Saturday, March 03, 2007

Quote of the Day

Entrepreneurial activity in our economy is the mainspring of economic growth and gains in employment. These entrepreneurs also need help. A report released this week by the Kauffman Foundation found that entrepreneurs are impeded by four major obstacles — regulatory red tape, high costs of health care, burdensome litigation, and lack of skilled labor.

The first 100 hours of the new Congress are over, but Congress has yet to deal with major issues affecting economic growth and investor confidence. It is time to act — before investors face an even more serious decline in our stock markets.

Diana Furchtgott-Roth in the NY Sun "Markets' Problem is Politics"

Political Nitwitery

Senator Hillary Clinton called for action to address the "growing vulnerability to the US economy" from our increasing foreign-held debt, citing that foreign nations now hold nearly half or more than $2.2 trillion of all public debt with China and Japan holding nearly $1 trillion. In remarks on the floor of the Senate and in a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Senator Clinton underscored that recent stock market losses, the biggest point loss since September 11th, 2001, should be a wake-up call of the risk to our economy of the "continuing erosion of our economic sovereignty."

As Larry Kudlow points out:

1. Foreign-owned Treasury bonds are only 16½% of GDP. Who cares?

2. Foreigners own $2.2 trillion of our bonds, compared to $54 trillion of U.S. household wealth. So what?

3. OPEC and China's share of total foreign ownership is only 20% ($450 billion). Britain, Japan, and other clear U.S. allies own the other 80% ($1.8 trillion). So where’s the great threat?

MP: In a credit arrangement, isn't it usually the creditor/lender who is at the most risk, and most vulnerable, and not the borrower/debtor? Think about it: If you have a $100,000 mortgage, who is more vulnerable and exposed to more risk: you or the bank/mortgage holder? As long as you make the payments, you have NO risk.

USA Isn't the Only Place Wal-Mart is Unpopular

NEW DELHI: Nearly 100 communist protesters demonstrated against the visit to India of a top Wal- Mart executive looking to open stores across the country in partnership with an Indian conglomerate.

India's retail market remains dominated by small mom-and-pop shops, and major Western retailers are eager to move in before Indian companies build their own chains.

But Indian law bans foreign multi-brand retailers like Wal-Mart Stores from setting up shop on their own.

So Wal-Mart, the world largest retailer, has formed an alliance with Bharti Enterprises — an Indian conglomerate that operates the country's largest mobile phone company — and the two plan to use a loophole in Indian law to open their chain.

Read more here.

Shoveling Out in Minnesota

Interesting Fact of the Day

China has 160 cities with population of 1 million people or more!

As Thomas Friedman said, in China if you're "one in a million," there are more than a thousand others just like you!

Friday, March 02, 2007

BMW 3-Series in India

On a previous post, I mentioned that U.S. exports to Inida have about quadrupled in the last 3 years as a result of the booming Indian economy, which is growing at 8-9% per year. As another indication of India's growing buying power, BMW will start selling its 3-series model cars here later this month, produced in a new BMW plant in Chennai. In May, the BMW 5-series will be produced in Chennai as well.

Read the
story here.

Carpe Diem Stats

1. According to the most recent monthly traffic rankings for major business and economics websites and blogs, Carpe Diem ranks #64 by average daily visits (141) and #66 for average daily pageviews (207).

2. Total cumulative visits to Carpe Diem since its start last September just went over 20,000 today, see the Sitemeter, just below the Archives on the right hand side.

3. Daily visits today to Carpe Diem was high (226 through 10 p.m.) due to links to my blog from the Adam Smith Institute blog, and the Club for Growth blog.

Carpe Diem from Bangalore!

Age and Sex Tax Discrimination in India

Personal income tax rates in Inida ranges from 10% to 30% with the following interesting personal exemptions, by sex and age:

Men 110,000 rupees (about $2,500)

Women 145,000 rupees (about $3,300)

Senior Citizens 195,000 rupees (about $4,300)

Like being able to use the women's tees for golf, I guess there would also be a tax advantage for a man having a sex change operation in India! Carpe Diem from Bangalore!

Thursday, March 01, 2007

Good News, Bad News for U.S. Housing Market

There was good news and bad news for the housing market in January. Sales of existing homes rose to an annual rate of 6.46 million in January, the highest level for seven months. But after increasing in December, the median price of an existing home fell by nearly 5%, to $210,600.

Separate data for the smaller market in new homes showed that sales plunged in January by 16.6%, to an annual rate of 937,000—the biggest drop in 13 years.

From The Economist.

What Does Economic Freedom Look Like at Night?

What does economic freedom look like at night from a NASA satellite?

See the fascinating NASA Earth night photograph from Aug 27, 2001 (click to enlarge). In Europe, it's easy to spot London, Paris, Stockholm, Madrid and Vienna. Check out Israel compared to the rest of the Arab countries. Note the Nile River and the rest of the "Dark Continent." After the Nile, the lights don't come on again until Johannesburg. From Strange Cosmos, via Tom McMahon.

According to the 2007 Heritage Foundation's Economic Freedom of the World in Five Regions, the economic freedom of Sub-Saharan Africa is the lowest in the world, and the economic freedom of Europe is the second highest in the world, just slightly behind the Americas.

It's All Relative

Michigan has the second highest unemployment in the U.S. at 7.1%, ahead of only Mississippi at 7.5%. However, it could be worse - there are 100 countries with unemployment rates at 10% or higher, about ten countries at 50% or higher, and 125 countries with a higher unemployment rate than Michigan. See the full ranked list here.

(Note: Michigan's jobless rate is for December 2006, and the country rankings are for 2005).

"In regione caecorum rex est luscus." (In the land of the blind, the one-eyed man is king.)

Iceland Joins Flat Tax Club

Iceland recently passed a flat tax rate of 22.75% for personal income at the federal level and 13% at the local level, for a combined flat tax rate of 36%, higher than flat tax rates in other countries (see chart above), but much lower than the previous marginal tax rate of almost 50% for high income earners. At the same time, corporate income tax rates were lowered in Iceland to a flat rate of 18%, down from rates as high as 50% in the late 1980s. As the Laffer Curve predicts, the lower corporate tax rates actually significantly raised corporate tax revenues collected by a factor of almost 2X, as a percentage of GDP (see graph above).

The move to a flat tax in Iceland is significant because it is the first advanced, Western economy to adopt a flat tax.

Iceland also now has the world's lowest unemployment rate for advanced economies at 2.1%.

Read more here from Cato Institute economist Dan Mitchell.

Wednesday, February 28, 2007

Indian Equivalent of Bum Fights? Slum Tours

For anyone weary of typical tourist sights like the Taj Mahal and other palaces, a new tourist attraction is available for visitors to India: a tour of Indian slums in New Delhi or Bombay.

Here is info on
one company, including a price list, less than $7 for a 2.5 hour tour and about $15 for a 4.5 hour tour.

Here is a newspaper article about slum tours in New Delhi.

Interesting Fact of the Day III

The Indian economy grew in 2006 by about 8.5% and is predicted to grow by more than 9% this year. At that rate, the Indian economy will double in size of the next 8 years, and will grow from its current size of about $1 trillion in GDP to $2 trillion.

Carpe Diem from Bangalore!

Interesting Fact of the Day II

In 1990, U.S. exports of goods and services to Inida were only $2.5 billion. By 2003, thirteen years later, U.S. exports to India had doubled to $5 billion.

Between 2003 to 2005, in a period of only two years, U.S. exports to Inida tripled from $5 billion to $15 billion, and in 2006, it is estimated that exports to Inida will exceed $19 billion!

We hear a lot about outsoucring TO India, but hear as much about our exploding exports of U.S. merchandise and services TO India.

For example, in "The World is Flat," Thomas Friedman describes the "24/7 Call Center," a typical call center in Banglaore (where I am currently visiting):

"All the computers are running Microsoft Windows, with chips designed by Intel. The phones are from Lucent (now Alcatel-Lucent). The air-conditioning is by Carrier, and even the bottled water is by Coke. In addition, 90% of the shares in 24/7 are owned by U.S. investors. So even with the outsourcing of some service jobs from the U.S. to Inida, India's growing economy is creating a huge demand for many more Amercian goods and services."

Interesting Fact of the Day

"According to the information technology office of the Indian state of Karnataka (where the city of Bangalore is located, and where I am currently visiting), Indian units of Cisco, Intel, IBM, Texas Instruments and GE have already filed more than a thousand patent applications with the U.S. Patent Office. Texas Instruments alone had 225 patents awarded to its Indian operation."

~From "The World is Flat" by Thomas Friedman

Tuesday, February 27, 2007

Philanthropy Hits New Record High

Facts about charitable donations in 2006:

1. The number of individual donations of $100 million or more hit a record in 2006.

2. In 2006, there were 21 donations of $100 million or more by individuals to universities, hospitals and charities, compared to 11 in 2005.

3. The philanthropy of the country's 60 most generous givers hit a record $7 billion in 2006, up from $4.3 billion the year before.

Read more here in USA Today.

Gore's Inconvenient Truth: He's an Energy Glutton

The average U.S. household consumes 10,600 kilowatt-hours (kWh) of energy per year. In 2006, Al Gore devoured 221,000 kWh — more than 20 times the U.S. average. In other words, Gore consumes more energy in a single year than the average household uses in two decades! Or Gore uses more in 4 years than the average American uses in their entire lifetime!

Last August alone, Gore burned through 22,600 kWh—guzzling more than twice the electricity in one month than an average American family uses in an entire year. As a result of his energy consumption, Gore’s average monthly electric bill topped $1,359.

Since the release of An Inconvenient Truth, Gore’s energy consumption has increased from an average of 16,200 kWh per month in 2005, to 18,400 kWh per month in 2006.

Gore’s extravagant energy use does not stop at his electric bill. Natural gas bills for Gore’s mansion and guest house averaged $1,080 per month last year. In total, Gore paid $30,000 in combined electricity and natural gas bills for his Nashville home in 2006.

more here from the Tennessee Center for Policy Research.

Monday, February 26, 2007

Impressions of Madrid After 4 Days

1. Lots of fur coats.
2. Lots of smokers, they are everywhere, this is a smoker's paradise.
3. Lots of olives, they are everywhere, and they are far higher quality than what we get in the U.S.
4. Free olives at almost every bar, and free tapas at every bar - olives, potato chips, spanish omelette (tortilla), small sandwiches, nut mixes, etc., included in the price of drinks.
5. Lots of facial piercings.
6. Not very many Internet cafes, I haven't seen one!
7. Very efficient subway system, and cheap (1 euro).
8. Accordions everywhere, on the subways, in the subway stations, all around downtown.
9. Excellent beer, wine and cheese, and of course olives.
10. Lots of books and lots of reading, more than the U.S. I think. Homes and apartments have lots more books than in the U.S., and there are lots of people reading books on the subway. In the U.S., it seems more common that people are reading newspapers on subways and trains.

Sunday, February 25, 2007

Why Should We Complain About Overvalued Dollar?

George Mason economist Don Bodreaux makes a good point that Americans are beneficiaries of an overvalued dollar vs. the yen or yuan, so why should we complain about bargain prices for Chinese and Japanese goods?

There's an even deeper reason why Americans should not tolerate Uncle Sam accusing foreign governments (like China and Japan) of undervaluing their currencies. Such undervaluing -- if, indeed, it occurs -- benefits Americans.

Keeping in mind that it is difficult to determine whether or not a government truly is keeping the value of its currency too low relative to the dollar, let's assume (for argument's sake) that the Chinese government really is doing so.

How does it achieve this outcome? Answer: The Chinese government must buy up dollars and keep them out of circulation. By reducing the supply of dollars on foreign-exchange markets, the value of the dollar rises relative to other currencies, including that of the Chinese yuan.

In other words, the value of the yuan falls against the dollar.

Now ask: How does the Chinese government buy these dollars? It can do so only by taxing its citizens, either directly (such as by raising their income taxes) or indirectly through inflation -- simply printing new yuan -- or deficit financing. Each of these policies transfers money from the pockets of Chinese citizens to the coffers of the Chinese government. This government then uses these yuan to buy up dollars.

The ultimate result is that the Chinese government forces Chinese citizens to subsidize the consumption of Americans and other peoples who import goods from China. The Chinese people either pay higher taxes or suffer inflation so that Chinese exporters can sell goods to foreigners at artificially low prices.

Why should Americans complain? The real victims of such currency manipulation are the Chinese people. Americans are beneficiaries.

Stepping on the Scale Exposes Union Flab

Labor unions, like the government, can change prices — in this case, the price of labor — but without changing the underlying reality that prices convey. Neither unions nor minimum wage laws change the productivity of workers. All they can do is forbid the employer from paying less than what the government or the unions want the employer to pay.

When that is more than the labor in question produces, some workers who are perfectly capable become "unemployable" only because of wages set above the level of their productivity. In the short run — which is what matters to politicians and to union leaders, who both get elected in the short run — workers who are already on the payroll may get a windfall gain before the market adjusts.

But, sooner or later, the chickens come home to roost. They have been coming home to roost big time in the automobile industry, where hundreds of thousands of jobs have been lost over the years. It is not that people don't want automobiles. Toyota is selling plenty of cars made in its American factories with non-union labor.

From economist Thomas Sowell´s recent column
Priceless Politics III.

MP: Like stepping on the bathroom scale, the ruthless forces of the market alway eventually expose economic flab and inefficiency. And although you can maybe avoid stepping on the scale in the short run, you cannot avoid the scale in the long run.

The market forces of supply and demand, along with a strong dose of globalization, finally forced the UAW to step on the scale, and guess what? Union wages and compensation are way too high, and union productivity is way too low, according to the scale. And like the bathroom scale, the market doesn´t lie, it always provides accurate and truthful information, as painful as it might be.

Bottom Line: The UAW is probably the most successful union in U.S. history, at achieving both higher-than-market wages and below-market productivity for its members, at least in the short run. But that very union success created the seeds of a powerful destruction that we are witnessing today, and in the long run that very union success is destroying thousands and thousands, and maybe millions of union jobs, and is destroying many of the very companies that employs its members (GM, Ford and Chrysler). As Sowell points out, the chickens have come home to roost, or the UAW finally had to step on the scale.

Top Oscar Picks from Actual Betting on Intrade

From Intrade, the top picks for Ocscars and odds:

Best Director: Martin Scorsese 90%
Best Supporting Actor: Eddie Murphy 60%
Best Supporting Actress: Jennifer Hudson 81%
Best Actress: Helen Mirren 94%
Bestor Actor: Forest Whitaker 82%
Best Picture: The Departed 47%

Other contracts:
Hillary Clinton to be Democratic nominee, about 50%
Hillary Clinton to be President, 2008: about 28%

Chance of U.S. economy in recession 2007: 16.5%