Expectation, Inflation and Deflation

November 9th, 2009 No comments

Econtalk.org had another good podcast today. One of the parts I liked best was a short statement about why the rate of inflation or deflation is not what matters, but rather unexpected changes in inflation/deflation. If only this more widely understood. In fact, I would argue that high rates of inflation are correlated with bad economies and not the cause of bad economies. It is more likely that the high inflation is caused by the government printing too much money.
“If everybody knew that prices were going to grow at 2% a year, everybody would factor that into interest rates. Value of the money changing hands a year from now goes up. Inflation would be irrelevant; deflation would also be irrelevant. People have this bizarre fear of deflation; unusual in our lifetime. If everybody understood that prices fell 2 or 3% a year, they would factor that into wage expectations, their borrowing and interest rates. Where you get real effects is when outcomes don’t mirror very closely your expectations. If I lend you $1000 and expect to get $1100 back, and prices are stable; if suddenly prices went up in a way that wasn’t anticipated at the time of the loan, those swings in reality versus expectations discourage economic activity.”

Categories: Economics Tags:

Politicians Hiding Taxes and more.

June 25th, 2009 No comments

I have been thinking about how many bad policy decisions are made because the good option is not politically feasible. The exmple I have been thinking of recently is Health care. I am going to simplify the current debate. Democrats, need to have more health care, taxing to get it is ok, government can allocate (ration) the spending.  Republicans, We need to do something, Taxes are bad, we want a free market, lets get employers to pay for it. Remember I am simplifying. The key to both of these solutions is that they would like to hide from you (we the people) what you are paying. They are ding this by making businesses, pay the cost. I would like to point out that all businesses are owned by people. I hope to show that my guidelines for a solution are better but politically difficult.

  1. Make the individual cost transparent. Government provided or free market insurance, Make the cost to the individual completely transparent. i.e. paid by the individual directly. I’m ok with income transfers/subsidies but don’t hide the costs.
  2. Medical conditions fall into to categories. Those with rapid feedback and those with long term. Playing sport is a rapid feed back, you know that you could get injured and you try not to. I see little reason to add a cost penalty to “risky sport” Pain seems like an adequate deterrent. Smoking, obesity, and other life habits have a much more delayed feedback. These types of habits should be penalized. It does not seem that the future risk of cancer, heart disease is an adequate deterrent. I think the cost of there health insurance should be adjusted so that there is a real time cost. I would also not allow the adjusting of cost based on past care. If the incentives are right don’t penalize for bad luck.
  3. Let patients choose there quality of care. The current system tries to provide the best care standard of care to everyone. I am sure you re asking why would you not always want the best. Well if you are asking that you are not the one paying. My example is; I had a mole on my face. I didn’t really care who removed it. I didn’t need a plastic surgeon or a dermatologist to do it so that there would be no scar. I am not that concerned about my appearance. I would have chosen to have my GP do it. But no I had to see another Doc. I had to see a dermatologist.  Well I wasn’t paying. Even if I was under our current system it is unlikely the GP would do it. Not because they can’t but because the standard is that a dermatologist removes facial moles. Next time I am doing my own.

Point 1 is clearly not political practical, We what to think health care is like Manna from the sky. Point 2 is not political practical because we don’t ike the ide of being told what to do, or eat or …. and I don’t think the AMA would support point 3 for a lot of resons I wont’ go into now.

Categories: My Politics Tags:

Less money where there is more unemployment

February 18th, 2009 No comments

This graph says it all but you can read more here. LINK

Categories: Uncategorized Tags:

Death Videos on YouTube

February 15th, 2009 No comments

I came across a video of a diver dying. It was posted on youtube. It was kinda a strange video like a short documentry. What was intersting to me is that YouTubes “Related Videos” contained more videos of people dieing. Now I seem to have a unique view of death based on other people I have talked to but I wounder is this accessability to seing people dying will change our culture. It is clearly different that being on the news for several resons. You don’t realy choose what you see on the news and I can’t ever think of a time I actualy saw a person dying on the news. Maybe in an abstract way like when the twin towers fell. Obviously there were people dieing. Well I guess the news showed people jumping but did it show them landing? I don’t remember. I hope they did not becuse if they did I would feel bad for forgeting. I am getting of topic. It is interesting to wounder how the assesability of death to those of all ages, cultures, ….. will affect there outlook on the subject. Does it matter?

Categories: Thought Tags:

try 2; Dual post to blog and FaceBook

February 14th, 2009 No comments

I am trying to get my blog to automatically post to FaceBook

Not sure why I am tring to do this but it seems it’s the thing to do

Categories: Uncategorized Tags:

IQ and how states vote

December 10th, 2008 No comments

What ever your slant can you give me an explanation that fits your preference. What I mean is I would not expect a relation ship like this. So can you explain why it is. For democrats it might be easy to say “we are smarter” for Republicans it is not so easy to say “we are stupid”. Both are not good explanations.  I have some for both but let me know what you think.

Categories: Bad Stats Tags:

I went to an ATM today, and it asked to borrow a twenty till next week.

October 17th, 2008 No comments

Powered by ScribeFire.

Categories: Uncategorized Tags:

Real Deal on ‘Joe the Plumber’

October 16th, 2008 No comments

Did you read the artical in the NYTimes, He insnt a licensed plumber, never was an apprentice. ere is the link.

Powered by ScribeFire.

Categories: Uncategorized Tags:

T. Boone Pickens

October 16th, 2008 No comments

If you have never head him speak he gave a good talk at the National Press club. I was a little unsure that he would have anything good to say but I was wrong. To bad we don’t have more people with good ideas and money to sell and invest in them. Why do so many look at environmental issues as an unnecessary cost rather than a business opportunity. Click on the link and the audio will play.

Oil executive speaks at National Press Club

Posted 09/26/2008 – BP Capital Management Chairman T. Boone Pickens discusses oil and energy at a National Press Club luncheon.

Categories: Uncategorized Tags:

Credit Default Swaps, there is still a market.

October 16th, 2008 No comments
The chart below is the current rate for Credit Default Swaps (Credit Derivative). It is interesting to me that these are still being traded more accurately there is still bond insurance being sold and there are some buyers. Keep in mind there is still no exchange or clearing house for these. Here is how to read this, For the B-rated bond you must pay 11% above the fed T to get insurance on the bond for a year. Of course if your bond pays 15% this is good and the Fed rate is almost 0 now. The problem is that there is maybe more risk that the company selling the insurance doesn’t pay than it is that the bond defaults.

Credit Derivative Indexes

Thursday, October 16, 2008
Credit derivatives are designed to allow sellers to take on, or buyers to reduce, the default risk on a bond.
CDX Index Spread
(basis pts)
Upfront Coupon
Roll date High Low Average
Investment grade, N. America 197.75 $97.89 1.50 Sept. 25 215.43 128.50 173.74
  High volatility 502.50 95.43 3.85 Sept. 25 506.67 453.08 474.69
High yield, N. America 120.06 78.85 5.00 Oct. 2 85.45 78.85 82.17
  B-rated 1136.41 80.35 5.00 Oct. 2 88.46 80.35 84.90
  BB-rated 708.04 92.48 5.00 Oct. 2 98.08 92.48 95.49
Emerging-markets 683.95 88.15 3.35 Sept. 25 97.37 88.15 92.63
Emerging markets diversified* 527.09 89.05 2.80 Sept. 25 96.60 87.75 91.84
participants together with Markit Group Limited select companies for
each index. For additional information and a list of participants and
components, please see www.markit.com
This chart can be found at: LINK

Categories: Economics Tags: