Saturday, February 22, 2014

Interesting graph showing the decline of the Mini-van era and the rise of the "Suburban Assault Vehicle'. Even with our cars we have asked to be Super-Sized.

Here is a graph (from Statista) of the Market Share of Domestic"Light Trucks" sold in the US from 1990 to 2012.  Instructively, it color codes the type of truck by body type and/or size.  See the key below.

I highlight a portion of of the market share in 1990 and 2013 (in RED) that interested me the most.

I see the rise of the "Suburban Assault Vehicles" (Lt Blue and Purple) for the soccer moms and dads and the decline of the Mini-van era (Green).  

You can see by the by 2012 the market for small to mid-sized trucks has become so small they are just a trace of the whole market.

The market share for "Large Trucks" has remained pretty constant at about 28% (give or take).

In terms of this class of vehicles, Americans have emphatically declared:  SUPER-SIZE ME!

Friday, February 21, 2014

Latest report on the holders of the US National Debt is out. Nice graphic showing the recent historical trend and who the buyers of our IOU's are.

Here is a graph (from HERE) of the latest report from the US Treasury (December 2013) on the various holders of the Public portion of the National Debt. That total is about $12.2 Trillion dollars.

The National Debt is divided up into two categories: Private and Public.  The Private portion of the National Debt is comprised of borrowing from various government Trust Funds and is about $5 trillion dollars, give or take a few hundred billion. The Public portion comes from sources outside the government and includes the US Federal Reserve Bank.

In the chart, just for reference, I highlighted the time period of the recession.  On the right I highlighted the owners of the debt and the percent that dollar amount is of the whole.

Some people are concerned about the amount of debt we owe to the foreign sector "Private Foreign plus Official Foreign"), a total of 47%.  Foreigners might stop lending to us or blackmail us by dumping the debt on the open market.

No problem. The Federal Reserve stands ready to fill the void if there is any shortfall.
The Fed bought a net $543 billion of Treasuries during 2013. That was not a record acmount — in 2011 it had purchased $656 billion — but it enabled to Fed to finance 71 percent of the net Treasury borrowing during the year. That was the highest proportion since the government resumed running deficits in 2002. The 2011 purchases amounted to 61 percent of the money the government borrowed that year.
I don't know if the Fed is a lender of last resort, first resort or somewhere in-between.  They are involved in a substantial way that they were not prior to the recession OR during it!  You can see they did not get involved in a big way until mid-2010.

Where your Cup o' Joe comes from and why it is likely to increase in price this year. What happens in Brazil is not staying in Brazil...

The Washington Post has an article today about the increase in the price of coffee in the commodities futures market.  You can see in this first graph the price going from about $1.20 in January 2014 to $1.72 for contracts to deliver in March 2014 (This is for the most plentiful Arabica bean).

Why the sudden spike in price?
Source: Washington Post

This graphic from Businessweek, shows where the two main coffee beans (Arabica and Robusta) are produced and the countries that are the main suppliers.  Brazil is dominates the cultivation and export of the Arabica bean.  However, the growing season has not been productive:
"...Usually during this time of year, the delicate Arabica coffee plants in the mountains of Brazil, where most of the world's coffee comes from, are maturing. White, fragrant flowers have appeared, followed by cherry-like fruit, each containing two seeds: Arabica coffee beans, the most popular in the world.
But last month, the worst drought in decades hit Brazil's coffee belt region, destroying crop yields and causing the price of coffee to shoot up by more than 50 percent so far this year. The drought is historic, with more than 140 cities in Brazil rationing water. The country's leading newspapers reported that some neighborhoods are only receiving water every three days.
For now, retail prices for coffee are stable. Roasters typically have enough supplies to cover themselves for a few months. But if the price of the Arabica (pronounced uh-RAB-ick-uh) beans continues to rise, consumers could start seeing the cost of their morning coffee creep up later this year, according to Jack Scoville, a futures market analyst specializing in grains and coffee, among other commodities...." (Washington Post)
Source: Businessweeek

The State of US manufacturing and employment. See here why Buggy Whips represent our past and our future.

I am always startled by this data. (From The Conversable Economist)

In terms of a share of the US economy as a whole, the manufacturing sector has been a relatively fixed percent of the total.  It has had its ebbs and flows but fairly constant.

What has not been constant is the mix of final goods produced by that sector. We have moved from manufacturing consumer goods (appliances, electronics and other "gadgets") to capital goods and higher value inputs (chemicals, pharmaceuticals, software, etc). In other words we are producing less stuff people see and more stuff that is not as obvious. Or as I like to say, we make everything else except the stuff you see at Walmart.

The other thing that has been constant but not is a positive way is the decline in manufacturing jobs.  This is not a new thing--the trend is long in the making.

Jobs in the manufacturing sector have declined from about 24% of all jobs to less than 10%.

Today it just simply takes fewer workers per manufacturing dollar relative to the past to make something.

In 1960 the ratio of share of workers to manufacturing as a share of GDP was (eyeball estimate) 24/12= 2(workers) to 1 in 1960. Today it is (eyeball estimate) 9/13 = .69 (of a worker) to 1.

Buggy Whip manufacturing (low skilled, routine production stuff) is not coming back to the US, but the technology, software and composite materials to make a new high tech buggy whip is likely to be produced here---if we foster it.

However, we seem to focus on the former and not enough on the latter.

What do you think???

Source: The Conversable Economist

Do you eat to satisfy hunger or to justify the amount of money you spent on the meal? My confession here with a study to back me up.

The Priceonomics blog has a posting regarding a study on All You Can Eat buffets.  The researchers were able to do real time observation with the cooperation of a restaurant in the Chicago area.

Here is the abstract to the paper:
Are price and consumption independent in fixed-price service contexts? A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza (2.95 vs. 4.09 pieces). This difference is significant and of similar size when controlling for age, height, gender and the day of participation. Additional analysis suggests that individual ratings of taste may be inversely related to consumption within treatment. Thus those who like it more, may consume less. One interpretation of our result is that, within this flat rate setting, individuals are consuming to get their money’s worth rather than consuming until their marginal hedonic utility of consumption is zero. 
The numbers I highlighted in bold above are put on a bar graph below to illustrate the finding.

Do we eat to satisfy our hunger (a fixed point) or to justify how much we paid  for the food (a variable amount)?

If I were honest about it, I would say this relationship holds for me.  I  believe I eat more at Golden Corral, on average, then I do at a CiCi's Pizza.  While price may not be at the forefront when I am consuming but it plays a part in how much I decide to consume, independent of how full I feel.

Don't judge me.  :)

Thursday, February 20, 2014

How much did foreign citizens working in the US earn and send home in 2013? And where is home? See the BIG numbers here...

When we study Balance of Payments (see here for latest report) as a part of the International Trade unit, one topic that is always of interest to students is "Unilateral Transfer Payment (net)".  A sub-topic of that is "Remittances".

Remittances are US dollars that foreign nationals earn in the US and send back to their home country. On net the US sends out more dollars than are returned to the US by US citizens living abroad and sending payments home.

Pew Research (a bonanza for blog fodder lately!) has a nice interactive map and data on remittances.

Here are Top 30 destinations for US dollars being "exported" abroad:

Here is a 2010 list of the Top 25 recipients of US Foreign Aid (tax dollars).  I highlighted the countries that appear on the remittance list above too.  In several cases, the residents of these countries are in the working in the US and sending home MORE US dollars than we send them in foreign aid.

Source: HERE

How has labor union membership fared in the last 30 years? Depends on if you are a public sector or private sector employee. See the graph here!!

Pew Research has a posting on union membership and peoples attitudes about unions in the US.

It contained this graphic.  In 201 total membership in public (Federal, State, and Local employees) AND private unions was 14.5 million people, roughly split 50-50 between public and private.

This is very different than the mix in 1983. Total union membership was 17.6 million (21% more than today), but in 1983 the private sector union membership was 68% of the total.

The public sector has increased membership by 26% (from 5.7 M to 7.2M) since 83' and private sector membership has decreased by 39% (from 11.9M to 7.3M).

About 33% of all public sector workers belong to a union.  Only about 6.7% of hourly wage workers in the private sector in US belong to a union.

Wednesday, February 19, 2014

Half of the US GDP is produced in very small geographic sections of the country. What is up with the rest of the US?

Not a fair question, as I will address below...

This graphic has been passed around the Twitter-sphere so much I do not know its origin.

Quite amazing if accurate. Roughly 20 metropolitan areas in the US are responsible for 50%, or about $8.4 Trillion of the US GDP in 2013 ($16.8 Trillion nominal dollars).  

One the one hand it makes sense because these areas have very high population densities and much of the US is relatively rural.  

Still, kinda looks unbalanced to look at it like this.

Should the Community College System be a part of the Social Safety Net in the US? I think so. What say you?

For a long time I have felt the Community College system in the US is a resource that is under-utilized and under-appreciated.  The latter probably more so than the former, unfortunately.

Seems like IF we accept the premise that we have multi-millions of the Long Term Unemployed who are not in the workforce, but would like to be, then we should do something to make obtaining additional education/skills much easier.  Otherwise, the problem will persist and ancillary social problems will arise from this involuntary idleness.

This short analysis of the Community College system by EMSI give credence to the value of doing so.  I excerpted part of it and highlighted what I think is the key point:

The Economic Impact of America’s Community Colleges

EMSI’s nationwide economic impact study, released this week by the American Association of Community Colleges, shows the net total impact of community colleges on the U.S. economy was $809 billion in 2012. That’s equal to 5.4% of the nation’s gross domestic product. Put another way, the added income created in the U.S. through increased student productivity and the spending of international students supported the equivalent of 15.5 million jobs in 2012. 
How do colleges contribute so much added income? Think of it this way. Anyone who has studied at a community college enters or re-enters the workforce with new skills. Millions of these students are working across the country today, and when they apply those skills, they’re rewarded with higher incomes than they would have otherwise (e.g., a home health aide who becomes a licensed practical nurse). They also raise business profits through their increased productivity. Together, these higher incomes and increased profits create even more income as they are spent in the U.S. economy.
I ain't no genius but this seems like a no-brainer.  The idea is easy, however, the devil is in the details of how to finance it and get people to take advantage of the opportunity.  Seems like it could be integrated into the existing social safety net.  We either pay for people today to become more self-sufficient or we will pay for them to be dependent for, well, a long time.

Any ideas??

AP Micro Example: Perfect Competition and a change in cost AND Market Price. Does not get better than this!!

For Teachers and/or Students of Microeconomics here is an excellent article you can use to illustrate how changes in variable costs and a change in market price affects a producer ("Firm") that operates in a "Perfectly Competitive" market.
Dairy farmers squeezing white gold from cows
Most milk manufactured in Wisconsin becomes cheese, but it’s also turning into white gold for dairy farmers in America’s Dairyland, because demand has never been higher and prices for it are rising at meteoric rates. 
A dramatic increase in dairy exports and limited milk production have combined to create the near-record high prices dairy farmers are receiving for their milk from customers like cheese producers. 
Combined with the near-record low prices they’re paying for corn to feed their cows, dairy farmers should see increased profits through this year, a leading dairy economist said.
“This is the dairy farmers’ year to enjoy,” said Mark Stephenson, the director of the UW-Madison’s Center for Dairy Profitability. 
Read more:
Let's go to the GRAPHS!  Each slide has has its own narration so I will let them speak for themselves.  If you see any errors or omissions please let me know. 

I hope this helps you understand changes in costs and prices in a Perfectly Competitive Market.

Tuesday, February 18, 2014

Jane Goodall releases a chimp into the wild. Your awwwwwweee moment of the week.

If this does not get to you then you are not human! :)

If you cannot watch the whole thing, start at 2:30.  Your awwwweee moment of the day. Your welcome. (HT: Sowing Agriculture Seeds)

Sunday, February 16, 2014

In 2012 China bought as many new cars as the US, Germany and Japan COMBINED. Surprised?

Quite astounding.  Since 2005 the sale of passenger cars (excludes SUVs'/Trucks) in the US, Germany and Japan have been level and/or declining.  Look at China starting in 2008.

In 2012 China bought as many new cars as the US, Germany and Japan COMBINED (my eyeball estimate).

They need gasoline, spare parts, tires, etc. The center of economic gravity is moving East, my friends.

Statistic: Sales of passenger cars in selected countries worldwide from 2005 to 2012 (in million units) | Statista
Find more statistics at Statista

Food coupon redemption before and after the recession. Buy 1 recession get 1 recovery free...

Sign of the times...

As of 2012 the dollar amount of food coupons redeemed returned to pre-recession levels. At the height of the recession $500 to $600 million dollars more were redeemed.

The use of coupons by stores and manufacturers is an example of 3rd Degree Price Discrimination by producers that have some pricing power.  It is a way to capture "Consumer Surplus" by segmenting consumers based on their willingness to pay. Some people (like me) dislike using coupons so I end up paying more for a particular good than someone who is willing to take the time to cut-out, save, and bring to the store the coupons.  The store captures a sale from the coupon-er that they might not have received before.

I suppose I subsidize people that do the coupon thing....Your welcome...

Well, anyway, seems like in terms of the use of coupons we are back to normal. Wonder what this says about the economy.  Any suggestions?
Statistic: Total number of redeemed food grocery coupons in the United States from 2007 to 2012 (in billions)* | Statista
Find more statistics at Statista

I can't even go to the movies and not observe an economics issue---See the picture I took in the parking lot today. Merica'...

I parked next to this car when we went to the movies today.

Noticed the bumper sticker that suggested buying this car, a Chevy Malibu, shows support for US auto manufacturing at the expense of a foreign auto producer. True enough.  Was this car assembled in the US with US labor?  Yes, it was produced in Kansas at a GM plant.  However....

If you are looking at a car in its entirety in terms of labor and PARTS, then perhaps a better choice could have been made. does an annual survey of vehicles to determine the TOTAL US supplied labor and parts that went to producing it.

Here is the latest one from 2013.  Each of these vehicles has at least 75% US sourced labor and parts.

If the owner of the above car wanted to buy a comparable car that was MORE Made in the USA than his Chevy he would do better to buy a Toyota Camry.

I bought American---I own a Camry myself.  :)

Federal Government Spending in two must see charts/graphs. It has increased BUT it depends on what the definition of "spending" is. It ain't as easy as it sounds...

Nice, concise visuals of the metamorphisis that the Federal government has undergone in the past 40 years (from a report from the Cato Institute)

This first graph shows, in trillions of dollars, federal spending from 2000 to 2013 in the 5 categories spending can be categorized (see the box for descriptions).

Transfer payments are simply moving money from one entity (taxpayers) to a second entity (government) to a third entity (recipients of entitlements).  The major entitlement programs are Social Security, Medicare, Medicaid.  Interest on the national debt is another big transfer payment (about $290 billion last year).

You can see that at about $2 Trillion transfer payments are the majority of the Federal Budget and subject to the most growth since 2000.

The data below puts the growth of Federal government spending since 1970 in the context of national in come, or GDP.  Notice that transfer payments have almost doubled!  The other categories are relatively stagnant.

Conclusion:  The Federal Government has become a check writer---moving money from one place to another.  "Doing things" has moved down the list of things the Federal government might accomplish.

Some say that is a good thing. Some say it is a bad thing.  Either way, it is a thing.  I report, you decide.
Source: Cato Institute

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