Category Archives: Money and the Economy

Simple Cheap Gadgets Gaining Popularity

For years, laptops were super expensive. Hardware companies put out the latest and greatest powerhouse computers. Often this was under the pre-tense that if you wanted to run the latest (increasingly larger and more complex) software, you had to have a more powerful computer.

Just recently, this trend has turned. Since more work is done “in the cloud” – the processing is done over the internet by some other computer. Think Gmail or google Docs, or facebook, or anything you do on your computer really. More and more is done through a browser. So, the need for a super powerful computer is not needed. More important is portability- so you can work on the go. This means, less power, more battery life and a small and light footprint.

Welcome the netbook. These typically tiny laptops have laughably weak processors – by traditional standards – but they do enough to get the job done for the tasks I described above.

This trend is not limited to computers. Camcorders were until very recently super expensive. They would have excessive features that most people never used. Ever look through a camcorder menu? Have you used half those features? Most people just want to capture a quick video and upload it to YouTube to share with their friends. Flip came along and created just that, for a quite affordable price.

This is the new success formula. Create something that is very easy to use for most people, and make it affordable. The current state of the economy has something to do with this trend as well.

Who is suffering during the recession?

Enlightening NY Times article discussing who is truly feeling the impact of the economic recession. Probably not who you think.

Unlike the last two recessions — earlier this decade and in the early 1990s — this one is causing much more job loss among the less educated than among college graduates. Those earlier recessions introduced the country to the concept of mass white-collar layoffs. The brunt of the layoffs in this recession is falling on construction workers, hotel workers, retail workers and others without a four-year degree.

The blue collar workers – those who actually make things – are getting hurt the most. The people who push paper (Admitted, I will soon be one of these people) are not getting hurt as much. This is an interesting twist. If not for what it says about our economy – are we protected by globalization and imports even more during a recession? – than for how it supports even further getting an advanced education. It does kind of make sense. During a downturn, we purchase less “stuff”, we travel less. Those who make, sell, and provide these items are going to be hurt more by this.

The Great Recession of 2008 (and beyond) is hurting men more than women. It is hurting homeowners and investors more than renters or retirees who rely on Social Security checks. It is hurting Latinos more than any other ethnic group. A year ago, a greater share of Latinos held jobs than whites. Today, the two have switched places.

The most interesting theory about this article is who the author think will benefit from the recession.

Hard as it may be to believe, the crash will also help a lot of young families. The stocks that they buy in coming years are likely to appreciate far more than they would have if the Dow were still above 14,000. The same is true of future house purchases for the one in three families still renting a home.

Also, the poor will benefit generally. The writer suggests that those at the top of the socioeconomic ladder will get hurt by their tanking investments. The poor are benefitting from the Obama tax credits, and finally – since these blue collar jobs are getting hurt the most- more will see the value in education. That means that more will seek out education, and thus benefit them and their families incomes long term.

That particular last bit is important.

Of course, these two factors both boil down to redistribution. One group is benefiting at the expense of another. Yes, many of the people on the losing end of that shift have done quite well in recent years, far better than most Americans. Still, the shift isn’t making the economic pie any bigger. It is simply being divided differently.

Which is why the third factor — education — is the most important of all. It can make the pie larger and divide it more evenly.

Oil down, Gas Up?

You might have noticed this the past few weeks as well.  As the price of oil continues to fall to insane lows, especially after how high it was this time last year, the price of gas is going back up. What’s up with that? NPR ran a story on how this happens, and it has almost convinced me it is not a conspiracy…

The price of gas is indeed tied to oil. It’s just a matter of which oil.

The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That’s the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.

Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.

But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.

The recession in America has dramatically cut demand for crude oil, and inventories are piling up. So prices for West Texas crude have fallen well below what oil costs from places like the North Sea, Saudi Arabia and South America.

The other problem is that since oil is cheap now, there is a disincentive to produce it. In fact, OPEC has, and is rumored to be again slashing its production. Since the economic downturn, less fuel is being used. So, the price plummeted. Now, they will cut output to lower supply to match demand. The result? The price will go up again.

At the same time, refiners have seen the same headlines as everyone else about job losses and consumer spending. They’ve slashed production just to avoid taking losses on gasoline no one will buy. Result: Higher gas prices.

“Why should a refiner produce more gasoline when the stuff we produce is not being used?” Drevna said.

Of course, complex explanations of the diverging price paths of West Texas crude and gas are unlikely to placate frustrated drivers. Memories of last summer’s $4-plus gas have not receded.

The interesting part will be what happens when the economy recovers, demand increases and the price REALLY skyrockets.

Conservative Contradictions in Complaints About Taxes

Once again, instead of offering a solutions – the Republicans are just attacking the Democratic plan. And per usual, they decide it is both too much and not enough.

Today the Wall Street Journal published an article that repubicans are touting as showing the Obama’s plan to increase taxes on the top 2% earners is not enough to cover expenses.

This is a thinly veiled attempt to protect the poor, poor rich. The same people whose increased wages over the last 8 years far outweigh the increases by the lower 80% of the population.

However, the headline at Drudge currently points to an ABC article that describes how there are over 1 trillions dollars in new taxes in Obama’s plan.

See what they are doing there? They say, taxing the wealthy is just a punishment that doesn’t solve anything, and redistrubutes wealth downward unfairly. “socialism” they shout. Then, out of the other side of their mouth they say, look general population this tax plan is going to cost YOU 1 TRILLION dollars.

The truth? No, the taxes aren’t going to cover everything. But you have to spend a bit to get out of a recession. Even Bush realized this. However, taxes on the Rich were rolled way back in the last eight years, and they need to be readjusted back to proper levels. The wealthiest 2% can afford the increase far easier than the rest of the 98% percent.

Beer No Longer Recession Proof

FiveThirtyEight - the website that became famous during the 2008 election for its incredibly in depth analysis of polling numbers – is still busy. Recently, it has been analyzing numbers regarding the economy.

And they aren’t good.

Typically, even during the worst downturns- there are certain industries that still did well. “Recession-proof” industries. These included the vices – alcohol, gambling as well as the entertainment industry.

However, the beer industry has seen its sales fall by an astounding amount. It’s enough to drive one to drink. Or, not.

It’s not just beer, either. Sales of jewelry and watches were off by 7.2 percent in the fourth quarter, the third-largest drop ever recorded. Casino gambling receipts are down about 8.5 percent from a year ago, far and away the largest decrease ever over four consecutive quarters.

If this is any indicator, it means people are REALLY cutting back. They are really scared, or are getting hit especially hard.

Entertainment Producers Encouraged to Come to Virginia

A new bill going through the Virginia General Assembly is poised to bring more entertainment projects to Virginia by offering state funds to help them pay for their projects.

The bill is Senate Bill 1421 and it states that anytime someone rents a movie in a hotel room, a 10% tax will be applied to the price of that movie rental.

Half of that tax goes to the Virginia general funds, half goes to the Governor’s Motion Picture Opportunity Fund. This fund is stated to “support the film and video industries in Virginia by providing the means for attracting production companies and producers who make their projects in the Commonwealth using Virginia employees, goods and services.” And “The types of projects eligible for consideration will be feature films, children’s programs, documentaries, television series or other television programs designed to fit a thirty-minute or longer format slot.” So the type of projects open to the funding is pretty broad.

Why would the state fund hollywood projects? Because when a huge movie crew comes to shoot a movie, they bring a large crew and cast. These people have to eat, lodge and basically live here for a few months. They will spend money, which helps out the economy far larger than the amount the state would be giving to the producer.

Stop Talking Down The Economy

The economy keeps slipping, despite all efforts to halt the downtrend so far. Part of the problem is that people are not confident in the economy for the future. They fear they might lose their job, or some other trouble – so they aren’t spending money, and instead are saving. The problem is that this causes the economy to slow down more because people aren’t buying things, and it becomes a self fulfilling prophecy. Explained well in the Economist:

It affects consumption and investment decisions, and is largely behind the dramatic collapse in demand we have observed over the last three months. Sure, consumers have lost a good part of their wealth, and this is reason enough for them to retrench. But there is more at work. If you think that another Depression might be around the corner, better to be careful and save more. Better to wait and see how things turn out. Buying a new house, a new car or a new laptop can surely be delayed a few months. The same goes for firms: given the uncertainty, why build a new plant or introduce a new product now? Better to pause until the smoke clears. This is perfectly understandable behaviour on the part of consumers and firms—but behaviour which has led to a collapse of demand, a collapse of output and the deep recession we are now in.

I think part of the problem is that people keep hearing everyday how bad the economy. This reinforces their fears. Even if they thought they could spend some money the nightly news shows a headline and they are discouraged anew.

I am not alone in this thinking. Today, Bill Clinton said the same thing on ABC.

In an interview with ABC News Clinton gives the new president an “A” for his first month in office yet says he should put on a more positive face when talking about the economy. Clinton says he likes the fact that Mr. Obama didn’t come out with a bunch of “happy talk” about the economic crisis. He added, “I just want the American people to know that he’s confident that we are gonna get out of this and he feels good about the long run.”

And he had more pearls of wisdom. Clinton went on to say that President Obama should talk to the public in greater depth about the economic crisis, saying he should lay out the full scope of what’s going on but end by saying he’s “hopeful and completely convinced” that we’ll make it out okay.

Now, I’m aware that there is a problem of just playing ostrich and hiding our heads in the sand and saying there is no problem. But, we need people to spend money in order to spur the economy moving again. The problem is that right now, while we need people in masse to spend money, it makes sense on a personal level to save. If the economy really tanks, you don’t want to be the one guy with a new car, a new wardrobe, an empty bank account and no job. We need to remind people it is okay to spend- this is really what will get the economy moving.

Proof that rich people are dicks

I consider myself a casual student of human behavior. I enjoy examining human behavior and figuring out biological and psychological reasons for why people do certain things.

One of the things that I find interesting is socioeconomic class behavior. I went to a high school with an interesting class dynamic. Half the students came from a rich section of town., the side with the private golf course- and the other half came from an older more run down area. The two sides were almost literally “across the tracks” from each other. In college, I went to a private school full of the upper crust. I loved dissecting how people interacted.

Ran across an article that examined how people signal their wealth subconciously.

Psychologists Michael Kraus and Dacher Keltner of the University of California, Berkeley, videotaped pairs of undergraduate students who were strangers to one another, during one-on-one interviews. In total, 100 undergraduate students participated.

The researchers then looked for certain gestures that indicate level of interest in the other person during one-minute slices of each conversation.

They found that students whose parents were from higher socioeconomic status (SES) backgrounds engaged in more of what he called “impolite” behaviors, such as grooming, doodling and fidgeting. Lower SES students showed more “I’m interested” gestures, including laughter and raising of the eyebrows.

So, those who were more wealthy acted aloof, those who were of a lower status were more engaged. What’s the reasoning?

It comes down to our animalistic tendencies, Kraus explained. Like a peacock’s tail, the seemingly snooty gestures of higher SES students indicates modern society’s version of “I’m fit,” and “I don’t need you.”

Lower SES individuals can’t afford to brush off others. “Lower SES people have fewer resources, and by definition should be more dependent on others,” Kraus said.

So, if you want to appear wealthy just act like you don’t care. I wondered how this would come across in certain situations. For job interviews, the higher status individual might appear like they didn’t care about the job. However, maybe we are subconciously aware of this and look for the aloof person because we secretly are aware of this. Or, maybe the whole point is moot because the higher status person gets jobs through other means like networking, etc.

I also wondered if women are aware of this. We all know desperation kills any interest from the fairer sex. Perhaps it is because they know you might be trying so hard because you are shooting beyond your level.

Golddigging Doesn’t Pay

We all have heard stories about how the economy has had an impact on the impoverished, or the student trying to get a loan, or the middle class family who is now upside down on their new house.

However, the media has largely been ignoring a big demographic that is suffering tremendously by the downturn. The banking industry girlfriends (NY TIMES).

Once it was seen as a blessing in certain circles to have a wealthy, powerful partner who would leave you alone with the credit card while he was busy brokering deals. Now, many Wall Street wives, girlfriends and, increasingly, exes, are living the curse of cutbacks in nanny hours and reservations at Masa or Megu. And that credit card? Canceled.

It’s hard to feel bad for these girls. Theses women, who date wallets not people, are now “suffering” because their allowances are getting cut off.

More evidence these girls are soulless and don’t deserve any pity?

“Next time you are stressing over some finance guy, remember that he is just a math-club nerd,” one woman wrote after recounting a breakup. “This recession just bought everyone an extra two years of the single life.”

As soon as your value to them is gone, they leave for the next ATM, er, boyfriend.

These girls have even created a support group online where they share their pain together.

In addition to meeting once or twice weekly for brunch or drinks at a bar or restaurant, the group has a blog, billed as “free from the scrutiny of feminists,” that invites women to join “if your monthly Bergdorf’s allowance has been halved and bottle service has all but disappeared from your life.”

Honestly, I can’t tell if they are being tongue in cheek or deadly serious. However, this is a lesson to everyone to re-prioritize what is valuable to you.

Even the girls on the side are feeling the pinch:

Raoul Felder, the Manhattan divorce lawyer, said that cases involving financiers always stack up as the economy starts to slip, because layoffs and shrinking bonuses place stress on relationships — and, he said, because “there aren’t funds or time for mistresses any more.”

(One such mistress wrote on the blog that when she pouted about not having been taken on a trip lately, her married man explained that with money so tight, his wife had taken to checking up on his accounts.)

Thank goodness their boyfriends seem a bit more rational.

Another, though, seemed chagrined, after her boyfriend told her to “grow up” and stop “complaining about vacations and dinner” since he had to “fire 20 people by the end of the week.”