" Where economics isn't just a job, but an adventure"
Quote of the Week
He who fights too long against dragons, becomes a dragon himself: and if you gaze too long into the abyss, the abyss will gaze into you.
-Friedrich Nietzsche
Click on the pictures to enlarge
Blog Topics 2016
January Should Insider Trading be Legalized: Part 2
February The Presidential Election & the Economy
March Does Narcan Increase Heroin Use
April Is NOAA destroying the American Fisherman
June Will California Style Power Outages Happen in New England
July Textbooks, Inflation & the FTC
Blog Topics 2015
January Does Implementation of the Death Penalty lead to higher costs
February Less Competition and Higher Hospital Costs
March Millionaires Who Get Subsidies from the Affordable Care Act
April The Unintended Obama Legacy
May The NY Times and $15 Minimum Wage
June Are Disability Payments Bankrupting Social Security
August Seattle's $15 minimum wage and it's Surprising Consequence
October The Great Stagnation: The Obama Legacy
November Poverty in the United States
December Should Insider Trading be Legalized: Part one by Olivia Marchioni
February Less Competition and Higher Hospital Costs
March Millionaires Who Get Subsidies from the Affordable Care Act
April The Unintended Obama Legacy
May The NY Times and $15 Minimum Wage
June Are Disability Payments Bankrupting Social Security
August Seattle's $15 minimum wage and it's Surprising Consequence
October The Great Stagnation: The Obama Legacy
November Poverty in the United States
December Should Insider Trading be Legalized: Part one by Olivia Marchioni
Blog Topics 2014 blog topics for 2013 are at page bottom
January Will Lake Meade become another Aral Sea
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
February Does Taxing the rich hurt the economy
March The Cause of the Great Depression
April Temporary Agricultural Subsidies lead to wealthy Farmers and Higher Prices
May The Presidents Stance on Gun Control leads to Increased Gun Ownership
June Is there really a Gender Pay Gap
July Did the Supreme Court decision in Roe v. Wade lower the crime rate
August Department of Education and wasted Money
October The Financial Follies of the EPA
November Social Security and Portfolio Diversification
December The White House and Terrorism
August Jobs Report
As summer is winding down, August historically has not been a good month for jobs and this year was no different. Economists were expecting the economy to create 180,000 jobs and the actual figure came in at 151,000. the unemployment rate, U3, was steady at 4.9% as did the Real Rate of unemployment, U6) (which includes part time and marginally attached workers) at 9.7%. Historically, the real rate is about twice the amount of of the U3. Wage growth in the form of hourly earnings, was up up just 3 cents at an annualized pace of 2.4 percent. The average work week declined 0.1 percent to 34.3 hours. The long term rate (those unemployed for more than 26 weeks) accounted for 26.1 percent of the unemployed, down from a high of about 50% during the recession. Among the major worker groups, the unemployment rates for adult men (4.5 percent),
adult women (4.5 percent),teenagers 15.7 percent, Whites 4.4 percent,
Blacks 8.1 percent, Asians 4.2 %, and Hispanics 5.6 percent showed little change in August. The biggest factor that appears to affect work group unemployment is education, or lack thereof.
adult women (4.5 percent),teenagers 15.7 percent, Whites 4.4 percent,
Blacks 8.1 percent, Asians 4.2 %, and Hispanics 5.6 percent showed little change in August. The biggest factor that appears to affect work group unemployment is education, or lack thereof.
Updates/Advisories 9-30-2016
DOW YTD
After dropping 196 points yesterday, the Dow closed up 163 points today finishing the day, week and month at 18,306, and the market continues to trade sideways. Yesterdays sell off was fueled by investor worry about European banks and talk of a December rate increase by the Federal Reserve. Investors were following embattled German lender Deutsche (the largest in Europe), which has been shaken by concerns about the health of its balance sheet, specifically its ability to withstand a potential $14 billion fine from the U.S. Justice Department. Deutsche Bank’s U.S.-listed shares DB, closed down 6.7%. The bank was starting to experience a slight run, however, after the bank listed it's cash and liquid assets, over $200 billion, investors feared was put to rest and the market bounced back today, up over 14%. Yesterday's pullback also had to do with some of the euphoria of the OPEC deal to cut production wearing off. OPEC has always been notorious for individual member countries cheating on quota's.
With 5 minutes left before the closing bell, the Dow was up over 200 points but last minute profit taking took it off it's highs. The market was receiving a boost from comments made by Federal Reserve Chair Janet Yellen Thursday after the close. In a video conference, she said the U.S. central bank might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds.
In economic news, personal spending remained flat in August, while income rose 0.2 percent. The core PCE, the Federal Reserve's preferred inflation measure, rose 0.2 percent. Other data released Friday included the final read on September consumer sentiment and the September Chicago PMI, both of which beat expectations.
Oil rebounded today and is up over $48/barrel which put it up 8% for the month and 23% for the year-to-date. Gold is down slightly to $1320/oz, the dollar stayed constant against the euro at $1.12/euro and the cost of a gallon of regular gas nationwide is up to $2.216.
With 5 minutes left before the closing bell, the Dow was up over 200 points but last minute profit taking took it off it's highs. The market was receiving a boost from comments made by Federal Reserve Chair Janet Yellen Thursday after the close. In a video conference, she said the U.S. central bank might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds.
In economic news, personal spending remained flat in August, while income rose 0.2 percent. The core PCE, the Federal Reserve's preferred inflation measure, rose 0.2 percent. Other data released Friday included the final read on September consumer sentiment and the September Chicago PMI, both of which beat expectations.
Oil rebounded today and is up over $48/barrel which put it up 8% for the month and 23% for the year-to-date. Gold is down slightly to $1320/oz, the dollar stayed constant against the euro at $1.12/euro and the cost of a gallon of regular gas nationwide is up to $2.216.
Updates/Advisories 9-28-2016
6 MONTH OIL CHART
After advancing 134 points on Tuesday, the Dow is up another 70 points today at 18298 after being down most of the day. Tuesday's gain was a result of the debates Monday. It appears to investors that Clinton is cementing her path towards the presidency and most investors feel that she will be better for the markets. She is reasonable predictable and the markets hate uncertainty which is what they will get with Trump, particularly in dealings with our trading partners. Today's turnaround, 116 points in 50 minutes, is a function of OPEC's announcement that they have reached a deal to curtail production. Not only is the Dow on it's way up, but so is the oil patch, with most quality oil stocks being up in the 5% range. Crude oil is up over $47/barrel, a >5% increase. The S&P and Nasdaq had briefly traded lower earlier in the session. Jeremy Klein, chief market strategist at FBN Securities, attributed the fall to an surprise build in gasoline inventories reported by the Energy Information Administration, which weighed on oil prices. "The gasoline inventories have been more important than the oil inventories recently," he said. "At least that's what it seems like from the traders' perspective." Some of you may be asking, isn't higher oil prices bad because it increases costs? Not necessarily. As long as oil is less than $60/barrel, those costs are reasonable and the increase in employment and purchase of capital goods in the oil industry, will more than outweigh the costs. What will move the markets later this week is that 6 different FED officials are scheduled to speak within the next week.
The dollar is stable against the Euro at $1.12/Euro, gold is up slightly at $1326/oz and the price of a gallon of gas nationwide is constant at $2.208.
The dollar is stable against the Euro at $1.12/Euro, gold is up slightly at $1326/oz and the price of a gallon of gas nationwide is constant at $2.208.
Updates/Advisories 9-26-2016
As I said in a previous post, I sometimes hate when I'm right. The Dow was down 166 points today to finish at 18,095 on debate/election fears/uncertainty. Take your pick. Many people are asking, "seriously, is this the best we have?" "Tonight's debate starts the election's critical point for stock investors," Dan Clifton, a Washington policy analyst at Strategas Research Partners, told clients in a research note. "Few events can move the needle as much as the first presidential debate -- with the average polling change from the first debate about 3 points." and, that, I believe, sets the tone. I'm not happy about either candidate and who I eventually vote for won't be a vote for that candidate, so much as it will be a vote against the other. Right now, I'm slightly favoring Trump, but I'm not happy about it. I favor Trump because I generally vote with my wallet. In other words, that candidate who will be better for the economy, and right now I believe it is Trump but not by much. Clinton wants to raise taxes and continue with the regulation that is in place. In other words, Obama 2.0. Remember, we have had 10 years of GDP under 3%. Trump wants to cut taxes, revamp Obamacare, and scale back on some of the ruinous regulations placed on business by both Dodd-Frank and Sarbanes-Oxley. On the other hand, I think Trump's foreign policy in regards to our trading partners is disastrous. I know, "just shoot me!"
In other News:
U.S. government bonds finished higher, with the yield on the 10-year Treasury dipping to 1.586% (the price of a bond and its yield is inversely related) U.S.-produced crude rose nearly 3% to $45.67, as traders look ahead to a key meeting in Algiers where OPEC members are again discussing whether to cap production in some fashion which is a reversal of Friday's sentiment, gold once again traded sideways at $1342/oz, the dollar weakened slightly to $1.13/Euro and the price of a gallon of regular gas nation wide is stable at $2.207.
Also in other news, the FBI says that violent crime is on the rise in most major cities for the 1st time in 25 years. In Chicago alone, there have been over 500 killings and more than 3000 shootings, and the year is not over. In case you're wondering, you're safer in Afghanistan than Chicago. As I've said previously, I put the blame squarely on Obama and his pro victim, anti-police stance; and let's not forget the Massachusetts Supreme Court that just ruled that is ok for a black man to run away from the police.
In other News:
U.S. government bonds finished higher, with the yield on the 10-year Treasury dipping to 1.586% (the price of a bond and its yield is inversely related) U.S.-produced crude rose nearly 3% to $45.67, as traders look ahead to a key meeting in Algiers where OPEC members are again discussing whether to cap production in some fashion which is a reversal of Friday's sentiment, gold once again traded sideways at $1342/oz, the dollar weakened slightly to $1.13/Euro and the price of a gallon of regular gas nation wide is stable at $2.207.
Also in other news, the FBI says that violent crime is on the rise in most major cities for the 1st time in 25 years. In Chicago alone, there have been over 500 killings and more than 3000 shootings, and the year is not over. In case you're wondering, you're safer in Afghanistan than Chicago. As I've said previously, I put the blame squarely on Obama and his pro victim, anti-police stance; and let's not forget the Massachusetts Supreme Court that just ruled that is ok for a black man to run away from the police.
Updates/Advisories 9-25-2016
The Dow continues to trade within a 3 month trading range and was down 131 points to finish the day and week at 18,261 with all but three of the 30 blue-chip components finishing in negative territory. Apple Inc. AAPL, -1.67% shares, off 1.6%, were also contributing to negative sentiment following reports that Japanese antitrust regulators were considering taking action against the Calif.-based company. Also contributing to the downturn Friday was oil which was down about 3% at $44.60/barrel on reports major oil producers aren't likely to reach an agreement to freeze production at a meeting this weekend. Regardless the market posted a second straight weekly gain, however, thanks to a Fed-induced rally earlier this week. Markets rallied earlier in the week as traders cheered the Federal Reserve’s latest policy announcement, sending the Nasdaq Composite to consecutive record closes. The Fed on Wednesday stood pat on interest rates, but also indicated confidence in the U.S. economy and signaled a rate rise could come by year’s end which was consistent with the streets expectations. Add to that the fact that the Fed downgraded the number of rate hikes it sees in coming years and what Wall Street is seeing is a "risk-on" attitude. The market-friendly Fed rate decision sparked a rally in the bond market, which pushed down yields on U.S. government bonds. The yield on the 10-year U.S. Treasury note fell to 1.616% Thursday, its lowest level since Sept. 9.
In other news: A Baker Hughes report showed active U.S. rigs drilling for oil climbing by 2 to 418 rigs this week. They have now posted increases in 12 out of the last 13 weeks. Shares of Twitter soared 22% amid intensifying talk of a takeover, possibly by companies including Salesforce.com Inc. CRM, -5.63% or affiliates of Alphabet Inc. GOOG, -0.04% CNBC reported Friday.
The FED decision has momentarily decreased market volatility, however analysts feel that one factor that will have an impact on markets and stocks, bonds and currencies will be the presidential election, If Donald Truump, who is still viewed as an underdog, puts in a good debate performance Monday and is viewed as a legitimate threat, it could send the markets reeling. Either way, I'm planning on down days during the beginning of the week.
The price of an ounce of gold was steady at $1342/oz, the dollar also was sideways at $1.12/Euro and the price of a gallon of regular gas nationwide was down slightly to $2.208.
In other news: A Baker Hughes report showed active U.S. rigs drilling for oil climbing by 2 to 418 rigs this week. They have now posted increases in 12 out of the last 13 weeks. Shares of Twitter soared 22% amid intensifying talk of a takeover, possibly by companies including Salesforce.com Inc. CRM, -5.63% or affiliates of Alphabet Inc. GOOG, -0.04% CNBC reported Friday.
The FED decision has momentarily decreased market volatility, however analysts feel that one factor that will have an impact on markets and stocks, bonds and currencies will be the presidential election, If Donald Truump, who is still viewed as an underdog, puts in a good debate performance Monday and is viewed as a legitimate threat, it could send the markets reeling. Either way, I'm planning on down days during the beginning of the week.
The price of an ounce of gold was steady at $1342/oz, the dollar also was sideways at $1.12/Euro and the price of a gallon of regular gas nationwide was down slightly to $2.208.
Updates/Advisories 9-22-2016
The Dow was up for the 3rd day in a row finishing at 18,392, up 99 points, compliments of the Federal Reserve. After it's scheduled FOMC meeting, the FED, in it's statement, didn't raise rates and said it would continue to look at the data. Speaking of data, there was an unexpected decrease in existing home sales in August. The National Association of Realtors reported a 0.9% decline in August to a 5.33 million annual rate, its second straight monthly decline. Economists forecast a 5.44 million rate. Crude oil moved higher for the second day as there was an unexpected dropped in the weekly inventory report on Wednesday. West Texas Intermediate crude was up 2.2% to $46.32 a barrel
The majority of investors are now pricing in the likelihood of a December rate hike. Chances are now at 52%, according to CME Group fed funds futures, up from 48% before the announcement on Wednesday. The FED's decision not to raise rights was the right decision, even tho 3 members of the FOMC dissented. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 16.46 percent after the Fed kept rates unchanged. On Thursday, it traded 11.3 percent lower, near 11.8.
In other news: polls between Democratic nominee Hillary Clinton and her Republican counterpart, Donald Trump, have narrowed significantly over the past few weeks, according to data from RealClearPolitics.com. Heading into their first debate, Clinton held a 6-point lead over Trump, according to an NBC News/Wall Street Journal poll.
U.S. Treasurys rose, with the two-year note yield around 0.78 percent and the benchmark 10-year yield near 1.63, the dollar was relatively stable at $1.12/Euro, gold down slightly to $1341/oz and a gallon of regular gas nationwide is stable at $2.215.
The majority of investors are now pricing in the likelihood of a December rate hike. Chances are now at 52%, according to CME Group fed funds futures, up from 48% before the announcement on Wednesday. The FED's decision not to raise rights was the right decision, even tho 3 members of the FOMC dissented. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 16.46 percent after the Fed kept rates unchanged. On Thursday, it traded 11.3 percent lower, near 11.8.
In other news: polls between Democratic nominee Hillary Clinton and her Republican counterpart, Donald Trump, have narrowed significantly over the past few weeks, according to data from RealClearPolitics.com. Heading into their first debate, Clinton held a 6-point lead over Trump, according to an NBC News/Wall Street Journal poll.
U.S. Treasurys rose, with the two-year note yield around 0.78 percent and the benchmark 10-year yield near 1.63, the dollar was relatively stable at $1.12/Euro, gold down slightly to $1341/oz and a gallon of regular gas nationwide is stable at $2.215.
Updates/Advisories 9-20-2016
With the Dow down only 3 points yesterday closing at 18,120, you may think that volatility has left the market; but keep holding on to your cookies, because at one time it was up over 130 points. As can be expected, volume was low as many investors stood on the sidelines waiting for the FED's meeting scheduled to begin today and culminating with their all important policy statement Wednesday at 2 PM. Currently, traders are pricing in just 15% of odds of a September rate hike, according to CME Group, down from roughly 35% at the end of August. The probability of a rate hike at the Fed's December meeting is now around 55%.
Market sentiment got an initial boost from the oil patch, where the price of a barrel of U.S.-produced crude rose 31 cents, or 0.7%, to $43.34, but off highs for the day. A weaker dollar, $1.11/Euro also was giving the broad market a lift, as it helps sales and profitability of U.S. companies that do a lot of business abroad. Oil also benefits from a weaker dollar as it makes it more affordable.
Currently, the Dow is up in pre-market trading and oil is down slightly to $42.98/barrel. Companies expected to report earnings on Tuesday include Lennar, FedEx, Adobe and KB Home. Another stock to watch will be Chesapeake Energy, after S&P Global Ratings downgraded its credit rating to "selective default" from "CC." The stock traded more than 5 percent lower in extended hours trade (CNBC).
What is making news today is the price of gas at the fuel pump where the national average of a gallon of regular is $2.211. The reason it is trending upwards, particularly in the south, is a leak in a pipeline (from New York to Texas), that supplies 40% of the east coast with its gas. The leak has been stopped and repairs are underway, but aren't expected to be completed until next week. So far, New England gas hasn't been affected with the the price of regular gas in NH at $2.13/gallon.
Market sentiment got an initial boost from the oil patch, where the price of a barrel of U.S.-produced crude rose 31 cents, or 0.7%, to $43.34, but off highs for the day. A weaker dollar, $1.11/Euro also was giving the broad market a lift, as it helps sales and profitability of U.S. companies that do a lot of business abroad. Oil also benefits from a weaker dollar as it makes it more affordable.
Currently, the Dow is up in pre-market trading and oil is down slightly to $42.98/barrel. Companies expected to report earnings on Tuesday include Lennar, FedEx, Adobe and KB Home. Another stock to watch will be Chesapeake Energy, after S&P Global Ratings downgraded its credit rating to "selective default" from "CC." The stock traded more than 5 percent lower in extended hours trade (CNBC).
What is making news today is the price of gas at the fuel pump where the national average of a gallon of regular is $2.211. The reason it is trending upwards, particularly in the south, is a leak in a pipeline (from New York to Texas), that supplies 40% of the east coast with its gas. The leak has been stopped and repairs are underway, but aren't expected to be completed until next week. So far, New England gas hasn't been affected with the the price of regular gas in NH at $2.13/gallon.
Updates/Advisories 9-18-2016
I sometimes hate being right. Volatility is back and this week, all eyes will be on the FED as the FOMS, meets Tuesday and Wednesday, and announce the result of its meeting Wednesday at 2, and whatever they decide to do, as the man said, " hold on to your cookies, we're going for a ride." After dropping 300 points mid-week, The Dow ran up 178 points on Thursday (mainly compliments of Apple), and then dropped 88 points on Friday. During the beginning of the week, the market swings were a function of what FED official was speaking and their view on interest rate hikes. However, towards the weeks end, the chance of a September rate hike diminished primarily as a result of poor economic readings, in retail sales, GDP and various manufacturing indices. In addition, the inflation rate for the past year (year-over-year) is 1.1%. On Friday, the Dow was down more than 140 points, before recovering. Contributing mainly to the fall was Goldman Sachs and United Technologies. The oil market settled about 2% lower with the price of oil (West Texas Intermediate) selling for $43.03/barrel. The concern was oversupply in the world wide oil market reinforced by the Baker Hughes rig count that reported an increase in drilling rigs by 2 over the previous week to 416.
Gold finished the week at $1314/oz, the dollar at $1.12/Euro and the price of a gallon of regular gas nationwide is up to $2.2.
Updates/Advisories 9-15-2016
After dropping nearly 300 points Tuesday and Wednesday, the Dow is up 180 points with 30 minutes left in the trading day, welcome back volatility, and this despite low/disappointing retail figures which showed a negative .3% for August. Helping the Dow is Apple, whose stock is up over 3% at $115.21. On the inflation front, prices at the wholesale level also came in softer-than-expected, with the so-called producer price index coming in flat in August, shy of the 0.1% gain forecast which should add more ammunition to the FED not raising rates in next weeks FOMC meeting. The soft retail data also appeared to reduce the chances of a FED rate hike. According to the CME Group, futures markets are now pricing in just a 12% chance of the Fed hiking rates next Wednesday, down from 15% Wednesday which appears to be the reason as to why the Dow is in rally mode today. And in case you're wondering, yes I do believe that the FED has done a great job of confusing everyone as to their direction, particularly in light of the weak economic data.
In addition to Apple, energy stocks are leading the way with oil up at just under $44/barrel. Crude prices fell about 3 percent for a second straight day on Wednesday following a 4.6 million barrel build in U.S. distillates inventories. It was the biggest weekly build since January and put distillate stocks at six-year seasonal highs.
Gold is up slightly at $1319/oz, the dollar is steady at $1.12/euro and the price of a gallon of gas nationwide is also steady at $2.182.
In addition to Apple, energy stocks are leading the way with oil up at just under $44/barrel. Crude prices fell about 3 percent for a second straight day on Wednesday following a 4.6 million barrel build in U.S. distillates inventories. It was the biggest weekly build since January and put distillate stocks at six-year seasonal highs.
Gold is up slightly at $1319/oz, the dollar is steady at $1.12/euro and the price of a gallon of gas nationwide is also steady at $2.182.
UNH Study Results 5-31-2016
In other News:
First, a little history. In 1800, 90% of the adult population were farmers (lots of factory child labor), by 1900, 25% of the population and currently, about 2% as a result of technology garnering greater yield/acre. As a result much farmland from the 19th century is no longer. In a recent study out of UNH, it was found that 75% of the farmland from the mid 19th century is now covered by trees and this is contributing to warmer winters. Trees causing higher temperatures you say; how is this possible? It is very simple physics. In the winter in NH (and most other states), farm pastures are covered with snow, and this reflects sunlight, and heat, into space. Now that 75% of these pastures are covered with trees, the dark trees absorb the heat and it permeates into the atmosphere causing a general warming and milder winters. If you've ever wondered what a stone wall was doing in the middle of the woods, those woods were once pastures and delineated borders and contained live stock.
3-23-2016
Here's something you don't here everyday, a prominent democrat bashing a serving democratic president. While speaking in Spokane Washington on behalf of his wife, Bill Clinton said the following; ""If you believe we can rise together, if you believe we've finally come to the point where we can put the awful legacy of the last eight years behind us", obviously a slam at Obama and his failed presidency. The Web site is cnn and the following link will get you there. http://www.cnn.com/2016/03/21/politics/bill-clinton-hillary-obama-legacy/index.html.
3-6-2016
A number of people have asked me about Bernie Sanders tax plan and he is in the same fantasy land as Obama. First, it would never pass a republican Congress and early indications are that the Republicans will definitely maintain control of the house.
He wants to make all state university's free; let's just look at NH. At UNH there are 14,500 students of which 45% are out of state. Just tuition, not including room and board for out of state students is $30,000 and in-state $17,000. If you do the math that's a total of $331,325,000, and that doesn't even include Plymouth, Keene and Granite state which are also part of the state University system Do that for every state and it is an astronomical cost that his fantasyland proposal doesn't even begin to cover. I hesitate to do the cost for California that has 38 million people as opposed to NH's 1.6 million.
What I find particularly disconcerting, is all the people who are buying this.
This platform has now been adopted by Hillary Clinton and the Democratic Party
With all the talk of interest rate hikes, I've received a number of e-mails concerning an explanation of what interest rates are relevant to us as consumers.
The Federal Funds Rate
This is the interest rate that is followed most closely and affects all other short term interest rates. It is the rate that one bank charges another bank on an overnight loan and has a direct effect on the prime rate. The current rate is .25%.
Prime Rate
This is the rate that the larger banks charge their best customers on short term loans (under 3 months). Once the federal funds rate is changed, the prime rate is changed by, usually, the largest bank, JP Morgan-Chase, and all other banks follow. The prime rate is generally 3% higher than the Federal Funds rate. The current prime rate is 3.25%. This affects all other short term loans: HELOC's (Home Equity Line Of Credit), boat loans, car loans, etc. What it does not affect directly is the mortgage rate.
The Federal Funds Rate
This is the interest rate that is followed most closely and affects all other short term interest rates. It is the rate that one bank charges another bank on an overnight loan and has a direct effect on the prime rate. The current rate is .25%.
Prime Rate
This is the rate that the larger banks charge their best customers on short term loans (under 3 months). Once the federal funds rate is changed, the prime rate is changed by, usually, the largest bank, JP Morgan-Chase, and all other banks follow. The prime rate is generally 3% higher than the Federal Funds rate. The current prime rate is 3.25%. This affects all other short term loans: HELOC's (Home Equity Line Of Credit), boat loans, car loans, etc. What it does not affect directly is the mortgage rate.
Yield on the 10 Year Government Bond
The government finances it's deficit by borrowing money and it does this by issuing bonds that have a maturity value anywhere from 30 days to 30 years. Technically, Treasury bills are issued for terms less than a year.Treasury notes are issued in terms of 2, 3, 5, and 10 years and
Treasury bonds are issued in terms of 30 years. The price of a bond is inversely related to its yield and the mortgage rate is usually 2-3% higher than the 10 year yield.
The government finances it's deficit by borrowing money and it does this by issuing bonds that have a maturity value anywhere from 30 days to 30 years. Technically, Treasury bills are issued for terms less than a year.Treasury notes are issued in terms of 2, 3, 5, and 10 years and
Treasury bonds are issued in terms of 30 years. The price of a bond is inversely related to its yield and the mortgage rate is usually 2-3% higher than the 10 year yield.
California Drought of 2015
California is in the middle of a drought; it must be global warming or now the more politically correct term (spare me), climate change. In case you haven't noticed, the climate is always changing. It is in a constant state of flux. If you notice the chart below right, California has had a number of mega-droughts during the medieval ages and this was considerably worse than it is now. Oh yea, and probably the father of these current climate alarmists were predicting an ice age in the 1960's (click on pictures below).
California is in the middle of a drought; it must be global warming or now the more politically correct term (spare me), climate change. In case you haven't noticed, the climate is always changing. It is in a constant state of flux. If you notice the chart below right, California has had a number of mega-droughts during the medieval ages and this was considerably worse than it is now. Oh yea, and probably the father of these current climate alarmists were predicting an ice age in the 1960's (click on pictures below).
The Congressional Budget Office predicted this week that more than 2 million people will leave the labor force because of Obamacare. Specifically, more people will leave the labor force or reduce their hours, to stay under the cap for federal subsidies. If you are a family of 4, and household income is under, WAIT FOR IT, $94,000, you are eligible for a federal subsidy. The number of part time/temporary workers has already increased by 35% since Obamacare was passed in 2010; and yes it will get worse, wait until 2015 when it becomes mandatory for businesses.
For a good laugh on Obamacare, go to this web site and watch this video; http://www.youtube.com/watch?v=qpa-5JdCnmo. It shows the president on 36 different occasions stating that if you like your healthcare plan you can keep it. Obviously there are 1 of two explanations for this misunderstanding. He was ill advised on the 2700 page, 4500 provision Affordable Care Act, or he knew about it and lied. According to a study by Forbes magazine, the ACA will increase premiums to men under 27 by 77%, 40 year olds, 37% and 64 year olds by 37%.
"We have to pass the bill ..."
http://blog.heritage.org/2010/03/10/video-of-the-week-we-have-to-pass-the-bill-so-you-can-find-out-what-is-in-it/
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 10 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 trillion. At this rate, we are on pace to reach the $3 trillion mark.
www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $2.6 Trillion and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
When Obamacare was 1st released, The Congressional Budget Office predicted that it would cost $900 billion over 10 years. At the time, I made a prediction to my students that I estimate the final cost would be closer to $3 trillion. Three years later, the CBO has raised it's estimate to $1.6 trillion. At this rate, we are on pace to reach the $3 trillion mark.
www.healthcare.gov, the official website to sign up for Obamacare had an original cost of $100 million. That cost is now up to $2.6 Trillion and rising. If the government can't manage the costs on a web site, and these costs have trippled since it opened on October 1, how can it possible manage a 2700 page, 4500 provision bill. The words of Nancy Pelosi (see above) are acting as a harbinger of doom: "We have to pass the bill, so we can find out what's in it."
Obamacare Revised Costs
More on Obamacare
In a recent survey by the New York FED on businesses, the median increase in healthcare premiums is expected to be 10%. More than a quarter of the manufacturing and service firms surveyed said they either have or will boost prices for goods and services "because of the effects that the ACA is having on your business." About 20 percent of respondents said they were reducing their number of workers and/or raising the share of part-time workers as a result of the ACA. His is in stark contrast to the presidents remarks earlier this year that healthcare costs are decreasing.
Maybe CEO's were right when they said the president "Just doesn't get it".
Commentary on Minimum Wage
The main argument concerning minimum wage is that it will help to alleviate poverty. That is clearly not the case. As you can see from the chart at the left, the poverty rate dropped dramatically in the 1960's. This was a function of great society legislation; specifically, increase in Social Security benefits in addition to the inception and implementation of Medicare and Medicaid. Since then, the poverty rate has fluctuated between 9-15% and is highly correlated with the unemployment rate. The vertical grey area's in the graph represent periods of recessions in the US. As can be expected, unemployment rises during recessions and peaks at the end (unemployment is said to be a lagging indicator). As you can also see from the chart, so too does the poverty rate. There is no indication whatsoever that the poverty rate is affected by increases in the minimum wage. Generally, this is quite the contrary. As can be evidenced from the below left chart, increases in minimum wage can contribute to unemployment and as we can infer from the above chart, as unemployment increases so to does poverty. If you look at NH, they have the lowest state poverty rate in the nation and it generally parallels the national unemployment rate. By raising the minimum wage, you increase business costs. As a result; businesses either pass these costs onto the consumer (in which case inflation nullifies any wage increase), substitute capital for labor, or simply go out of business. If you look at the chart below right, UAW (United Auto Workers) membership has decreased in the late 1970's from 1.5 million to 350,000 in 2009. The reason for this is simple. Detroit isn't making fewer cars, they are making more, but they have made their assembly lines more robotic and have substituted capital for labor, which became cheaper in the long run. This can also happen to those fast food workers who want a $15 minimum wage. There is currently a machine on the market that can make 300 burgers/hour. In other words, capital can be substituted for labor. Someone please e-mail me and explain how someone is better off unemployed at $8.25/hour as opposed to being gainfully employed at $7.25/hour
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
You cannot legislate equality. If you want to decrease poverty, implement policies to insure that higher levels of education is available to all.
BLOG Topics 2013
January Do Protected Seals lead to Depleted Fish Stocks
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
February Prohibition: Profits to Cartels & Increased Violence for Americans
March Increased Minimum Wage & Extended benefits lead to Higher Unemployment
April Ethanol from corn & Agflation
May Cash for Clunkers lead to Higher Used Car Prices & Wasted Tax Dollars
June The Affordable Care Act; Anything but Affordable Part 1
July The Affordable Care Act; The poster Child for False Advertising
August Detroit: Higher Taxes + Liberal Benefits = Bankruptcy
September No Keystone Pipeline leads to more pollution
October Global Warming! Or is it Global Cooling!
November Poverty & Benefits
December Does Affirmative Action lead to Reverse Discrimination?
iOMe Challenge 2012
The United States has amongst the lowest savings rate for all technological nations. The iOMe challenge is a nationwide competition between Colleges where teams submit a 10,000 page essay on how Americans can improve their savings rates. In addition, teams must produce an approximate 60 second video which complements the essay. If you click on the iOMe logo above, it will take you to Bentley University's 2012 video submission. The faculty adviser for the challenge is John Tommasi and is offered during his Fall EC 351 course, Contemporary Issues in Economics.
I'm pleased to announce that on February 15, Bentley was declared the winner of the iOMe video portion of the contest. Congrats to the team members and great job! |
EC 3900 Energy Economics
EC 3900, Energy Economics and International Markets, is a 3 credit, Short Term Program, that is offered during Spring semester. After 7 weeks of lecture, the class takes a 10 day educational/cultural tour to France where 80% of their electricity is produced by nuclear power. During the 10 day trip, students travel to, and tour various nuclear facilities Last year's class visited; Marsailles, Aix en Provance, Lyons, Brest and 4 days in Paris.
|
Unintended Consequences
If there were ever words that can strike fear into the hearts of any man women or child, it's: "I'm from the Government and I'm here to help". On a monthly basis my blog, from an economic standpoint, will explore government laws, decisions and actions, which while well intentioned, had inadvertent results that were either disastrous, or made a bad situation worse. It wouldn't surprise me if you reached the conclusion that congress does two things well, nothing and overreact; and you may ask yourself, do Congressional members vote for what is best for the economy, or what will get them re-elected.
iOMe Challenge 2012 - Video |
iOMe Challenge 2011 - Video |
