Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

January 6, 2019

From Tulips to Cryptocurrency

There always seem to be another mania. 

From the Tulips Mania in 1637, when a tulip went for more than 10x what a skilled workman earned in an entire year!

To Cryptocurrency in 2018, which is down about 80% from its $20,000 peak losing $700,000,000,000. 

In between, we had the gold rush, the great depression, the tech/dot-com bubble, and the housing/mortgage crisis, and many more I am sure. 

There seems to always be something for people to get excited about in an "irrational exuberance" type of way, as former Federal Reserve Chair, Alan Greenspan put it.

Is it boredom, big dreams, unadulterated greed, the desire to "get rich quick" and easy, the belief that you've discovered the Holy Grail or is it just people being stupid. 

Either way, we have a way of getting ourselves in trouble, some "losing their shirts."

Not sure who said it, but there isn't an easy fix to your life. 

There are small and big problems, and then there is you trying to fix them (with G-d's help). 

As to bitcoins and tulips, they ain't worth what you think they are. ;-)

(Source Graphic: Andy Blumenthal with photos from Pixabay). 
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February 17, 2015

From Stability Comes Instability

I remember hearing the phrase (not sure from where), "everything and the opposite."

I think it refers to how within each thing in life are elements of the exact contrary and opposing force. 

Similar to the interactions of ying and yang, the world is an interplay of opposites--males and females, black and white, fire and water, ebb and flow, good and bad, optimism and pessimism, and so on. 

Everything has a point and it's counterpoint.

It was interesting to me to see this concept expressed in terms of the financial markets (Wall Street Journal), where bull and bear contend in terms of our finances.

But what was even more fascinating was the notion from the economist, Hyman Minsky, who noted that the very dynamic between stability and instability was inherent within itself.

So for example, Minsky posits that a stable economic market leads to it's very opposite, instability.

This happens because stability "leads to optimism, optimism leads to excessive risk-taking, and excessive risk-taking leads to instability" (and I imagine this works in reverse as well with instability-pessimism, retrenchment and limiting risk to stability once again).

Thus, success and hubris breeds failure, and similarly failure and repetitive trial and error/hard work results in success.

It is the interflow between ying and yang, the cycle of life, life and death (and rebirth), the seasons come and go, boom and bust, and ever other swinging of the pendulum being polar opposites that we experience. 

The article in the Journal is called "Don't Fear The Bear Market," I suppose because we can take comfort that what follows the bear is another bull. 

But the title sort of minimizes the corollary--Don't (overly) rejoice in the bull--because you know what comes next.

Go cautiously and humbly through life's swings.  ;-)

(Source Photo: Andy Blumenthal)
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January 17, 2014

China's Dangerous Socioeconomic Malaise

Fascinating article in the Wall Street Journal today on China's "Left Behind Kids."

While we hear about China as the rising Asian economic powerhouse, we do not often contemplate the socioeconomic impact of what is occurring there on Chinese families. 

As China rises to economic superpower status, more than 250 million migrant workers pour from the poor rural parts of China to the cities to supply the  relatively cheap labor to keep manufacturing humming and the economy brimming with growth.

Those left behind are 61 million Chinese children, who are growing up without one or both parents. 

One in five Chinese children haven't seen their parent(s) for at least 3 months.

But laws in China prevent children from coming to the cities with their parents in order to stem the flow of migration from rural areas. 

Chinese parents are saying, "We'll go wherever we can get the highest pay,"

Children are saying, "What's the big deal of having no mother anyway? I can grow up without a mom."

So while smog and pollution is spoiling beautiful China cities and harming people's physical health, the greater concern is that children are missing out on the loving, bonding, caring, and guidance that comes with a regular parental presence and good sound parenting from them. 

Understanding that strong parent-child relationships are critical to the formation of mental, emotional, and spiritual health of the children, the numbers and severity of Chinese children that are missing out on this is of great concern. 

While some children may be okay under the care of able grandparents along with regular visits or calls by parents, many others children, who don't have this, could end up having serious mental and emotional problems.

Already "more than 70% of children in rural China show signs of mental health problems such as anxiety and depression."

And as is often the case, anxiety and depression turn into resentment and anger.

With tens of millions of left behind children being forced to fend for themselves and hundreds of millions of migrant parents living in "dormitories, tents, or bomb shelters" away from their families and homes, what we have here is a bonafide socioeconomic ticking time bomb. 

Political pundits often point to the concern of China's power elite that the people will rise up against them and the Communist Party,
but I think the far bigger concern is to those outside of the system altogether. 

In my mind, the destruction of the core family will ultimately result in a tsunami of frustration, anger, and a weakening of social values.

Moreover, this  could very well spillover and lead to a dangerous rise of militancy, where people do not want to lash out against their political system or leadership, but rather against everyone else who took the goods that left them economically richer, but poorer in just about every other way. ;-)

(Source Photo: Andy Blumenthal)
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July 24, 2011

How Do You Like Those Apples?

Apple

A new proposed method for determining Cost of Living Adjustments (COLA) for people receiving Social Security and federal and military retiree pensions is called the Chained Consumer Price Index (CPI).

The Federal Times (18 July 2011) reports that "proposed COLA changes would mean smaller annuities for retirees."

Essentially, the Chained CPI doesn't just look at the change in prices for "market basket" of goods, but it "takes into account...the fact that most consumers change their buying habits when prices go up."

What this means in a simple example (exaggerated for effect) is that:

If the price of an Apple goes up from $1 to $2 instead of COLA being adjusted so that retirees get $2 for the apple, we give them instead maybe $1.25, since we ASSUME that because the price of apples went up "people are likely to buy fewer apples or switch to a cheaper fruit."

Does that sound right from your shopping experience?

Are you going to buy fewer apples or are they sort of a necessity? Further, if the price of apples goes up, is it not likely that the price of other common fruits will go up in an inflationary environment as well.

This proposal which is estimated "to save $300 billion in its first decade" sounds like quite the fuzzy economics indeed.

So how do you like those apples?

(Source Picture: here)

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April 2, 2011

The Cost of Underestimating Technology


While research is important and I respect the people who devote themselves to doing this, sometimes they risk being disconnected from reality and the consequences associated with it.

From the Wall Street Journal, 2 April 2011--two economists calculated that "$1,700 is the benefit the average American derives from personal computers each year."

They call this the "benefit we get from computers above and beyond what we pay for them."

To me, this figure seems inconsistent with common sense and the realities on the ground.

In an information age, where we are connected virtually 24 x 7 and can download hundreds of thousands of apps for free, endlessly surf the internet, shop and bank online, get much of our entertainment, news, and gaming on the the web, and communicate around the globe by voice, video, and text for the cost on a monthly high speed connection, I say hogwash.

Moreover, we need to factor in that most of us are now information workers (about 20%) or depend on technology in performing our jobs everyday and earning our living.

Just yesterday in fact, the Wall Street Journal reported that more people work for the government (22.5 million--forget the private sector information workers for the moment) than in construction, farming, fishing, forestry, manufacturing, mining, and utilities combined!

Additionally, at work, we are using computers more and more not only for transaction processing, but also for content management, business intelligence, collaboration, mobility (and robotics and artificial intelligence is coming up fast).

Finally, technology enables breakthroughs--in medicine, energy, environment, education, materials sciences, and more--the impact of technology to us is not just now, but in the potential it brings us for further innovations down the road.

So is the benefit that you get from computers less than $5 day?

I know for me that's the understatement of a lifetime.

Apparently by some, technology continues to be misunderstood, be undervalued and therefore potentially risks being underinvested in, which harms our nations competitiveness and our collective future.

As much respect as I have for economics, it doesn't take an economist to think with common business sense.

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