Monday, May 26, 2008

old, undated, anonymous

Holy is the Lord. Yes, Holy is the Lord. Yes, you are called to be Holy. Yet you cannot experience the holiness of God without the humility of Christ. For you must know in your heart of hearts that the holiness of God is a gift that cannot be obtained by anything you do, nor by anything that is in you save the Holy Spirit of God. The works that bring holiness are the workings of the Holy Spirit and the realization that it is a gift of God -- a gift that is obtained only by the radical, free grace of God.

Thursday, May 22, 2008

coupon clipping

According to an article in today's Wall Street Journal (p. D2), the U.S. Department of Agriculture forecasts that food prices "...would rise between 4.5% and 5.5% this year, adding about $350 to a typical household's expenses." Clipping coupons might be one strategy for coping with rising grocery bills. Near the end of the article there is a nice table comparing online coupon sites.

"The Best Sites for Coupon Clipping"
The Wall Street Journal

As the price of food keeps going up, it's getting harder for my family to justify the extra cost of buying organic and brand-name products over generic ones. So we tested some Web-based services that promise easy access to discount coupons.
» Full Story in The Wall Street Journal

As a bonus, here is a link to a related blog post, "Save on Groceries and Eating Out" at Great Prices Here (May 17th).

Be blessed!
RB

Tuesday, May 20, 2008

10q 4 chicken

In honor of Offspring #4, an anointed prayer of thanks:



Note: Originally posted by him.

Monday, May 19, 2008

lifehouse skit/vision 2008@cfc

The CFC version of an earlier video post:


Note: Originally posted by her.

Sunday, May 11, 2008

economic bright spot or light from an oncoming train?

Saturday morning’s Watertown Daily Times (WDT, p. A6) had an AP news story: “Trade deficit drops during March” with the WDT adding the upbeat subheading, “ECONOMIC BRIGHT SPOT: Demand for imports falls by bigger-than-expected amount.”

Now maybe the trade deficit (exports less imports) is getting smaller due to the weaker dollar, the falling dollar. This makes imports more expensive and they should fall. Not bad since a weaker, cheaper dollar also makes U.S. products cheaper to foreigners. U.S. exports will increase, increasing spending in the U.S. This is good for the economy. Some think strong export spending has been keeping, and could continue to keep, the U.S.A. out of a full-blown recession.

Now most people think that deficits are bad. Therefore a smaller deficit is a good thing. The word deficit has a negative connotation. It really does not matter what kind of deficit we’re talking about, a deficit, any deficit, seems bad.

With a weaker dollar a falling trade deficit is, for most people, a good thing.

However in this case, at this point in time, a falling trade deficit is very, very bad news.

To quote the article,

The smaller deficit was driven by a 2.9 percent drop in imports, which reflected widespread weakness in demand as consumers, battered by a severe housing slump, a credit crisis and soaring gasoline prices, cut back on their purchases of both domestic goods and imports.

Thus, the reason the demand for imports fell was not so much due to a weaker dollar, but because of deteriorating business conditions in the U.S.A. U.S. spending is down, U.S. production is down, therefore U.S. spending on imports is also down. This may indicate a U.S. RECESSION.

The article also noted that this “…marked the biggest one-month decline in imports since December 2001, when the country was struggling to emerge from the last recession.” November-December 2001 was when the last recession ended. The end of a recession does not mean that bad times are over. The end of the recession means the economy has hit bottom. The end of a recession is a good news, bad news sort of thing. Good news: The economy is not getting worse. Bad News: The economy is at its worst.

To compare the current economic situation with the last time the economy hit bottom is, to say the least, not very comforting.

I also found even more disturbing information buried in the article. The trade deficit improved not just because imports fell, but because imports fell by more than exports fell. Falling exports mean falling spending on U.S. products. Falling spending on U.S. products may mean falling U.S. incomes, falling U.S. production, and falling U.S. employment. This may indicate a U.S. RECESSION. Falling spending from abroad may mean a world-wide recession. This is not good for anyone.

There is absolutely nothing good about this news.

Saturday, May 10, 2008

hillary’s gas problem: part 2

Late Thursday afternoon I was reading various stories at wsj.com when I ran across a blog about eliminating the excise tax on gasoline. Apparently there are no economists that anyone can find who support eliminating the tax. Even those who are economic advisers to either John McCain or Hillary Clinton do not support this. Clinton did not even seek the advice of any economists. Pure politics is what is behind the whole excise tax elimination idea.

Most economists do not think removing the tax would result in a fall in the price of gasoline. The most optimistic and most extreme estimate suggests that gasoline prices might fall as much as 6 cents. That means that the oil companies would still get to keep 12 cents out of the 18-cent tax cut.

However, the consensus among economists is that the fall in price will be somewhere between zero and close to nothing, therefore close to a pure gain for the oil companies.

I mentioned this at the dinner table that evening and it surprised me that my usual dinner companions found this did not make any sense at all. Now if you know those with whom I usually share my evening meal, you know that they are smart people, certainly smarter than I am. We had a long discussion. I not only had problems seeing why they came to a different conclusion but also found it difficult trying to make sense to these bright folks.

Hey, if this doesn’t make sense to you, you are in good company.

So why won’t the price of gasoline fall much, if at all? Let me give it a go. To start off, please realize the only way the gasoline price will fall (other things being equal) is if more gasoline is produced. If the price fell, people would buy a bit more gasoline. There needs to be more gasoline to buy.

What if U.S. refineries are operating at capacity and can’t produce any more gasoline? Removing the tax will make selling gasoline more profitable by 18 cents a gallon. The oil companies would want to sell more and take advantage of this opportunity. However, there is nothing they can do because they are already producing as much as they can. To increase refining capacity would take years. Therefore, since they cannot supply more gasoline to sell, and as discussed above, then the price will not fall at all.

Look at it this way: Why would oil companies sell the same amount of gasoline for less when they can continue to sell it all at the current price?

Nothing would change for consumers. Same amount of gasoline on the market. That means the same price. However, the oil companies get to pocket an extra 18 cents a gallon.

Now what if the oil companies could squeeze a bit more gasoline out of their refineries if they got to keep some of the extra 18 cents afforded by the tax removal? Maybe they could import more refined gasoline if we make it worth their while? Then price could fall, but not by very much. Why? The increase in the quantity of gasoline would not be very much so the fall in price would not be very much.

To quote the economist who came up with the 6-cent fall in price, "...I think it is safe to say that we stand firm in agreement that this is a bad, bad idea."

If this still doesn’t make sense, please share your thinking with me.

Be blessed.
RB

Friday, May 9, 2008

hillary's gas problem: part 1

A week or so ago I came into a class where my students were engaged in a vigorous, but civil debate. No big surprise there, except the debate was about economics! Specifically, they were arguing about temporarily eliminating the excise tax on gasoline. Originally proposed by John McCain and then supported by Hillary Clinton (who got the most publicity out it), but opposed by Barack Obama, the tax cut became a political issue.

Finally they asked me whether or not it was a good idea. When I asked them what they thought this tax repeal was supposed to accomplish, they answered lower gasoline prices.

This was perfect. We had covered who bears the burden of a tax like this earlier in the semester. In fact, a few days before I had handed back a test with a question on this. Also the final exam was approaching where this would be covered. So I said to them, “You tell me. Come on, we just did this.” I put up on the board a simple supply and demand graph and we quickly reviewed “tax incidence.” [NOTE: I’ll have a more non-economics-major-friendly explanation in my next post, so don’t give up.] Most students knew placing a tax on producers would shift back the supply curve (visually move it vertically up by the amount of the tax), remembering how much of the tax was passed on to consumers depended on the relative responsiveness (what economists call elasticity) of supply and demand to price. I showed the familiar case where the demand responsiveness to price was equal to the supply responsiveness, implying tax incidence would be equal. That is, an 18-cent tax would cause consumer prices to increase by 9 cents. (This is very easy to show on a S&D graph.)

Of course they caught on that a tax cut would be the same thing only in reverse. We quickly agreed that both supply and demand were pretty unresponsive to price. However, the answer relies on their price responsiveness relative to each other. The important question becomes which is most unresponsive. Since U.S. refineries are operating at capacity and can’t produce much more, if any, we thought it would be quite likely that supply would be most unresponsive. We drew the graph, with the supply curve being steeper than the demand curve.

The answer became obvious. Less than half of the 18-cent excise tax reduction would be passed on to consumers in the form of a lower price.

When I came into class, they had been arguing about the pros and cons of whether an 18-cent reduction in the price of gasoline was worth the loss of tax revenue. This impact, as reported in the press, was relatively minor for an individual consumer. With a little economic analysis, they saw that the benefit to consumers would be only a fraction of the minor amount reported.

They also saw that the main beneficiaries of eliminating the gasoline tax would be the oil companies.

This is an example of why I love economics. Everyone “knows” how a tax cut will lower prices. Then you use a little economics to show the counterintuitive reality of the situation. The comfortable, pat answers are overturned. Intellectually, it pulls the rug out from under you. It messes with your mind. That can be fun. It is certainly fun to see students discover this as well.

Be blessed!
RB

Saturday, May 3, 2008

recession -- are we there yet?

A lot of folks seem pretty sure we are in a recession. I'm not one of them. As you can see from the graph, the drop in payroll employment was rather minor last month.

The other number I watch is the Index of Industrial Production, which did not fall in March.

The preliminary number for GDP in the first three months of the year came out last week. It indicated low but positive growth -- and doesn't really convey much useful information. GDP data is very useful, among the best, but this preliminary number is so subject to substantial revision that many argue it should not even be released. (Some other countries, like Canada and Great Britain, don't bother publishing preliminary GDP estimates.) At the end of both this and next month, more useful revised numbers will be announced.

In short, these data are not strong indicators of a recession.

What is a recession? The National Bureau of Economic Research (NBER, a very prestigious private research organization) has a committee that officially times the start and end of recessions.

The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. (Source: NBER)

So when does a recession start? When the NBER decides it does! Don't hold your breath: they won't announce it officially until long after it is over. However, by that time it will be obvious we've had one. The only doubt will be the month it started or ended. That is often a judgment call.

I understand people want certainty. Only God should be certain about the current or future state of the economy. While there are people that are willing to provide certainty about such matters, you should avoid such people, especially if you have the condition bovine fecal toxicity sensitivity syndrome (BFTSS).

Be blessed!
RB

Thursday, May 1, 2008

the sky is high and the emperor is far away

Some think of China as a highly controlled society where heavy-handed government power decides what is allowed and what is prohibited. Fortunately, the truth is that the economy is so large, so diverse, that government can not keep track of the tens of thousands of small factories in the country, let alone know what they are actually doing.

A case in point: The BBC reports that a Chinese factory has been manufacturing "Free Tibet" flags. I love it. A Chinese factory is making flags for protesters whom the government is trying to suppress.

A student sent me the link to the story.

Enjoy.


FYI: Another translation for the title of this post is "Heaven is high and the emperor is far away" (Tian Gao Huang-di Yuan). "Chinese folks use the phrase to express a kind of gleeful subversion of any authority figure" (Source: Wikipedia).