The Economics of Being Vindictive

A few days back I said I believed people were naturally good because I thought that the basic tenets of what is generally ascribed to being good, was in fact the most efficient way of living. Now, it might be that we have come to assume that these things are good because of their benefits - why else would we assume that giving is good, when logically having the most you can makes a lot of sense.

I had a conversation with my grandmother about lying. I said I wasn't a good liar in general - I think too much and I would then have to create all new realities around that lie. And it was then that I was then reminded how inefficient a lie is. The truth, when compounded over time, is of far greater value than a lie (unless of course you can completely get away with it and benefit from it significantly...sigh). Lies will limit the potential paths that can be taken in the future (in the short term a lie might create more potential paths, but this pattern will not continue over the long term - though, see Bernie Madoff as an example of a really long lasting lie - did he gain more than he will lose?). Maybe I am not all that great a human being for not lying all the time, maybe I am just thrifty.

The reason for this post is a recent scientific study of vindictiveness. An eye for an eye has such a certain logical value. The Golden Rule almost speaks of the virtue vindictiveness - unto others, as yourself (but not really). Why not act in the exact fashion that someone acted toward you? It is a great deterrent and is an easy equation to figure.

The articles says, vindictive people don't make as much money, have fewer friends, and aren't as happy (and probably live shorter lives as well). What do you mean? Getting back at someone doesn't make the most of my time in the long term?

The issue is that the equation is a bit more complicated than simply if A (someone steals from me), then B (I steal from them) and as a result C (we are both happy and the world goes on - which might be pushed simply as A+B=C=O - meaning no harm in the end). It is more complicated, for instance the real equation involves time, because we will live on after the event. We cannot consider that the event will live in a vacuum (though our patterns of voting for members of Congress make me question that sometimes).

There is another part of the equation that isn't considered. Any event that occurs causes changes - negative and positive. Those changes - those consequences for our actions - shape our responses. If I see that an individual who works hard to build something but fails - and is allowed to fail and lose everything, but is able to figure something something else out without being killed off (imagine the small bird who is aspirational and flies into the large open skies of a hungry hawk), I am going to be motivated to try and build something as well - understanding I may lose it all, but I'll still be alive. I think that is an important factor of our risk taking society and allof the things we have created as humans.

We see more hard working people succeed than cheaters, and because of this we know that taking a little risk, doing it right, giving slack to those who hurt is, actually benefits us in the long term because of the general society that arises around it. And, once again, we human are social creatures that exist in this world and not one of our philosophical fantasy lands.

In the end, being vindictive is inefficient. It doesn't allow us to focus on what matters. And, most importantly, it limits the potential of mass good among the people, which limits trust, and creates very expensive transaction costs (see financial crises 2007-Present), limiting everything's ability to grow.

Now, if only I could be this wonderful person.

Why I Believe We Are Naturally Good

It is evolutionarily chosen for.

How do I get that sort of idea from something like a scientific study of business groups (the article says nothing of biology directly)? Why are we - you and I - human beings - so amazingly successful? Because you and I, are part of a grand "we."

At first it may have just been a small we, say just a you and I. Say you and I had another (notice I didn't say "decided"). Suddenly, there would be reason for you and I and the "soon to be" to become a "we." We had to. The world is hard and we take a long time to mature. Several of our neighbors come together and the process begins toward this great society that we are all part of, even with all of its ills - it is SO VERY GRAND (click each letter).

So it is society that makes us humans so amazing. Of course, within this huge community of successful individuals there will always freeloaders and people who choose to bug the system - this has been part of us since we were bacteria. And that is fine - because from these attacks on our system - we learn more, we evolve more, we get smarter, and we keep fighting (I think if we ever did lose that fighting spirit we would all slump over and die - right there - just like in a cool cartoon movie I saw once).

But now that we have come to live within a society in which we are all trying our best to get ahead in - what do we feel is the best way to get ahead? Well, our ancestors found that befriending others and being good to those close to you was a good thing. Back in the day, when the world was much larger, it was much harder to be a fake good person - we humans are damn good and picking up on things! And back then your world of people was much smaller (of course I have no idea when back then was). So to be a good person was to have a stronger family and a stronger clan and a better existence.

It seems like so many other things, our basic human instinct at goodness, is still there. It is beneficial because the cliche, "It's better to be feared, than loved," is wrong. In the long term, goodness wins out. If you are good you will distribute the spoils better which enable people to be happier (to a point of course). If you are good you will listen and care on levels that engender that closer, emotional tie to you and with that - you are tapping into our ancient selves - our naturally good cores.

It is best to be a good person because that particular set of qualities - cooperation, empathy, hard work, honesty - are qualities that best coordinate the movements of groups of human beings.

Obama to Order Lending Increase

Do we ever learn?

My response to this headline is a bit knee-jerk as I don't know the manner that Obama will "require" increased lending from banks. The rhetoric might be to motivate people or simply to build a facade, but saying what is being said is not good for the economy. The article basically says that in order to qualify for loans, banks will have to increase their lending instead of sitting on the money.

Why did we just go through a large housing bubble? From the economic side there are a lot of reasons but I want to focus on the politics. What were the driving political forces behind the explosion of home prices?

• In the late 1990's Congress mandated that Fannie Mae and Freddie Mac lower their lending standards. In baser language that means Congress mandated that those two create a loan class that would be guaranteed to lose money based upon all past experience. Instead of allowing bankers to be bankers, Congress took it in their own hands to become bankers - and we all know the results.
• Cheap and voluminous money. When money is given to banks at a rate so low, and in such quantities that bad investments can be hidden and shifted around in these large pools of cash for years things are bound to happen - things like economic collapses. In order for inflation and prices to stay normal the amount of money in the economy should increase at a rate relatively similar to the creation of value in society. For instance, if there are 1,000 people creating $100 worth of labor output every day then maybe there should be $100,000 more money in the world each day.The money has to represent something, it does not have value in and of itself - it represents value.

Now Obama has communicated that he wishes for banks to alter their lending in order to get more money into the economy. I understand the need to motivate the country, but please let us learn. Money should be loaned when the numbers add up to a profit for the bank. Money should not be loaned because politicians say it should be...

Solar Panels to Drop in Price

As has been long said by industry analysts, the price of solar panels is expected to drop significantly over the next couple of years. This spells wonderful options for end users as one of the largest issues with solar panel uptake has been the significant upfront cash investment necessary.

Lets put it this way, the article states:

In California a typical 4 kilowatt, $32,000 solar energy system cost a homeowner about $23,000 last year after state and federal incentives. This year, if the price predictions come true, the price for the same system would be between $10,000 and $12,000.

What does this mean in other parts of the real world? In the state of Florida it takes, on average, about 14 years for a solar powered home to make back its initial investment. If these numbers hold, that time frame might fall to 7-10 years.

Why is the price of a solar installation dropping so much so quickly?

• There have been large investments in silicon production around the world. Folks have been predicting the price drop associated with silicon volume for a while now, and it seems to be coming together now.
• The manufacturing capability of solar panels in the industry has grown significantly over the past several years. In 2006, 2,204 MW of solar cells were produced. In 2007 that number jumped 60% to just over 3,600 MW. Energy can now be produced on an automated robotic production line.
• The Economic Crises of 2008. Demand is down. The price of oil fell from $147/barrel to a current in the range of $36/barrel. People can't get money for large investments. Homes aren't being built or updated as homeowners are hurting.
• Big projects the world over are beginning to benefit the masses. As countries like China, Spain, Germany, and Portugal blaze new trails in developing large solar power infrastructures expertise and experience are building. As stated in a recent article I read about Chinese solar investments, "As our technicians become more experienced, prices will drop."

Do I think solar will take over oil today? Of course not. Do I think it should? Absolutely. What will happen in the short to middle term future of solar? Who knows. I do believe the price of oil is lower than it should be based on past and future trends, but politicians affect that much more than true supply and demand do these days. And who is to say that society won't learn from the past and become significantly more energy efficient, thus pushing down the price of energy as demand waffles? I'm not that smart...

But, I do see the price of solar dropping. And I do see the horizon changing.

This Needs to Be the Change in the Medical System

This would fix our health care issues. Change, fundamentally, how Doctors work with patients. Let the entire public be the doctor's patient. Force the patient to have more responsibility for their own health - we each pay more car insurance for bad driving. You can get good, cheap health care, at a super cheap price - as long as you are taking care of your body in a responsible manner. If you choose to wreck your body through eating habits, exercise habits, and whatever else it is that you do then the privilege of health care will be more expensive.

The reason this works - is that if we started being a simply healthier society we would eat less, hurt ourselves less, live better, work better, take care of our kids longer, and probably be doing things that are better for our minds as well. Additionally, one of those wonderful benefits of movement and exercise are the benefits in the brain - quicker, smarter, faster type of benefits.

Society would benefit. Individuals would benefit as well. So would businesses. Rich people. And poor people. The military would like it! Individuals benefit in that they are educated continually about health and looked after because of the system. Business would benefit in that they wouldn't have the responsibility of insurance, unless desired, their medicare taxes would be lower, but more importantly - their employees would be healthier, stronger, able to work better, and happier. Rich people benefit in that society has more healthy people, doctors will become more profitable investments, society would be more efficient, and those rich folks will have better employees - and thus - MORE MONEY! Poor people - health care, education, ...real health care...The military would love having a huge, healthy population of people to kill people in other countries. It is a strategically sound operation!

It benefits all of us much more if the system is an after thought - a commodity because of how good it takes care of us. If we let doctors focus on the cutting edge of medicine because of how healthy we are - we are going to push medicine so far, so fast in today's research and development world.

We are doing so well today because of the improved health of people. But the economics of the system are weighing down growth.

A long term plan that makes people pay for health insurance based upon their habits and measurable body changes. Government gives you are card and a set of rules - you want public health care - you act in the interest of the public. All the while - you as an individual are an amazingly healthy person! A patient level rating system based on data that is scored in a system. Doctors are rated based upon the quality of their patients.

A key here - we are talking about hurting those who currently are unhealthy and costly - because anyone can make themselves more healthy over the long term! As long as your health is improving your rates get better.

...I don't want to write anymore or edit...I have homework. :-)

Another Bailout?

Why are there so many damn bailouts? Sigh...ode to getting votes!

So, if we are going to do another damn bailout and we are going to loan money to banks at 1%, why don't we do the same thing to consumers? Why not instead give a $700,000,000,000 package to each individual? Each individual in the country would get about $2,295.08. You could even give this amount of money out in the opposite direction of the tax base? This way, the poor people - who will spend it quickest most likely - will pump all of this money back into the economy from the low levels - buildings the coffers of the system many times on its way up. Imagine a poor family who makes $25,0o0 a year getting a check for $5,000? How do you think that would be spent?

And that $4,000,000,000,000 (thats trillion by the way - 12 zeros - who are we? Zimbabwe?) that we are loaning out from all the other departments of the Treasury - well, we could offer loans to people all the United States at super low interest rates! That would be a $13,114 loan per person in this country. Add that to the average check of $2,295 in cash, and suddenly there is a $15,409 windfall for each citizen in the United States of America. I wonder, how that money, will be spent? Think about the amount of that money, that you - the Federal Governement will make off of it? I learned in my Economics course that the mutiplying effect of money in the US Ecnomogy was about 3. That means, the $4.7 trillion in money that would be loaned out to the people of the United States would be actually turn into $14.21 trillion in money from the governments point of view. And how much of that money would you, Uncle Sam, take from a tax perspective? 10% (I keep this number lower because individual income tax wont be included). That's almost $1,500,000,000. That also happens to be about 31% of the original loan amount - imagine we applied the taxes collected from the loan money and applied it to the original loan, minus the costs of operation (probably 50% of the taxes collected)?

This is a huge amount of money. This volume of zeros, in the past, has always been associated with hyper-inflation. This amount of money injected into the economy would turn out to be nearly the size of the annual economy. In essence, we could double the rate of growth of the United States, over the course of a year.

Of course, the very fact that we are bailing anybody out is a screw-up, in my opinion. Those who have savings, those who have sacrificed are now bearing the risk because of inflation. Gold is still around $700 for an ounce. All time highs and it is holding...

I just think bailing out the coporation is part of the problem. We are worried about a consumer led recession. House pricing drops. Lack of demand. Something like this might change that dynamic...course...we could all be screwed either way. :-)

Why didn't Bush get Credit?

Everyone wants to proclaim that Barack Obama is going to bring the large, public works projects like The Manhattan Project or the Tennessee Valley Authority, back into vogue with a green twist. Some people proclaim it and some people denounce it.

Why didn't George Walker Bush get credit for his New Deal? Since 2001, the U.S. economy has been running on the back of the Federal Reserve and cheap money, as well a huge government investment in technology - much of which is moved through military research and 9/11 protection. Not to mention the trillion(s?) dollar war. All of this money has been put into the world as an investment from a giant sovereign fund.

What percentage of the GDP, over the last eight years, had fraudulent mortgages underwriting it? The Bush Doctrine included a New Deal for America that lasted about four years. And now, we are about to get another big "government" investment.

I wonder if a large influx of forceful investment dollars can jump start anyone to get beyond hurdles in a few industries to create some societal game changing technologies.

Russia, Qatar & Iran Announce Gas Triumvirate

Russia, Iran and Qatar announce cartel that will control 60% of world's gas supplies

The purpose of this cartel would be to coordinate sales of gas around the world, most likely, to inflate prices so that the selling countries can make more money.

Thank you Russia, Iran and Qatar. The vehicle that I drive is a V6 and since I happen to drive, one might say, "aggressively" my gas mileage tends to be quite dismal for a small Asian vehicle. So at first glass, I should be one person who would be in significant support of lower fuel prices. Additionally, and this is for all people, every single good that I use has its price marked up because of the cost of the fuel that transports it. So in fact, like most of the human's on the world - I should be demanding lower fuel prices and aghast at the nerve of these evil countries and their non-capitalistic actions!

In fact, however, I am happy to see an action like this. Why? Because I long for higher fuel prices. I am hoping the price of flattens out around $90/barrel. I would like to see the price of gas increase stay at an aggressive price as well. Why would I want to transfer my hard earned wealth, and that same hard earned wealth of the common folk from around the world to evil dictatorial style countries?

Because the longer the price of fuel stays high, and the higher it is, the more money, time, patience, and expertise goes into developing environmentally sound energy sources. Solar power will change the rules in time - and I don't care what any of the naysayers chip about. We all hear the pretty statistic that the Sun sends down enough energy to power the world for a year in a day (or something like that). Well, the only way for us to get there is to be pushed by money - that is what I have learned motivates people. Geothermal power, wind power, ocean power, and a few others are just waiting for our scientific attention.

Right now, oil has fallen to around $73 per barrel and the stock price of renewable energy companies has dropped as well. This is because investors don't see renewable energy worth it if energy is cheap. In the early '80s when the price of oil fell through the ground all of the alternative energy initiatives that began in the 70's collapsed as well. The financial motivation dissipated. In order to keep investors and governments focused on the alternative prize oil needs to be a little more aggressively priced - thank you OPEC, and just for good measure, we should jack the price of gas up as well - thank you Russia, Iran, and Qatar! Keep up the monopolistic, short term thinking! We need more of you in this world...

ECB's Nowotny Sees Global `Tri-Polar' Currency System Evolving

European Central Bank's Nowotny Sees Global `Tri-Polar' Currency System Evolving

Diversity in the world is what many people seem to preach. Diversity in food, businesses, experience, plant and animal life, investing, and, above all, opinions. Diversity allows for a more stable overall environment - if one arm falls the others continue on their trajectory or, maybe, even pick up a little because of the other's fall. Diversity is good.

As an American, really, as any body/individual that is in the premier position of power, stepping aside from that position of preeminence is very hard. Fear of change. Fear of loss. Fear of retribution. It is a simple evolutionary trait that once you achieve a certain level within a group you want to hold onto that position because it is in your, and, you believe, in everyone's best interests for you to be there.

Well, the United States has chosen to put policies and long term practices in place that potentially weaken that position of preeminence. But maybe, just maybe, over the long term, sharing that power will benefit everyone involved. Maybe by giving away the big chair for a triumvirate everyone will benefit.

I hate it when people say its a brave new world...because everyday is a brave new world. Not a single one of us on this planet has ever lived today before. The dynamics is this world are unique. There are always parallels...but uniqueness is always the case. And, it is a brave new world. Opportunity is the name of the game now.

re: Why the Critics of Globalization Are Mistaken

Three friends gave me three great responses to this posting via email and I wanted to take a minute to sent them out to the world and the respond to them as they all brought up interesting and important points.

Response #1: Case Study in Capitalism Run Amok

In hindsight, I think it would have been better policy to extend tax benefits to those corporations that kept jobs in the US. The wage gap between labor here and overseas is so great, however, that it might have been a futile effort. Tax breaks would have helped. It would have been better than lowering the tax rates for rich Americans whose incomes have sky-rocketed while Average Joe is out of work.

And we should have gone to war with the Middle East after 9-11 building energy efficient electric cars and hybrids, extending loans and more tax benefits to our car makers to do so. We could have led the charge in wind tech, nuclear, etc. Instead, we played right into the hands of the terrorists by invading Iraq, spending $10b a month on that war which would have been better spent on a Green Revolution in the States.

Now we have to fight to become the engine of economic growth for the Green Economy, and countries like China and Japan will be hot on our heels to compete for supremacy in that industry. At least Obama knows what time it is on this topic.

This whole mess is the logical end of an unregulated capitalistic society, where greedy corporations make every attempt to extend credit to borrowers who are incapable of meeting these obligations. The housing market was the last straw, but you can see the warning signs during the tech bubble (margin trading for a company with no revenues, anyone?), the run-up in commodities (nobody takes delivery of the oil they trade, do they?), the carry-trade (borrow cheap Yen and buy an internet stock in Zimbabwe), those checks sent-out with your credit card begging for your consumption. I could go on forever.

As Bush said the other night during an interview with the press, it's really sad that losers at the highest level of Corporate America were rewarded for failure. And the majority of the wealth created during that time went to those same managers and their closest employees thru bonuses and compensation. So fuck you Average Joe, and go find another job, if you can.

$1 trillion invested in the university's of the United States focusing on energy technology would hurt terrorism more than anything and, over the long term, would lead to a brand new technological revolution in the world.

Response #2: The long term hurt of outsourcing

What do you think about certain jobs being outsourced as a result of globalization, specifically those in the manufacturing sectors OVER THE LONG TERM? I do realize that companies will benefit in the short term from lower production wages and maybe even cheaper material costs. But when a country like the US develops, as it has, a significant amount of its jobs in a financial and service sector and those sectors suffer a crash or serious recession like we are experiencing, isn't there a need for that country in it's effort to re-employ those that have lost jobs to put them into more of a manufacturing or industrial role. I feel like there is a reverse-industrialization that happens in these economic situations, and when the most advanced industrial element, in this case, speculative financial instruments start to subside, those employees can't go back into that sector, they are forced to look in other areas. If they have an assembly line or manufacturing background, that would be their fall back; however, globalization will have already relocated that fall back position to another country.

I think from a fiscal standpoint you are right, but I am seeing a human resource element, a re-training element, that has to be addressed as a component of globalization. Right now I see a US economy that has outsourced the mining of raw materials and the production of final products. That leaves the financing and service industry that dominate the US, both of which are the most exposed in a recession. I think that is why we have a focus on "bailing" out and "stimulus" packages, instead of creating public works that got us out of the last depression.

I don't have a problem with globalization, just as I don't have a problem with anything that is done with measure and caution. I think there are benefits to be had for outsourcing some manufacturing, some resource mining. But I think in the long term too much globalization could bring us to a point where countries become the cogs in the machine, and we would be subject to negotiation with each "cog" that feels it's not getting enough foreign aid, etc. I like having some things be ALL AMERICAN, so shoot me!

The most interesting thing about this response was that it took me back to World War II and why the United States was able to fight off two machines in the form of Germany and Japan - industrial might. If we don't have the resources to produce to the goods to fight the battles what happens? What happens when we don't have a substantial number of factories? War is a terrible reason to change economic logic - but we still leave in a world in which small brained humans see murder and violence and an answer and the United Nations and sanctions cannot stop those who have guns.

Response #3 - You fool, global-whatever has long passed. We are already in the brave new world.

John..thanks for forwarding this very highminded almost irrelevant piece to me...it is not my intent by any means to make light of this issue but the world as we knew it has changed, not will change or in the process of changing but has changed!

In any event to complete the thought,what has happened before the last week of so and what will happen,be it Global--or---whatever izations is a totally new ball game.We are in a new world of doing..and with this fresh wind of change comes unleashed storms of opportunities for the young of mind and body---so there! You are in the catbird seat young man...

Why am I wasting time talking about the critics of globalization? Those critics and myself are talking of a wind long past...in fact, why am I not doing right now! Back to the books...

Why the Critics of Globalization Are Mistaken

Why the Critics of Globalization Are Mistaken

In the US I continually hear about how globalization is a false promise that has not and will not ever benefit the common working man in this country. And I struggle with this because I hear it continually while the arguments against that logic are in front of every single one of us every single day.

The major thing that I hear about globalization from Americans is how they have become poorer as a result of globalization. Certain jobs have left the US and headed elsewhere but in exchange for those jobs we have been able to keep the prices of our goods cheaper than they have ever been in this world. That little combination there makes it so we don't have to make as much money from a cash perspective to live the same lifestyle.

Now that simplistic argument above isn't much solace for the real people who have lost jobs in the auto industry, in the foundry industry, and so many others - and some of those people I know and it hurts to watch - but, and this is of such importance, over the long term we all win. Over the long term the system builds upon itself. There are pains at various points, like today with the US exporting our flawed economic policies, but imagine if something like this had happened 50 or 75 years ago. Bedlam, riots, and calls of the apocalypse. We are a stronger planet, we are more intertwined and we are managing a very significant loss of capital.

Globalization is good. To say it is bad is as foolish as an individual in the US saying that Florida should stop peach trade with Georgia because it takes away from the orange grower's ability to make money and keep jobs. Why haven't the orange growers begun to export to Georgia? Why hasn't the US gotten smarter and caught up with the world yet in manufacturing? Because it is a long process. The world is large and the shifts in the dynamics take time.

Be patient. We all will benefit.

Rough Times Make Us Healthier

When the rough gets going, the body feels better. Some social scientists have done a little research and have found that in certain circumstances around economic downturns people get healthier - in multiple manners. Their bodies get healthier - they eat better (the absolute best evidence that we are eating too much in our wealth). Their families get healthier - they spend more time with them. Their rates of suicide drop (caught me here). And a few other interesting little tid bits...

Our bodies are evolved to work in conditions of feast and famine. Maybe these economic bubbles aren't the work of bad policy or foolish Wall Streeters but the natural reactions of human beings in situation of plenty. When there is something to be gotten, as our history has dictated to us, you must get as much as you can because at some point it will stop flowing.

And maybe, those famines are important to us because they reeducate us. They refocus us. They teach us how to live within our means, how to appreciate a normal sized meal and how to live in a manner that made human beings so great.

Long live volatality!

Fannie Mae Eases Credit To Aid Mortgage Lending - Sept. 30, 1999

Why are we having a home value based economic failure?

I wonder if this has something to do with it...

Remember, this article is from 1999 - note the below paragraph:

"In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's."

There needs to be a balance between social support and free markets. To much in either direction causes issues as we know the limitations of human beings. This isn't fully eh fault of Democrats or Republicans, but definitely the fault of both of them.

Good & Expensive Gas

I am a student of economics. I believe that many of our issues in life can be attributed to economics. Obesity - cheap food. Pollution - unrecognized consequences (and thus no financial consequences). Waste - cheap whatever we are wasting. Lack of Education - cheap jobs. War - underpaid leadership. If things were to appropriately represent their cost and value then our habits would change as the cost of those things changed.

I know I may piss of people when I say this, but like mom or dad said, "You won't understand this until your older, but this is in your best interest." I am HAPPY to see the price of gas go up. We have gotten fat and lazy and because of this we are losing our edge. This "we" that I speak of is mostly aimed at the United States citizenry because that is where I see the consequences of cheap gas. Our electricity is cheap so we leave everything running all day long. Our gas is cheap so we drive down the street to the corner store and eat in our cars (with the AC on). So many things we do, just because we can.

Time.com wrote an article talking about 10 Things You Can Like About $4 Gas and the best part is that none of the things on the list even talk about the international politics or the development of technology.

Lets get on the ball people - accountability pays for itself in the long term - just like mom and dad said.

Economics in the 21st Century

Two separate articles caught my attention on a similar topic - our gaining intelligence in the world of finance and economics.

The first involves a new breed of websites like Prosper.com (by the way I happen to be a lender on this website) which is a peer to peer lending website. Peer to Peer Lending is a form of lending that brings the lenders and the borrowers directly in contact with each other, removing the banks from the equation. The purpose of banks are to use their expertise to do exactly what these sites are doing - find people with capital to invest and find those with a need for loans and then, using their ability to value risk, make loans that bring profit to everyone involved. The study, titled "The Democratization of Personal Consumer Loans?", showed that lenders might be benefiting more from these sites because of higher rates of return than their traditional manner of savings and that borrowers might be benefiting more because of lower rates of interest that are available.

For those of us who believe in The Long Tail this is simply a logical procession. Banks came into being because they were needed - how do we pool resources and find people needing loans on a widespread area? For those of us who have learned to save (and there aren't many) the benefits of long-term compounding interest are significant.

The second article that I found speaks of altruism and how it applies to Economics.

"Sam Bowlers...points to new experimental evidence that people do often act against their own personal self-interest in favor of the common good, and they do so in predictable, understandable ways. Poorly-designed economic institutions fail to take advantage of intrinsic moral behavior and often undermine it."

Our default view on human beings is that we are all self-interested, short minded beasts looking out only for number one, and to a certain level there is some truth to this with a lot of people. But wonderfully things like morals have been ingrained in our culture and society and these things greatly affect how we choose to act. Of course you can argue that that those of us who are following morals are acting in our own interests as we are attempting to help ourselves in the long term by impressing our friends, making ourselves happy, doing it for our religious reasons or a million other excuses - but I see it being closer to human beings looking to benefit their society, which over the long term, benefits them. So long term self beneficial altruism?

A certain phrase comes to mind - "A rising tide lifts all boats."

A Whole New Set of Problems

Mauritius: Call-Centre And BPO Sector Needs Lower International Bandwidth Prices to Stay Competitive

The "great" thing about this article is that the reason for stress here is that competing in the international business world is the greatest concern. Mauritius is a island nation located off of the coast of Madagascar in the Indian Ocean which itself is a much larger island nation located off of the coast of southeast Africa.

"Bandwidth is the petrol of the new global economy and as the price of actual petrol continues to go through the roof, it is an essential component of being able to sell "smart exports" based on "think-work" rather than simply minerals, produce or tourism."

Getting into these "smart exports" for a nation that is lacking in resources, land space or the traditional development path seems to be a very intelligent way to go - Hong Kong, Taiwan and Singapore focused on education, services, exports to wealthy nations and high tech manufacturing to make their moves.

With internet cables being run all over the world there are going to be quite a few groups who will have the potential to create whole new paths to development. Skip the manufacturing and head straight to the knowledge economies. Might we skip the ravaging of the environment that occurs as so many countries develop? And since one key of the knowledge economy is that the populace must be decently educated and one potential trait is a generally higher standard of living- might there also be lesser political strife with that combination of education and wealth?

This is the firt time human beings on Earth have ever developed this world. This is the first time we have built out this planet. This is the first time we have done any of this. You and I are both part of the experiment.

The Economics of Now

I read an article recently, it was titled, "Why the debt crisis is now the greatest threat to the American Republic."

There was one particularly sobering paragraph...it finished with this:

"The historian Thomas E. Woods, Jr., observes that, during the 1950s and 1960s, between one-third and two-thirds of all American research talent was siphoned off into the military sector. It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles."

This is an interesting paragraph...and one VERY large rebuttal is that there are quite a few things that have come from that un economically thought out spending that went on and is going on.

But is must be understood that we have sold off the long term in exchange for military might. Our education and infrastructure has crumbled.

Our lack of focus is causing the world significant harm.

The Economy Will Continue On

"Second-lien Loans" are the new group of buyers who are going belly up. These people were getting another one of the magic variants that drove the markets in the past few years. A couple of points about these loans that gives me a bit of solace - 1. There were far fewer given out than the prior ARM sub-prime loans that went crazy (and still are to this day). 2. The rate of default is relatively low. I am hoping this is the first half of the big curve and not some very early beginning to the slope upward on the rate increase chart. Our economy has weathered a lot. The rate of increase on the defaults is still increasing but an end is already seen. The market needs to react. It has overstepped itself a bit. Let it cool.

Then buy. As always.

China - Good Lord

I don't believe we individual citizens of the USA give China the appropriate attention. Recently it executed its former "chief drug regulator" for taking bribes and allowing them to fall into the current international furor related to fake products. The government stated the individual had taken bribes in and allowed "six types of fake medicines" to be approved. The interesting part of the whole issue, to me at least, was the response by China to this issue.

1. They did EXECUTE the person who the blame was placed upon. Now, take this with a grain of salt, in that complicity of an issue like this is far greater than a single individual. There were hundreds, if not thousands, of people in government who probably knew of the issues and that doesn't even count the people who were actually making the fake products. This person was executed as an example.

2. One particular set of words stated was that by 2010 China would have markedly increased its ability to monitor fake products, but that it would take at least five years (2012) for them to make a serious dent and be able to control their manufacturers. The acknowledgment of the issue. The realization of the significance of the issue. And the measured reaction that shows a considerable understanding of the situation. With the MONTHLY surplus of goods traded to the US topping $26 Billion, and the legislative branch of the US fighting for the yuan to be let free to trade in the international monetary markets, China must take action in order to feed it machine.

As a good friend of mine tells me continually, the Chinese history is full of ups and downs and the US is still Number 1. As I tell my friend, do not let that history satiate you adn make you lazy. The Chinese are serious about this world. They are going to be the largest economy in the world. I recently read an article where a comment was made about the inroads that Chinese politicians have made in Asia and the reactions by the peoples there. A particular quote stood out that went something like -

China's Asian partners see the United States as a passing fancy. The US has only been around for about 200 years. China has been here for 3,000 years and they expect China to be here for another 3,000 years.

This is a grand world we live in. Down with the Humans! Long live the Humans!

The Lard of the Land

The Food Supply will Change

"Rice prices are climbing worldwide. Butter prices in Europe have spiked by 40 per cent in the past year. Wheat futures are trading at their highest level for a decade. Global soybean prices have risen by a half. Pork prices in China are up 20 per cent on last year and the food price index in India was up by 11 per cent year on year. In Mexico there have been riots in response to a 60 per cent rise in the cost of tortillas."

What this really means for us is that economics is coming back into play. Maybe this is the best thing for our obesity problem. Life in this universe wasn't designed. It comes through struggle against the continual oncoming rush of entropy in the universe. Change is the only real constant. Maybe we should eat a little less. Maybe we should save some of that food for a meal later on. Maybe we should be a little more mindful.

$465 Billion Dollars ($465,000,000,000)

What would you do with $465 Billion dollars? The Boston Globe put together some pretty pictures.

You really don't even have to read much to get the point here.

Charity As it Should be Done

Kiva is something I have harped on in the past (here and here). I like it because it allows me, on a very micromanaged level, to choose how I wish to develop the world within a set of pre-chosen receivers. Kiva gives me a list of potentials who would like to receive a loan and it gives me a description of them. What there busness will be. A very slight snippet of their life. A talk about where they live. And possibly something of their ambitions. I donate there because I trust. Yes, I do know there are potential risks associated with giving money to groups in far away countries (419) but the risk of me losing my money versus a single individual losing the potential of a proper existence doesn't compare. I like giving. It makes me feel a little more relevant. It almost makes me feel as if I am, in some way, part of the solution. Ode to my emotions...as wild as they might be.

One thing I hear a lot from people is that they don't give because they think their hard earned money will go to inefficiency. Most people don't mind paying taxes. They receive services as a result - roads, police, protection from foreign invasion all the way down to social security, a certain level of available public health and a space program. I like to pay my taxes when I see the deal I get is worth it. I have in the past not donated to churches or groups like the Red Cross because of all of the lacking care I see in spending my money. How much money goes to pay for the executive's suite or the pretty leather chairs located in the Manhattan offices of whomever is collecting my hard work? I work hard and sacrifice for that money and as a result, I want it to be looked at and cared for in a similar manner as I do my own money. That money represents my productivity in life. In the American economy that I exist in, it represents my life's work (in the working sense of the word, my life will one day encompass helping the future of my planet through the raising of healthy children one day). It does matter.

What I would like to see created (or, lord knows, help create) is a tool, similar to Kiva in a few ways, to allow me to donate money to groups like the Red Cross but to donate money only to very specific places and parts of that process. I do know on the Red Cross' website they allow for you to specify where your donations go on a very high level (for instance when the Asian Tsunami destroyed so many lives I was able to choose from a drop down menu where I wanted my money to go). But that isn't enough for me. I want to be able to choose to allow my money to go specificially for the blankets of a child in a hospital located in Indonesia or the formula for a baby in the Sudan. Let every cost that is associated with a particular project around the world be paid for on an individual level. Quite possibly we might not choose to give money to the salaried employees of these groups, but I have a feeling that over time these positions will whither away as the collection of monies becomes automated and private enterprise then steps in. If I have chosen to pay for the blankets and you choose to pay for the air transportation from the factory that makes said blankets then what else is needed? I know that is an oversimplification but the world can be that easy if the time is taken in terms of programming the software and the end users appropriately invest their time.

Hospitals in Jakarta should explicitly define their needs. Locals associated with the website should invest their time to check up and verify the quality of the work done by the group and that the product is being appropriately applied to where it is needed. yes, there will always be risk but that is part of the equation when knowledge isn't perfect.

Just an idea at a loony hour of the weekend.

World Economic Movement

U.S. Stocks Gain, Erasing Losses From Rout, on Profit Optimism

G-7 Confident Global Trade, Growth Gaps Shrinking

The US stock market seems to keep pushing upward. The companies keep reporting profits that are increasing. Unemployment seems to be holding steady and possibly dropping from historic levels. Even with all of our issues we are maintaining a solid long term growth.

The world's economy is now pulling the US along a bit. The regions are starting to grow in significance. The world is no longer so influenced by the movement of one country. A multi pole universe will lead to a greater amount of stability and growth. Hopefully people will live better lives...

`Reassuring'

First-quarter earnings among S&P 500 companies probably rose 3.1 percent, ending a 14-quarter streak of at least 10 percent growth, according to analyst estimates compiled by Bloomberg. That streak is the longest since 1950.

Full-year earnings growth may slow to 6.2 percent, before reaccelerating to 10.9 percent in 2008, analyst estimates show.

The World Economic Tail

Kiva – The purpose of this website is to help The Long Tail of the human race to develop. The idea of Kiva is based upon MicroEconomics (a recent winner of the Nobel Prize solidifies the world opinion of microeconomics – it is here to stay, at least for a while).

I have always thought that helping out people far away was good. But I never really put the numbers to it.

Lets say (all of these numbers come from the CIA Factbook..heh)…

(Notable issue with numbers – nothing reported for the Vatican City)

US Economy = $12,982,323,352,500/year
World Economy = $79,422,560,891,818/year
Per Capita World: $11,327
Per Capita US: $43,500

If we remove 300,000,000 Americans from the math we are left with:

World Population = 6,712,879,586
World Economy = $66,440,237,539,318/year
Per Capita = $9,897

If we remove the top 40 countries, we are left with…

World Population = 5,619,236,117 (80% of the people)
World Economy = $32,895,685,600,218 (41% of the business)
Per Capita = $5854.12


Imagine…bringing up the poorest 80% of the world simply up the to average of the entire world ($11,327)…

80% at $11,327 = $63,653,332,143,109


New Grand Totals
World Economy = $110,180,207,434,709
Per Capita = $15,714

The world Economy grew 72%. Even the rich should want this…

That is the spirit baby!

http://www.latimes.com/
"Even though I had a good job, I was tired of living paycheck to paycheck
and not making any headway with my credit cards," he said. "I've learned
that I can push myself, break down my own boundaries. I've been able to
learn that I can change and adapt to different kinds of situations."

Why Social Security "disappearing" in 40 years doesn't worry me.

I won't need it. Simple answer - technology. In 1900 the average age was 47.* Today greater than 75 in America. The world changes. By the year 2040 I am thinking that at the age of 71 I will be going strong and I won't tap into my $$ until I am ready to retire around 85 or so. Cus I will still have another 15 years to jack around playing golf after that. At least. Additionally, the quality of the medical help will be of a different sort as we learn to use robots to do the busy work and allow our professionals to really take care of the people and the pressing needs. The quality of life is always improving. We learn to do things better all the time.

I do actually believe in a small central government and strong state governments, as our states are now turning into mini economies all their own (CA would be the WORLDS 6th largest). The variety is what allows for growth and change and mix. The freedom to move among is what keeps it fresh.

*Source: The Mercury, 11 November, 1997, p.26-27