How the Precious Orchid Got So Cheap

Taiwan's Efficient Growers, Who Copied Tech Industry, Bemoan Days When a Flower Fetched $100,000

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Commodity Prices and Paradigm Shifts

The mother of all paradigm shifts

But there is a paradigm shift underway, maybe even the mother of all paradigm shifts, and it is coming from a direction where Grantham and other bears are not looking.

The real paradigm shift, or more like a paradigm drift, because it is slowly enveloping us, is that we are moving toward preferences and lifestyle where we will simply consume less. A lot less. Like improvements in efficiency, changes in tastes and preferences are nothing new, but this time is different.

The real paradigm shift, or more like a paradigm drift, because it is slowly enveloping us, is that we are moving toward preferences and lifestyle where we will simply consume less. A lot less. Like improvements in efficiency, changes in tastes and preferences are nothing new, but this time is different.

I have already discussed this in previous posts on life in the experience machine and the world of smaller scale. In The Accidental Egalitarian I make the point that with the increased focus on technology – where we spend more and more of our time on our cell phone, doing emails, watching DVDs and surfing the web – there is less of a difference between how the super rich and the reasonably well off spend their time hour by hour during their typical days. The point of that post is that in practical terms the income gap is not as large as it might seem; that several orders of magnitude differences in income don’t make all that much difference in what these people do with their time. The point here is a corollary: those activities do not require much in the way of material consumption, and therefore not much in terms of commodities.

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People who are staring at a tsunami of demand for commodities from the developing world and predicting a doomsday of $400 oil and $4000 gold are missing the longer-term retreating tide of demand as citizens of the developed world actually demand decreasing amounts of energy, large goods, and heavy infrastructure. We won't be packing up and moving to Mars, as the science fiction solutions to resource depletion propose. We will pack up and move into the virtual world.

How to Make the Dollar Sound Again

BY disclosing a plan to conjure $600 billion to support the sagging economy, the Federal Reserve affirmed the interesting fact that dollars can be conjured. In the digital age, you don’t even need a printing press.

Related

• Times Topic: Gold Standard

This was on Nov. 3. A general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop.

Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.

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This is why Mr. Bernanke has set out to materialize an additional $600 billion in the next eight months.

The intended consequences of this intervention include lower interest rates, higher stock prices, a perkier Consumer Price Index and more hiring. The unintended consequences remain to be seen. A partial list of unwanted possibilities includes an overvalued stock market (followed by a crash), a collapsing dollar, an unscripted surge in consumer prices (followed by higher interest rates), a populist revolt against zero-percent savings rates and wall-to-wall European tourists on the sidewalks of Manhattan.

As for interest rates, they are already low enough to coax another cycle of imprudent lending and borrowing. It gives one pause that the Fed, with all its massed brain power, failed to anticipate even a little of the troubles of 2007-09.

Las Vegas Faces Its Deepest Slide Since the 1940s

The nation’s gambling capital is staggering under a confluence of economic forces that has sent Las Vegas into what officials describe as its deepest economic rut since casinos first began rising in the desert here in the 1940s.

Even as city leaders remain hopeful that gambling revenues will rebound with the nation’s economy, experts project that it will not be enough to make up for an even deeper realignment that has taken place in the course of this recession: the collapse of the construction industry, which was the other economic pillar of the city and the state.

Unemployment in Nevada is now 14.4 percent, the highest in the nation and a stark contrast to the 3.8 percent unemployment rate here just 10 years ago; in Las Vegas, it is 14.7 percent.

August was the 44th consecutive month in which Nevada led the nation in housing foreclosures.

Do We Need $75,000 a Year to Be Happy?

People say money doesn't buy happiness. Except, according to a new study from Princeton University's Woodrow Wilson School, it sort of does — up to about $75,000 a year. The lower a person's annual income falls below that benchmark, the unhappier he or she feels. But no matter how much more than $75,000 people make, they don't report any greater degree of happiness.
Before employers rush to hold — or raise — everyone's salary to $75,000, the study points out that there are actually two types of happiness. There's your changeable, day-to-day mood: whether you're stressed or blue or feeling emotionally sound. Then there's the deeper satisfaction you feel about the way your life is going — the kind of thing Tony Robbins tries to teach you.
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It's no surprise, then, that when the same polls are done in different countries, Americans come out as a bit of a mixed lot: they're fifth in terms of happiness, 33rd in terms of smiling and 10th in terms of enjoyment. At the same time, they're the 89th biggest worriers, the 69th saddest and fifth most stressed people out of the 151 nations studied. Even so, perhaps because of the country's general wealth, they are in the top 10 citizenries where people feel their lives are going well, beaten out by such eternal optimists as the Canadians, New Zealanders and Scandinavians.

Read more: http://www.time.com/time/business/article/0,8599,2016291,00.html#ixzz0zVSJQt7u

Why Girly Jobs Don’t Pay Well

A really good kindergarten teacher is worth $320,000 annually, according to one recent estimate, well publicized in this newspaper. That would reflect the present value of the additional money that students in a really good kindergarten class can expect to earn over their careers.

But average pay for kindergarten teachers is only about $50,380. And even at that level, kindergarten teachers, many employed by public school systems, fare relatively well compared with those in similar jobs.

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As one online discussion of girly jobs explains, some women may just like these jobs despite the low pay.

Some empirical research supports this claim. In a careful analysis oflongitudinal data on earnings that includes survey questions regarding attitudes related to work preferences, Nicole Fortin, at economist at the University of British Columbia, finds that women tend to place less importance on money and more importance on people and family than men do.

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Caring often entails commitments to dependents such as young children, adults with disabilities or the frail elderly who can’t afford to pay directly for the services provided. It doesn’t fit easily into the impersonal logic of fee for service or supply and demand.

Further, caring often creates “outputs” that are not easily captured in market transactions, such as the increases in lifetime capabilities created by excellent kindergarten and preschool teachers.

It’s hard to imagine an explicit contract that could enable a care worker to “capture” the value-added – which extends well beyond increases in lifetime earnings to many less tangible benefits.

Good care helps create – and maintain – good people.

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I agree. And I argue that child care, elder care, education and many social services resemble health care in this respect. They are not commodities that can be efficiently produced by a purely market-based economic system.

What’s striking is the high cost of femininity. Many traits that contribute to women’s success in finding a male partner don’t pay off in the labor market – and vice versa. As one economic analysis of a speed-dating experiment puts it, “Men do not value women’s intelligence or ambition when it exceeds their own.” By contrast, intelligence and ambition contribute to men’s success in both the “dating market” and the labor market.

But men’s attitudes toward women (which are changing, albeit slowly) don’t tell the whole story. Another factor is women’s affinity for services that aren’t rewarded by a market-based economy.

Steve Wynn Takes On Washington (and Healthcare)

Steve Wynn, a casino resort/real-estate developer who has been credited with spearheading the dramatic resurgence and expansion of the Las Vegas Strip, talks about the Fall of America.

Why The U.S. Will Never Have A Balanced Budget Again

There are some sobering statistics, concisely presented here..
Uvealblues

The United States government will never have another balanced budget again.  Yes, you read that correctly.  U.S. government finances have now reached a critical "tipping point" and things are going to spin wildly out of control from this time forward.
Why?  Spending on entitlement programs and interest on the national debt are now accelerating.  Some time around 2020 they will eat up every single dollar of federal revenue that is brought in before a penny is spent on anything else.  Of course the solution to all of this would be to radically cut entitlement programs, but no U.S. politician in his or her right mind would do that.

Read more: http://www.businessinsider.com/why-the-us-will-never-have-a-balanced-budget-again-2010-6#ixzz0vwaNJ0Cg

It’s Complicated: Making Sense of Complexity

 AS WENT THE ROMANS? Thomas Cole’s “Course of Empire: Destruction.”

The increasing speed of complexity in terms of knowledge is exciting in my field, but in terms of the beaurocracy of U.S. health care is counter productive...
uvealblues

Ladies and gentlemen, the state of our union is stumped.

Christoph Niemann

The Great Recession and the wars in Iraq and Afghanistan, arguably the toughest problems we’ve confronted in decades, are nothing if not spectacularly complicated. Trying to size up these puzzles is like gaping at a homemade contraption that has mysteriously evolved into something even its designers can no longer fathom, let alone operate and dismantle. Is there an owner’s manual for this thing? Can it be unplugged? If we figure out where it’s getting fuel, can we starve it and hope it expires?
Look at the military’s PowerPoint slide of the Afghanistan war, a labyrinth of cross-thatching lines and arrows swirling around words like INSURGENTS and COALITION CAPACITY & PRIORITIES. (Please click on the link for the powerpoint slide--uvealblues)
“When we understand this slide,” said Gen. Stanley A. McChrystal, who leads the American effort in Afghanistan, “we’ll have won the war.”
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You sense that the march toward complexity has turned into a sprint in the debate about health care reform and even the gargantuan oil spill in the Gulf of Mexico, challenges so baroque, and with so many disparate and moving parts, the best you can do is hope that someone in charge understands them. Complexity used to signify progress — it was the frisson of a new gadget, the riddle of some advance in technology. Now complexity lurks behind the most expensive and intractable issues of our age. It’s the pet that grew fangs and started eating the furniture.
Of course, a nagging sense of incomprehension is a perennial feature of the human experience.

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“Complexity creeps up on you,” he said in an interview. “It grows in ways, each of which seems reasonable at the time. It seemed reasonable at the time that we went into Afghanistan. It’s the cumulative costs that makes a society insolvent. Everything the Roman emperors did was a reasonable response in the situation that they found themselves in. It was the cumulative impact that did them in.”
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Which gets to the worrisome part of the complexity of problems we face today. Instead of improving our lives, it’s vexing them.
What we need, suggests Brenda Zimmerman, a professor at Schulich School of Business in Ontario, is a distinction between the complicated and the complex.
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“We get seduced by the complicated in Western society,” Ms. Zimmerman says. “We’re in awe of it and we pull away from the duty to ask simple questions, which we do whenever we deal with matters that are complex.”

via Simoleon Sense

Net Worth Fighting For

Go to this link for the entire analysis 
Uvealabues

Did the onerous income taxes of the 1950s and ’60s affect the behavior of big-money boxers?  The Atlantic’s Henry Fetter believes so, as he explains in his recent article:

The theory makes perfect sense, and yes, you read that right: back in the ’50s, the marginal rate of the uppermost individual Federal income tax bracket was indeed an incredible 90%!  In other words, after making a certain amount of money, nine out of ten of your hard-earned dollars went straight to the man.  If I had a demotivational font, I’d use it here to type “Ouch!”
In 1965, the top tax rate fell to 70%, and it stayed there until Reagan swaggered into the joint and knocked everyone on their asses.  By the end of his second term, as he gave a parting high five to Bush, he’d gutted the upper bracket to a millionaire-friendly 28% on all earnings over $160,000 – in today’s dollars!  Trickle down, baby!
Three decades later, the Gipper is long gone, but the tax code legacy of Reaganomics lives on.  To illustrate, Weather Sealed’s infographic team charted the historical U.S. income tax brackets for singles, adjusted for inflation, from 1910 to present:

Big Banks Draw Big Profits From Microloans to Poor

In recent years, the idea of giving small loans to poor people became the darling of the development world, hailed as the long elusive formula to propel even the most destitute into better lives.
Actors like Natalie Portman and Michael Douglas lent their boldface names to the cause. Muhammad Yunus, the economist who pioneered the practice by lending small amounts to basket weavers in Bangladesh, won a Nobel Peace Prize for it in 2006. The idea even got its very own United Nations year in 2005.

But the phenomenon has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more. 

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Underlying the issue is a fierce debate over whether microloans actually lift people out of poverty, as their promoters so often claim. The recent conclusion of some researchers is that not every poor person is an entrepreneur waiting to be discovered, but that the loans do help cushion some of the worst blows of poverty.
“The lesson is simply that it didn’t save the world,” Dean S. Karlan, a professor of economics at Yale University, said about microlending. “It is not the single transformative tool that proponents have been selling it as, but there are positive benefits.”
Still, its earliest proponents do not want its reputation tarnished by new investors seeking profits on the backs of the poor, though they recognize that the days of just earning enough to cover costs are over.

One in Four Borrowers Is Underwater

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
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Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.
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Borrowers with negative equity are more likely to default if they live in a state where the bank can't pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond.

But borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced, said Sanjiv Das, head of Citigroup's mortgage unit. "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction."

Mortgage companies have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or redefaulting because they believed the bank would reduce their principal," Mr. Das said.

Wave of Debt Payments Facing U.S. Government

WASHINGTON — The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

Americans Have Been Taken Hostage

Dylan Ratigan from MSNBC calling it as he sees it ... 

The American people have been taken hostage to a broken system.
It is a system that remains in place to this day.
A system where bank lobbyists have been spending in record numbers to make sure it stays that way.
A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built.
It is a system that so far has forced the taxpayer to provide the banks with the use of $14 trillion from the Federal Reserve, much of the $7 trillion outstanding at the US Treasury and $2.3 trillion at the FDIC.
A system partially built by the very people who currently advise our President, run our Treasury Department and are charged with its reform.
And most stunningly -- it is a system that no one in our government has yet made any effort to fundamentally change.
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As hostages -- was there any sum of money we wouldn't have given AIG?
Why did we pay Goldman Sachs and all the other banks 100 cents on the dollar for their contracts with AIG, using taxpayer money, while we forced GM and others to take massive payment cuts?
Why hasn't any of the bonus money paid to the CEOs that built this financial nuclear bomb been clawed back?
And more than anything else -- why does the US Congress refuse to outlaw the most anti-competitive structure known to our economy, one summed up as TOO BIG TOO FAIL?
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Why is this? Who does our Government work for? How much longer will we as Americans tolerate it? And what, if anything, can we do about it?
As we approach the anniversary of the bailouts for our banks and insurers -- and watch the multi-trillion taxpayer-funded programs at the Federal Reserve continue to support banks and subsidize their multibillion bonus pools, we must ask if our politicians represent the interests of America? Or those who would rob America of its money and its future?

Faber: Next Stimulus Will Be Worse

I subscribe to Mark's Faber newsletter and recommend it...there is a good video interview at the link...
uvealblues

Some economists think that another bubble is what’s needed to get the economy moving again.

Gloom, Boom and Doom publisher Marc Faber said this is ridiculous, and that the Federal Reserve — which he holds responsible for creating the housing bubble — wants to do it all over again.

Catching The Gold Bug

A quick primer on gold investment...

More and more investors are acquiring physical gold, or bullion, in the form of small bars the size of iPhones or coins like American Eagles and South African Krugerrands. Individuals’ bullion purchases almost doubled last year, amid apocalyptic panic over the financial system, to 862 metric tons.

Lately, that panic-driven demand has given way to a more subdued, yet still potent, fear that stocks will suffer as the recession grinds on for a long time, so gold makes sense. At the same time, there’s a rising anxiety about inflation among people like Dr. Van Steyn, resulting from the Obama administration’s massive stimulus spending.

The World is Flat

For those of you who haven't read Friedman's excellent book, you can get a nice video summary here from his talk at MIT...
uvealblues

More or less equal?

The gap between rich and poor has been widening for 30 years. It has started narrowing again.

The Quiet Coup

Wow--this is a must read for an insightful viewpoint on the current banking crisis. It is written by Simon Johnson, a professor at the MIT Sloan School of Management and former chief economist at the International Monetary Fund during 2007 and 2008. There is so much good writing here, that it is very hard to excerpt....
Uvealblues

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
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Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system.

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A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”

Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t.

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From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing: (read on)

Nassim Nicholas Taleb: the prophet of boom and doom

This article is a bit dated (June 2008) but a good profile of Nicholas Taleb, the author of the well-known book, "The Black Swan."
Uvealblues
When this man said the world’s economy was heading for disaster, he was scorned. Now traders, economists, even Nasa, are clamouring to hear him speak