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What a Difference A Century Makes

admin — Thu, 02 Sep 2010 18:00:10 +0000

Some U.S. statistics for the year 1904:

Average life expectancy: 48 years

Homes with a bathtub: 14%

Homes with a telephone: 8%

Cost of a 3-minute call from Denver to NYC: $11.

Number of cars in the US: 8,000

Tallest structure in the world: Eiffel Tower

Average hourly wage: $0.22 ($4.61 in today’s dollars)

Average Annual earnings: $450 ($9,500 in today’s dollars)

Percent of births at home: 95%

Percent of physicians without college education: 90%

3 leading causes of death: Pneumonia, influenza, Tuberculosis

Percent of Americans graduating from high school: 6%

Number of murders in entire US: 230

Average length of recession: 22 months

Source: LibertyPost.org

What a Difference A Century Makes is a post from: pay as you go car insurance

The Goldilocks Economy: 67-Month Expansion

admin — Thu, 02 Sep 2010 12:45:09 +0000

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According to the National Bureau of Economic Research, the average length of an economic expansion since WWII is 57 months. The current economic expansion that started in December 2001 is now in its 67th month, and still going strong (see graph above).

According to today’s WSJ: “The job market’s solid performance in June, along with recent signs of vigor in manufacturing and a buoyant stock market, suggest the U.S. economy is entering the second half with considerable steam despite nervousness on Wall Street about cracks in the credit markets and woes in housing.

In short, the U.S. economy seems to be enjoying a Goldilocks moment — not too hot, not too cold.”

The Goldilocks Economy: 67-Month Expansion is a post from: pay as you go car insurance

Workers Pay the Corporate Tax With Lower Wages

admin — Thu, 02 Sep 2010 07:32:18 +0000

Economist and Columbia Business School Dean R. Glen Hubbard writes in the WSJ that workers actually bear most of the corporate tax burden in the form of lower wages, and cutting the corporate tax rates would increase wages:

Who bears the corporate tax burden? Some may be tempted with a quick answer, “corporations.” But that is clearly wrong. The Econ 101 admonition that people pay taxes — in this case, suppliers of capital through lower returns, workers through lower wages, and/or consumers through higher prices — remains true even when the tax is aimed at capital.

Recent research has cast an eye in a somewhat different direction, showing that the corporate tax may be borne not entirely (or even principally) by owners of capital, but by workers. Globalization plays a role. In an open economy, with mobile capital, a source-based tax like the corporate tax will lead to a capital outflow, reducing investment and productivity and wages.

A recent paper by the American Enterprise Institute analyzes data across countries and over time, concluding that for OECD countries, a 1% increase in corporate tax rates results in a 0.8% decrease in manufacturing wage rates.

Wage effects of this size suggest labor bears much of the burden of the corporate tax. In fact, workers collectively would be better off if they voted for higher taxes on labor with corresponding cuts in the corporate tax.

Cutting the corporate tax rate would be positive for investment, productivity and economic growth. It would also reduce a tax burden now borne in large part (or even entirely) by labor, bolstering wages.

Workers Pay the Corporate Tax With Lower Wages is a post from: pay as you go car insurance

And You Thought Gas Prices Were High.. "Agflation"

admin — Thu, 02 Sep 2010 02:30:43 +0000

The chart above shows prices for retail gasoline prices and wholesale milk prices over the last year, using data from the EIA (monthly gas prices) and Global Financial Data (monthly average corn prices paid to farmers), both converted to a price index that equals 100 in June 2006. As the data show, gas prices are about the same as a year ago, while milk prices have increased by 50% in the last 12 months. And more milk price increases are coming…

From today’s WSJ: “On Friday, the Agriculture Department, which regulates the minimum milk prices received by farmers, set the price that processors will have to pay for drinkable milk in July at $20.91 per hundred pounds of milk, up 17% from the June price and up 84% from a year earlier.

In the U.S., some dairy farmers are raising milk prices to offset the higher prices they pay for cattle feed as corn prices rise. Corn is a key feed ingredient.

In May, the average price of a gallon of whole milk in the U.S. was $3.26, up 6.2% from $3.07 a year earlier, according to the Labor Department.

Cheese prices are also starting to rise and Pizza Hut recently raised the price of a regular cheese pizza.”

And You Thought Gas Prices Were High.. "Agflation" is a post from: pay as you go car insurance

Fair But Unbalanced Reporting on the Economy

admin — Wed, 01 Sep 2010 21:30:02 +0000

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According to futures trading on Intrade.com, there is only a 8.5% chance that the U.S. economy will experience a recession in 2007.

According to Brian Wesbury writing in today’s WSJ, “the July WSJ economic forecasting survey shows that 49 out of 60 forecasters expect real GDP to grow at an average annual rate of 2%, or faster, in 2007. Of the remaining 11 forecasters, only two expect growth of less than 1%, and only one expects a recession. For 2008, the forecasters are even more optimistic, with none expecting recession.”

“Despite this, an NBC News/WSJ poll in July found that 68% of Americans thought that the economy was either in recession already, or would experience a recession sometime during the next 12 months. Interestingly, this is not much of a change from the past. This same survey question has been polled at least five times since September 2002. Each time a robust majority of between 65% and 85% of respondents thought a recession was either underway or would occur within the year. Americans have been bearish on the economy for quite some time.”

Why the disconnect between economic reality and the general public’s misguided and distorted perception of the economy?

Brian explains it this way: “A randomly selected pairing of economists from the WSJ forecasting panel would pit two rather optimistic forecasters against each other in debate. But having two economists debate about whether GDP will grow 2.1% this year or 2.4% is downright boring. As a result, the producers of business news spice things up. They arrange for debates between a bullish economist and a bearish economist.” (MP: Like my debate on Kudlow & Company.)

“While this is entertaining, and may bring in eyeballs, which sell commercials, this idea of “fair and balanced” debates leaves an impression that the experts are split 50/50, when in reality it’s more like 80/20, or 90/10. But if all the public sees is an endless stream of 50/50 debates, then it is really not that much of a surprise that people think the future is basically a coin toss. And a coin toss, especially in a time of war and terrorism, is not very good odds.”

Fair But Unbalanced Reporting on the Economy is a post from: pay as you go car insurance

Bank Stocks Rebound by 2.5%, Keepin' Hope Alive

admin — Wed, 01 Sep 2010 16:18:02 +0000

In some “Black Friday bargain hunting,” the broader stock market indexes rebounded today by about 1.4% (see chart above, SP=red line, DJ=black and NASDAQ=green), and bank stocks rebounded at almost twice that rate (about 2.5%) as measured by the NASDAQ Bank Index (blue line above).

Maybe there’s hope.

(P.S. I’ll probably retire from intraday prognasticatin’, and wait until the market has closed to do my analyses.)

Bank Stocks Rebound by 2.5%, Keepin' Hope Alive is a post from: pay as you go car insurance

The Unconscionably Ridiculous "Unfair Sales Act"

admin — Wed, 01 Sep 2010 11:17:02 +0000

Update: I reported in May about a gas station owner in Wisconsin named Raj Bhandari who got in trouble with state bureaucrats because his gas prices were “too low,” at a time when gas prices were actually at an historical high (see chart above, click to enlarge), and everybody was complaining about gas prices being TOO HIGH.

Bhandari, who owns Center City BP in Merrill, Wis., 150 miles north of Madison, was ordered by Wisconsin state regulators in late April to stop offering discounts of 2 cents per gallon to senior citizens and 3 cents per gallon for donors to a youth hockey league, because the programs violated the law. The state’s “Unfair Sales Act” makes it illegal for retailers to sell gasoline without marking it up 6% over what they paid or 9.18% over the local wholesale price – whichever is higher. Violators face stiff fines from regulators, and can be sued by competitors for selling gas too cheap.

Raj filed a lawsuit Tuesday seeking to overturn a 1930s state law requiring retailers to mark up the price of gas. “I should be allowed to give whatever discounts I want to give to the people in order to run my business,” Bhandari said, and his lawyer added, “Entrepreneurs and consumers – not state bureaucrats – are in the best position to decide the price of gas.”

Yeah, and here I thought politicians and bureaucrats were worried about gas prices being too high, not too low! After all, the House just voted 282-141 to pass the Federal Price Gouging Prevention Act to protect consumers against gas prices that are TOO HIGH!

(HT: Society and Money)

The Unconscionably Ridiculous "Unfair Sales Act" is a post from: pay as you go car insurance

Competition Breeds Competence and Lower Prices

admin — Wed, 01 Sep 2010 06:16:02 +0000

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The 2008 North American International Auto Show (NAIAS) started today in Detroit. From the NAIAS website:

More than 6,700 journalists from 62 countries and 42 United States attended the NAIAS 2007 Press Days. Almost 30% of media attendees were from outside the U.S. In addition to Europe and Asia, many media came from a wide variety of countries from all over the globe including Azerbaijan, Argentina, Chile, Croatia, Egypt, Ecuador, Jamaica, India, Latvia, Moldavo, Peru, Rwanda, Turkey, Venezuela and Yugoslavia, to name just a few.

And one of the main things that draws these journalists is the sheer number of vehicle debuts showcased at the NAIAS. The NAIAS has hosted 1,049 North American and worldwide vehicle introductions – which is a fancy way of saying that these vehicles were seen for the first time in the world or in the U.S. at the NAIAS. Media know that if they want to capture a photo of a vehicle the first time it is debuted, their best bet is the NAIAS (see picture above from this year’s show).

The positive news about the 2008 NAIAS is a real “breath of fresh air” for Michigan. We hear a lot in Michigan about the loss of manufacturing and UAW jobs here, the decline of the automobile industry in Michigan, losses and declining market share for Ford and GM, the highest unemployment rate in the country (7.4%), etc.

One of the most under-appreciated, unreported and unrecognized facts about the automobile industry is captured in the chart above (click to enlarge), showing the Consumer Price Index (CPI) for All Items from the BLS, vs. the CPI for New Cars from 1995-2007.

Notice that since 1995, consumer prices have increased by 40%, an annual rate of 2.6% for consumer prices on average. However, new car prices have FALLEN by about 2% over the last 13 years, meaning that new cars are much more affordable today than in 1995. If new car prices had increased at the same rate as the average product in the CPI, new car prices today would be 40% higher than they are today! Keep in mind that wages and income have increased at a rate equal to, or higher than, the CPI, meaning that cars are about 42% MORE AFFORDABLE today, relative to income and average prices, THAN IN 1995!

Despite the financial troubles for the UAW and the Big Three, American consumers have benefited tremendously from the intense foreign competition in the auto industry. Except for electronic goods, what other consumer products are actually cheaper today than in 1995? Not too many.

Bottom Line: Competition in the auto industry (or any industry) breeds competence, to the great benefit of the U.S. consumer. Without the significant discipline of foreign competition, we’d probably be paying 40% more for our American cars today.

Competition Breeds Competence and Lower Prices is a post from: pay as you go car insurance

Chocolate Goes Global

admin — Wed, 01 Sep 2010 01:15:03 +0000

The World Is Flat, and Chocolatiers Want to Coat It

NY Times: Swiss chocolatiers, having long ago conquered markets in Europe and North America, are now aiming at the vast expanses of Russia, India and China, making Swiss chocolate a case study in globalization.

Reminder: Trade works both ways. As economies like India, Russia, China, and Brazil become wealthy and prosperous by producing goods and services for the U.S. and European markets, the workers of those economies also become increasingly wealthy and prosperous consumers of American and European products.

Exhibit A: Swiss chocolate.

Chocolate Goes Global is a post from: pay as you go car insurance

Biomedicine Revolution, Motivated By Profits

admin — Tue, 31 Aug 2010 20:15:02 +0000

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Last night on 20/20, Michael Moore praised government-controlled health care systems in Canada and Europe. He then called for “the elimination of all private profit-making companies in the health care industry” and suggests turning over all health-care spending in the U.S. to the government to provide “free” health care to everyone.

Before turning over the entire profit-making pharmaceutical industry to the government, consider this fact:

“Looking at a broad range of pharmaceuticals, scholars at Tufts University examined all 284 new medicines approved in the U.S. in the 1990s. They found that 93% originated from the pharmaceutical industry, with 7% split between government and academic or nonprofit sources.”

In other words, it was the profit-making private sector that developed 264 out of 284 new medicines in the 1990s, and many are saving lives today. Without the profit motive, most of those drugs probably wouldn’t exist today.

And what can we expect in the future from the profit-making pharmaceutical industry?

Looking to the future, one can see the tremendous potential for the flow of pharmaceutical innovation to expand and accelerate. In terms of the science, we are now in the early stages of a revolution in biomedicine, an explosion of new knowledge that will translate into a whole host of new and better medicines. Yet, the business of finding these new medicines is risky and costly. No one is guaranteed to achieve the financial returns that encourage investment in pharmaceutical R&D. However, two important principles guarantee that such a return is possible: a market-based system of pricing, and intellectual property protection.

I don’t think Michael Moore understands the “invisible hand.”

Biomedicine Revolution, Motivated By Profits is a post from: pay as you go car insurance