This is one of the people who will be reforming the financial regulatory sector and ultimately shaping the future of the global economy:
Watch CBS News Videos Online
The Euro and the Mainstream Media
Here is a comprehensive if not overly pessimistic piece on Greece, the euro and the current state of global debt.
I'm a bit disturbed by the lack of mainstream media attention to this issue. I receive virtually all of my news from Yahoo! Finance and Bloomberg.com, but will periodically check CNN.com and other similar sites to get a more bird's-eye view. There has been nothing on these sites about this issue. I find it eerily reminiscent of mid-2008 period when things stared heating up and most journalists were not attempting to get to the bottom of anything but instead screaming, "What the hell is going on!" and "This is what's going on this is whose fault it is!"
I understand the MSM's hesitation to get involved. It is a very complex, complicated issue, is quite technical and probably boring to most people, and doesn't, as of this moment, directly affect Americans, unlike say the fall of Lehman and Bear.
But that doesn't erase the fact this is an extremely serious situation that deserves attention. If you are looking for more info, the blogosphere has been doing an excellent job over the past few months.
Chaos in Europe
My take on the euro situation is that the EU is in a catch-22. If they bailout Greece (which it looks like they most definitely will), what signal does that send to the rest of the Eurozone, and in particular other high risk nations like Ireland, Italy and Spain? Will bailouts become the norm? What signal will that send to outside nations and investors about the credibility of the currency, if not the entire region? There is also potential inflation concerns to be worried about.
Yet, what signal does the EU send if it allows Greece to default? What will that say about the stability of the euro?
"Greece in itself is not a big thing," said Sveder van Wijnbergen, of the Free University of Amsterdam, who says Athens' budget shortfall of euro5 4 billion ($75 billion) is small change by European standards. "I'm worried about what sort of message we give to other governments."
In my view this is a short-term sure thing if I've ever seen one. I'm going to buy some DRR on Tuesday and possibly move some of my gold exposure to this area as well.
Some Stuff on Trade
Here's a Don Boudreaux letter to the editor on trade and job creation (which are really one in the same if you think about it):
Labor-union official Vincent Fyfe wants the state of New York to continue prohibiting supermarkets from selling wine (Letters, Feb. 12). His reason? Supermarket wine sales will put some liquor-store owners out of business and their employees out of work.
Note to Mr. Fyfe: the purpose of the wine trade – like every other trade – is to serve consumers, not to create jobs for producers. If job creation were paramount, then government should not only continue to prohibit supermarkets from selling wine, but should require that bottles of beer, wine, and spirits be hand-delivered to retailers, one at a time, while cradled in the arms of carriers each pulled though the streets in a rickshaw.
Of course, such a requirement would harm consumers, but it would also create lots of jobs.
Sincerely,
Donald J. Boudreaux
While at dinner a few months I heard someone close to me say that the new devices offered by the local Stop & Shop that allowed shoppers to instantly check out their items were not only bad because they were cumbersome (the real motivation for her vitriol I believe), but also because they eliminated the jobs of traditional check out people.
I held my tongue but wanted to ask, "Should EZPass be eliminated as well? It surely destroys the job of the local tollbooth worker."
Given that she is an avid user of EZPass, and one who loves the benefits it provides, I'm not sure what she would have said.
In a similar vein, Russ Roberts' most recent EconTalk podcast is an excellent monologue on trade and borrows heavily on the ideas of Smith, Ricardo and Krugman. Highly recommended.
Labor-union official Vincent Fyfe wants the state of New York to continue prohibiting supermarkets from selling wine (Letters, Feb. 12). His reason? Supermarket wine sales will put some liquor-store owners out of business and their employees out of work.
Note to Mr. Fyfe: the purpose of the wine trade – like every other trade – is to serve consumers, not to create jobs for producers. If job creation were paramount, then government should not only continue to prohibit supermarkets from selling wine, but should require that bottles of beer, wine, and spirits be hand-delivered to retailers, one at a time, while cradled in the arms of carriers each pulled though the streets in a rickshaw.
Of course, such a requirement would harm consumers, but it would also create lots of jobs.
Sincerely,
Donald J. Boudreaux
While at dinner a few months I heard someone close to me say that the new devices offered by the local Stop & Shop that allowed shoppers to instantly check out their items were not only bad because they were cumbersome (the real motivation for her vitriol I believe), but also because they eliminated the jobs of traditional check out people.
I held my tongue but wanted to ask, "Should EZPass be eliminated as well? It surely destroys the job of the local tollbooth worker."
Given that she is an avid user of EZPass, and one who loves the benefits it provides, I'm not sure what she would have said.
In a similar vein, Russ Roberts' most recent EconTalk podcast is an excellent monologue on trade and borrows heavily on the ideas of Smith, Ricardo and Krugman. Highly recommended.
The Economics of eBooks
Interesting article by the The New York Times on the potential increase in pricing of ebooks. The thrust of the article is that in the near future ebooks will increase from a standard $9.99 price to $14.99, a 50% mark up. Consumers, predictably, are not happy:
“I just don’t want to be extorted,” said Joshua Levitsky, a computer technician and Kindle owner in New York. “I want to pay what it’s worth. If it costs them nothing to print the paper book, which I can’t believe, then they should be the same price. But I just don’t see how it can be the same price.”
First of all, Joshua, you are not being extorted. No one is saying you have to buy $14.99 ebooks in the future or you're going to be harmed in some way. This not a mafia-style "protection" racket or an egregious tax situation. If you don't like it, don't buy it.
Secondly, Joshua, and I assume other upset consumers, are using the Labor Theory of Value to determine what they believe the "correct" price of an ebook should be. Of course, as we now know, the value of any product is determined by its marginal utility concerning a particular consumer in conjunction with the combined factors of input cost and the profit motive. For example, if the final Twilight book costs $10 to "make" and the final Harry Potter book cost $10 to make, then they should be retailed at the same price (given the same profit margin preference). But, personally, I would have paid $100 for the final Harry Potter book, whereas you could not have paid me $100 to slog through the final Twilight book (or any of them for that matter). But many readers probably feel the opposite, saying they would have paid anything for the Twilight book but zero for Harry Potter. So saying an ebook should cost $9.99 or $14.99 or any other predetermined, ultimately arbritary price, is nonsense. Prices are amorphous, as I will shortly explain.
Author Douglas Preston makes the same fallacious arguments, but from the other side of the aisle:
“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”
To reiterate, there is no "real price". Let's recall what a price is. It is a signal, a relay of information to parties about how much another party values an asset they hold title to. The receiving parties then decide whether the benefits they will get from the asset will exceed the costs (the price they have to pay to obtain title from the other party). For every individual for every asset, this preference is different and is subject to an innumerable amount of factors.
As I mentioned before, if Joshua doesn't like the price change, he simply does not have to purchase any more books. Yes, he will have to deal with the sunk cost of the ebook hardware, but this was a foreseeable event and an eBook still has value besides purchasing books (free public domain works, web browser, etc...). Or he could fill his spare time with other activities. Or he could go to a library, like Wilma Sanders:
“As far as I’m concerned, Amazon has committed to the $9.99 price,” said Wilma Sanders, a 70-year-old retiree who has homes in Plymouth, Mass., and Marco Island, Fla. She said that if e-book prices rose, she would stop buying. “I’m still a library-goer. There are enough good books out there that I don’t need to pay more than I want to. I already can’t keep up with what I have.”
I'm with Wilma on this. I do think Amazon will eventually fall back on the $9.99 model. What it seems like their doing is trying to translate the old hardcover/paperback price differential to the new medium (eg: when books first come out they will cost $15, then will drop down to $10 after a few months). But why does the model have to be so standard and rigid? Why can't prices float dependant on how popular a book is? My point is this is a very new market that does not need to be cemented as one particular model.
Obviously the role of publishers' and the deals they have with Amazon, Sony, B&N and Apple all play a huge role in this and the article doesn't mention a whole lot about them.
But my basic point is Amazon doesn't owe consumers anything. That's the beauty of a market. It's voluntary exchange. So if you don't like what they have to offer, go somewhere else or do something else. But don't go on Amazon.com and give a new book repeated one star ratings because you think it's overpriced. It's immature and adversely affects others.
(HT: Marginal Revolution)
“I just don’t want to be extorted,” said Joshua Levitsky, a computer technician and Kindle owner in New York. “I want to pay what it’s worth. If it costs them nothing to print the paper book, which I can’t believe, then they should be the same price. But I just don’t see how it can be the same price.”
First of all, Joshua, you are not being extorted. No one is saying you have to buy $14.99 ebooks in the future or you're going to be harmed in some way. This not a mafia-style "protection" racket or an egregious tax situation. If you don't like it, don't buy it.
Secondly, Joshua, and I assume other upset consumers, are using the Labor Theory of Value to determine what they believe the "correct" price of an ebook should be. Of course, as we now know, the value of any product is determined by its marginal utility concerning a particular consumer in conjunction with the combined factors of input cost and the profit motive. For example, if the final Twilight book costs $10 to "make" and the final Harry Potter book cost $10 to make, then they should be retailed at the same price (given the same profit margin preference). But, personally, I would have paid $100 for the final Harry Potter book, whereas you could not have paid me $100 to slog through the final Twilight book (or any of them for that matter). But many readers probably feel the opposite, saying they would have paid anything for the Twilight book but zero for Harry Potter. So saying an ebook should cost $9.99 or $14.99 or any other predetermined, ultimately arbritary price, is nonsense. Prices are amorphous, as I will shortly explain.
Author Douglas Preston makes the same fallacious arguments, but from the other side of the aisle:
“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”
To reiterate, there is no "real price". Let's recall what a price is. It is a signal, a relay of information to parties about how much another party values an asset they hold title to. The receiving parties then decide whether the benefits they will get from the asset will exceed the costs (the price they have to pay to obtain title from the other party). For every individual for every asset, this preference is different and is subject to an innumerable amount of factors.
As I mentioned before, if Joshua doesn't like the price change, he simply does not have to purchase any more books. Yes, he will have to deal with the sunk cost of the ebook hardware, but this was a foreseeable event and an eBook still has value besides purchasing books (free public domain works, web browser, etc...). Or he could fill his spare time with other activities. Or he could go to a library, like Wilma Sanders:
“As far as I’m concerned, Amazon has committed to the $9.99 price,” said Wilma Sanders, a 70-year-old retiree who has homes in Plymouth, Mass., and Marco Island, Fla. She said that if e-book prices rose, she would stop buying. “I’m still a library-goer. There are enough good books out there that I don’t need to pay more than I want to. I already can’t keep up with what I have.”
I'm with Wilma on this. I do think Amazon will eventually fall back on the $9.99 model. What it seems like their doing is trying to translate the old hardcover/paperback price differential to the new medium (eg: when books first come out they will cost $15, then will drop down to $10 after a few months). But why does the model have to be so standard and rigid? Why can't prices float dependant on how popular a book is? My point is this is a very new market that does not need to be cemented as one particular model.
Obviously the role of publishers' and the deals they have with Amazon, Sony, B&N and Apple all play a huge role in this and the article doesn't mention a whole lot about them.
But my basic point is Amazon doesn't owe consumers anything. That's the beauty of a market. It's voluntary exchange. So if you don't like what they have to offer, go somewhere else or do something else. But don't go on Amazon.com and give a new book repeated one star ratings because you think it's overpriced. It's immature and adversely affects others.
(HT: Marginal Revolution)
Sarah Palin is No Barry Goldwater
Katrina vanden Heuvel recently writes:
Palin nonetheless delivered a speech steeped in the late Arizonan's extremist brand of conservatism. In his 1960 manifesto The Conscience of a Conservative, Goldwater wrote, "I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution or that have failed their purpose, or that impose on the people an unwarranted financial burden." Palin took an equally extremist anti-Washington/anti-government stance, fulminating against the 2009 Recovery and Reinvestment Act by condemning the "fat strings attached" to federal stimulus dollars and by accusing the Obama administration of baldly using the stimulus as a power grab that "disrespect[s] the Tenth Amendment of our Constitution." (Never mind the denunciation of Miranda Rights that she herself had made minutes earlier.)
I don't follow. Never mind the shameless attempt to try and brand free-market conservatism as equivalent to violent political terrorism, what in what in God's name does Sarah Palin have to do with Barry Goldwater?
One may disagree with Conscience of a Conservative from an ideological standpoint, but I think it is safe to say that all can agree the short work is a highly principled, highly consistent essay. It builds on classical liberal political and economic thought and does so quite coherently. Goldwater's book is a testament to individual liberty as a moral end in and of itself. If you disagree with that, fine. But don't say "Well, Sarah Palin is one of the current faces of conservatism and Barry Goldwater is one of the older faces, so Sarah Palin must be today's Barry Goldwater."
Sarah Palin believes in centrally planned nation-building. She believes the federal government should determine who can and cannot get married. She believes the federal government should dictate what you can and cannot put into your own body. Like most so-called conservatives, Sarah Palin loves to espouse the wonders and beauties of the free market when it suits her purposes. But if she doesn't like the outcome of the market (aka individuals making their own decisions), then she will attempt to use the coercive power of the State to enforce her way and outlaw alternatives in a flash.
Barry Goldwater may not have been a practical politician and he have held views that many found and still find unreasonable. But the man was no hypocrite. Sarah Palin is.
American Idol 2010
And so it begins. My early pick is Casey James (WARNING: DO NOT TYPE INTO GOOGLE WHILE AT WORK), though I'm skeptical he'll find enough of a niche to get as far he might deserve to go.
Also liked Andrew Garcia. This cover of Paula Abdul's "Straight Up" could win a Grammy.
A bunch of really good girls, but can't remember their names at the moment. Some very singers though, overall.
Couldn't help but notice that all the best singers all played acoustic. Definitely no coincidence.
Where Do We Go From Here?
I've been following the global economic situtation pretty closely over the past few weeks and the one thing that seems clear to me is that no one has any idea where we are headed. I think it's easy to just throw out a prediction that everyone will forget in fifteen minutes, but if you really want to see what people believe, check out where they've plopped their money. Last week I shifted 15 - 20% of my holdings from an S&P 500 tracking ETF to VXX, which tracks the VIX (in theory). Pretty much I'm paying 89 basis points for insurance against any future collapse, which I think is entirely possible.
My rationale for this move is for the most part the debt situation in Europe. Carment Reinhardt is not enthused by what is going on there. Arnold Kling reinforces her thoughts, though doesn't go into much substantive detail. The latest news is Greece will be bailed out by the EU, but what will this mean for the Euro? Already record shorting is being done on the currency.
A couple of months ago I bought gold anticipating some sort of situation like this. But the flight from the Euro has not gone to metals, and in particular gold as many anticipated, but instead to the dollar. This needless to say has adversely affected gold, driving it down during a time when all the fundamentals say it should be shooting up! I may looking at UUP to play and hedge off this development (I'm still long gold), but that party may soon be over too. I just don't know.
We live in strange times indeed.
My rationale for this move is for the most part the debt situation in Europe. Carment Reinhardt is not enthused by what is going on there. Arnold Kling reinforces her thoughts, though doesn't go into much substantive detail. The latest news is Greece will be bailed out by the EU, but what will this mean for the Euro? Already record shorting is being done on the currency.
A couple of months ago I bought gold anticipating some sort of situation like this. But the flight from the Euro has not gone to metals, and in particular gold as many anticipated, but instead to the dollar. This needless to say has adversely affected gold, driving it down during a time when all the fundamentals say it should be shooting up! I may looking at UUP to play and hedge off this development (I'm still long gold), but that party may soon be over too. I just don't know.
We live in strange times indeed.
Economist Blogger Drama
Hey Rob, if you ever thought our debates got a little testy, check out what's going on between Mario Rizzo/Steve Horwitz and Brad DeLong.
Stimulus debates really bring it out of people.
Stimulus debates really bring it out of people.
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