Archive for June 2012
Understanding the Scam
The Friday File: Internet scammers must minimize false positives (targets that are attacked yet yield nothing) and false negatives (viable targets that are not attacked). It’s because scamming costs time and money and misidentifying false positives is very costly. To hone in on top targets, scammers say they’re from Nigeria, misspell words, and deliberately make…
Read MoreOh Canada!
To cool down an overheated housing market, the Canadian government, in a move called for by some big banks, is reducing the maximum mortgage length to 25 years from 30 (no balloons), decreasing the maximum one can borrow against a house to 80% from 85%, and capping the maximum mortgage at $800,000 for government-insured mortgages.…
Read MoreAnemic Recovery
Following recessions this severe, economic recoveries are usually quite robust. But not this time. Why? Chronic lack of credit kills sales, depresses investment, and hurts productivity. Prolonged levels of high unemployment erode worker skills, making it hard for the unemployed to find work, shrinking the labor-force. Most importantly, crises stunt innovation, R&D, and the efficiency…
Read MoreBank Run 101
Bank Run 101: Spaniards withdraw euros from Spanish banks and deposit them in German banks. Since Spanish banks still have the same loans outstanding, they go to the Spanish Central Bank for loans. Since all Spanish banks need money, the SCB borrows from the ECB which then borrows from the Bundesbank — because German banks…
Read MoreGoing to Pot
While Uruguay’s bid to legalize marijuana sales makes it the first state to go to pot to raise revenues, the effort should be applauded. President Mijica’s proposal would charge the state with oversight over planting, grading and distribution of Marijuana. Legalizing pot is the best way to address trafficking and cartel violence given insatiable demand.…
Read MoreBet on Bowling
The Friday File: Prior athletic accomplishments are not predictive of future performance with one exception — bowling. Scoring a goal doesn’t increase your chances of scoring another, and there’s no evidence of a “hot hand” in basketball. However, because lane conditions don’t change during a tournament, pro bowlers exhibit a higher strike percentage in the…
Read MoreThe Name is Bond
The ongoing euro-zone debt crisis has been a borrowing bonanza to both Switzerland (not part of the EU) and Denmark (part of the EU but not the euro-zone). On Tuesday, Denmark issued 2-year bonds with a yield of -0.223% while Switzerland issued 3-month debt yielding -0.79%. This means investors will be repaid less than they…
Read MoreThe Game of Life
If you follow these rules: complete a high school degree, work full time, and wait until 21 to get married and have a baby, then you have only a 2% chance of being in poverty and a 72% chance of joining the middle class (earning $55,000+). However, if you violate all three rules, you have…
Read MoreGood Legislation
Legislation requiring ATM operators (who may not be banks) to post placards listing fees for using ATM machines is being vigorously opposed by banking industry lobbyists, who prefer that fees be opaque. However, this is good legislation. It has low administrative costs, lets consumers quickly know what ATM costs are and thus make informed decisions…
Read MoreGDP Down to Earth
The US is 22% of world GDP, the Euro zone 18%, Brazil, Russia, India and China (the BRICs) about 20% and the rest of the world the other 40%. As for growth in calendar year ‘12, the BRICs should hit 6%, China alone might hit 8.5%, the US will, if all goes well, hit 2.5%…
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