T-Bills

Back on September 25th the Wall Street Journal published an article about nervous investors who were buying low yield, short term U.S. Treasury Bills as safe securities. [Demand for Short-Term Treasury Debt Puts a Crimp in World-Wide Supply, wsj, 9/25/08]I remembered that because I just read another article about nervous investors buying government securities at low yields, under 1 percent. This time it is the Washington Post writing about the low yield U.S. Treasury bonds and declaring that "it’s terrible news for the economy, which relies on...

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Credit Deployment

A recent headline from Wednesday, November 26th in the Washington Post reads “U.S. Moves to Revive Consumer Spending.” The first line of the article tells readers “The government said yesterday that it will deploy up to $800 billion to make it cheaper for Americans to get a home mortgage, take out a car loan or borrow money through a credit card . . .” The word “deploy” has never been a financial term in my memory. Troops get deployed, but money is typically saved or spent. Dollars need to be spent rather than deployed to revive the economy so...

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Credit Ratings

Many savers with a 401(k) or other investment account are probably familiar with the Standard & Poors, Moody’s or other credit rating firms. Monthly statements usually include their ratings alongside a list of assets.Lately though the credit rating firms have admitted to Congress [Washington Post, Credit-Rating Firms Grilled Over Conflicts, October 23, 2008] their ratings have been tainted by conflict of interest. Moody’s and Standard & Poors are paid by the firms they rate. The article quoted a memo written at Standard & Poors by...

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Circuit City Jobs

Circuit City is back in the news [Washington Post, November 6, 2008] with plans to close 155 stores and layoff thousands in bankruptcy reorganization. I say back in the news because there was an article about Circuit City in the Washington Post back on March 29, 2007 titled “Circuit City Cuts 3,400 ‘Overpaid’ Workers.” The cuts came out of 40,000 in store jobs, or 9 percent of the company’s in store workforce. The firings were not related to job performance the company announced, but came as part of an effort to cut costs and improve the bottom...

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Mr. Greenspan Talks

The caption in the Washington Post reads “Greenspan Says He Was Wrong on Regulation.” [WP, Oct. 24, 2008] The former Federal Reserve Board Chairman told Congressional Committee members the “… crisis has shaken his very understanding of how markets work, and agreed that certain financial derivatives should be regulated – an idea he long resisted.” After his opening comments to the committee Mr. Greenspan argues against regulation and warns Congress that regulation is a threat to economic growth, despite the collapse of derivatives markets this fall....

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1929 meet 2008

There are many comparisons in recent newspapers between the crash of 1929 and the crisis of 2008. The media of today has not settled on a consistent title for America’s current events but “Crisis” appears to be the most common caption among the newspapers I see.Many books and articles have been published on the stock market crash of 1929, but one book in particular stands out as short, only 197 pages, readable and relevant for today’s debacle. It is The Great Crash, by John Kenneth Galbraith.After using newspaper and other accounts he describes...

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Dividends and Taxes

In 2007 someone starting out in their twenties with a modest $30,000 a year salary will be expected to pay $5,091.25 in federal income and payroll taxes. For a single person who earns the same $30,000 as dividend income the total federal tax would be $1,062.50.For a married couple starting out where both earn $30,000 a year salary, they pay federal tax of $10,182.50. For a married couple who earns the same $60,000 as dividend income they pay $2,125 in total federal tax. There is no payroll tax on dividend income.This extraordinary favoritism toward...

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Bailout

I have talked with many people about last week’s bailout; they are all angry. Some that I have talked with were complete strangers who started in ranting and raving at the newsstand and several at my neighborhood library. In my unscientific poll it is unanimous: everyone regards the bailout plan as a payoff to politically connected cronies who caused the defaults. Many recognize there are better alternative plans.For the federal government to buy the current defaulted mortgage backed securities has enormous potential for abuse. Salomon brothers...

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Government Spending and Jobs

Recently the two candidates, and the two parties, in the presidential campaign started arguing about a government project called “The Bridge to No Where.” Apparently the project was a multi-million dollar bridge to a small Alaska Island. Both sides now agree the project was wasteful government spending, but both sides claim their opposition to the project shows their commitment to save the taxpayer’s money and cut government spending. It is easy to be against wasteful government spending, but neither side has much to say about the role of government...

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High Wire

High Wire: The Precarious Financial Lives of American Families, by Peter Gosselin, (New York: Basic Books, 2008) 330 pages, $26.95.High Wire opens with an exceptionally long introduction, 34 pages actually. In it Gosselin establishes the premise of the book: America has growing economic risk and personal insecurity to go with its economic growth. He quotes from the Mayflower Compact of 1620, which was an agreement to “combine ourselves together into a civil body politic … as shall be thought most meet and convenient for the general good of the...

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Consumers Trading Down

On July 11th the Wall Street Journal published an article entitled “U.S. Consumers Trade Down as Economic Angst Grows.” The article described Americans saving money by choosing less expensive brands and models of products. Wholesalers and retailers are cutting back offerings of designer brands for the less expensive “plain Jane” products.The article concentrated on products but had almost nothing to say about services. If Americans just cut back on designer brands job losses should be moderate. If America cuts back on services, unemployment will...

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America's Job Market Free-for-All

America’s Job Market Free-for-AllAmericans should know more about their jobs. When we open our newspapers these sad Sunday mornings and read stories about Circuit City firings, plant closings and jobs moving to Bangalore, it is understandable that many think about job losses, but that is a mistake. America has job losses, but a bigger problem is the new jobs we are taking rather than the old jobs we are losing.Many know America has fewer manufacturing jobs and more service jobs, but the service industry is frequently described in generic terms...

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The Age of Turbulence

The Age of Turbulence: Adventures in a New World, Alan Greenspan (New York, The Penguin Press, 2007). 505 pages. $35.00The Age of Turbulence begins with an introduction where Greenspan tells readers he is dividing the book into halves where “the first half is my effort to retrace the arc of my learning curve, and the second half is a more objective effort to use this as the foundation on which to erect a conceptual framework for understanding the new global economy.”The first half has eleven chapters, or 231 pages, which are a chronological memoir....

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The Big Squeeze

Steven Greenhouse, The Big Squeeze: Tough Times for the American Worker, (New York, NY: Alfred A. Knopf, 2008). 303 pages, notes, bibliography. $25.95 USASome years ago I was talking with someone who worked for a large international corporation that did business all over the world. He named several countries as very troublesome, but mentioned one in particular, whose name shall remain anonymous, where making a phone call outside the country required walking across the street to another building to pay a bribe to an official in the phone exchange.I...

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Three Billion Capitalists

Clyde Prestowitz, Three Billion New Capitalists: the Great Shift of Wealth and Power to the East, (New York: Basic Books, 2005). 278 pagesThree Billion New Capitalists tells the story of three billion new entrants into the global economy. The new entrants work mostly from China, India, Japan, Korea, and places that were formerly isolated, socialist strongholds that refused to open their economies and to trade. Not that many years ago it was Japanese cars and Japanese cameras that introduced Americans to imports and foreign trade. The introductory...

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Corrections

A Career in CorrectionsThe Standard Occupational Classification (SOC) manual of the Bureau of Labor Statistics has four jobs specialized to a career in corrections. These jobs are in addition to managerial, maintenance and institutional food service jobs that are found in many sectors of the economy. They are specialized to corrections because 96 to 99 percent of them are in state and local government. A career in corrections is also a career in government.As of the May 2006 Occupational Survey, the Bureau of Labor Statistics reports 37.4 thousand...

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Investing in Education

There are several ways to estimate returns on investments in education, or other types of investments for that matter. One way is to compare wages between jobs using general workforce skills with jobs that need college degree skills. Compare wages for a certified teacher with a college degree to wages for a teaching assistant, for example.Another way converts college tuition and expenses into an estimate of a minimum wage or minimum salary increase that will make college a paying investment. The process requires interest calculations because money...

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Returns to Education

Returns to a College Education"Seven years of college down the drain."-John BlutarskyMr. Blutarsky, as many will remember, offered the conclusion above to his Delta house frat brothers following their especially memorable meeting with Dean Wormer. The statement is correct. Anyone who attends college for seven years only to be expelled without a degree, and with Mr. Blutarsky's zero point zero GPA will not earn any return on their college investment. Otherwise though, expect college to pay. Occasionally in the popular press there will be an article...

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