The Fed just doesn’t get it.. February 9, 2009
Posted by The Armchair Economist in Business, Commentary, Consumerism, Economics, Politics.add a comment
Late 2008, the the Fed gave out ~$350b, about half of the $700b ‘bailout’ Congressional hearings showed that there was very poor accountability towards how banks spent that money. Rather than loan it out, banks just hoarded it. When asked why they weren’t loaning the money, they said that they are increasing loan requirements due to the poor economic outlook. In other words, the banks are doing what they should be doing… assessing the risk of nonpayment to potential borrowers.
Today, the Fed announced an overhaul in how the rest of the bailout money will be used: it will be used to buy back the ‘toxic assets’ that are supposedly weighing down the banks balance sheets. How does this change the fundamental problem of banks not loaning the money out? (more…)
Some quick points.. September 30, 2008
Posted by The Armchair Economist in Commentary, Economics, Politics.Tags: Accountability, Bailout, Economics, Finance, Wall Street
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I’ve been studying for my board exams so haven’t been able to post.. but some quick points:
I’m glad to see the bailout fail in the house yesterday. Unfortunately rather than scratching the current plan, they are merely adding more clauses to it to gain more votes. While the stock market reaction was expected, I am also disgusted that politicians are using the market losses to justify passing the bailout. In case people weren’t aware, investing in the stock market means inherent risk. Using the bailout to prop up stock prices seems a tad short sighted, doesn’t it? Perhaps our problem has nothing to do with decreasing housing prices.. and the root lies in our systemic aversion to accountability?
An Overlooked Solution: Some lessons from Sweden September 23, 2008
Posted by The Armchair Economist in Business, Commentary, Economics.Tags: Accountability, Bailout, Economics, Finance, Mortgage, News, Wall Street
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It seems as if Paulson’s plans aren’t getting through Capitol Hill as easily as easily as Paulson and the Bush administration would like it to. Rather than blindly react to a calamity (as they did after 9/11), cooler heads are prevailing. In a way, the quick announcement by the Fed for a ‘Bailout’ last Friday fulfilled its main goal.. of stabilizing a market that was running on fear. While the Senate Banking Committee is busy fleshing out the details of the bailout, I wonder why no one has brought up a strategy that was utilized by the Swedish Government in the 1990s to stabilize their own economy after a similar housing bust. (more…)
Open Letter to Senator Charles Schumer September 20, 2008
Posted by The Armchair Economist in Business, Commentary, Economics, Politics.Tags: Accountability, Banking, Business, Economics, Mortgage, Politics, Subprime
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The Honorable Charles Schumer,
I am writing to you, as a constituent and resident of New York State, to share with you my thoughts and concerns regarding the Federal Reserve’s action in response to this week’s financial upheaval on Wall Street.
While I understand the necessity for swift and decisive action in order to stabilize financial markets, the actions outlined by the Federal Reserve do nothing to address the root cause of the sub-prime lending debacle. It is of my opinion that our problems derive from monetary policy driven by our exclusive reliance on continual economic expansion to fund increasingly large government programs (and an unpopular war), a policy that favors growth over stability. (more…)
Fed bailout of Wall Street: Reverse Redistribution of Wealth September 19, 2008
Posted by The Armchair Economist in Business, Commentary, Economics.Tags: Accountability, Banking, Business, Economics, Fed, Finance, Investing, Mortgage
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Fiscal conservatives (and the rich) have always cried foul over progressive tax policies and socialist policies(or as they see it, the redistribution of wealth from the rich to the poor). Today, we are witnessing perhaps history’s greatest reverse redistribution of wealth.. from the lowly taxpayer/common man to those who gambled on risky bets (and lost).
While this bailout was necessary to stem the fear running in on the Street and risking catastrophic damage to the US/world economy (think: companies going bankrupt, people losing jobs, less tax revenue, less social services.. depression perhaps), there is no debate that this is basically a free ‘put’ option to gamblers who were caught holding the bag. (more…)
From a Feminist: Vote for Palin because shes a Woman! September 17, 2008
Posted by The Armchair Economist in Commentary, Politics.Tags: Abortion, Election 2008, McCain, Obama, Palin, Politics, Womens Rights
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I came across an interesting post that seems to be a site for Ex-Hillary supporters who are going to vote for McCain/Palin. Rather than put forth any legitimate (am I being sexist since I’m a man?) reasons, this is what she is saying (I will extract the relevant points to save you from the wall of text):
…American women have NOT come a long way, baby… the overwhelming thing we all must do is to elect more women to local, state and federal government. Why? Because of the 30% Solution…. well-recognized fact that no significant progress is ever made on womens’ issues in any country unless the federal government is made up of at least 30% women. Our federal government is currently made up of 17% women, which explains why we have had such a difficult time moving forward… If 30% of the Senate and House were women, you can bet your increasingly-less-valuable paycheck that both parties would be feeling a lot more responsible to that constituency…. The Democrats have utterly failed to demonstrate their commitment to womens’ rights by refusing to nominate the woman who was the clear winner of the primaries this year… The main reason McCain picked Palin was to satisfy his conservative base, but he was also extremely aware of the pissed-off faction of the Democratic Party that has finally seen the impenetrably sexist nature of the Party we thought was our friend and advocate…. McCain and the Republicans are willing to elect a woman to the Executive Branch for the first time in the history of our country. They are advancing the 30% Solution. Obama and the Democrats are not, and are not. Do you get it now, Obamans?… It is time to acknowledge that, as Hillary said, Womens’ rights are human rights. And it is time to cast your vote for a woman this Election Day. I am casting my vote for two women, McKinney/Clemente, unless McCain comes close enough to win New York, in which case I will vote McCain/Palin at the top. And after this election, I am only casting my vote for women, unless I have no alternative.
Is it me or does anyone else find it highly ironic and hilarious that someone who is out to advance women’s right is going to vote for a woman SIMPLY because she is a woman (rather than based on her abilities/accomplishments)? In their short sighted desire to see a woman in office, they are willing to vote for a person that has acknowledged a woman doesn’t have rights to her own body. How far back does this set the women’s lib movement?
MyGallons.com: Profiteering off the frenzied fear of the weekly fillup July 4, 2008
Posted by The Armchair Economist in Commentary.Tags: Business, Cars, Commentary, Economics, Fraud, Gas Prices, Mygallons.com, Scam
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Recently, I’ve been reading countless stories about consumers making ridiculous financial decisions to trade their SUVs for something more fuel efficient, anything ranging from a Smart car to a motorcycle. The sad part is that for many of these people, they are upside down on their SUV (ie: they owe more on the SUV than the car is worth) so they are paying HIGHLY inflated prices for the gas sipper they are trading into (I’ve heard loans of 39k for a 27k Prius!) Insane, but this isn’t normally enough to get me to post, but today I came across an article by Kimberly Palmer, of the Alpha Consumer blog on a company called MyGallons.com.
The premise of this company is that you can buy gas at today’s price and use it later, when gas prices increase even more. Sounds good right? (if you have any kind of training in finance you probably already see the faults). The fine print includes: Annual Fee of: $29.95, ($39.95 if you don’t want to give them permission to automatically deduct from your credit card), a $1.95 ‘fill up’ fee if you use a credit card (the only accepted payment method), in addition to other fees (ie: an overdraft fee). I’ll leave it to you to do some back of the envelope math to see how much ‘savings’ you need to negate the transaction costs.
So what happens if the price of gas goes DOWN? The FAQ helpfully states: Gas prices move up and down all the time. If prices drop you can wait for them to go back up in the days or weeks ahead. (more…)
Economics of trading in an SUV May 29, 2008
Posted by The Armchair Economist in Commentary.Tags: Business, Cars, Commentary, Culture, Economics, Personal Finance
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With oil futures at $130/barrel and gas prices topping $4.00 a gallon in many areas, SUV owners are feeling the pinch at the pump where fill ups often cost between $80-100. While it is easy to villify SUV owners for their largess and lack of forsight, the question remains: Is it worth it to trade the SUV in for a smaller, more efficient car?
Many consumer finance organizations (1,2) argue that it isn’t economic to trade in an SUV while the SUV market is depressed and trade in values are low. The argument is that since everyone else is trading in their SUVs and no one is looking to buy them, the market is flooded with these vehicles. The trade in value you will get is thousands of dollars less than what these vehicles ought to be worth, and the hit you will be taking on trade-in value is not justified from the savings recouped by $30 per fillup. You would need hundreds of fillups to make the trade-in worthwhile and the smarter strategy is just to wait until the market improves before trading in your SUV.
This argument is predicated on two facts: 1) Gas prices will improve.. or atleast not continue to get worse 2) Demand of SUVs will improve in the future. Without a crystal ball, there is no guarantee that gas prices will improve (infact, Ford predicts gas prices will remain in the 3.75-4.25 range through 2009). While I don’t know if gas prices will be 3.00 or 5.00 one year from now, I’m willing to bet that it won’t go to the price levels in the 90s-early 2000s ($1-2/gallon) that enabled consumers to waste gas without a second thought. (To put that into some perspective, oil prices need to drop from the current $130/barrel level down to the $30-50/barrel level!) Without a significant drop in oil prices, we will likely not see any increased demand for gas guzzling vehicles. The only way we’d work through the current backlog of SUVs is for people who actually NEED the carrying capacity of these vehicles…
A RATIONAL decision to purchase an SUV? Thats a new one..
The Fallacy of Carbon Offsets May 18, 2008
Posted by The Armchair Economist in Commentary.Tags: Accountability, Business, Carbon Offsets, Environment, Fads, Global Warming, Personal Responsibility, Politics, Science, Trends
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Have you ever noticed the options to purchase ‘Carbon Offsets’ from travel sites when you buy airline tickets? My first thought when I saw these start popping up several years ago were that these were a scam (how do you know they really plant trees or pass the money to organizations that do.. and what is their ‘commission’?). Eventually, I started hearing about people calculating their carbon footprints and then buying the appropriate carbon offsets so that they are ‘carbon neutral’.
While, I can’t imagine that it is bad to plant more trees and to be more aware of your impact on the environment via your ‘carbon footprint’, the whole idea of ‘carbon offsets’ is at odds with an environmental friendly way of life. When we hear about greenhouse gases and global warming, most of us probably feel alittle bit guilty about our individual contributions.. however the idea of being able to ‘buy’ our way out of our guilt only serves to divert our attention from where it really should lie: Conservation.
When you calculate how much electricity/oil your 4000 sq ft home consumes during the summer/winter, as well as how much gas your V12 SUV consumes, its easy to feel responsible. While buying carbon offsets may help you feel that you did something for the environment, it isn’t the answer. If paying for the appropriate carbon offsets is all you did, you are ultimately consuming the same number of resources (ie: and contributing to the rise of price of natural resources). Similarly, when you purchase carbon credits from airlines to offset the carbon footprint of your trip, you are giving the airline a free pass to keep on using an aging, fuel inefficient fleet. Put your wallet where your mouth is and do alittle research into the airline that flies your route and uses the most efficient aircraft (I wonder if a site exists that does this automatically?)
Besides selling your house or trading in your SUV for a Prius (kudos to you if you are that invested in our environment), there are simple and effective (yet not very obvious) things we can do to reduce our carbon footprint, all of it revolving around conservation and reuse. Figuring out the amount of trash that you throw away is a good gauge of your impact on the environment. Reuse those plastic bags (stop getting them from the grocery stores, do you know how much energy and oil based products it takes to make plastic bags, not to mention their uncanny ability to resist biodegradation). Minimize the amount of water you use (Fix those leaks and turn off those faucets when brushing your teeth). Buy bigger sized products (Speaking directly to those manufacturers that try to hide price increases by decreasing the amount of product while using the same sized container.. I’d rather you just raise the price and give me the same amount of product, since the product:waste ratio only gets worse). Walk/Bike/Skate/Use Public Transportation.. and STOP DRIVING to the next store within the same shopping complex! Refuse to purchase convenience foods (ie: packaged salads, ‘lunch sized’ package of foods).
The ways you can minimize your carbon footprint are endless.. and none of these require you to spend an extra cent! digg story
Armchair Economics 
Docs vs. Glocks August 8, 2012
Posted by The Armchair Economist in Commentary, Health Care, Medicine, Politics.Tags: Gun Control, Medicine
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