Monday, July 31, 2006
“I’ll pay $1,000 to whoever finds me my future wife.”
Tired of going to the clubs and bars (not that I really frequented them anyway) and tiring of courting ditz after drug-addict after psycho-path after spoiled brat daddy’s girl, dating has quickly gone from something that would put you on cloud nine for a week when you were 16 to a chore you abhor by the age of 31. And instead of having that giddy optimistic feeling of (what was that thing called again….ummm…OH YEAH) hope, now I find myself asking, “OK, what the hell is going to be wrong with this one.” Thus, without any rational economic thinking, I just blurted out, “Look, I’ll pay you or anybody who finds me my wife $1,000.”
But the more I thought about this idea, the more I realized this was genius. Outsourcing your dating to other people. And not just one person, but allowing the competitive free market to work for you by just posting a bounty and letting other people vie for the money. This would not only free you from the financial burden of going out and the expenses of dating, but would also free up your time to allow you to pursue whatever pursuits you desire. You could play video games all day, work out, swim. A compelling economic argument exists that you could work instead, thereby earning more than the $1,000.
Enthralled by this idea, I was more than willing to pay Brad, or anybody else for that matter, the $1,000 bounty for finding me a spouse.
But Brad is a greedy bastard.
Brad pointed out that;
$1,000 is a one time fee. There is not much economic incentive to go hit the pavement, let a lone poke around when the “benefits of marriage” would arguably be more than one year.
Therefore he should get “retaining fees” or “royalties” annually.
Being the economist, I concurred. Not only should the bounty hunter be rewarded, but this would tie his/her financial incentives in with my long term marriage incentives. For without annual retaining fees, the bounty hunter may have the incentive to just grab any ol’ person that can put on a good game for a year, get married, and then make my life hell for the next 30 years. Thus, I proposed a sliding scale compensation scheme.
Each year the bounty hunter’s royalty would be based on the level of “happiness” I would have with my marriage. This would be rated on a scale of 1-10. 1 good, 10 bad and 5 being average. If the marriage scored anywhere between 1-5 then the spousal bounty hunter would receive no royalties. However, if it was rated 6 or higher, the following compensation would be paid out;
6 – I might make it to year 2 - $100
7 – I’m reasonably happy with my wife - $200
8 – Wow, I kind of still actually like my wife and enjoy spending time with here, GOOD JOB BRAD! - $300
9 – DAMN! Life is ACTUALLY BETTER WITH HER! This is a rare woman indeed! - $400
10 – She serves me martini’s while in French Maid lingerie, reads The Economist, does not want children, and makes better charts that I” - $500
All good and well, but what incase of divorce? Divorce would be an obvious failure on the part of the spousal bounty hunter. Thus I proposed that if I were to get divorced, Brad would have to pay me $2,000 AND $2,000 towards lawyers fees.
Then the cynical Andrew L came in and suggested this was just an elaborate scheme to swindle $1,000 from Brad. As if I’d go through the hell of being married for one year for a cheap grand.
But that was another point to all this. The original $1,000. Was that the true economic price that somebody would be willing to pay? Would be enough to incentive enough people to look. So I asked around.
I asked my producer who said, “no way, not in a million years for only $1,000.”
I asked my best friend, who presumably would just do me the favor of setting me up without financial recompense, “no way, not in a million years for only $1,000.”
I asked myself if I would look around if somebody paid me a $1,000. Hell no, it wasn’t worth the time.
It seems that it is already well known what a hideous waste of precious time and resources this is, let alone a lot of my friends are already currently pissing away their resources on this futile pursuit. A mere $1,000 is not going to incentive them to bother looking.
So I went and did what all economists try to do but what efficient markets end up doing for us anyway; estimate the price of things that are not estimatible, but we’ll give it a go anyway because an estimate must be concocted.
And based on the projected total outlays for dating and courtship, assuming the average age one gets married, prorating one’s time at the market wage and discounting it to today’s value I came up with a rough estimate of $44,420. ie- you are going to spend $44,420 in time and money on chasing down your spouse and should be the economic price you are willing to pay to find somebody else out there thereby freeing up your life to pursue other pursuits.
Of course, just like Brad, I am a cheap bastard. That’s the costs to me, that doesn’t mean I can’t tender the offer to the public and let the forces of competition whittle away at the price. Besides, that’s the whole idea of outsourcing; specialists can do it better and cheaper than what I can. Furthermore, I should be paid for my financial innovation and genius and being the first to market with this idea.
Alas, I will gladly pay whoever finds me my spouse $5,000, without any of the complicated “retainer fees/divorce penalties” proposed by Brad. Just a straight flat fee of $5,000.
And now that I’ve effectively outsourced that heinous burden, you’ll excuse me whilst I no longer go to a bar or approach a girl ever again and pursue life’s pursuits that interest me. Ahhh, the life of an economist.
Friday, July 28, 2006
"If you pay people not to work, guess what, they won't."
And it was with much anger and ballyhoo that the left said welfare reform in 1996 would bring about Great Depression levels of poverty and children would die and have to eat each other's feces to survive.
Well, not only has billions of wealth been produced and millions of people's self-esteem been bolstered, welfare cases have gone down.
Now if we could only force the parasites at AARP to follow the same high standards of our poor.
Thursday, July 27, 2006
"CHICAGO COUNCIL OKs LIVING WAGE"
What seems to have happened is that Chicago's city council, in all of its wisdom, decided to pass a law requiring employers beyond a certain size to pay $10/hr minimum wage and $3/hr in health benefits.
The purpose in this I presume is to provide the workers of Chicago a living wage.
So riddle me this, riddle me that aspiring and junior deputy economists, WHAT IS THE EFFECT THIS NEW LAW GOING TO HAVE ON CHICAGO'S LABOR MARKET???!!!?!!!?
One doesn't have to be a U of Chicago grad student to realize that companies will just not set up shop in the first place in Chicago, IRONICALLY HAVING THE REVERSE EFFECT OF WHAT WAS INTENDED BY THE IDIOTS IN THE CHICAGO CITY COUNCIL!!!
Again, it seems the parasite has killed off its host and not realized it and in doing so has condemned itself. For while it may be grand that wages are now higher, unfortunately, this will deter companies and potential employers from conducting business in Chicago, and thus THERE WILL BE NO FREAKING JOBS, let alone ones that pay $10/hr. Furthermore, this will contribute to the divide between rich and poor in Chicago as now the only businesses that will set up shop are those that need specialized labor and would have to pay about $10/hr anyway, and thereby denied unskilled and presumably poor labor any employment prospects.
But what I get a kick out of the most is the response of those useful idiots who failed to understand this basic economic concept of the labor market. These morons who don't realize their jobs are gone. These idiots who think 0 jobs at $10 is better than 50,000 jobs at $7 or $8. What is their response?
U of Chicago graduates, they are not.
So I've been asked to compile a list of sites that are the "best" for researching and studying economics.
Now, if you're like me, you found yourself a bevy of sites, and if those sites suit your purpose, you don't really go out and explore or look around for additional sites. And while I may have a slightly broader list than most, I'd be curious if any of you aspiring, deputy or real-life economists out there could recommend your favorites.
Thus far, some of the key ones off the top of my head are;
Any others I'd really appreciate!
Tuesday, July 25, 2006
That is until my daytime gig required I analyze an ethanol plant as a prospective investment.
Now, truthfully, I couldn't care less about the ethanol deal. Yeah, I'm sure it's interesting, but as far as I can tell, oil has to be pretty darn high to make ethanol economic WITHOUT the subsidies.
And that's my whole point.
It's only when oil is in the nose-bleed section does ethanol (among other alternative fuels) ever become addressed or contemplated or make the news. Of course oil doesn't remain in the nose-bleed section forever. And if/when any one of the following happens;
1. The Mideast settles down, grows up and instead of killing people to get to Allah they find out they can make a tidy living pumping oil
2. A new large deposit of oil is found
3. The US goes into recession thereby dropping demand for oil
4. China grows only at 7% GDP instead of 12%!
5. We build some refineries
Interest and demand for these alternative fuels are going to tank as the price of oil is going to tank (bringing ethanol prices with it) and thus go back to being once again the fuel of choice;
And while I may lament the loss of ethanol for a discussion topic, when oil tanks (which it will), there will be a much more interesting topic in its place;
How the hell will Hugo Chavez stay in power without his oil money?
Get the terrorists to do capitulate
Kind of reminds me of the mother versus father approach.
Mother approach; "Oh please stop beating up your brother. That's not nice. Oh, think of what you're doing. Please be rational. I'll give you a cookie if you stop peeing on the floor. You don't want me to think about letting you know that I might be contemplating maybe asking you to perhaps go to your room, do you?"
Father approach; "WHACK!!!!!" Do that again and I'll beat you effing senseless again!
Monday, July 24, 2006
Clean up ONLY the biological messes.
ie-I’ll clean the bathroom, wash the dishes, take out the garbage etc., anything that will grow germs, mold and so forth, but I have a hard time finding the rationale for picking up the place, or putting away my video games, organizing that pile of papers, or picking up my clothes, let alone that pointless evil brainwashing process foisted upon us by women; folding them.
These objects are hurting no one, laying there on the floor. They are innocent. They are not spewing disease and fermenting infectious germs like say, children. Thus, I say leave the non-bacterial stuff alone and clean up only what truly matters.
Alas, while these are one of the many benefits of bachelorhood, there comes the time where I unfortunately must clean BEYOND my standards and that is anytime I have the prospect for a date.
Notice, I said "prospect." For we all know that just because a girl says yes to a date, doesn’t mean you’re actually going on it (thus prompting me to come up with the Theory of 505025). But regardless of the probability that you’re actually going to go out on a date, bachelors have to assume that you are going out on the date.
And not only are you going out on the date, but you must also assume the girl will have poor judgement, and therefore you might get lucky and she might actually go home with you, thereby leaving you no option but to fully clean the bachelor pad.
And that is the paradox.
Is the probability that you are actually going to score with a chick worth the AT MINIMUM 4 HOURS of unnecessary cleaning?
The short answer is no, but again it is the only bet you can make, thus you have no choice.
So you spend the next 4 hours cleaning your house head to toe. And based on statistics, 78% of the time it will be pointless, because girls (at least in Minnesota, be curious about other states/countries) bail out at the last minute or somehow fail to show up 78% of the time. And upon further thought, it’s even less likely than that, in that it’s only about 5% of the time will the girl actually see the inside of your house.
However, as much as I’d like to say that it ends there, it does not. For while it is most certainly likely a waste of your time to clean the house, you LITERALLY HAVE NO OPTION WHEN IT COMES TO CLEANING YOUR CAR!
I don’t know about you, but I use my car as kind of a separate, off-site mobile storage unit. Why rent some place to store my excess wares when I have a perfectly good automobile trunk. And if you don’t have children and look in the owners manual of your car, you’ll see that the backseat automatically defaults to "Extra Storage Space for Your Crap."
Unfortunately, women don’t see the economic genius in using all storage space available to you, so unless she’s picking you up or you’re biking over to her place, you get to clean the car.
Here is where certainly the 78% Bail Out Ratio becomes tedious and annoying as all hell. Assuming you not only clean out the car, but also wash and wax it, as well as Windex the interior, you at minimum will spend 1.5 hours on that car. Add that to the 4 hours you spend cleaning out the house, you’ve now spent 5.5 hours in total cleaning.
This unspoken opportunity cost is rarely considered when budgeting yourself for a date. If you take 5.5 hours and multiply it by your hourly wage at work, it will provide some insight as to just how truly costly dating is and that’s assuming you’re going on the date.
Fortunately, there is a solution, and your Captain Capitalism has found it.
For those aspiring Male economists, we all know that women do not like to be chased.
Actually, let me rephrase that;
We have no freaking clue what women like.
But we do know when we chase them or show any interest in them, they do not have any interest in us. However, when we ignore them and act indifferent to them, then we need sticks and RPG’s to keep them away.
Thus, fellow Economists of the Bachelortude Order, I propose that for the first date you do not pick them up, but rather meet them at the venue or location of the date. This not gives you the air of indifference to them, thereby making you look irresistible in their feminine eyes, but it also alleviates us of the responsibility of cleaning the car since we will not be picking them up.
Furthermore, should things go so well that there might be the potential for a little smoochy-smooch, then I suggest you insist on going to her place.
This alleviates you of the responsibility of cleaning the house.
If you follow these rules, I estimate this will save you 5.5 hours worth of labor, which translates into $88 at average market wages.
However, for all the drawbacks of unnecessary cleaning, I must admit today, I’m glad I am cleaning the place head to toe in preparation of selling the house. For not only did I unearth those two old charts from The Economist, but also this political cartoon.
It’s 2 years old, but I’d still like to point out where 2 years of negotiations and warm fuzzy puppy talk with the Iranians have gotten us.
Sunday, July 23, 2006
So I found it interesting when I was cleaning out the house in preparation to move out of the crap hole that is known as the "city" and into those boring, yet low crime and low tax suburbs a couple articles from The Economist I had set aside.
Dated by about 2-3 years, the charts are phenomenal and support my theory that US stock prices are being driven more by retirement cash flows than corporate profits;
Also of concern is the larger and larger percentage the financial sector accounts for in market capitalization, increasing 5 fold since 1980.
But fear not. I'm sure, just like Dotcoms....and Tulip Bulbs...and Beanie Babies...and the South Seas Company...and Indonesia...and the Housing Bubble we're in now, I'm sure, I'M ABSOLUTELY SURE THIS TIME I'M WRONG!
China never looked so good.
Saturday, July 22, 2006
Anyway, here's one that was BROUGHT to my attention!
I concur with the implication that a recession is on the way.
Fortunately, it will only affect those stupid enough to finance their houses with ARMS or Negative Amortization mortgages.
Friday, July 21, 2006
Of course, why would it be any other way? I mean there certainly couldn't be any sociological or demographic reasons for it. Right? I mean, men are evil and oppressive, end of story, now increase my pay you sexist bastard!
Of course there are those that would contest otherwise. Some would contest that it's because of the biological fact that women get pregnant whereas men don't. Some suggest that when you account for degree, education and continual experience, there is no difference. I've been bold enough to suggest that a larger factor in this is that women tend to major in subjects that won't get them jobs, or at least high paying ones.
Regardless women have been catching up.
But I don't think it has anything to do with measures taken by the hyphenating-name/60's-70's/baby boomer crowd and their gender-equalizing legislation. It could be, I don't know, something as simple as women are having less kids and thus have more time for careers (that and men's income hasn't been increasing as fast)?
It's crazy how complicated this economics schtick it.
Regardless, I will point out one final thing;
I find it utterly ironic that data on "births" and children are found at the Center for Disease Control.
Time to pour yourself a cocktail and tune in to The Economics Supper Club!
The Station is AM 1500 KSTP
The Time is 1-3PM CENTRAL STANDARD
The phone numbers are 651-646-8255 and 1-877-615-1500
And you can listen online here
On a side note, this chart might come in handy. Will be talking about how more and more Minnesota students (and students in general) are opting to major in crap,...err... I'm sorry, I meant to say, "the social sciences and art." I'll then point out that maybe, just MAYBE, Asians make more than anybody else in the country because they emphasize the sciences. But what the heck do I know? I'm just an economist;
Regardless, be sure to tune in!
Thursday, July 20, 2006
Wednesday, July 19, 2006
I know of one project in a small Minnesota town where the population is 2,200 people, and the developer wants to put in 115 MULTI-FAMILY UNITS!!!
Just assuming 2 dwellings per unit, that means this guy actually thinks the population is going to grow by 25% in 3 years...and that they're all going to want crappy, cookie cutting side to side town homes.
Of course, no study was done to see if demand would actually meet or exceed supply, and home builders just keep on building assuming it will always sell.
Well, aside from high interest rates there's another factor affect/driving housing prices lower; a glut o' supply.
We have record levels of inventory of housing/houses for sale;
And this was an interesting little chart I found, you can read the description below;
Now, if my economic spidey senses are correct, they tell me that when supply overly exceeds demand something happens to prices. Unforutnately I went to the public schools, so this is a difficult one for me, but I'm guessing, I don't know, maybe they're ummmm going down????
Tuesday, July 18, 2006
Here's the long version of what it means. But in short, it basically measures how affordable housing is. The higher, the more affordable housing is. The lower, the worse, as housing becomes less and less affordable.
Well, the index has been plummeting as short term interest rates (and long term ones as well) increase, not to mention all the ARM/Reverse Amort. yahoos flooding the market with money they shouldn't have been loaned in the first place has tended to drive prices sky high.
This here's the chart for the nation, unfortunately the NAR is stingy with their data and they don't have monthly data for 2003-2005 (they do, they just don't release it)
Fortunately I found a decent proxy here for the local market, giving you a better idea of the rate at which houses are becoming less and less affordable.
It's a sad day when a realtor admits there might be a bubble.
Monday, July 17, 2006
And so I click on it, voting that I am an American and save 10% or more each year.
The results come in and I'm actually surprised how many people claimed to be saving as much as they are (I'm also surprise that such a cool hip web site only got 26 respondents).
Then I realized I'm on the St. Louis Federal Reserve's web site and there might be a weeee little bit of sample bias as the majority of the people going to this web site ain't exactly the same people who threw parties when Lil' Kim was released from jail or the morons that actually vote on American Idol.
Why do we economists have to be so responsible?
What I cannot help but notice is how the Lebonese Prime Minister is all of the sudden NOW willing to go after Hezbollah.
See what the threat of death can do?
Regardless, the world doesn't need any more carrots. It needs lots o' sticks.
Hilarious. And cynical. I like their cynicism. As cynicism is usually not cynicism, but reality, it just takes a cynic to realize that. Like their post on April 18th.
Anyway, this cartoon is surely going to be proven wrong as I'm sure we'll be proven right in how we're playing nice with Iran. I mean, cause we're nice, right? I mean, they'll realize we're being nice and understanding, which is why Hitler never invaded Poland or France, because the Allies were so nice and understanding of him before. Maybe if we just gave Iran their equivalent of the Sudetenland they'll comply.
Anyway, visit them if you haven't already. Half thinking about buying some of their auctions.
Sunday, July 16, 2006
Friday, July 14, 2006
Don't know about you, but we have a heat waves here in Minneapolis. Fortunately we live in a nanny state that tells us what to do;
The State of Minnesota Recommends;
1. Drink lot's of alcohol. Alcohol is a better hydrater than water.
2. Run outside a lot. We're talking at least 10 miles. Your body will replace the water you sweat out with the alcohol you just drank.
3. Do NOT run the air conditioner. Air conditioners use energy, and energy pollutes the air with greenhouse gases. So if you all don't use air conditioning, global warming will reverse itself.
4. Listen to The Economics Supper Club, this Saturday from 1-3PM Central Standard Time. Listen on the radio or over the internet via the following link
5. Call into The Economics Supper Club 651-646-8255 or 1-877-615-1500.
Remember, if you do what the state tells you, you'll be cool!
Anyway, here is what is measures. And if that it too elongated, the HMI basically measures how healthy the housing market is.
And it isn't too healthy. You know those bevy of cookie cutter townhomes/single family homes that form a big massive circle around every major metropolitan area and sprawl out for miles until all you can see is a vast sea of identical and un-unique housing that all of the sudden makes you feel like you're in a public housing project designed by communist architects?
Yeah, those architectural master pieces are foisting a glut of supply on the housing market, driving down prices.
It's also driving down the HMI to it's lowest point in 11 YEARS!
A buyers market for sure, but a market so overvalued you'll definitely want to low ball those selling by a significant margin.
Not that he was accusing me of lying or being uninformed, truthfully he sounded like an economist and was just informing me that the government had revised the figures and perhaps there was a genuine recession.
Remember, a recession is when GDP contracts for 2 SUCCESSIVE quarters in a row.
Though not booming economic growth, we did NOT have a recession.
I am vindicated once again...but it's hard to be wrong when you only argue the truth.
Wednesday, July 12, 2006
You see, this is why this is an important post, because the left doesn't think. They don't research, they don't study, they just want free money and anything that maybe, sort of seems to support their cause, they will immediately herald as an example of "socialism" working.
So once again, I shall post this to remind all leftists that your darling children in Scandinavia, while impressive, are no rivals for the US. The only country that beats or rivals the US is Luxembourg and soon to be Ireland.
OK, closest we got was Doink looking up oil as a percent of Norway’s GDP for the latest year. Which was what I was trying to get at, but wanted a nice longitudinal chart which you’ll see below.
Going from practically nothing in 1971, oil now accounts for a full 24% of Norway’s GDP (although I speculate this high percentage has a lot to do with an increase in the price of oil recently and it’s traditionally more around 20%).
Regardless, what I did then was calculate Norway’s GDP per Capita going back to 1971 WITHOUT that evil capitalist abomination we all have learned to hate and which any good socialist would never associate themselves with or be proud of; oil.
And the results are what we’d largely expect. Norwegians only work about 75% as much as Americans, and thus when you take away their cash cow, they enjoy standards of living of roughly 75%.
This further confirmed something I’ve always suspected of Norway, and that’s if you took away the oil, they wouldn’t be materially different than any other Scandinavian country.
So aspiring and junior deputy economists, what’s the lesson to learn from all this?
That the next time you hear some leftist idiot start blathering on about how Norway has higher standards of living than the US and is proof positive that socialism works, you can once again, hit them upside the head with the truth and point out to them that, no in fact, Norway really doesn’t have higher standards of living and just happens to be lucky geologically…that and they should be ashamed for taking such joy in (GASP!) oil!
Tuesday, July 11, 2006
Just a pretty standard chart. Again, note China, India and Ireland are at the top. These three have liberalized their economies more than most, pursuing pro-capitalist policies, and shucks howdy, look at that, they're growing.
Will the insane complexity of economics ever cease?
Monday, July 10, 2006
I then suggested that they target the Twin Cities market for we here in Minnesota suffer from a duopoly of two main papers, both of which are communist rags, and that The Economist could swoop in and take the market by storm.
The Economist was actually kind enough to have their main representative in New York call me and discuss it. I learned that The Economist's target market wasn't the everyday person, but that they were ACTUALLY ADVERTISING ON NPR!!!! That was their target market!!!!! 50 something burnt out hippies that listen to Prairie Home Companion, drive Volvo's and eat only organic food.
This shocked me for it almost seemed that The Economist didn't realize what a boon it is/could be to people of more righter leaning ideologies.
Well fast forward 2 years and many things have changed. One, Captain Capitalism has become a somewhat mentionable blog, but more importantly I got a radio show. And as you know there is no money in radio...unless you get sponsors.
Thus, I see a mutually beneficial opportunity.
I disagree with the marketing department at The Economist, I think there is a voracious demand for no-nonsense, unbiased, economic and political news and this demand is pent up in people who are sick of their schmaltzy, leftist dailies like the Star Tribune, The LA Times, The Pioneer Press, The Miami Herald and other MSM entities that hold metropolitan areas oligopolistic hostage. I see additional voracious demand in the collegiate-aged youth as many of you here have exhibited here.
The Economist does not see that.
The Economist is like that beautiful girl next door that has braces, her hair put up and thick rimmed glasses. AND YOU JUST KNOW IF SHE'D LET IT DOWN WE'D BE ALL OVER HER!!!!
THUS, I am doing what I can contacting their offices here in the States to see if they'd be interested in sponsoring The Economics Supper Club (ahem, which you can listen to on AM 1500 on Saturdays from 1-3PM Central Standard time!).
What I need is all Junior Deputy Economists, Aspiring Economists, and Captain Capitalism Groupies that have subscribed to The Economist to make a post here so I can show the people at The Economist that there is demand for their services, it's not the Baby Boomer Public Sector Granola Eaters, and that (ahem) if you happened to have subscribed to The Economist because of this blog, that you also make that known ;)
Besides, it's just a crying shame and pity that PEOPLE MAGAZINE has almost 4 times as many readers.
There is something seriously wrong with the world when people care more about Brittney Spear's latest excursion into sluttery than whether the the shrinking budget deficit is the cause of the Laffer Effect.
Saturday, July 08, 2006
First, it seems the tax cuts are cutting away at the left's only real legitimate criticism of the Bush administration (deficit spending) as those dem der evil tax cuts prompted such economic growth that the deficit is expected to shrink because of unexpected tax revenues.
SECOND, it was the NEW YORK TIMES that wrote the article.
Of course, it's only the New York Times. Main stream media. You know, that ailing dinosaur that is about to become extinct.
And the reason it's about to become extinct is because of natural predators like myself can outdo them in accuracy and above all CHARTS!!!!
So here it is, the government deficit as a percent of GDP.
My favorite is how the deficit during WWII provides some excellent context as to just how expensive the "War in Iraq" is.
Of course the severity of the deficit during WWII warps and dwarfs other deficits, so I focused in on the last 30 years here;
2.3% of GDP?
Yeah, right, Laffer didn't know squat.
Friday, July 07, 2006
That being said, all you need to know is two things;
ARM's and Negative Amortization Loans.
We're all familiar with ARM's. Originally intended for people who KNEW they were only going to live in a place for 3-5 years, these loans were a great way for them to build up equity in a house and take advantage of lower, short term interest rates.
Of course, ARM's started getting abused when people who shouldn't have been loaned money bought houses they couldn't afford using ARM's.
They are paying for it now with WSJP and short term interest rates at 8%+.
But my favorite was something that I thought shouldn't have existed.
You know, there are things that just SHOULD NOT EXIST.
Like genetically engineered mosquitos that carry AIDS. That's a bad idea.
Or dance shoes with glass soles. That's a bad idea.
Or surgical gloves laced with Ebola. That's a bad idea.
Or music that is repetitive with no lyrical component, talent or creativity, ie-rap. That's a bad idea.
Now common sense would dictate to most industries that you would not develop a product that would harm the potential customer. But what if your a mortgage banker with few moral scrupples. Everybody with good credit already has a loan. People with marginal credit already have an ARM, leaving only folk with the crappiest of credit. How do you get them a loan and your precious 1% commish?
Enter in the negative amortization loan or the "reverse amortization loan."
Here's a loan where you are charged interest, but you are so unable to afford the house, you can't even pay the INTEREST on the loan. But that's OK, BECUASE THAT'S THE IDEA OF A NEGATIVE AMORTIZATION LOAN! You pay only PART of the interest and the remaining balance of interest is ADDED to your principal balance on the mortgage. Thus you never actually pay down your mortgage balance, it only GOES UP.
Sudden rap doesn't sound half bad.
What I'm failing to grasp is why would any bank or financial institution push such a product? The only way I can see it, is if they are predatory and fully intend on collateralizing the house when (inevitably) the poor schmoe that was stupid enough to get a reverse mortgage can no longer afford the PARTIAL interest payments.
Of course, that's just how it affects the few unfortunate souls that engage in this sort of financing.
Unfortunately there are not so "few" unfortunate souls as ARM's and, worse still, negative amortization loans are becoming more and more common. Common enough to the point they no doubt are having an affect on their entire housing market (namely a housing bubble). Thus when 25% of the loans hitting the market in 2005 are negative amortization loans and an additional 23% are interest only loans, this money that should not have been given to people floods the housing market, artificially driving up prices. Artifically I say, because once interest rates go up (which they are), these people will quickly leave the market as they cannot finance the loan, flooding the market with housing that frankly, nobody really needs, and prices will drop to normal levels.
The question is whether this decrease or even temporary halt in housing prices will destroy the "wealth effect" that has prompted American consumers to spend more than they make via the Home Equity Loan, and has been one of the engines of the economy's growth in the past 5 years.
I smell a minor recession coming on.
Thursday, July 06, 2006
Wednesday, July 05, 2006
The classical example is the University of Iowa where they allow people to take bets on which politicians they think are going to win, thus resulting in "stock prices" for different candidates.
Some of the evidence points to the masses (read-the people) are better predictors and forecasters than the alleged "experts" as it is probably better to have a million minds working on a project than just a handful of doctorates.
Of course, this is nothing new as we've been using markets to predict the outcome of stocks for centuries. But what I get a kick out of is how nobody seems to point this out when leftists are elected into office or perhaps NOT elected into office.
Most recently Mexico looks to have elected Calderon over Obrador, the free-marketeer against the socialist. This resulted in Mexican stock markets rallying about 3% on the news, and continuing their rally today;
Of course this is common sense that the markets, which are based on profits, economic growth, sales, etc., would respond positively to a capitalist winning the presidential election. But what I get a kick out of is how nobody points out just what a slap in the face this is to leftists across the globe. That when people are allowed to invest their money and they have to put it down somewhere in a free market, such as the stock markets, they prefer the capitalist crowd. It's the masses telling the left, "socialism sucks, your policies would result in lower profits, confiscated business assets, lower sales, lower economic growth and all other things that would naturally bring down the markets and make our lives sucky."
What would ultimately prove my point would be to have a chart of the Bolivian stock markets when Morales was elected in Bolivia. And I fully had intended to find a chart and post it here.
Alas, it seems that I am asking too much of a small, socialist country for their stock exchange seems to have absolutely NO INFORMATION ON THEIR WEB SITE! Heck, not even a chart! Not to mention they don't even bother translating it into different languages.
So I am forced to speculate;
HAD Bolivia had a fully functioning stock market
WHICH represented actual stock prices
I WOULD BET A MILLION BOLIVIAN PESOS (read- 3 cents) THAT IT WOULD HAVE TANKED!
Anybody got a line of a good Bolivian chart?
Tuesday, July 04, 2006
1. Enough to provide for the entirety of their retirement
2. Wasn't being pissed away anyway on the "Great Society"
the Baby Boomers, soon to be Abe Simpsons of the world, would ignorantly live life through the 60's, 70's, 80's, 90's and today thinking somehow they were "entitled" to limitless social security benefits.
This was not just being conducted in the US, but replicated in our oh-so-much-more-intouch European counterparts where they too promised the world to voters.
Of course for those of us who ever bothered to look at government budgets and social pension forecasts, we knew this was nothing more than a ponzi scheme, concocted and perpetuated by politicians to ensure they had the old-fart vote, not to mention the vote of ignorant dumb youths who thought it unfair that retirees be forced to pay for their own retirement, even though they would be the ones bending over to pay for it.
And with a ninja-like cunninginess, the politicians were still able to fend off paying the piper by employing the ingenius use of debt, allowing them to cut taxes, yet increase spending, allowing everybody to have their cake and eat it too, while postponing the inevitable financial hangover far into the future. Far enough that the politcians would be dead and thus pulling off the perfect crime.
Thus leaving us with the current situation we have today, ie-retirees don't pay for their own retirement, but rather rely on current generations to pay for their retirement.
I'm absolutely amazed how the bottom 20%, essentially have a free retirement. I'm equally appalled that the top income earning retirees STILL GET A GOVERNMENT SUBSIDY!!!!
Alas, Abe Simpson summarized old people the best when he said this.
Monday, July 03, 2006
What better way to ring in the birthday of the factually world's greatest nation than to pour yourself a brewski...or perhaps a martini, kick back on this hot 3rd evening and take in all that is the economic wisdom known as The Economics Supper Club.
Will have on tap tonight, which is more important, economic or social rights.
Talk about my experiences talking to Punjab in scenic Bangalore to get my piece o' crap Dell computer to work, and how this is a rare example of free market failure.
Get around to how Bike Messengers are feeling the pinch from technological advances and how technology will obsolete certain labor and industries.
And if we have time find out where the hell all the Mexican woman are on the Latin dance scene.
You can tune in at AM 1500 or listen to streaming audio here.
Call in by calling 651-646-8255 or TOLL FREE for you Canucks and other North Americans at 1-877-615-1500!
No, I'm serious, they have.
For while in a free market it should normally take, A DAY to get a computer, load up your software and BAMMMM! Be cruising on the internet, it has taken over ONE ENTIRE MONTH (and counting) to get a new computer to replace the Gateway that lasted me 5 years with no problems.
Thus, I conclude, communists, or at least some really hard core East German leftists, have commandeered the computer industry, for who else could produce such spectacular market failure than communists?
So, again, while I'm waiting for Dell and Best Buy and the rest of the communist-soaked computer industry to get their heads out of their asses and provide me a computer, I am once again relegated to posting links and textual posts from the office computer.
Anyway, Deroy Murdock had a good piece with some REALLY SPIFFY CHARTS! And, as you may or may not know, I like charts.
So, click here and get your substitute fix for Cappy Cap.
I apologize for the discontinuous supply of charts, but that's what happens when your supply chain is corrupted by communists.
Sunday, July 02, 2006
Now, for those of us who know that corporations, companies, employers and investment are good things that should be wooed into taking up stakes in our country so that jobs, investment, economic production and wealth may occur, this is no shock. Corporations employ people and are going to go where the lowest taxes are. This drives up demand for labor, and thus wages.
Pretty simple ecnoomics.
But for those on the left who deem corporations as "evil" entities that are to be taxed because (to quote Tim Robbin's from "Team America, World Police") "these American corporations are all like, they're um, like, all corporationy!" this should hit them upside their hallow heads and given them reason once again to retreat and desperately grasp for sounds reasons why exactly corporations are a bad thing.
I have not read it in its entirety, but one of the more interesting things the study does is compare the effect neighboring countries' corporate tax rates have on other countries. Surprise, surprise, the lower the tax rate in one country, the lower the wages are in a neighboring country.
Perhaps this is why Ireland is richer than most of Old Europe, and why the former Soviet Bloc will be asking itself in 30 years, "Uh, why did we join the EU again?"