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Economics Headlines for the Week: 2/7/2011

February 7, 2011

Economics headlines from this week’s news, blogs, and op-eds.

To see the week’s economics headlines click here:

Op-Ed: Modeled Behavior: Pity the businessman and the farmer

A little food for thought piece about whether fighting for small-businesses is always the right thing to do for society. My personal opinion on the issue is that while big businesses often can do a better job of providing cheaper goods (but in general at the cost of worse and less personal “service”) , they should be dealt with cautiously because of this fact. Economies of scale are useful in lowering costs, however if you’ve studied economics one of the basics is that these economies of scale coupled with high fixed entry cost actually lead to market inefficiencies in the production and distribution of goods. This means that on “fair and free market” (fair only as in Pareto efficient) principles alone we should at least be somewhat resistant to market consolidation.

USA Today: Buses fastest-growing form of intercity travel

So much for Obama’s high-speed rail lines… or maybe this is good news for them if people are seeking non-automobile forms of transportation? This news could be read as a sign of America’s decline or a sign of a new revolution in transportation infrastructure and the life-blood of our economy (oil). The fact that what this means is unclear really indicates the economic precipice America finds itself facing. Are we going to fall or change course?

The Washington Examiner: Former Kaplan students petition to shut down admissions

Unfortunately, most of these for-profit online colleges such as Kaplan are frauds. They defraud students and the government by taking tuition money primarily from federal loans, a type of loan in which bankruptcy is impossible so there is no risk to the schools. They then provide students with a relatively useless degree and high debt-load. The federal student-loans serve as a government subsidy for these schools allowing them to drag on the economy by producing little real value to their customers while not being forced to suffer the consequences of loan delinquencies because of strict laws on student-loan bankruptcy.

Zero Hedge: Bernake’s Poverty Effect Foodstamp Recipients Jump by 400k in November, Hit New Record of 41.6 Million

While this site is very hit or miss in terms of the accuracy of its content, you can’t really argue with this data.

Zero Hedge: On Mervyn King’s Apology That Central Banks Are Destroying The Middle Class’ Standard of Living

Again, sometimes the information on this site is garbage and extremely biased… but its hard to dispute quotes. The head of Britain’s Central Bank has all but said austerity measures are penalizing the middle-class to pay for upper-class bailouts.

“The Bank of England cannot prevent the squeeze on real take-home pay that so many families are now beginning to realise is the legacy of the banking crisis and the need to rebalance our economy.”

“The squeeze on living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.”

“I sympathise completely with savers and those who behaved prudently now find themselves among the biggest losers from this crisis.”

Of course, those running the World’s central banks would like you to think that it is all inevitable.

MSNBC: Dylan Ratigan: California: Highest number of foreclosures in the nation

A great short video on deregulation, Fannie Mae, Banks, and what the housing-boom looks like now. The housing crisis isn’t over yet.

Op-Ed: Paul Krugman: How Good Is That PMI Number?

Is manufacturing bouncing back going to help the overall economy? Paul Krugman looks at the data, and while it’s a bit noisy (i.e. there is a lot of variability), he says it’s a “good number”. Unfortunately in his own analysis he basically admits that it’s not meaningful. The reason is because there is high variance in the relationship between PMI and GDP. This means that in an economic time period of uncertainty, it is likely that this relationship is weaker. Furthermore, you cannot assert any causal (or predictive) relationship between the two factors; because problems of Endogeneity of the PMI as an indicator for manufacturing, and Simultaneity between GDP and PMI linked to reverse causality (does high GDP lead to manufacturing gains or do manufacturing gains lead to high GDP).

Bloomberg: John Paulson Said to Have Made $5 Billion in 2010 as Funds Rose

Good news for Wall Street salaries! Of course John Paulson made a ton of his money from government bailouts of financial institutions and the bailout of General Motors, but I forgot… that’s just how the free-market is supposed to work.

Macleans.ca: The stock market is for suckers

An article on why the private sale of shares in Facebook is evidence that the stock market is for suckers.

Op-Ed: Alternet: Debts Should Be Honored Except When the Money Is Owed To Working People

Economist Dean Baker from the Economic Policy Institute explains how conservative politicians pushed to make it harder for individuals to file for bankruptcy; but are now arguing that states should declare bankruptcy so that the government doesn’t have to pay the contractually owed salaries and benefits to employees. Isn’t the hypocrisy depressing?

Reuters: Snap Analysis – A tale of two surveys in jobs report

A jobless recovery… America is looking more and more like Japan of the last 20 years.


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