perspective.
The issue of student loan forgiveness is a touchy one with passionate advocates on either side. Unlike other debts, student loans cannot be discharged in bankruptcy. Sometimes even death doesn't erase the burden. The individuals signing the papers for debts which can exceed six figures are often young, uninformed and naive/overly optimistic about post-graduation employment possibilities. And those who take the debts on are often forced to start paying them back when they are just starting out in entry-level positions and are therefore most financially insecure. There is also a significant percentage of the population which ascribes to the idea that forgiveness is morally acceptable because the loans were made by predatory corporations in the first place.
On the other hand, college is statistically a good gamble over the long-term as lifetime earning potential will largely overshadow the downside of loan repayment. And those taking the loans, while young, are no younger than those we ask to die for our country. Loanees have the tools at their disposal to understand the burdens they are taking on. Finally, countering the 'corporations are just out to get us' argument would be the contrasting moral obligation line of reasoning; essentially that paying back debts is a responsibility, and shirking that responsibility is not fair to society.
The issue of student loan forgiveness is a touchy one with passionate advocates on either side. Unlike other debts, student loans cannot be discharged in bankruptcy. Sometimes even death doesn't erase the burden. The individuals signing the papers for debts which can exceed six figures are often young, uninformed and naive/overly optimistic about post-graduation employment possibilities. And those who take the debts on are often forced to start paying them back when they are just starting out in entry-level positions and are therefore most financially insecure. There is also a significant percentage of the population which ascribes to the idea that forgiveness is morally acceptable because the loans were made by predatory corporations in the first place.
On the other hand, college is statistically a good gamble over the long-term as lifetime earning potential will largely overshadow the downside of loan repayment. And those taking the loans, while young, are no younger than those we ask to die for our country. Loanees have the tools at their disposal to understand the burdens they are taking on. Finally, countering the 'corporations are just out to get us' argument would be the contrasting moral obligation line of reasoning; essentially that paying back debts is a responsibility, and shirking that responsibility is not fair to society.
9.15.2011
Local Currency Regimes: Part 2 of 2
This post is part 2 in a short series on local currency regimes. Part 1 can be found here. We ended Part 1 with a discussion of the federal legal framework for currency issuance as part of a broader discussion on whether Utah could legally create a functioning local currency. The prompt for this query was the passage of legislation by the state earlier this year of a bill dealing with the recognition of gold as legal tender.
At first blush, this would appear to create a fairly restrictive environment. This was, of course, the intent of the framers as potential affronts to the sovereign's ability to control monetary policy, depreciation and counterfeiting were all very real threats in the early years of our democratic experiment. However, despite the clear restrictions, there nonetheless remains some room for alternatives. For example, through a process of elimination of the negatives, a careful reader might be left believing that a private body could issue paper money. This would be true, and is exactly what BerkShares and, at last count, over 100 other local currency regimes across the U.S. have done.
Under the BerkShares model, local banks issue BerkShare notes for dollars at a 100 to 95 ratio. According to the BerkShares website, this creates a built-in 5% discount for consumers using the currency. The discount that venders give is theoretically more than made up for in sales volumes when they attract more local consumers. Venders may also presumably be able to take advantage of discounts themselves if the system is large enough that they are buying their goods from venders who accept the shares. Modeling out a complete transaction flow might help illustrate the point better for any readers who are wondering how this works.
First, a consumer brings $95 to a participating bank and walks away with 100 BerkShare units. They can then go to dinner at a restaurant that accepts Berkshares and ring up a $100 bill. The restaurant will accept the 100 BerkShares for the meal in lieu of $100. This is a 5% discount on the meal, but perhaps the customer would not have chosen the restaurant if they weren't on the system, so the restaurant deems the discount to be a fair trade-off for volume. The following day, the restaurant manager can either go to the bank and exchange the shares for $95 in cash. Alternatively, she could use the shares to buy tomatoes for the next night's service from a local farmer who accepts them, thus gaining her own discount on the transaction. The farmer then goes to a participating hardware store, and the cycle continues.
At first blush, this would appear to create a fairly restrictive environment. This was, of course, the intent of the framers as potential affronts to the sovereign's ability to control monetary policy, depreciation and counterfeiting were all very real threats in the early years of our democratic experiment. However, despite the clear restrictions, there nonetheless remains some room for alternatives. For example, through a process of elimination of the negatives, a careful reader might be left believing that a private body could issue paper money. This would be true, and is exactly what BerkShares and, at last count, over 100 other local currency regimes across the U.S. have done.
Under the BerkShares model, local banks issue BerkShare notes for dollars at a 100 to 95 ratio. According to the BerkShares website, this creates a built-in 5% discount for consumers using the currency. The discount that venders give is theoretically more than made up for in sales volumes when they attract more local consumers. Venders may also presumably be able to take advantage of discounts themselves if the system is large enough that they are buying their goods from venders who accept the shares. Modeling out a complete transaction flow might help illustrate the point better for any readers who are wondering how this works.
First, a consumer brings $95 to a participating bank and walks away with 100 BerkShare units. They can then go to dinner at a restaurant that accepts Berkshares and ring up a $100 bill. The restaurant will accept the 100 BerkShares for the meal in lieu of $100. This is a 5% discount on the meal, but perhaps the customer would not have chosen the restaurant if they weren't on the system, so the restaurant deems the discount to be a fair trade-off for volume. The following day, the restaurant manager can either go to the bank and exchange the shares for $95 in cash. Alternatively, she could use the shares to buy tomatoes for the next night's service from a local farmer who accepts them, thus gaining her own discount on the transaction. The farmer then goes to a participating hardware store, and the cycle continues.
9.14.2011
Clean Energy, Green Jobs and Global Competition.
Our good friend Ken Zweibel from the GW Solar Institute recently appeared on the Weather Channel special 'Changing Planet: Clean Energy, Green Jobs, and Global Competition.' A short clip from the town hall-style discussion can be found below, while full video can be found at the nbclearn.com site here.
Changing Planet - GW Solar Clip from Solar Institute on Vimeo.
Changing Planet - GW Solar Clip from Solar Institute on Vimeo.
Updates on the Virtual Campaign Trail
BlawgConomics introduced the idea of the 'virtual campaign trail' earlier this year, but we have since neglected to keep readers updated with any new developments in the use of technology to secure political victories. As we believe that technology will be used both extensively and ever more effectively in national elections, we intend to keep tabs on the latest updates from the e-world for our readers with greater regularity.
Though our original post was focused on tools such as email, video sharing and social media, it should have been clear to us at that point that our convenient phrase would end up encompassing a variety of rather more interesting e-strategies. If that concept wasn't clear at the outset, it certainly has gained lucidity in the interim. A very good example came to Blawgconomics' attention the other day as it appears that a Pro-Bama group has set up a website where supporters can flag threads, posts and sites that 'attack' the President. If while they are doing so, they are inclined to donate to the cause, well that is just fine too.
Another feature of the site is a fact-checking section. From what we have seen, it is predictably utilized as a platform to vilify members of the GOP who have declared that they are running for President, though commentators like Glenn Beck receive attention as well. While we haven't seen such a strategy from any of the Republican hopefuls, we assume that it is only a matter of time before the candidates ironically exhibit that greatest form of flattery.
Though our original post was focused on tools such as email, video sharing and social media, it should have been clear to us at that point that our convenient phrase would end up encompassing a variety of rather more interesting e-strategies. If that concept wasn't clear at the outset, it certainly has gained lucidity in the interim. A very good example came to Blawgconomics' attention the other day as it appears that a Pro-Bama group has set up a website where supporters can flag threads, posts and sites that 'attack' the President. If while they are doing so, they are inclined to donate to the cause, well that is just fine too.
Another feature of the site is a fact-checking section. From what we have seen, it is predictably utilized as a platform to vilify members of the GOP who have declared that they are running for President, though commentators like Glenn Beck receive attention as well. While we haven't seen such a strategy from any of the Republican hopefuls, we assume that it is only a matter of time before the candidates ironically exhibit that greatest form of flattery.
Pass up an opportunity to recycle this graphic? Not a chance...
9.13.2011
Local Currency Regimes: Part 1 of 2
For some time I have been meaning to put something together in response to contributor Jeremiah Newhall's excellent legal analysis of the recent currency legislation in Utah. I hope that the lack of immediacy of my response doesn't make it any less interesting for our readers. To those who missed this early-summer story, Utah passed a law recognizing 'gold and silver coins that are issued by the federal government as legal tender in the state.' At that same time as he was able to uncover some fairly shoddy reporting by much of the media on this topic, Mr. Newhall was also able to boil the 'mostly symbolic' bill down to two fairly simple points:
1. The bill is essentially a tautologic recognition that federally-issued legal tender is legal tender in Utah, and;
2. It provides a state (but not federal) tax break on capital gains which will essentially only benefit collectors of oversized commemorative coins which can 'only be purchased in blocks of 5 due to high call volumes'
In short, the Utah bill amounts to much ado about nothing and will not impact the day to day lives of a vast majority of Utahns. However, while the bill will have little immediate impact, there is another section to the bill which received little to no attention in the media which could be of interest in the future. Section 4 establishes a 'Revenue and Taxation Interim Committee' to explore the possibilities for using alternative forms of legal tender in the future. The committee is tasked with recommending model legislation for the 2012 General Session if such an alternative currency system turns out to be feasible.
It is possible that the members of this committee will take a look at the Constitution and Mr. Newhall's analysis and decide that the promulgation of alternative currencies is not possible for states. They would be correct to draw this conclusion; it would be impossible under the current framework for a state to legally create its own, separate currency system. On the other hand, if they wanted to be a bit more creative, the members of the committee could look to a small program in Western Massachusetts for guidance and inspiration and conclude that an alternative currency system in their state might be both desirable and constitutionally viable. From the BerkShares website:
1. The bill is essentially a tautologic recognition that federally-issued legal tender is legal tender in Utah, and;
2. It provides a state (but not federal) tax break on capital gains which will essentially only benefit collectors of oversized commemorative coins which can 'only be purchased in blocks of 5 due to high call volumes'
In short, the Utah bill amounts to much ado about nothing and will not impact the day to day lives of a vast majority of Utahns. However, while the bill will have little immediate impact, there is another section to the bill which received little to no attention in the media which could be of interest in the future. Section 4 establishes a 'Revenue and Taxation Interim Committee' to explore the possibilities for using alternative forms of legal tender in the future. The committee is tasked with recommending model legislation for the 2012 General Session if such an alternative currency system turns out to be feasible.
It is possible that the members of this committee will take a look at the Constitution and Mr. Newhall's analysis and decide that the promulgation of alternative currencies is not possible for states. They would be correct to draw this conclusion; it would be impossible under the current framework for a state to legally create its own, separate currency system. On the other hand, if they wanted to be a bit more creative, the members of the committee could look to a small program in Western Massachusetts for guidance and inspiration and conclude that an alternative currency system in their state might be both desirable and constitutionally viable. From the BerkShares website:
9.12.2011
So Much for Student/Teacher Ratios...
They are used at almost every level of the education system to rank and compare, glorify and condemn their subjects. However, maybe student/teacher ratios aren't all they are cracked up to be?
Who Starts Startups?
One of the interesting things about the online tools we use is that they are able, without so much as a prompt, to accumulate and store incredible amounts of hard data about our backgrounds and everyday lives. For those with natural sky-is-falling/ conspiracy theory inclinations, this is potentially a very bad thing. If you count yourself among that crowd, we suggest you check out our brief post on Anonymous in the hopes that you might be able to unearth some kindred spirits.
This slightly cheeky reference shouldn't suggest that we don't believe that risks exist. Whether it is from the companies themselves, governments or hackers, there is of course some degree of danger inherent in so much of the information governing and documenting our lives living in perpetuity in code form. However, despite risks, there are also some very interesting and less than nefarious uses such information can be put to. For example, we have written about Merriam-Webster's data mining of word searches in an attempt to link them to current events. And frequent readers will remember our attempt to coin a new term based on the use of Google's data by e-conomists.
We came across another good example of this today from LinkedIn's blog. The employment networking site was able to drill down into the profiles of 13,000 startup founders (defined as those who identify themselves as founders (or co-founders) of U.S. companies created after 2000, with a LinkedIn company profile, and that currently have between 2 – 200 employees) to figure out who starts startups.
What did they find? The infographic here will give the curious a good visual of the results. For anyone who doesn't want to click over, most of the individuals highlighted reside on the coasts, have LinkedIn connections to VC's and have tech companies listed in their profiles. Oh yeah, many of them went to schools like Stanford, Harvard and Sloan.
While these are hardly shockers, there was one bit of information that those who think that Mark Zuckerberg is the prototype will find interesting: most startup founders are over age 30. Apparently there is hope for Blawgconomics yet. Anyone interesting in diving a bit deeper into this topic can view author Monica Rogati's presentation from StartupFest 2011 here.
This slightly cheeky reference shouldn't suggest that we don't believe that risks exist. Whether it is from the companies themselves, governments or hackers, there is of course some degree of danger inherent in so much of the information governing and documenting our lives living in perpetuity in code form. However, despite risks, there are also some very interesting and less than nefarious uses such information can be put to. For example, we have written about Merriam-Webster's data mining of word searches in an attempt to link them to current events. And frequent readers will remember our attempt to coin a new term based on the use of Google's data by e-conomists.
We came across another good example of this today from LinkedIn's blog. The employment networking site was able to drill down into the profiles of 13,000 startup founders (defined as those who identify themselves as founders (or co-founders) of U.S. companies created after 2000, with a LinkedIn company profile, and that currently have between 2 – 200 employees) to figure out who starts startups.
What did they find? The infographic here will give the curious a good visual of the results. For anyone who doesn't want to click over, most of the individuals highlighted reside on the coasts, have LinkedIn connections to VC's and have tech companies listed in their profiles. Oh yeah, many of them went to schools like Stanford, Harvard and Sloan.
While these are hardly shockers, there was one bit of information that those who think that Mark Zuckerberg is the prototype will find interesting: most startup founders are over age 30. Apparently there is hope for Blawgconomics yet. Anyone interesting in diving a bit deeper into this topic can view author Monica Rogati's presentation from StartupFest 2011 here.
Iceland Revisited
I had some fairly strong opinions on the situation in Iceland early last year after its population continuously voted down deals its elected government was making to settle bank default-related debts with fellow sovereigns England and The Netherlands. Though we are on the record as writing that bank bailouts are anti-capitalistic (in the Shumpeterian creative destruction sense, not the anti-socialistic sky-is-falling version of the TV news networks) and can foster moral hazard, we nevertheless accused Icelanders of being shortsighted when they refused to fulfill their responsibilities for their banks under EU directives.
So, was I right? Within the past two weeks Iceland has wrapped up its lending program with the IMF, its unemployment rate has seemed to stabilize and is moving in the right direction, and the island nation seems to be in a much better state than many of its European counterparts. Based on this evidence, particularly in a broader economic environment which has been less than robust, it would appear that the citizens of Iceland and their populist president were right after all.
However, since the 'no' votes and leading up to an announcement of a deal last week, the government continued its efforts at sincere negotiations to settle its debts, leading everyone to correctly believe that a satisfactory conclusion would be had. Therefore, many of the positive developments in the interim (such as the continuing relationship with the IMF) were facilitated by the idea that the referendums were not the final word.
In short, maybe we were both right. Putting the debt settlement plan to the people certainly put the government in a better negotiating position, particularly once the English and Dutch made it clear that they weren't interested in being cast as bullies. However, the very real prospect of a final settlement enabled the country to move forward from the brink it was precariously perched on. As is so often the case with complex situations, it would seem that thinking of things in terms of black and white answers to problems was/is not always the best strategy. Good advice for policymakers and bloggers alike perhaps...
So, was I right? Within the past two weeks Iceland has wrapped up its lending program with the IMF, its unemployment rate has seemed to stabilize and is moving in the right direction, and the island nation seems to be in a much better state than many of its European counterparts. Based on this evidence, particularly in a broader economic environment which has been less than robust, it would appear that the citizens of Iceland and their populist president were right after all.
However, since the 'no' votes and leading up to an announcement of a deal last week, the government continued its efforts at sincere negotiations to settle its debts, leading everyone to correctly believe that a satisfactory conclusion would be had. Therefore, many of the positive developments in the interim (such as the continuing relationship with the IMF) were facilitated by the idea that the referendums were not the final word.
In short, maybe we were both right. Putting the debt settlement plan to the people certainly put the government in a better negotiating position, particularly once the English and Dutch made it clear that they weren't interested in being cast as bullies. However, the very real prospect of a final settlement enabled the country to move forward from the brink it was precariously perched on. As is so often the case with complex situations, it would seem that thinking of things in terms of black and white answers to problems was/is not always the best strategy. Good advice for policymakers and bloggers alike perhaps...
The Story of the European Bank Run
I am not always a fan of Paul Krugman. It isn't (always) his analysis itself which bothers me, but rather his seeming inability to separate the economics he originally became famous for from the type of snippy, often too personal political discourse which has since kept him in the spotlight. To be fair, this mixing of real economic analysis with personal pettiness is seemingly part of his job description with The New York Times at this point. However, when I see examples of the clear, thoughtful analysis he is capable of, it makes the other 'stuff' all the more frustrating.
An article representing such a valuable contribution to the current economic discourse can be found here. In the article, Krugman looks at the crisis in Europe and examines the actual differences in the behaviors of the nations which are often lumped together as 'in trouble.' In doing so, he separates the Spain's and Italy's of the EU from the Greece's by noting that the former two states were in far superior economic situations, at least prior to the economic meltdown, than the latter.
He therefore attributes the current troubles facing them to a sort of sovereign bank run. He doesn't dispense with the opinion in this piece; indeed he calls for Jean-Claude Trichet and the ECB to start buying up debt and ignore the moralists who have said that the Mediterranean nations need to take their medicine. However, in the post he manages to avoid the kind of personal potshots which seem to pervade some of his other articles. The suggestions are also timely and relevant as banking systems of individual nations and perhaps even the EU experiment come closer to unraveling. I doubt this will get to his ears (or that he would care if it did...), but Bravo, Mr. Krugman.
An article representing such a valuable contribution to the current economic discourse can be found here. In the article, Krugman looks at the crisis in Europe and examines the actual differences in the behaviors of the nations which are often lumped together as 'in trouble.' In doing so, he separates the Spain's and Italy's of the EU from the Greece's by noting that the former two states were in far superior economic situations, at least prior to the economic meltdown, than the latter.
He therefore attributes the current troubles facing them to a sort of sovereign bank run. He doesn't dispense with the opinion in this piece; indeed he calls for Jean-Claude Trichet and the ECB to start buying up debt and ignore the moralists who have said that the Mediterranean nations need to take their medicine. However, in the post he manages to avoid the kind of personal potshots which seem to pervade some of his other articles. The suggestions are also timely and relevant as banking systems of individual nations and perhaps even the EU experiment come closer to unraveling. I doubt this will get to his ears (or that he would care if it did...), but Bravo, Mr. Krugman.
9.09.2011
PSA: White House Talking Points on the American Jobs Act
Below are the White House's official talking points on the bill President Obama was trumpeting in his nationally-televised speech last night. Additional information can be found at the White House Blog here.
First, it provides a tax cut for small businesses, not big corporations, to help them hire and expand now, and provides an additional tax cut to any business that hires or increases wages.
Second, it puts more people back to work, including up to 280,000 teachers laid off by state-budget cuts, first responders and veterans coming back from Iraq and Afghanistan, and construction workers repairing crumbling bridges, roads and more than 35,000 public schools, with projects chosen by need and impact, not earmarks and politics. And, it expands job opportunities for hundreds of thousands of low-income youth and adults through a new Pathways Back to Work Fund that supports summer and year round jobs for youth; innovative new job training programs to connect low-income workers to jobs quickly; and successful programs to encourage employers to bring on disadvantaged workers.
Third, it helps out-of-work Americans by extending unemployment benefits to help them support their families while looking for work and reforming the system with training programs that build real skills, connect to real jobs and help the long-term unemployed. It bans employers from discriminating against the unemployed when hiring, and provides a new tax credit to employers hiring workers who have been out of a job for over 6 months.
Fourth, it puts more money in the pockets of working and middle class Americans by cutting in half the payroll tax that comes out of every worker's paycheck, saving families an average of $1,500 a year’ and taking executive action to remove the barriers that exist in the current federal refinancing program (HARP) to help more Americans refinance their mortgages at historically low rates, save money and stay in their homes.
Last, the plan won’t add a dime to the deficit and is fully paid for through a balanced deficit reduction plan that includes closing corporate tax loopholes and asking the wealthiest Americans to pay their fair share.
PSA: The American Jobs Act
Following is the official transcript of President Obama's speech regarding the proposed American Jobs Act, applause and all...
THE PRESIDENT: Mr. Speaker, Mr. Vice President, members of Congress, and fellow Americans:
Tonight we meet at an urgent time for our country. We continue to face an economic crisis that has left millions of our neighbors jobless, and a political crisis that’s made things worse.
This past week, reporters have been asking, “What will this speech mean for the President? What will it mean for Congress? How will it affect their polls, and the next election?”
But the millions of Americans who are watching right now, they don’t care about politics. They have real-life concerns. Many have spent months looking for work. Others are doing their best just to scrape by -- giving up nights out with the family to save on gas or make the mortgage; postponing retirement to send a kid to college.
These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share -- where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America.
THE PRESIDENT: Mr. Speaker, Mr. Vice President, members of Congress, and fellow Americans:
Tonight we meet at an urgent time for our country. We continue to face an economic crisis that has left millions of our neighbors jobless, and a political crisis that’s made things worse.
This past week, reporters have been asking, “What will this speech mean for the President? What will it mean for Congress? How will it affect their polls, and the next election?”
But the millions of Americans who are watching right now, they don’t care about politics. They have real-life concerns. Many have spent months looking for work. Others are doing their best just to scrape by -- giving up nights out with the family to save on gas or make the mortgage; postponing retirement to send a kid to college.
These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share -- where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America.
9.08.2011
Is Blogging Dead?
Blogging has become one of the media of choice in the internet age. Everyone from house moms to The New York Times to yours truly has hopped on the bandwagon. It has enabled people to share recipes and keep distant family members up to date on the latest goings on. It has enabled stodgy media organizations to keep up with faster times. It has allowed people like me to share ideas and hopefully provoke some thought in readers around the world in a way that wasn't possible in the old days.
However, the same innovations and spirit that brought blogging into the public consciousness have also decreased attention spans. Blogs themselves, mobile apps, e-readers, those ubiquitous creeping news stories tickers, even video games; all have decreased the ability of the information consumer to focus on any one thing for more than a few seconds. This isn't necessarily bad, it is just the way of things. And as attention spans go the way of skirts during a stock market boom (for those who forget stock market booms, the inference is that they are getting shorter...) it is very possible that we could see blogs utilized less both by those who propagate and those who seek information.
So what else is there? What hits harder in less space than a blog post? A tweet of course. Though we are admittedly not as culturally relevant as, say, Lady Gaga, Kim Kardashian or Katy Perry, Blawgconomics has nonetheless hopped on the bandwagon. Or maybe re-hopped on the bandwagon; we briefly worked on an account when we started the blog, but we allowed it to go dormant. Now that we are a hugely successful multimedia organization, we thought that we were due to get back on the horse.
While we won't be posted anything as enlightening as "On a plane" like one of the lovely starlets above recently did, we will be putting up a lot of links to relevant stories as well as some thoughts on items we don't have the time to blog about at length. Check out the page at BlawgConomics (of course) or at the new tab located at the top of this page. As always, don't hesitate to send feedback to us at editor (at) blawgconomics.com.
However, the same innovations and spirit that brought blogging into the public consciousness have also decreased attention spans. Blogs themselves, mobile apps, e-readers, those ubiquitous creeping news stories tickers, even video games; all have decreased the ability of the information consumer to focus on any one thing for more than a few seconds. This isn't necessarily bad, it is just the way of things. And as attention spans go the way of skirts during a stock market boom (for those who forget stock market booms, the inference is that they are getting shorter...) it is very possible that we could see blogs utilized less both by those who propagate and those who seek information.
So what else is there? What hits harder in less space than a blog post? A tweet of course. Though we are admittedly not as culturally relevant as, say, Lady Gaga, Kim Kardashian or Katy Perry, Blawgconomics has nonetheless hopped on the bandwagon. Or maybe re-hopped on the bandwagon; we briefly worked on an account when we started the blog, but we allowed it to go dormant. Now that we are a hugely successful multimedia organization, we thought that we were due to get back on the horse.
While we won't be posted anything as enlightening as "On a plane" like one of the lovely starlets above recently did, we will be putting up a lot of links to relevant stories as well as some thoughts on items we don't have the time to blog about at length. Check out the page at BlawgConomics (of course) or at the new tab located at the top of this page. As always, don't hesitate to send feedback to us at editor (at) blawgconomics.com.
9.06.2011
Economic Development, Green Style
Romania is one of the poorest countries in Europe with crumbling Soviet-era infrastructure, a lack of exports and high unemployment among its citizens. Its government is trying to kill a lot of these birds with one stone as it has passed legislation which will provide some of the most generous subsidies for the development of wind projects anywhere on the globe.
Under the plan the legislation is meant to facilitate, Romania will generate 43% of its gross domestic electricity consumption from renewables by 2020, a goal which will add a seemingly reasonable 2-4% to the energy costs of local consumers according to estimates. Developers will be responsible for some of the costs of infrastructure improvement under the plan. There has also been some discussion of exporting energy if it proves to be cost-effective. For more on the '$12 Billion Wind Energy Drive,' visit Businessweek here.
Under the plan the legislation is meant to facilitate, Romania will generate 43% of its gross domestic electricity consumption from renewables by 2020, a goal which will add a seemingly reasonable 2-4% to the energy costs of local consumers according to estimates. Developers will be responsible for some of the costs of infrastructure improvement under the plan. There has also been some discussion of exporting energy if it proves to be cost-effective. For more on the '$12 Billion Wind Energy Drive,' visit Businessweek here.
Sales v. Secrets
Let's play a game of what-if. Suppose you ran a company in a distressed industry and you decided to take it in a new direction, revamping your product to participate in the green revolution. Of course, depending on the industry, this could potentially mean billions of dollars in development, testing and marketing costs. Imagine that, against the odds, you were able to successful right the ship, that you were actually able to commoditize your grand idea, and that your efforts succeeded. Now imagine that the government of your largest potential growth market was forcing you to share the secret sauce in exchange for market access.
This very nightmare is currently playing out for automakers such as GM as they attempt to build up markets for certain hybrids and electrics in China. While observers are noting that this type of 'deal' would contravene agreements under the current WTO regime, there is also a practical matter that many companies which cross the Chinese government tend to lose access to the nation's consumers. My mother always told me that there is being right, and that there is common sense, and that unfortunately, they don't always perfectly marry. This reality has already forced some companies to play nice, but others are grappling a bit more strenuously with the problem. For more on this developing story, visit The New York Times here.
This very nightmare is currently playing out for automakers such as GM as they attempt to build up markets for certain hybrids and electrics in China. While observers are noting that this type of 'deal' would contravene agreements under the current WTO regime, there is also a practical matter that many companies which cross the Chinese government tend to lose access to the nation's consumers. My mother always told me that there is being right, and that there is common sense, and that unfortunately, they don't always perfectly marry. This reality has already forced some companies to play nice, but others are grappling a bit more strenuously with the problem. For more on this developing story, visit The New York Times here.
The Future History of Biographies: Part II
Sometimes I don't bring my 'A'-game to the table when writing for the site. Sometimes I post something at the end or the beginning of a long day. Sometimes having the forum this site affords me to share thoughts milling about in my mind doesn't necessarily lead to compelling reading. Sometimes the ability to share thoughts instantaneously with the world at large isn't the best thing that technology has done for our society. Just like in real life, sometimes our e-selves just have bad days. Perhaps all of these factors contributed to a less than robust posting late last week (as well as some others in the past...but we will let those sleeping dogs lie).
Indeed, where is the law and/or the economics in questioning how biographies will be written in the future? Now, of course, being a law and economics site, we can almost always find a legal or economic touchpoint in a story. However, it would take some mental and verbal gymnastics to work out a good, relevant legal/economic story out of our 'Biographies' post. This should probably have become obvious when I barely even made an attempt to do so.
This was brought to our attention by an honest reader who noted that the sidebar to that story was probably more intriguing than the story itself. For anyone who doesn't care to click back to what I have already described as a lackluster effort, the sidebar included the following thought: because physical books, in addition to the words they contain, give utility to owners, they will continue on as a viable commodity. This is in contrast to other media for information, such as CDs, which have been made irrelevant by iPods and the like. I concluded that the market for actual, tangible books would remain even in a world of Nooks and Kindles.
Despite finding this thought interesting, the commenter disagreed with it. To him, the stronger analogy was to records, another medium which was inherently pleasurable but which still, to a great extent, fell by the wayside. Maybe it is worthwhile, since this topic is of more interest than the idea that autobiographies will be more prevalent than biographies in the future, to take some more time to explore it.
Indeed, where is the law and/or the economics in questioning how biographies will be written in the future? Now, of course, being a law and economics site, we can almost always find a legal or economic touchpoint in a story. However, it would take some mental and verbal gymnastics to work out a good, relevant legal/economic story out of our 'Biographies' post. This should probably have become obvious when I barely even made an attempt to do so.
This was brought to our attention by an honest reader who noted that the sidebar to that story was probably more intriguing than the story itself. For anyone who doesn't care to click back to what I have already described as a lackluster effort, the sidebar included the following thought: because physical books, in addition to the words they contain, give utility to owners, they will continue on as a viable commodity. This is in contrast to other media for information, such as CDs, which have been made irrelevant by iPods and the like. I concluded that the market for actual, tangible books would remain even in a world of Nooks and Kindles.
Despite finding this thought interesting, the commenter disagreed with it. To him, the stronger analogy was to records, another medium which was inherently pleasurable but which still, to a great extent, fell by the wayside. Maybe it is worthwhile, since this topic is of more interest than the idea that autobiographies will be more prevalent than biographies in the future, to take some more time to explore it.
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