Gas Prices in Perspective

Compared to 1973, when the average passenger car got only 13.4 m.p.g., fuel efficiency increased to 22.9 m.p.g. by 2005, a 71% increase in efficiency in a 32-year period!
Despite today's high oil and gas prices, we've had it pretty good for a long, long time, with a long-run historical, 90-year trend of a decline in real gas prices.


The chart above (click to enlarge) shows the cost of 1,000 gallons of gas at the retail price in each year from 1919 to 2007 using historical gas price data from the EIA, as a percent of GDP per capita in those years

from Carpe Diem

It is not as paid as it seems. Put in a historical perspective, it is actually good.

Gas Prices

Gasoline will hit a new record high price - perhaps as early as Tuesday - and experts say it will likely continue to soar in tandem with the skyrocketing price of crude.

The national average retail price for gas has already risen 26 cents in the last month, according to the motorist organization AAA. At $3.222 a gallon, it is less than a cent away from the all-time record.

And experts say motorists should prepare to pay nearly $4 a gallon - and in some places even more than that - before the price of gas finally comes down in the late spring as high prices crimp demand...

Oil, already trading near $90 a barrel on the back of strong global demand, took off in February as the economy worsened and the Federal Reserve cut interest rates with crude now spiking to record highs on a near-daily basis - settling at a record $107.90 on Monday.

read the CNN story

Top 30 Failed Technology Predictions

Here is the list.

My favorites:

1. “There is no reason anyone would want a computer in their home.” — Ken Olson, president, chairman and founder of Digital Equipment Corp. (DEC), maker of big business mainframe computers, arguing against the PC in 1977.

14. “The cinema is little more than a fad. It’s canned drama. What audiences really want to see is flesh and blood on the stage.” -– Charlie Chaplin, actor, producer, director, and studio founder, 1916

15. “The horse is here to stay but the automobile is only a novelty - a fad.” — The president of the Michigan Savings Bank advising Henry Ford’s lawyer, Horace Rackham, not to invest in the Ford Motor Co., 1903

18. “The world potential market for copying machines is 5000 at most.” — IBM, to the eventual founders of Xerox, saying the photocopier had no market large enough to justify production, 1959.

26. “[Television] won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.” — Darryl Zanuck, movie producer, 20th Century Fox, 1946.

How Different Investments Did Last Week

Part Time Work

More people also are holding multiple part-time jobs out of economic need. In 2007, an average of 1.8 million people held two jobs for that reason, the highest since the government began regularly tracking the statistic in 1994. The growth was largely fueled by women, who overtook men to make up the majority of the multiple-job market for the first time, according to a labor bureau study...

Overall, the part-time share of the job market has been fairly constant for decades, accounting for about 17% of jobs. Overwhelmingly, people in part-time jobs continue to take them by choice for the shorter hours and greater flexibility, and both that group and the overall part-time workforce dipped slightly last month. But economists expect the share of those in economic need to keep rising as full-time employment falls. "You're going to see a lot of part-time workers who wish that they were working full time," says John Silvia, chief economist at Wachovia Bank.

Part-time jobs typically pay 10% to 20% less per hour than comparable full-time work. Often they offer no health or retirement benefits and little job security, though some "part-timers" work 60 hours a week, or more. Those working two part-time jobs are taxed twice for unemployment insurance.

read the WSJ article

Recession?

U.S. employers shed 63,000 jobs last month, the most in five years, reinforcing a widening view that the U.S. is falling into recession. Among economists and politicians, the debate is shifting to how deep the downturn will be and how to ease it...

Private-sector jobs fell by 101,000, the third straight month of declines. The February unemployment rate edged down to 4.8% from 4.9%, but only because some job-seekers quit looking for work.

"I believe we are facing the most serious...economic and financial stresses that the U.S. has faced in at least a generation -- and possibly much longer," Lawrence Summers, who was Treasury secretary during the Clinton administration, said Friday at a Stanford University conference. "We are in nearly unprecedented territory with respect to financial strain."

Edward Lazear, chairman of President Bush's Council of Economic Advisers, told reporters, "I'm still not saying that there is a recession," but "there is no denying that when you get negative job numbers, realistically the economy is less strong than we had hoped it would be."...

The last two recessions, in 1990-91 and 2001, each lasted only eight months. "This is going to be our weakest quarter," said Mr. Lazear, predicting renewed growth by summer.

read the WSJ article

Tax Rates: Bush v Clinton

great charts and commentary from Carpe Diem

My thoughts: Lower taxes are always good. Let people keep more of what they earn. We can't tax ourselves into prosperity.

Negative Real Interest Rates

HT: Mankiw

Central Banking: US v. Europe

The contrasting ways Mr. Bernanke and Mr. Trichet responded to the crisis in the markets reflect something more than the differing economic and financial conditions in the United States and Europe.

At a more fundamental level, they reflect surprisingly different views of how each economy responds to the underlying forces affecting growth and inflation.

The Fed’s mandate, balanced between fighting inflation and encouraging full employment, leads to a simple investor calculus: if growth sags, the Fed is virtually certain to cut interest rates...

The European bank, by contrast, is skeptical of the notion that inflation automatically falls when growth cools, and it has a mandate, inherited from the German central bank, to keep prices stable above all else. So the view from the European bank’s sleek silvery headquarters here is very different from the Fed’s perspective in Washington, whatever market participants may think about the inevitability of lower European interest rates.

read the New York Times article

Stocks Hit Lowest Level Since 2006

Stocks tanked Friday, falling to the worst levels in nearly 18 months after a weak February employment report and more financial sector woes exacerbated recession fears.

Oil spiked to a record $106 a barrel before retreating a bit, the dollar continued its plunge and traders continued to pour money into government bonds.

The Dow Jones industrial average lost 1.2%, falling to its lowest point since Oct. 11, 2006.

The broader Standard & Poor's 500 index fell 0.8%, closing at its lowest level since August 23, 2006. The Nasdaq composite lost almost 0.4% and ended at its lowest point since Sept. 11, 2006.

from CNN

On the plus side, it is a good time to get into the market and/or add to your current portfolio.

Oil and GDP

The standard equation for calculating GDP is C+I+G+(X-M)

C= personal consumption expenditures
I= gross investments
G= government spending
X= exports
M= imports

In periods of prosperity it is generally considerable desirable to have GDP increasing between 3-5% on an annual basis. Over 5% is considered unsustainable and inflationary. Under 3% is considered weak growth and possibly recessionary.

A recession is typically defined in textbooks as two consecutive quarters of declining GDP. The National Bureau of Economic Research (NBER), the organization that officially dates recessions uses a slightly different method. Read about it here.

Currently we have a $14 trillion economy that had a growth rate of 0.6% in the 4th quarter of 2007. We are still in the 1st quarter of 2008, yet the media and most people seem to be convinced that we are in a recession already. Maybe, only time will tell.

Predicting recessions and the economic future is not an exact science. Numerous thing could occur to greatly improve or diminish the economic outlook on a daily basis. There are many factors to consider.

Back to GDP. If GDP is increasing it is generally considered good. Slow growth has a lot of people worried but it is still growth.

But if oil stays at $100 a barrel for the next 12 months, consumers will have shelled out an extra $100 billion on oil by next year. That's an extra $100 billion not being spent at the mall, mega-mart or multiplex.

"The entire stimulus package could be drained by higher energy costs," Lafakis said, referring to the $120 billion lawmakers will refund to taxpayers in an effort to keep the economy out of recession. "That has the potential to turn a mild recession into something more dark."

Of course, high oil prices are not the only thing weighing on consumer spending, which accounts for about two-thirds of all U.S. economic activity. Declining home values mean people can't access cash through a home equity loan or profit from higher sale prices. In addition, the economy is shedding jobs, and unemployed people tend to spend less money.

"On its own, $100 oil wouldn't pull the economy into recession," said Beth Ann Bovino, a senior economist at Standard and Poor's. "But given the other factors, it's just another shoe to drop."

from CNN

Now people are being told that it is how consumers are spending their money that matters. If you spend money on gas or at the mall GDP does not change. However, it does have a broader economic impact that is not immediately reflected in GDP numbers.

The main point is you can have "bad" economic times with a recession. Also, a recession is not necessarily bad for everyone.

People also should save money for the unexpected and unpredictable future events.

Oil Prices Driving Recession Fears

Back in October, when oil prices were near $90 a barrel and the economy was still humming along economists said high oil prices shouldn't cut into economic growth. The economy used oil more efficiently than it did in the 1970s, and spending on gas was just a small percent of people's budget, the experts said.

Fast forward to March and you've got a sputtering economy, and economists saying $105 oil deserves a big part of the blame...

"You have a very significant restraint on consumer spending," said Chris Lafakis, an associate economist at Moody's Economy.com, an economic consultancy. "It acts as a tax would."

Lafakis said consumers spend an extra $5 billion each year for each $1 increase in the price of crude...

Both Bovino and Lafakis have similar predictions for the economy - a mild recession lasting the first and second quarters of 2008, then a modest recovery beginning in the second half of this year.

However, if oil goes to $115 or $120 a barrel - certainly not an outlandish thought given that crude prices have nearly doubled over the last 12 months - then those bets may be off.

read the CNN story

February 2008 Jobs

great charts from The Mess Greenspan Made

Employers made their deepest cut in staffing in almost five years in February, the Labor Department reported Friday.

There was a net loss of 63,000 jobs, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists had forecast a gain of 25,000 jobs.

The weak report fueled already mounting recession fears and is likely to keep the Federal Reserve cutting interest rates further when it meets later this month...

Despite the loss, the unemployment rate improved to 4.8% from the 4.9% reading in January. Economists had forecast the unemployment rate would rise to 5%. A survey of households is used to estimate the unemployment rate, while a survey of employers that is considered to be more accurate sets the readings on the changes in payrolls.

The unemployment rate fell because of an increase of 450,000 people whom the government no longer counts as being part of the labor force for a variety of factors, such as that they are not currently looking for work. That drop in the size of the labor force allowed for he modest decline in unemployment, even as the household survey showed 255,000 fewer Americans with jobs than in January.

read the CNN story

Remember unemployment numbers by themselves are not an accurate measure of the employment picture. February saw declining unemployment (generally good) and declining employment (bad) as people left the workforce.

Students: Questions, Comments, and Suggestions

Midterms coming up.

Parents: Questions, Comments, and Suggestions

Midterms March 11, 12, 13

Recession?

President Bush's top economic adviser said Friday the nation's economic growth could dip into negative territory for the current quarter, an assessment that tracks with many outside experts but is the most pessimistic to come so far from the White House.

"We don't really know whether it will be negative or not," Edward Lazear, chairman of the White House Council of Economic Advisers, told reporters at the White House. "We have definitely downgraded our forecast for this quarter."

He would not discuss whether the White House is predicting the economy will actually fall into a recession. Some economists think it already has.

"I'm still not saying that there's a recession," Lazear said. "We are going to have a weak growth quarter, and whether you call that a recession or not is something that we won't know for many months."

read the CNN story

Remember a recession is 2 consecutive quarters of economic decline. It GDP is negative in the 1st quarter, it is the 1st of two quarters.

Free Market Solutions: Roads

Are roads a true public good that can only be provided by the government? Below are some people arguing NO.

Street Smart: Competition, Entrepreneurship, and the Future of Roads
edited by Gabriel Roth

The main obstacle to private road services rests with political classes reluctant to give up their lucrative sources of power, wealth and influence through current government road monopolies. However, those seeking responsive road services determined by the free interplay of consumers and private suppliers will find Street Smart making a powerful and authoritative case for the need for change and provides essential understanding of the complex issues involved.

The Mythology of Holdout as a Justification for Eminent Domain and Public Provision of Roads
Bruce Benson

Free Market Transportation: Denationalizing the Roads
Walter Block

Roads Without the State
Peter Samuel

The Public Sector, II: Streets and Roads
For a New Liberty, Murray Rothbard

Government Highways: Unsafe at Any Speed
Richard Barbarick

New Directions in Road Privatization
Laurent Carnis

"If we examine, with attention, into the composition and constitution of man, the diversity of talents in different men for reciprocally accommodating the wants of each other, his propensity to society, and consequently to preserve the advantages resulting from it, we shall easily discover that a great part of what is called government is mere imposition.

Government is no further necessary than to supply the few cases to which society and civilization are not conveniently competent; and instances are not wanting to show that everything which government can usefully add thereto, has been performed by the common consent of society, without government...

The more perfect civilization is, the less occasion has it for government, because the more does it regulate its own affairs, and govern itself; but so contrary is the practice of old governments to the reason of the case, that the expenses of them increase in the proportion they ought to diminish. It is but few general laws that civilized life requires, and those of such common usefulness, that whether they are enforced by the forms of government or not, the effect will be nearly the same. If we consider what the principles are that first condense man into society, and what the motives that regulate their mutual intercourse afterwards, we shall find, by the time we arrive at what is called government, that nearly the whole of the business is performed by the natural operation of the parts upon each other...

All the great laws of society are the laws of nature. Those of trade and commerce, whether with respect to the intercourse of individuals or of nations, are laws of mutual and reciprocal interest. They are followed and obeyed because it is the interest of the parties so to do, and not on account of any formal laws their governments may impose orinterpose...

Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.

The trade of governing has always been monopolized by the most ignorant and the most rascally individuals of mankind."

Thomas Paine

My thoughts: Private roads would be cheaper, safer, and more efficient. Without a paradigm shift in favor of market solutions to government problems it will never occur.

Foreclosures Hit All Time High

More home owners than ever are losing the battle to make their monthly mortgage payments.

Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report's quarterly, 36-year history.

Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.

Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.

read the CNN story

Best/Worst Foods in America

Outback Steakhouse Aussie Cheese Fries with Ranch Dressing

2,900 calories 182 g fat 240 g carbs

read more

One of the best starters ever.

All Recessions are Local

from The Mess That Greenspan Made

Great Poster: Gas Prices

1062 Billionaire in the World

read the Forbes story

New Snickers

They’ve introduced their new Limited Edition Snickers Charged which boasts 60 milligrams of caffeine, taurine and other B vitamins (about 10% of your RDA).

The bar is slightly smaller than their regular one, again this is the same with all the limited edition bars. It’s 1.83 ounces instead of 2.06...

It smells much like the regular Snickers, has the same texture ... same crunchy peanuts, chewy caramel and super-sweet nougat with a hit of salt. And then it comes along, the caffeine kick. And when I say kick, I mean in the mouth. It’s a bitter aftertaste that sits high and in the back of the mouth. It just kind of lingers there, like maybe it’s not something you ate but something you smelled (sometimes strong skunk will do that to me). And it stays with you, probably as long as the caffeine is in your system. I clocked my aftertaste for eating one half of a bar at 90 minutes...

That 60 milligrams is nothing to sneeze at:

1 - 8-ounce soft drink contains 20-40 milligrams (about 150-170 calories)
1 - 8-ounce regular coffee contains 65-120 milligrams (5-100)
1 - 8-ounce energy drink contains 72-80 milligrams (110-140 calories)

more info here and here

Sounds good.

Gas Prices: Where the Money Goes

more info here

Oil: New All-Time High

Oil prices neared $105 a barrel Wednesday for the first time ever after a government report showed a surprise dip in crude supplies and OPEC announced its decision to not increase production.

U.S. light crude for April delivery settled at a record $104.52, up $5, beating the previous settlement high of $102.59 set last week. After the settlement, crude prices rose as high as $104.95, topping the previous all-time intraday high of $103.95 set Monday.

In its weekly report, the Energy Information Administration said crude stocks fell by 3.1 million barrels last week. Analysts were looking for a rise of 2.3 million barrels, according to a Dow Jones poll. Oil was up $2.05 to $101.57 a barrel just prior to the inventory report's release at 10:30 a.m. ET....

Oil prices have risen nearly five-fold since 2002. Most analysts blame rising demand and tight supply. That has also attracted floods of investment money, and exaggerated the effects of supply disruptions.

read the CNN story

The Deskjet Printer Turns 20

The deskjet printer is celebrating a big day today. It's 20 years old. Hewlett Packard rolled out the deskjet in 1988. Back then it weighed 14 pounds and cost $1,000. These days it costs less than one hundred dollars. HP has sold more than 200 million in the past two decades.

source

Actually on 2/28/2008

Inflation Key Worry, Not Recession

Dallas Federal Reserve President Richard Fisher said Tuesday he believes inflation is a greater threat than a slowdown of the U.S. economy, suggesting that he will keep pushing his Fed colleagues to stop cutting rates.

The Fed made a 0.75 percentage point rate cut at an emergency meeting Jan. 21, and another half-point cut at the conclusion of the Jan. 29-30 two-day meeting. Fisher, who joined the Federal Open Market Committee for the two-day meeting, was the sole vote against that cut.

The FOMC is next set to meet March 18, and investors are widely expecting another half-point cut at that meeting...

"Talk of 'cheap money' makes my skin crawl," he said in his prepared remarks. "The words imply a debased currency and inflation and the harsh medicine that inevitably must be administered to purge it."...

"We cannot, in my opinion, confidently assume that slower U.S. economic growth will quell U.S. inflation and, more important, keep inflationary expectations anchored," he said. "Containing inflation is the purpose of the ship I crew for, and if a temporary economic slowdown is what we must endure while we achieve that purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient."

read the article

Finally, someone is recognizing the real threat.

Cartoon: Government Planning

Oil: All Time High in Real Dollars

Oil reached a historic high near $104 a barrel Monday, surpassing the inflation-adjusted level of the 1980s, as a weakening dollar made crude futures attractive to investors.

U.S. crude for April delivery hit $103.95 a barrel in early trading before easing to settle at $102.45 on the New York Mercantile Exchange, up 61 cents for the day.

Crude has now passed what many analysts consider to be the previous record high - $103.76 when adjusted for inflation, set in early 1980 - following the Iranian Revolution. The record high is a bit subjective however - ranging from about $93 to over $103 - depending on the contract cited and the inflation calculation used.

read the story

2006 Tax Collection

from Visualizing Economics

ISM Manufacturing Index

The nation's broadest measure of manufacturing activity, the ISM Manufacturing Index, plunged back below the expansion/contraction line in February for the second time in three months, close to the five year lows reached in December.

from The Mess That Greenspan Made

This points toward recession, but does not guarantee one.

NAFTA: Charts

Despite all of the political rhetoric about NAFTA, free trade and globalization causing U.S. job losses in manufacturing, one of the most significant factors in the recent decline of American manufacturing jobs is the significant increase in productivity of U.S. workers. Manufacturing output and productivity in the U.S. are both at all-time highs - we're able to produce more and more output with fewer and fewer workers.

Although some manufacturing jobs are gone forever, we're much better off as a country to be able to get increases in manufactruing output with fewer workers, just like the productivity gains in agriculture that eliminated millions of farming jobs. In the long run, we are much better off with fewer jobs in the farming sector producing an increasing amount of agricultural output, and likewise, we'll be better off in the long run with fewer workers in the manufacturing sector producing an increasing amount of output.

Mark Perry at Carpe Diem

Free trade is good. Productivity growth is good. Clinging to the past bad.

Tax Rates by Quintiles

from Mankiw

Cartoon: Housing Crisis Meets the Falling Dollar

Three Trillion Dollar War

When US troops invaded Iraq in March 2003, the Bush administration predicted that the war would be self-financing and that rebuilding the nation would cost less than USD 2b, but Stiglitz estimates that the wars in Iraq and Afghanistan are costing America more than USD 3 trillion.

That estimate from the Noble Prize-winning Sttiglitz also serves as the title of his new book, "The Three Trillion Dollar War", which hits store shelves Friday...

When other factors are added - such as interest on debt, future borrowing for war expenses, the cost of a continued military presence in Iraq and lifetime health-care and counseling for veterans - they think that the wars' costs range from USD 5 trillion to USD 7 trillion.

read the article

Winner of the 2001 Nobel Prize in Economics, Joseph E. Stiglitz of Columbia University.

Recession is a Bigger Concern Than Inflation

Despite the risk of inflation, further rate cuts may be appropriate and necessary amid a struggling economy, a Federal Reserve official said Monday.

In a speech delivered to the National Association for Business Economics in Washington, the president of the Philadelphia Federal Reserve, Charles I. Plosser, said inflationary worries can be put aside in certain unique situations...

Plosser, a member of the key interest rate-setting Federal Open Market Committee, argued that the current economic downturn warrants further action to avoid falling into a recession.

"I believe we are in a situation where monetary policy cannot be made by focusing solely on inflation," Plosser said. "The current turmoil in financial markets has already had a significant impact on the economy and has the potential to continue to restrain economic growth going forward."

read the article

The economy is growing, although it is slow growth, yet the Fed is continuing to ignore the very real inflation threat. Bernanke and the Fed will be too little, too late to stop inflation.

The End of Bull Markets?

Although you won't find it listed on your calendar, we're approaching the anniversary of an epochal event. No, it has nothing to do with the NCAA basketball tournament. It's a different kind of March Madness: The end of the bull market that lasted for a generation and changed the way that Americans think about stocks.

When the greatest bull market in U.S. history started in the summer of 1982, only a relative handful of people owned stocks, which were cheap because they were considered highly risky. But by the time the Standard & Poor's 500 peaked in March 2000 amid a fully inflated stock bubble, the masses were in the market. Stocks were magical, a supposedly can't-miss way to pay for your kids' college, save for retirement, enrich employees by giving them options, and regrow hair. (Just kidding about the hair. Alas.) ...

I'm reasonably sure, though, that stocks are likely to outperform high-quality bonds in the long term - not much of an accomplishment in a world where 30-year Treasuries yield about 4.5%. However, I don't expect to be able to earn almost 20% a year for 18 years owning an S&P index fund. The long bull market was great. But it's not coming back- at least for this generation of investors. Get used to it.

read the article

A bit on the pessimistic side. For long term investing (30-50 years) the market still has a lot to offer.

Cartoon: Recession Defined

How Different Investments Did Last Week

Cartoon: Not a Recession

Shift Happens

The Fed Expected to Cut Rates Again

Ben Bernanke didn't tell Congress this week exactly what the Federal Reserve would do next, but the central bank chief certainly left Wall Street with the impression that a half-point cut is a sure thing.

Federal Reserve policymakers are scheduled to meet again on March 18. Right now futures listed on the Chicago Board of Trade indicate that investors are pricing in a 100% chance of a half-point cut and a 32% chance that the Fed will slash interest rates by three-quarters of a percentage point.

"A 50-point cut seems to be a reasonable compromise," said Stuart Hoffman, chief economist at PNC Financial Services. "Any more than that and he will catch some inflation flack."

Bernanke, as part of his semi-annual hearing on the Fed's monetary policy, spent two days testifying in the House and Senate and outlined the trio of challenges facing the Fed: an economy at risk of falling into a recession, topsy-turvy financial markets and the rising risk of inflation.

read the CNN story

Effective Middle Class Tax Rate in 2005: 14.2%

In 2005, the CBO data indicate that in the middle fifth, the total effective tax rate -- the share of federal taxes as a percent of income -- was 14.2 percent, while the effective individual income tax rate was 3.0 percent. These figures compare to 2000 levels of 16.6 percent and 5.0 percent, respectively. Between 2003 and 2005, the total effective tax rate for the middle fifth edged up, but still remained far below the levels of the previous 24 years.

source and source

(HT: Greg Mankiw)

GDP Graph: Output Expenditure Model

source

Bernanke: "No Stagflation"

Federal Reserve Chairman Ben Bernanke told Congress Thursday that the nation is "not anywhere near" the dangerous stagflation situation that prevailed in the 1970s.

With the economy slowing and inflation rising, fears have grown that the country could be headed for the dreaded twin evils of stagnant growth and rising prices known as "stagflation."

"I don't anticipate stagflation," Bernanke told the Senate Banking Committee.

Still, high energy prices and rising inflation do complicate the Fed's job of trying to keep the economy growing and inflation contained, Bernanke acknowledged.

High energy prices are creating "inflationary stress," Bernanke said. And, that is "complicating" the Fed's work in terms of shoring up the economy, the Fed chief said.

read the CNN story

Time will tell.

Law of Unintended Consequences: Daylight Saving Time Edition

For decades, conventional wisdom has held that daylight-saving time, which begins March 9, reduces energy use. But a unique situation in Indiana provides evidence challenging that view: Springing forward may actually waste energy.

Up until two years ago, only 15 of Indiana's 92 counties set their clocks an hour ahead in the spring and an hour back in the fall. The rest stayed on standard time all year, in part because farmers resisted the prospect of having to work an extra hour in the morning dark. But many residents came to hate falling in and out of sync with businesses and residents in neighboring states and prevailed upon the Indiana Legislature to put the entire state on daylight-saving time beginning in the spring of 2006.

Indiana's change of heart gave University of California-Santa Barbara economics professor Matthew Kotchen and Ph.D. student Laura Grant a unique way to see how the time shift affects energy use. Using more than seven million monthly meter readings from Duke Energy Corp., covering nearly all the households in southern Indiana for three years, they were able to compare energy consumption before and after counties began observing daylight-saving time. Readings from counties that had already adopted daylight-saving time provided a control group that helped them to adjust for changes in weather from one year to the next.

Their finding: Having the entire state switch to daylight-saving time each year, rather than stay on standard time, costs Indiana households an additional $8.6 million in electricity bills. They conclude that the reduced cost of lighting in afternoons during daylight-saving time is more than offset by the higher air-conditioning costs on hot afternoons and increased heating costs on cool mornings.

"I've never had a paper with such a clear and unambiguous finding as this," says Mr. Kotchen, who presented the paper at a National Bureau of Economic Research conference this month...

"My read on this study is that it's one data point that gives us something to think about," says Richard Stevie, an economist with Duke Energy, of Mr. Kotchen and Ms. Grant's research. "I think that additional research really needs to be done." And UCLA economist Matthew Kahn points out that even if the evidence on Indiana is airtight, the effect of daylight-saving time on other states might be different -- a point that Mr. Markey makes as well.

read the WSJ article

Interesting.

What to Wear?

Smoking Bans Increase Drunk Driving Deaths

Adams, S. and Cotti, C., "Drunk driving after the passage of smoking bans in bars," Journal of Public Economics (forthcoming).

SMOKING BANS CAN be hazardous to some people's health. A rigorous statistical examination has found that smoking bans increase drunken-driving fatalities. One might expect that a ban on smoking in bars would deter some people from showing up, thereby reducing the number of people driving home drunk. But jurisdictions with smoking bans often border jurisdictions without bans, and some bars may skirt the ban, so that smokers can bypass the ban with extra driving. There is also a large overlap between the smoker and alcoholic populations, which would exacerbate the danger from extra driving. The authors estimate that smoking bans increase fatal drunken-driving accidents by about 13 percent, or about 2.5 such accidents per year for a typical county. Assuming a smoking ban is still worth it, the results suggest the need for a more aggressive approach to drunken driving - or a nationwide smoking ban.

source

The law of unintended consequences appears again

Foreclosures Up In January by 57%

If there's one thing to count on these days, it's that every month the foreclosure crisis will get worse.

January was no exception. Filings of all types, including default notices, auction notices and bank repossessions, soared by 57% compared with last year, according to RealtyTrac, an online marketer of foreclosure properties.

A total of 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions during the month. The only good news was the comparatively modest month-to-month increase in total filings.

read the CNN article

Home Sales

The New 5 Dollar Bill

more info

Man Fired Over Dilbert Cartoon

A man was fired when he posted this Dilbert cartoon.



Scott Adams, the creator of Dilbert, is taking up his cause in a new series of cartoons and on his blog.








The issue in the strip with be resolved with a “deus ex machina.” "It refers to a bad writer’s trick of having some improbable character arrive at the end of a story and conveniently solve all the problems." Scott Adams

Unfortunately, the real life incident with be slightly more complicated to resolve.


Note: This post relates to SSEPF6a of the GPS for economics.

How Different Investments Did Last Week

2008: Slow Growth, No Recession

Also Thursday, the Conference Board reported that its composite index of leading indicators, which is intended to show the economy's future direction, fell to 135.8 in January after an upwardly revised 0.1% drop in December. The reading matched the 0.1% median decrease estimate of 17 economists surveyed by Dow Jones Newswires Monday.

With January's decline, the leading index has fallen 2% -- a decline of a 4% annual rate -- from July 2007 to January 2008, the largest six-month decline in the index since early 2001, the private research group said. In addition, weakness among the index components have been more widespread than the strengths in recent months.

In January, stock prices made the largest negative contribution to the index, and housing permits also made a large negative contribution. Smaller negatives came from manufacturers' new orders for nondefense capital goods and interest rate spread. Positive contributors were real money supply, average weekly jobless claims, consumer expectations and vendor performance...

Looking at the figures, Ken Goldstein, labor economist at the Conference Board, said that while the leading index declined, the coincident index, which measures where the economy is at present "remains slow but steady."

The coincident index "is a better indicator than [gross domestic product] of where we are right now," Mr. Goldstein said, "and since [that index] was still showing a positive change in January, then the economy was not in recession." However, he said, "the change in the leading index, including the duration, intensity and dispersion across markets, suggests weak growth going forward."

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Despite the continued fear, it appears the economy will avoid a recession in 2008.

Cartoon: Recession

Students: Questions, Comments, and Suggestions

One more week finished.

6th period: Any answers yet?

Parents: Questions, Comments, and Suggestions

another week down

Stagflation?

The U.S. faces an unwelcome combination of looming recession and persistent inflation that is reviving angst about stagflation, a condition not seen since the 1970s...

A simultaneous rise in unemployment and inflation poses a dilemma for Fed Chairman Ben Bernanke. When the Fed wants to fight unemployment, it lowers interest rates. When it wants to damp inflation, it raises them. It's impossible to do both at the same time...

That credibility could be endangered by the Fed's recent track record. Yesterday's forecasts show that FOMC members define price stability as inflation of 1.5% to 2%, measured by an index that differs slightly from the commonly cited consumer-price index. By that measure, inflation has averaged 2.8% since mid-2004, when oil began a multiyear surge. Core inflation, which excludes food and energy, has averaged 2.2%...

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I think inflation is a much bigger concern than a recession at this point.

What can we do to make it better?

Inflation on the Rise

source

The media and the Fed primarily focus on "core inflation" which is low. However, overall is a better measure since it includes food and energy.

Personal Finance: 401(k) Info

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Cartoon: Recession v. Stimulus

While the fear of recession is overblown, the "economic stimulus" is correctly identified as insignificant.

Slow Growth for 2008

The Federal Reserve cut its economic growth forecast for the economy Wednesday and suggested that more rate cuts could be on the way to combat further weakness.

The central bank said it now sees the economy growing at a rate between 1.3% to 2% this year, down from its previous forecast from October of growth between 1.8% and 2.5% for 2008.

The Fed also said it expects the unemployment rate for the year to be between 5.2% and 5.3%, up from the 4.8 % to 4.9% range previously given. Unemployment stood at 4.9% in January, according to the latest reading from the Labor Department.

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The economy is far from strong, but 1.3% to 2% growth is NOT a recession.

Castro Falls...Literally

Blu Ray Wins

Toshiba said Tuesday it will no longer manufacture HD DVDs, effectively ending the long-running battle with the rival Blu-ray for a dominant high-definition format.

Toshiba said it made the decision to cease developing, manufacturing, and marketing HD DVDs after "recent major changes in the market." It promised to continue offering support and service for all existing Toshiba HD DVD products.

"We carefully assessed the long-term impact of continuing the so-called 'next-generation format war' and concluded that a swift decision will best help the market develop," Toshiba President and Chief Executive Atsutoshi Nishida said in a news release.

Toshiba's HD DVD business has been suffering recently with a string of major retailers and rental companies announcing their preference for Blu-ray, developed by Sony.

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Oil Price in Real Dollars

Remember real dollars are the only way to make meaningful comparisons across time.