Recently in economics Category

Well This Explains Everything!

Apparently people are just feeling dizzy, and that's why the markets are still screwed up. Or so says the Minneapolis Fed. Of course, these are the same people who came out with the faulty analysis "debunking 4 myths" about the current crisis (see an analysis here).

Allow me to offer another explanation: banks are nervous and greedy, and are thus using the bailout to build up their war chests, waiting for Congress to further bailout the economy. But, what do I know? :)

Why I Didn't Buy a Hybrid

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As you may or may not recall, I had ordered a 2009 Ford Escape Hybrid from my local dealer back in April, but it never arrived. Ford instead randomly selected 5 people from the 50 who had placed orders with the dealer, rather than taking names in order (we were the first on the list). At any rate, we've had a change of mind on the subject, and here's why.

1) Monthly Cost: By buying a Ford Escape instead of an Escape Hybrid, we're paying about $265/month less over 60 months. At $5/gal, that would be 53 gallons of gas per MONTH that I'd have to use in the non-hybrid in order to break even. That would be a lot of driving, and we simply do not plan to use this vehicle as our primary around-town car. (I recall doing a post on this a while back, but I can't find it now. Maybe someone will remember my chart and its associated post.)

2) Sticker Cost: We looked at a couple used Escape Hybrids at the dealer on Saturday before settling on the non-hybrid choice. The dealer is paying more than the original sticker price to bring these things into the region, where demand is through the roof. A used 2008 Escape Hybrid with nearly 15k miles was stickered at $35k and there would be no budging on that price. A slightly more appointed 2008 Escape Hybrid on the lot with around 25k miles was listed for even more. MSRP on these would have been in the $30-34k range a 12-18 months ago.

3) Total Cost of Ownership: I learned that for new Ford vehicles you can buy a maintenance plan up front that covers all regularly scheduled maintenance for x years up to y miles. In my case, $1390 gives me 6 years or 97,500 miles, which covers oil changes, brake jobs, transmission service, tire rotation/balance, power steering service, etc, etc, etc. Considering I spent about $800 this year alone on my Civic for the 50k miles service, I see a lot of value in that package. Ford has offered this service as a relatively cheap way to increase customer satisfaction and, ultimately, customer retention. At the same time, it lowers my TCO.

There's an interesting post up on PickTheBrain.com this morning talking about how the current economic crisis really stems from moral depravity. The gist of the article is:

"Many people give little attention to the means as their ego tells them the ends justify the means. This approach was infamously promoted by Machiavelli in The Prince, which suggested, amongst other things, the shrewd methods an aspiring prince could use to acquire the throne (remind you of any modern day politicians?)."

It's a very quick read, and definitely recommended. It doesn't get all self-righteous and sanctimonious, but simply points out that the current problems stem from greed-motivated actions that were deceptive and illegal in nature. Not to beat a dead horse or anything, but this seems to be the hallmark of the Baby Boomer generation.

Looking for a sure-fire example of why the economic stimulus package - just sent up to the White House by Congress today - will not have the intended effect? According to The Gavel:

"Put hundreds of dollars into the hands of more than 130 million American families including seniors and disabled veterans – who will spend it immediately to reinvigorate the economy"
Ummm.... so.... they seem pretty sure that the refunds will go right back into the economy by way of purchases... given all the debt load people are shouldering, is that really a safe assumption? If/when we receive ours, I know exactly where it's going: toward lingering credit card debt. Maybe I'm just crazy with fiscal responsibility and conservatism these days, but I doubt that I'm alone.

A word of caution: don't expect these rebates to magically solve anything...

Lending Markets = House of Cards?

This post from Marc Andreessen talks about some of the marketing behind private equity decisions, and how it's resulted in quite the mess. Combine this with the high debt load of Americans, the mortgage situation, and the need for sovereign wealth funds to parachute in money to keep our lenders and banks solvent, and, well, it makes me think that maybe things are as bad as they seem.

My primary concern is with artificially sustaining the industry against the rising tide of recession or, dare I say, depression. I'm beginning to wonder if we're still actually feeling the effects of the Great Depression, in that market control and regulation implemented in the wake of that collapse are now artificially prolonging bad decisions, inflating the market, and preventing an adequate self-correction.

But I'm not an economist... so, take these comments for what they are: concerned speculation.

America: Bubbleland

Last post for the day - promise! Here's an interesting and somewhat amusing article about how the "new economy" has become a self-sustaining bubble-blowing machine. It's actually far more serious than it sounds. The long and short of it is that the economy may not longer be controllable by economists, politicians, or the Fed. Hmmm. Oh, and it sustains itself by building bubbles, popping them, building bigger bubbles, and so on. It's an interesting theory. If it's true, the question then is how to ride those waves up, bail out in time, and then reinvest into the next wave. Or something like that, right? :)

Just a grab bag of links across the spectrum of things I've been reading today. Enjoy!

* Best Buy recalls infected picture frames: Some Insignia-branded digital picture frames seemed to have been shipped with a computer virus. Oops!
* LEGO Brick's 50th Anniversary: It's the 50th anniversary of the LEGO brick. Check out this site with a cool graphical timeline. :)
* Disabled Spy Satellite Threatens Earth: Duck and cover! A US spy satellite seems to have lost its propulsion system and is projected to come crashing back to Terra Firma some time in the next couple weeks. It's rumored to contain sensitive data, and to be toxic. I wonder if the "toxic waste" warnings are designed to keep people away from the sensitive data? :)
* Code Red: An Economist Explains How to Revive the Healthcare System Without Destroying It: Tyler Cowen recommends this book if you're curious about the economics of health care and how to solve the problems.
* Happy Data Privacy Day!: Per SANS, the IAPP has declared today Data Privacy Day. Protect your data, identity, and shred stuff. More importantly, fight the rollback of civil liberties.
* New 4100 Lumen Flashlight Can Set Things On Fire: Looking for a portable way to fry everything in sight? Check out this new flashlight, capable of 4100 lumens. It can burn paper, melt plastic, or fry an egg. Fun stuff! :)

The Tipping Point Challenged

I've never read the book The Tipping Point: How Little Things Can Make a Big Difference, but I do know that it posits the theory that if you can get a few key influential people on the bandwagon for your product or service, then they will kick off a trend that will result in a tidal wave of business, ensuring success. Well, there's now a new theory out that says that this is a bunch of bologna. A quick quote from the article:

(...) According to MarketingVOX, an online marketing news journal, more than $1 billion is spent a year on word-of-mouth campaigns targeting Influentials, an amount growing at 36% a year, faster than any other part of marketing and advertising. That's on top of billions more in PR and ads leveled at the cognoscenti.

Yet, if you believe Watts, all that money and effort is being wasted. Because according to him, Influentials have no such effect. Indeed, they have no special role in trends at all.

Check out the whole story over on the Fast Company web site at:
http://www.fastcompany.com/magazine/122/is-the-tipping-point-toast.html


This video is a few months old now, but I just stumbled across it on Dumb Little Man. It's actually very clever and makes many good points. I personally hate the car-buying experience, but have gotten better at it since I got completely hosed 5 years ago, with a great deal turned around into a complete screw job (a lease instead of a buy, among other things). Definitely worth the 5 minutes and 53 seconds to watch it. :)

If you listen the mass media hysteria, you'd think the world were on the brink of total collapse. You'd think that we're about ready to sprint right past recession to depression. Certainly the global markets are jittery, as is the stock market, and even the Federal Reserve Bank. Any time the Fed cuts .75 points from a key rate, people sit up and take notice.

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