http://sportsillustrated.cnn.com/vault/article/magazine/MAG1180944/1/index.htm

http://sportsillustrated.cnn.com/vault/article/magazine/MAG1180944/1/index.htm

Dollar Depreciates as Federal Reserve signals more money is on the way to the marketplace...

Dollar Slides in Wake of Fed Statement

The dollar stumbled broadly Tuesday after the Federal Reserve said it stood ready to kick-start a slowing U.S. economy.
The euro rose sharply, racking up gains of more than 1.5% against the dollar, while the greenback wilted against the yen, briefly dipping below 85 yen, considered by some analysts to be Japan's threshold for the currency's strength after last week's market intervention.
"What we see is the door being kept open to further quantitative easing," Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said of the Fed's possible fresh round of economy-stimulating asset purchases.
"Quantitative easing is broadly viewed to be corrosive to a currency's value, and so with the increased probability of easing measures, the knee-jerk reaction in the market is to sell the dollar," he said.

Here is a video explaining the concept of "quantitative easing"...hang with it for a few minutes. The first part is just an introduction but it gets better. I promise!!

Don't worry about the price of tea in China, BUT you better care about the price of cotton in China---that is if you wear clothes...

This is the second day in a row I have an entry concerning China and its impact in commodity makets. Today it is the market for cotton....

Cotton Tops $1 a Pound ""Cotton prices breached the $1-a-pound level for the first time in 15 years as delayed harvests and booming demand in Asia are cutting into supplies, putting clothing makers on edge...Prices have surged 33% since the beginning of the year due to bad weather in China, which is both the world's No. 1 grower and importer, and the flooding that has washed out Pakistan's fields. Global cotton inventories are estimated to fall 22% from a year ago as demand outstrips supply, according to the U.S. Department of Agriculture....""

The first graph shows the Market for Cotton at equilibrium price and quantity "A".

Delayed harvests as described above serve to DECREASE the supply of cotton on the world market. This is shown be the shifting of the supply curve to the LEFT ("Supply 1") and movement along the demand curve to a new equilibrium price and market quantity at "B".

Compounding the problem is the "booming demand" from Asian clothing manufacturers. This is illustrated by the shifting of the demand curve ( from Demand* to Demand 1) to the RIGHT and movement along the supply curve to another new equilibrium price and market quantity at "C". The article suggests there is still have shortage of cotton on the market so we don't quite return to market quantity "Qe".

There is potentially good news, however:

""High prices are a boon for producers in the U.S., which is the world's biggest cotton exporter. The U.S. is shipping at a torrid pace to keep up with demand. Exports sales have already exceeded half of the 15.5 million bales the U.S. is expected to produce, Ms. Johnson said. The U.S. cotton harvest is running ahead of normal, a situation that could potentially damp prices. The USDA on Monday said 13% of the cotton crop was harvested as of Sunday, ahead of last year's 7%.""

Markets for most commodites are not static and they dont recognize "ceterus paribus" (hold all varibles constant except for the one you are testing). Many factors effect demand and supply constantly. Some natural, like the weather, and some more concrete, from scarcity to market manipulation. Change is inevitable, so it provides opportunities for me to make blog entries and create supply and demand graphs...Does life get any better??? :)

Price of Steel rises---Can't be China's fault, can it? Dang it! It is...see nifty graphs illustrating this change!!

China increasingly is able to influence the price of raw materials in the world-wide marketplace...

Steel-Price Rise Defies Forecasts

Despite predictions that world-wide steel prices would remain weak for the rest of 2010, they have started to climb for several types of the metal used in products ranging from ships to tin cans, appliances and oil pipelines. The recent increases, which follow a summer of soft prices, are as high as 12% and as low as 1%, depending on the kind of product and the location. They reflect cutbacks in China as steel producers there lower output to meet the government's year-end energy-savings target.

The first graph represents the steel market in equilibrium...

This second graph illustrates the highlighted portion from the quote above. The supply curve shifts to the LEFT ("Supply 1") representing a decrease in SUPPLY. We know the supply curve shifts to the left because as a result of the Chinese action, at EVERY price there is going to be LESS quantity supplied RELATIVE to the quantity supplied on the original supply curve. As the supply curve shifts left, we move upwards and to the left ON the demand curve until we reach a new market equilibrium at P1 and Q1. The market quantity is less than it was and the market price is higher than it was.

How much are prices going to rise? The graphic below gives you some idea of how spot prices in the steel market have been affected...Please note that the prices COULD be affected by other varibles in the market, but this article suggests that the decrease in production by the Chinese plays a significant role.

Wall Street Journal

It IS possible to tax your way into prosperity!! No, really it is! See enclosed to find out...

Well, it only works if you are a criminal or an organized crime figure. Get your state legislature to enact high taxes on a product that is legal, but people just have to have. Tell the legislators that it is good for the people AND it will raise LOTS of money for the state government. Then you smuggle the product into the state and sell it for less than any business can sell it for because of the high taxes that the store must collect. Obviously this outcome was not the intention of lawmakers, but it is one of the "unintended consequences" that Frederic Bastiat warned would emerge from the "bad economist". I am certain Bastiat was not actually referring to economists, but politicians who played one on the floor of the legislature. I have no problem with taxing cigarettes, BUT the rate of taxation has to be rationally determined not just for the revenue it might raise, but for the additional PREDICTABLE results such as the one described below.

Trade In Black-Market Cigarettes: Hot, Dangerous

Black-market cigarettes are costing many states hundreds of millions of dollars a year in lost tax revenue. And the lucrative, illicit trade is attracting violent criminal gangs that can be lethally ruthless.

Criminals buy cigarettes in bulk, in states with relatively low taxes such as Virginia or North Carolina. They load the cigarettes into tractor-trailers or rented trucks and drive them north, for example, to New York. They follow the same routes they would use to traffic illegal drugs.

Police say a carton that costs less than $40 including tax in a store in Virginia goes for more than $100 in a store in New York City.

Because of high taxes in the city, selling contraband cigarettes at rates even slightly lower than their value in the store can mean big money for criminals.

"They can be sold from ... the back of a van on the corner. They can be brought in through big trucks across the border and taken to warehouses and distributed from there," Gore says

ATTN: Year 12 and 13s and 1st year Uni students!! PLEASE, PLEASE, PLEASE READ THIS ENTRY!!!

This is some of the BEST, basic advice I have seen for Year 12/13s and 1st year Uni students...In some combination, you MUST do all of these and do them to the best of your ability!! Please read the whole article, but I have pasted the 5 must do's below---learn them, live them...

The Current Recession Is Apparently Scaring Millennials

1.Do at least one internship during your college career, two if possible. First, it signals to future employers your passion and career objectives, not that you just wasted four years seeking any higher paying job. Second, it allows you to build a network that you can rely on later while job searching.


2.Network. Make connections throughout your college career, on and offline, including students, faculty, and work-related colleagues and bosses, and keep them active.

3.Participate in extra-curricular activities (and network).

4.It's your education, which means you should be an active participant in your education. Your education does not take place in the classroom; it takes place outside the classroom when you spend time reading and discussing with your classmates and friends the ideas discussed in the classroom. My job as a professor is to pique your interest in the material, but it's your job to follow through and pursue the learning and teaching of yourselves. I employ provocative examples in the classroom as a means of piquing your interest.

5.Don't forget opportunity costs. Life is balance and too much time spent doing one activity means giving up time doing others. Those others might be beneficial also. Too much partying means you're giving up valuable learning in the classroom. On the other hand, valued and marketable skills can be learned through athletics and competition, which means some sacrifice of your school work to participate may pay higher returns than just focusing on schoolwork. Give it your best shot for both, but understand the balance.

"We need Inflation like we need a hole in the head!!" Don't think of it as a hole -- It could be a good thing! (inflati

I am covering the basics of supply and demand right now in my AP and "regular" economics classes. One of the determinants of demand is "consumer expectations". A common example is to suggest today that we have complete knowledge that the price of a good is going to increase in the near future. How do consumers respond to this information? Well, even high school students know you go out and buy the good TODAY! That increases the demand for the good (shifts the demand curve to the right). Ceterus Paribus (holding all other variables constant), this will cause the market quantity to increase, as well as the price. See graph below:

Economic logic/theory suggests that the more a producer produces, the more workers they will need to produce the good. So far so good, but this is only ONE industry/business that hired some workers because the price of the good they produce increased. So, what is good for one industry (in a Micro sense) MIGHT be good for all industries (in a Macro sense), right? How do we get ALL prices to rise simultaneously so the above process can play out and we have LESS UNemployment nationwide but at the cost of some inflation? Gahh! There is that "inflation" word! BUT is it really a bad word given our present circumstances?
Currently there is a clog in the process. Business and banks are sitting on piles of money right now and are not spending or lending, repectively. Consumers are hesitant to spend because of an uncertain economy and, to a lesser extent, deflation (one puts off buying today in anticipation of lower prices in the future). All these things contribute to a stagnant economy.
The worry that DEFLATION is the problem of the day. We need to induce a little inflation (by increasing the money supply) AND have the Federal Reserve publicly TELEGRAPH that they are pursuing a moderate (3%?) inflationary policy. The thinking is this will prompt consumers to do just what I illustrated at the beginning of this post, but on an economy-wide basis. Anticipation of higher prices of homes, cars, other consumer goods will incentivize people to go buy today. Consumers and businesses will want to spend dollars that are worth more TODAY than they will be worth in the future.The result will be an increase in the aggregate level of demand for goods/services, a movement to Full-Employment ("FE RGDP") and an increase in the price level, as one would expect. See graph below.

There is lots of controversy about this in the economic blogosphere, and since I am just a simple-minded high school teacher, this is as easy an explanation as I can make. Hey, it gets me through the day...What do you think---Inflation, deflation, leave alone?? Would love to hear from you...

Housing Bubble and a dishonest political class---birds of a feather or not connected at all---You decide, I am too tired...

Homeownership and the Housing Bubble---Is there a correlation?...The graph below shows the Consumer Price Index (Dark Red Line, right scale), the housing price index (pulled from within the CPI--Bright Red Line, right scale) and the Homeownership Rate in the US since 1990 (Blue Line, left scale). For the purposes of this graph, the author (Carpe Diem) used 1990 as the base year (CPI and Housing Index =100). A housing index high of approx. 225 in 2007 means that housing prices increased 125% over 20 years (225 minus 100= 125). Over the SAME period prices in general, as measured by the CPI, increased 50% (approx 150 minus 100= 50). 

Source: Carpe Diem


The layman's definition for inflation is "too much money chasing too few goods". The demand for housing outpaced the available stock of new and used houses fueled by "easy money" from the Federal Reserve and multiplied by the creative financial instruments developed by Wall Street firms. All designed to get more money into the hands of more people to buy more housing.
Three simple observations can be made about the data: (1) homeownership rates increased dramatically since 1995 (a VERY steep increase year over year after 1995), (2) lagging behind, yet increasing at an increasing rate and keeping pace with homeownership rates, is the price of housing in general and (3) while prices as measure by the whole CPI have increased, they have increased at a modest rate over time.
There have been a myriad of reasons hypothesized for the "bubble" in the housing market which contributed to the meltdown in the banking/financial markets. I believe history will be a much better judge as time passes and more objectivity is inserted into the analysis than there is presently. However, the President AND Congress are responsible for over-sight in these matters. One cannot underestimate the power these two entities exert over the process. This letter sent to Pres. Bush in 2004 by members of Congress provides some insight into the thinking at the time. There seems to be a suggestion that there is a favorable trade-off between "safety and soundness" of the financial system and "affordable housing". Please read the whole letter but here is the operable paragraph: (note: GSE are "Government Sponsored Entities" such as "Fannie Mae" and "Freddie Mac". They hold a majority of mortgages in the US and are implicitly guaranteed by the Federal Govt.--this is a whole other blog entry).

"...We write as members of the House of Representatives who continually press the GSEs to do more in affordable housing. Until recently, we have been disappointed that the Administration has not been more supportive of our efforts to press the GSEs to do more. We have been concerned that the Administration's legislative proposal regarding the GSEs would weaken affordable housing perfonnance by the GSEs, by emphasizing only safety and soundness. While the GSEs' affordable housing mission is not in any way incompatible with their safety and soundness, an exclusive focus on safety and soundness is likely to come, in practice, at the expense of affordable housing....""

There are many parties to blame in the meltdown and I don't blame politicians exclusively, but for the political class to deny any culpability, as some of the signatories have claimed in public forums, is less than disingenuous and borders on dishonesty...I will let you make the call there...

Don't whine about the price of wine---It's China's fault---is this becoming a familiar refrain?

More evidence of the increasing purchasing power of the Chinese...For better or worse, this luxury good is in big demand, hence the world price will increase as well...

New Whine: China Pushes Bordeaux Prices Higher

""...But wine makers and merchants also credit booming demand from emerging economies, especially that of China, where labels like Lafite and Margaux have joined Prada and Hermés as badges of wealth. Last year, China passed the U.S. to become Bordeaux's biggest export market by volume outside Europe..."The pricing of the 2009 wines is way, way above what's been seen before for any previous vintage," Mr. Gearing says. A big factor is China. The volume of Bordeaux bottled wine exported to the country last year was 39 times the volume in 2000, according to the Council of Bordeaux Wine. Exports of 2009 Bordeaux to China increased 97% by volume and 40% by value from 2008. "China is now our most important market, even before France," says Paul Pontallier, general director of Château Margaux, which recently opened an office in Hong Kong. "It's really taken off over the past six to twelve months."

How College Students spend their time---Do you REALLY only study this amount of time?

""Being in, or at, a college doesn’t seem to be a terribly bad life.
That’s one of the many implications from a new report by Bureau of Labor Statistics, titled “Back to College.” Here, for example, is the lifestyle of the typical full-time college student:""

Economix

White House to NOT install Solar Panels---My opinion--INSTALL THEM and ignore the critics!!

I believe solar energy is going to be a vital component to servicing our current and future energy needs and will contribute significantly to a much needed positive Aggregate Supply shock. By a positive Aggregate Supply shock, I mean the advancements in solar will be so significant that widespread adoption will across the board decrease the cost of producing for producers--decreasing the cost of producing provides an incentive to produce more. Produce more goods and more workers will be needed for the production of those goods (so says the economic logic). Producing more goods then promotes spinoff subsitute and complementary goods--so on and so forth--we are off to the production races...That is REAL economic growth! The tangible and intangible residual benefits are a cleaner environment (a nod to the Lefties) AND less dependence on countries that rely on oil as its primary export (a nod to the Righties). BOTH ideologies have a stake in this fight and and I don't understand (well actually I do understand) why the resistance from the Right and the timidity from the Left.
I don't get the Administrations decision to not install solar panels at/on the White House (Click HERE for article). Seems a fear of not wanting to invite comparisons to the Carter Administrations has driven the decision, if not in its totality then at least partially. Are we NOT past that yet? Considering that $80 billion , yes $80 billion, has been allocated in various forms of economic stimulus to renewable energy research, development and actual installation, seems it would be EXCELLENT leadership to outfit the White House with solar technology. Most Americans are committed to the notion of developing alternative energy sources. The use of the technology is widespread enough that I don't believe the average American would look askance at it. I say install them!! What do you think? Install the solar panels or not? You have heard my spiel, let me hear your thoughts...

"Buy one, Get One Free" Or "Half-Off"--I can't decide which is better!!

It is difficult to not be manipulated by clever marketing, or unclever marketing for that matter (You believe when an item is advertised as "half-off" that it was ACTUALLY sold at the original price at one time, don't you??). I can explain this to students all day long, but I am sure when they go to the store they are lured by the "sale". Sellers engage in a concept called relative pricing. If I have an item I want to sell for $50 and advertise it at that price I will NOT get the same response if I instead put a "manufacturers suggested retail price" of $100.00 and offered it for sale at $50.00, half-off. Same price outcome but not the same sales response. the first instance I did not give you are basis for comparison, the second I did...

""Behaviorial economist Richard Thaler has noted that consumers are really bad at making decisions about value and constantly need "reference prices" for comparison. A dress costs $80. Is that too much? Not if it's marked down 50 percent from $160. The trick is, that artificial $160 reference price may not really exist.""How Apple plays the pricing game

I can cleverly do this with multiple items that are similar but steer you to the one I really want you to buy. Apple (and others) do this very well, but Apple may be the best at this "relative pricing" game...

""...Decoys explain why Apple often sells each gadget in a pricing series, such as the new iPod Touch's $229, $299, and $399 price points for different storage capacities. You may gladly spend $229 to get a hot media player, thinking it's a deal compared with the highest-priced version and not blink that you could instead buy an iPhone 4 at the lower price of $199 with more features.
The $399 "decoy" has clouded your judgment. Apple wins the best of both worlds - stoking demand for products that look like bargains and for all the decoys it sells at much higher prices. Yes, some people will spend $399 for a music player with slightly better technology - and Apple makes even fatter margins...."

If after reading this you still get fooled, well, at LEAST you are an educated fool...Ummm, that did not come our right, did it??? :)

How compromise choices can make you money

Need a current event article for Economics? This one is short and discusses more concepts than any other article I have seen recently...it a carpet bo

Short article chocked full of supply and demand problems thoughout a supply chain, illustrates structural unemployment, changes in the labor force for trucking, the pitfalls of extending unemployment benefits...seems unending...if you need a source for AP Economics or a college economics class, this is one stop shopping...
Shortages of trucks and truck drivers stall product deliveries

Are Americans selfish and not charitable? Nice graphic enclosed that shows who is naughty and who is nice

A bit of good news, but I did not have to be told this...Americans ARE generous...(Click on image to make bigger OR click on link to go to source).
Americans Are More Caring Than 99% Of The World

Here's a rare bit of information to make Americans feel good about themselves.
A UK-based think tank rated Americans fifth in the world in a composite index of charitable activity, including giving money, volunteering, and helping a stranger. Only Canada, Ireland, Australia, and New Zealand ranked higher. Charity-wise, Americans do better than the British, French, Chinese, and the rest of the world.

Liar, Liar, pants on fire! Well, not on fire, but they may be larger than they appear...

I KNEW IT!! Not all pant sizes are created equal. The graphic below shows the variations in ACTUAL size of select pants relative to the size stated on the label. The label in the pants says "36 inches". However, when measured you can see the ACTUAL size of the pants is not as advertised. The pants are considerably larger, in some cases. Is this dishonest advertising OR do we WANT to be duped in this manner?
Are Your Pants Lying to You? An Investigation

POP! That is sound of the"bubble" about to burst in the market for Higher Education...Can colleges escape the laws of supply and demand? I think not..

There has been lots of talk about how to control over-spending in the housing and healthcare markets. Major legislation has been passed and political capital has been expend to address these problems. How about the potential "bubble" in higher education? Is this issue important to college students?? Well, yes. Has it been seriously addressed? Well, you decide for yourself as you write checks to pay for your college expenses...

The first graph pulls out the price of College Tuition (Dark Red Line) over time and compares it to prices as a whole (CPI-Blue Line) and the price of housing ( Bright Red Line)

The second graph pulls out the price of College Textbooks (Blue Line) and compare it to prices as a whole (CPI-Dark Red Line) and the price of housing (Bright Red Line)

Graphs courtesy of Carpe Diem

Immigration: NOT and economic debate…

Because if it were, there would be no debate at all. Immigration, from an economic standpoint, is simply the flow of labor from one geographic region to another. I’m not talking about the kinds of immigrants who arrive in America or Switzerland or the UK as refugees fleeing political, religious, gender or racial persecution. Such asylum seekers have motives that are entirely non-economic for fleeing their homelands. I’m talking about the millions of people every year pack up their homes and seek a new life in a new country for economic reasons.

America has been called the “land of opportunity”, and for nearly five centuries now the opportunities the New World has had to offer have attracted immigrants from all corners of the globe. First it was the Spanish and the Portuguese who came in conquest in search of gold and silver. Later came the pilgrims seeking religious freedom, and after that the Irish, Italian, Germans, Russians and countless other Europeans seeking the economic opportunities offered by the construction of railroads, homesteads on the Great Plains and gold in the mountains of the West. Chinese arrived by the millions from the 1850′s through the turn of the 20th century, and over the past hundred years America’s racial, ethnic, religious, linguistic and cultural fabric has been enriched by the arrival of millions upon millions of people seeking the economic opportunities America has had to offer. The opportunities of the 21st century no longer involve the hope of striking gold or working on the railroad, rather they exist in industries such as software engineering, medicine, scientific research, finance and, yes, agriculture and construction.

It is interesting to me that in the United States today, American citizens and politicians seem to be as angry as ever about the seemingly endless flow of “illegals” flooding across the American border, bringing with them crime and contributing to unemployment among American workers already struggling to find jobs during the country’s deepest recession in decades. If you believe politicians like the governor of Arizona, Jan Brewer, this “invasion” of illegals from south of the US border is simply tearing apart the fabric of American society. Her state has even gone so far as to pass a law requiring police officers to require anyone who they suspect of being “illegal” to present proof of their legal status upon the officer’s request. Other attempts by states to crack down on illegal immigration include laws forbidding landlords from renting apartments to illegal immigrants and on a national level there is a major push to change the US constitution, in which the 14th Amendment states that any child born in the United States is automatically a US citizen. Imigration opponents claim that millions of Latinos enter the US illegally to have babies, which they call “anchor babies”, who become US citizens and then, supposedly, later in life, help their parents become legal US residents.

The protest against illegal immigration has dominated the right wing agenda in America lately, and has brought angry Americans to the street for rallies across the country aimed at sending illegals “back to where they came from”.

The irony of the whole situation is that today, in the midst of the Great Recession, immigration rates are falling rapidly. The number of immigrants entering the United States illegally has actually fallen by 67% in the last few years, from 850,000 per year between 2000 and 2005 to under 300,000 in 2009. Even more ironically, the number of illegals leaving the United States now actually exceeds the number entering the US, meaning that the total number of illegal immigrants (around 11 million in 2009) is decreasing and is lower now than it has been for much of the last decade. The Washington Post presents the facts:

From an economic perspective, the backlash against illegal immigration to the United Sates right now is perplexing and frustrating. Americans currently find themselves in a dire economic situation in which over 8 million people have lost their jobs, the unemployment rate is stuck at a historic high of nearly 10%, and discouraged workers have dropped out of the labor force at alarming rates, meaning that almost one in five Americans is either unable to find work or has given up the search. Clearly there is much to be upset about.

But all the facts above send a clear message to potential illegal immigrants to America, as well as to those who are already here! The message is, “DON’T COME!” (or for those who are already here, “maybe this is a good time to leave!”). Some of the decrease in the flow of illegal immigrants can probably be attributed to tougher border security and increased enforcement of the existing immigration law. But it’s more likely that the decrease in the illegal population is an economic phenomenon. Here’s why:

America purportedly practices a system of economics known as a free market. The fundamental characteristic of the free market system is that resources are allocated efficiently when they are allowed to flow from markets in which they are in low demand to markets in which they are in high demand. Price is the signal that tells resource owners where their resources are demanded the most. When we are talking about immigration, the resource that is flowing from market to market is labor. In a free market economy, there should be no government controls over the free flow of labor from one market to another. When the price of labor in one market (say the apple industry in Washington State or the construction sector in Arizona) is higher than in another market (say the corn industry in Mexico or the retail sector in Guatemala), the signal sent by this imbalance of wages is that more labor is demanded in Washington and Arizona and less is needed in Mexico and Guatemala.

The imbalance of wages between the US and its closest neighbors leads to a natural inflow of labor from low-wage countries to the higher wage industries in the United States. It’s a form of osmosis, which according to Wikipedia is “the movement of water across a partially permeable membrane from an area of high water concentration to an area of low water concentration… which tends to reduce the difference in concentrations”. Instead of water, immigration is osmosis of labor. Labor is more abundant in Mexico and Latin America than it is in the United States. The flow of labor across America’s “semi-permeable” border with Mexico simply “reduces the differences in concentration” of labor between the US and its southerly neighbors.

Making it harder for immigrants to come into the United States does little to protect American jobs. One thing I teach my students is that in a world where labor is not able to be imported (i.e. one where immigration is stemmed or slowed down), we should expect to see capital exported. A higher border fence with Mexico or more immigration police or a repeal of the 14th Amendment may reduce the number of people coming to the United States to find work, but these barriers to immigration will do nothing to stop the flow of capital to Mexico and the rest of the low-wage world. If Americans want more jobs to be done in America, then they should embrace those who are willing to do them, otherwise those jobs can be exported to where the wages are lower and people are willing to do them. If labor is immobile, capital will grow legs!

The immigration debate is not an economic debate. It is a political one. From a purely economic perspective, with the efficiency of free markets as a guiding principle, the free flow of labor across national borders improves overall efficiency of both the countries from which the immigrants come and the country in which they arrive. American workers are only marginally affected by the presence of illegal immigrants in the United States. Several studies have shown that while employment among certain Americans is affected slightly, there is no evidence that illegal immigration puts downward pressure on American wage rates. Jobs that might not even exist in America without immigrant workers willing to work for low wages do get done thanks to immigration, and the American economy is stronger and healthier because of this. Without immigration, those jobs will still get done, just not in America! Or, if the jobs can’t be exported, they’ll get done but at a much higher cost, raising prices for American households and reducing the real income of the American people.

In economic terms, increased immigration allows the United States to have a comparative advantage in the production of a broader range of goods and services than it would have without immigration. Since in a global economy, what a nation’s economy produces is determined by what it can produce at the lowest opportunity cost, the more low-wage labor America has to employ, the larger it can expect its economy to be and the greater number of exports it can expect to sell to the rest of the world. Immigration is overwhelmingly positive for the American economy, even illegal immigration. If it weren’t illegal, it would happen anyway, just more of it, which again would only make the US economy stronger and its output greater.

Again, these are all mute points in the current American debate over immigration, because the fact is that the net flow of illegal immigrants is actually negative right now. NPR reports,

Signs are pointing to stabilization on the border… as a still-sputtering U.S. economy and high unemployment continue to contribute to the over-the-border slowdown. Estimates suggest that the U.S. economy has lost 8 million jobs in the downturn, including 4 million manufacturing and construction jobs over the past three years.

The free market offers the perfect solution to the illegal immigration debate in the United States. Let it be! If America doesn’t need more labor, then labor will not come to America, and some of that which is already here will leave. But once the US economy begins to recover and the demand for labor begins to grow once more, let it be! Instead of building higher fences and hiring more border police, find ways to make it easier for workers to enter the country and fill the jobs for which they are demanded. America will be stronger for it! After all, if we don’t embrace the inflow of labor, we better be prepared for an outflow of capital. And as a decrease in the labor force and the amount of capital in a nation is a recipe for economic contraction, recession and declining standard of living among that nation’s people.

Is that the America we want to see in the future? Would America be the land of freedom and opportunity today if it had kept out immigrants throughout its history instead of embracing them and incorporating them into American society and the US economy? I doubt it. So, America, end the debate… because from an economist’s perspective, it was over before it even began!

Ok, the deep fried thing at the Texas State Fair has gone one product too far....

Iam a beer drinker, however it's the creativity and trial and error that stems from this innovation is what fascinates me. The economics is interesting too: is this food item the result of demand-side or supply-side economics? Did people demand this good and the entrepreneur then go about producing it, or did the entrepreneur anticipate that if he/she supplied it people would want it? Sorry, this is how I think about everything---the "economic way of thinking" controls my life!! :)

Texas State Fair's culinary contenders fry everything from Pop-Tarts to beer

""If Big Tex looks a little glassy-eyed this fall, blame it on the Fried Beer. Or the Deep Fried Frozen Margarita.
Booze is generating a buzz for the State Fair of Texas, as fried-alcohol dishes made the list of top new fair foods announced Wednesday.
Eight imaginative contenders are vying for the Sixth Annual Big Tex Choice Awards, with the winners getting plenty of publicity – and long lines of eager fairgoers willing to gobble up the fried goodness.
But have your ID handy for the Fried Beer and Deep Fried Frozen Margarita – you must be 21 or older to partake....Fried Beer is a beer-filled pretzel-like dough pocket that's shaped like ravioli. Take a bite and the beer pours out.""

Happy Capital Day!! Opps, I mean Labor Day...or do I?

On Labor Day Americans celebrate the contribution of the worker to the production of goods and services. Good enough and well deserved. However, why don't we have a day for what really allows workers to be more productive AND work less with their physical bodies and more with higher level thinking skills?...(HT: Division of Labour)

""Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.
Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.
There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture capital behind him. Capital can refer to either the tools of production or the funds that finance them. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.
This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists in spite of some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business.
And yet, we have a “Labor Day” in America but not a “Capital Day.”
Of course not being American, I've never actually celebrated labour day but I do appreciate the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that! But I’m starting a new tradition this year that may never catch on and it doesn’t matter to me if it doesn’t. I’m doing it anyway: In odd-numbered years, I will celebrate Labor Day on the first Monday of September. In even-numbered years, I will celebrate what I’ll call Capital Day. This makes Monday, September 6, 2010 my first official Capital Day.
This weekend, I’ll be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife.
Happy Capital Day, America!""