Archive for March 2013
Punching Ahead
The Friday File: In an attempt to reduce concussions, the International Boxing Association will prohibit the wearing of headgear in competition! Absent helmets, it’s hoped boxers will refrain from using their heads as weapons, will have improved peripheral vision, and will not hit as hard as they will be unprotected when counterattacked. Remember, helmets offer…
Read MoreGay Gains
Recognizing gay marriage would reduce, yes reduce, federal spending by about $500 million/year. While that’s just two-hundredths-of-one-percent of annual federal spending, it helps. Spending will fall because generally fewer married couples qualify for (means-tested) entitlements such as welfare, Medicaid, Medicare, and SSI. Moreover, added revenue from the “marriage penalty” more than offsets all increases in…
Read MoreBuilder Sediment
Home builder sentiment recently fell for the second straight month despite a booming housing sector. This is probably because small builders face increasing difficulty finding lots, spec loans are still largely off limits, lumber prices have doubled, and labor shortages abound. Despite these woes, housing starts will rise by 200,000 units in 2013. The question…
Read MoreWishing for Wages
While the economic recovery will soon enter its fifth year, wage growth is invisible. In part, it’s because unemployment is high, but also because more and more jobs are in leisure/hospitality and retail. These two sectors now account for 21% of US employment, yet pay just $13/hour and $16/hour respectively. Manufacturing pays $23/hour, yet employs…
Read MoreHappy Housing
Between 1998 and 2002, before the housing market went haywire, total housing starts averaged 1.65 million units and the population of the US averaged 282 million persons. Over the next five years the US population will average about 320 million. As a result, I expect housing starts to steadily rise to a plateau of about…
Read MoreMcIndex
The Friday File: Based on the idea that exchange rates and prices eventually adjust to make the same thing equally priced the world over, the Big Mac Index was created. In Norway, a Big Mac is $7.84, in Switzerland $7.12 and Brazil $5.64, all overvalued currencies. But it’s just $2.03 in South Africa and $2.57…
Read MoreThe Three Rs
If Congress accepts President Obama’s proposal to expand preschool programs it would go against the vast majority of research that finds programs like Head Start deliver few if any lasting benefits. That said, if we do it, we must devote most program money to the youngest children so that we prevent achievement gaps from forming…
Read MoreSugar High
To prevent defaults by sugar processors that borrowed $862 million under a government price-support system, the USDA may purchase 400,000 tons of sugar to prop up prices. Sugar has fallen 18% to 21.03 cents/lb since the loans were made last October. Higher sugar prices would naturally lead to higher food prices. Yeah! The world price…
Read MoreCash Crunch
The Cyprus fiasco shows us two things. First, countries that don’t issue their own currency simply cannot guarantee bank deposits as they have no control over their monetary policy. It also shows that monetary unions cannot survive bank runs. The upshot, there will now be a calls for a euro-wide bank regulator (like the FDIC)…
Read MoreStrong Week
Retail sales jumped a strong 0.4%, even after subtracting high gas prices, higher building material prices, and autos and groceries. Industrial production was up and is nearing its pre-recession peak and the four-week moving average of initial weekly unemployment claims is at its lowest level in five years. Inflation continues to be benign. The only…
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