Saturday, May 03, 2008

Good Question: These Folks Want to Be President?

Politicians want lower gas and oil prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

~"Windfall Profits for Dummies" in today's WSJ

IQ and The Wealth of Nations

GDP per capita vs. IQ
Top 20 Countries for Average IQ

IQ by country, click on map above to enlarge (green is highest, yellow is second-highest).

Source: "IQ and The Wealth of Nations" entry
on Wikipedia

The Energy Efficient Economy Can Handle $112 Oil

Compared to the early 1970s, the U.S. economy is now twice as energy efficient, requiring only about 1/2 of the energy consumption per dollar of real GDP in 2007 (8.78 BTUs per dollar of real GDP) as in 1973 (17.44 BTUs per dollar of real GDP), according to data just released by the Energy Information Administration.

Bottom Line: The energy-efficient economy of today is much better able to absorb higher energy prices than in the past. Although high oil prices crippled the economy in the 1970s and early 1980s, and contributed to three serious recessions between 1973-1982, the energy-efficient Goldilocks Economy of the 21st Century just keeps humming along, recession-free.

Intrade: Recession Odds Plunge From 60% to 30%


In just the last 10 days, the odds of a recession have fallen from 60% to 30%, based on futures trading on (see chart above, click to enlarge). Goldilocks rocks!!

Friday, May 02, 2008

Chart of the Day: Monetary Base Growth Only .70%

The chart above (click to enlarge) shows the percent change (from a year ago) in the Adjusted Monetary Base. It's now growing at an annual rate of only 0.70% through April 23, down from 10% in 2002, and the lowest rate in more than 7 years.

Right-to-Work States: 7, Forced-Union States 0

What are the main economic differences between right-to-work states and forced-union states (see map above)?

Not much really, except that compared to forced-union states, right-to-work states have had faster economic growth, lower unemployment rates, greater employment growth, higher state real GDP growth, greater growth in personal income, higher population growth, and greater home price appreciation. That's all.

James Hohman at the Mackinac Center has the data.

Household Survey: 362,000 Jobs Added in April

From today's BLS employment report, here's what probably won't get reported:

According to the more comprehensive Household Survey Data (which unlike the establishment data, includes the self-employed, unpaid family workers, agricultural workers, and private household workers), there were 146.331 million Americans employed in April (see chart above), which is: a) 618,000 higher than April of last year (145.733 million jobs), and b) 362,000 higher than March of 2008 (145.969 million).

Note also what happened to employment levels for both measures during the 2001 recession. Much different than 2008. No recession.

Update: Also, as Brian Wesbury points out, the actual, unrounded unemployment rate is only 4.952%, very, very close to being reported as 4.9% instead of 5%!

Beer Prices in 182 Countries

Check out The Price of a Pint database of World Beer Prices in 182 countries, priced in USDs, BPs, Euros, $CAN and $AUD, including a list of the most expensive countries (#1 is Monaco - $11 for a pint) and most affordable countries (#1 is Congo - 15 cents for a pint).

Thursday, May 01, 2008

Exxon Paid Almost $3 in Taxes for Every $1 Profit

Actually, income taxes of $9.3B are only about 1/3 of Exxon's total tax liability of $29.3B for the first quarter of 2008, according to this press release (see top chart above). Further, Exxon paid close to $3 in taxes ($2.69) for each $1 it earned in profits.

2008 Job Market Looks Good for College Grads

CNN--The average starting salary offer is 4% higher for 2008 graduates than last year's alumni, according to a recent study by the National Association of Colleges and Employers. Additionally, hiring is expected to increase by 8%. (Chart above show average starting salaries by discipline.)

Via Club for Growth.

CD Exclusive: Exxon's Record Tax Payment

Exxon's income taxes of $9.32 billion ($9,320,000,000) in the first quarter 2008 sets a new all-time record for the highest amount of income taxes ever paid by a U.S. corporation in a single quarter, and tops the previous record amounts of income taxes paid by Exxon last year (see chart above).

Amount of taxes Exxon paid in the first quarter 2008:

Daily: $103,500,000

Hourly: $4,300,000

Every minute: $72,000

Every second: $1,200

Exxon Income Taxes Set All-Time Record of $9.3B

NEW YORK ( -- Record oil prices netted Exxon Mobil $10.89 billion in the first quarter, sharply higher than a year earlier but short of Wall Street expectations and below what was needed to set a new all-time profit record.

The sheer size of the Exxon profit reported Thursday will still likely attract attention from consumer groups and lawmakers, who have been arguing for higher taxes on oil companies amid soaring gas and oil prices.

The company posted first-quarter net income of $10.89 billion, or $2.03 a share. That's up 17% from the $9.28 billion, or $1.62 a share it earned a year earlier, but it missed analysts' consensus forecast of $2.14.

Revenue hit $116.85 billion, up 34% from a year earlier when sales hit $87.2 billion. The profit was still enough to be the second highest U.S. corporate profit on record, falling just short of the record $11.66 billion Exxon Mobil earned in the fourth quarter. The profit came to $1,385 a second, enough to buy nearly 382 gallons of gas at current prices.

Prediction: In every single media story today about Exxon, the one key income statement variable that will receive ABSOLUTELY NO ATTENTION is the amount of income taxes paid by Exxon, which was $9.32 billion in the first quarter,
according to Exxon.

Following CNN's analysis, Exxon paid $1185 in income taxes every second this quarter, enough to buy 327 gallons of gas.

Bottom Line: Although Exxon's profits in the first quarter didn't set a record, its quarterly income taxes paid of $9.32 billion did set an all-time record. I predict this will go largely unreported.

New Paradigms Don't Come from Old Paradigms

Quote of the Day:

The Rockefellers, of all families, should know that Exxon Mobil is unlikely to have much success ushering in a new energy paradigm that will change the world for the better. A company that depends on an established technology rarely has the incentives or ability to lead a shift to the technology that will upend the old way. The oil industry was created by a dry-goods merchant in Cleveland, not by whale-oil harvesters in New England.

~Daniel Gross in

Monster Employment Index Rises 7 Points in April

The Monster Employment Index added seven points in April, the strongest single month gain in more than 12 months, as online job availability in the U.S. continued to rise for the third consecutive month (see chart above).

Monster Worldwide's VP of Research said "The Index’s three-month growth trend, combined with its slightly improved year-over-year growth rate, is an encouraging sign of stabilization in the U.S. labor market.”

Highlights of the April report include:
  • The financial services sector is showing a degree of stabilization, despite highly publicized layoffs in the banking industry.

  • Online job opportunities continue to expand in Kansas City, Pittsburgh and Houston.

MP: This positive labor market report provides additional support for the view that the U.S. economy is not in recession, and has started to show some signs of recovery.

Outsourcing Airplane Maintenance to El Salvador and Personal Household Outsourcing

San Luis Talpa, El Salvador/LA TIMES BUSINESS--Southwest Airlines planned to begin flying planes to this small Central American nation this year -- but not with passengers aboard. The carrier wanted to outsource some of its maintenance to a Salvadoran repair shop called Aeroman (pictured above).

Aeroman already services jetliners operated by U.S. carriers JetBlue and America West. The airlines fly empty planes hundreds of miles from the United States to have them refurbished, repaired and inspected. It's like driving across town for a cheaper mechanic -- except that airlines can save millions of dollars over the life of their rides.

Industry experts say maintenance outsourcing will only increase as airlines grapple with post-9/11 security costs and sharply higher fuel prices. Already a $41-billion business, so-called MRO (for maintenance, repair and overhaul) outsourcing is expected to reach nearly $60 billion within a decade.

HT: Ben Cunningham

MP: Just in case you have any objections to this type of outsourcing, consider your own frequent personal outsourcing at the level of your own household. You probably outsource the cleaning of some of your clothes to a local dry cleaner, you often outsource the preparation and cooking of your food to a local restaurant, you outsource the upkeep and maintenance of your vehicle to a local car wash, oil change service, and repair shop, you might outsource the cleaning of your house and your lawn maintenance to an outside agency, you outsource the preparation of your taxes to a tax service, etc. etc.

In almost all of these examples, you could have performed those services internally within your own household (cleaned your own clothes, prepared your own food, changed your own oil, cleaned your own house or prepared your own taxes), but a personal cost-benefit analysis suggested that it was more cost-effective for you to outsource those tasks to someone outside your household, compared to performing those services yourself. In that sense, a household is just like a small business firm, which continually makes business decisions that involve comparing the cost of external vs. internal production. Just like a small or large firm, your household chooses the least expensive alternative, and outsources when it makes economic sense.

Wednesday, April 30, 2008

Recession Odds Fall On Intrade

The chart above (click to enlarge) shows the falling odds of a 2008 recession, based on futures trading on over the last 14 days. From a 70% chance of a 2008 recession on April 17, the odds have now fallen below 45%.

World's Most Worthless Currencies

#1 is the new 10,000,000 Zimbabwe dollar banknote (pictured above), which is currently worth less than $4. See the list here.


According to today's Bureau of Economic Analysis report, "Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.6% in the first quarter of 2008, according to advance estimates. In the fourth quarter, real GDP also increased 0.6%."

Pussy Willow Sunday

Our group was in Togliatti, Russia on Palm Sunday (April 20 this year according to the Russian orthodox calendar) and we visited a Russian Orthodox church and were surprised to see people carrying pussy willows instead of palm branches (which do not grow that far north).

Tuesday, April 29, 2008

Result of U.S. War on Drugs: PRISON NATION

The United States leads the world in prisoner production. There are 2.3 million people behind bars. China, with four times as many people, has 1.6 million in prison.

In terms of population, the United States has 738 people in prison for every 100,000, while the closest competitor in this regard is Russia with 611 (see chart above,
data available here). I'm struck by this figure: 487 in Cuba. The median global rate is 125.

What's amazing is that most of this imprisoning trend is recent, dating really from the 1980s, and most of the change is due to drug laws. From 1925 to 1975, the rate of imprisonment was stable at 110, lower than the international average, which is what you might expect in a country that purports to value freedom. But then it suddenly shot up in the 1980s. There were 30,000 people in jail for drugs in 1980, while today there are half a million.

From Prison Nation by Llewellyn Rockwell, via Division of Labour

Strippers Can't Compete with Internet

TORONTO, April 28 (UPI) -- The number of strippers and strip clubs in Toronto is declining, with former dancers blaming the Internet for putting them out of work.

An economics lesson here in low barriers to entry, competition and contestable markets?

Are Inflationary Concerns Inflated?

Inflation: Food
Inflation: Energy
Inflation: All Items Less Energy and Food
The charts above are from the St. Louis Federal Reserve, using CPI data from the BLS, and show the percent change from a year ago, from 2000 - 2008. Is it possible that inflationary fears are inflated? Consider that:

1. Food inflation fell in both February and March 2008.

2. Energy inflation fell in both February and March, and is lower in 2008 than in 11 months in 2005 and 2006.

3. Inflation for all items less food and energy is lower in 2008 than in 10 months in 2006 and 2007.

Bad Auto Investments / Weight Inequality

Monday, April 28, 2008

Economics of College

In the first of a three-part series on the "Economics of College," economist Thomas Sowell asks, "How many people would go to college if they had to pay the real cost of all the resources taken from other parts of the economy? Probably a lot fewer people."

Part 1 here, Part 2 here and Part 3 here.

$100 Int'l. Phone Call in 1973 Now Costs Only $1.60

ECONOMIST--The cost of a phone call abroad has dropped dramatically in the past three decades, thanks to market liberalization and advances in technology. A one-minute fixed-line call from America has fallen by 98.4% in real terms since 1973 (see chart above).

In other words, an international phone call that cost $100 in 1973 now costs only $1.60 (adjusted for inflation), and a call that cost $10 now costs only 16 cents.

Russia's New Consumer Nation: Wal-Mart Drools

BENTONVILLE, ARKANSAS/MSNBC - Wal-Mart is moving closer to a possible expansion into Russia with the appointment of an experienced European executive to scope out possibilities in a vast retail market worth more than $140 billion a year in food sales alone.

From a related Reuters article, Wal-Mart Chief Executive Lee Scott said at the company's analyst meeting last October that Wal-Mart hoped to be in Russia "at some point in the future." Scott called Russia a "growing consumer nation," and he said consumers there have shown a propensity to spend while in other developing countries they tend to save.

MP: If you thought the oil and gas markets are booming in places like Russia, check out the consumer and retail sector stock index in Russia compared to the oil/gas sector stock index in Russia (see graph above, data available here)! From what we heard in Russia at visits to both Ford and GM headquarters in Moscow, Russia will probably overtake Germany this year as both Ford and GM's #1 European market for vehicle sales.

Every Sales Receipt in Russia Gets Ripped!

I've been to Russia now four times, and one of the most interesting and unusual retail practices in stores there is the Russian sales clerks' habit of tearing almost every sales receipt before they hand it to you or set it down on the counter (see picture above).

Supposedly, this practice goes back to the Soviet days, when most stores had the merchandise behind counters and glass cases. To make a purchase, you would ask an employee to get the merchandise for you and prepare a sales receipt, which you take to a second employee/cashier. After you paid, you would take the receipt back to the first employee to pick up your stuff. Then that employee would tear the receipt, to finalize the transaction, and prevent customers from trying to come back and get a second item later for free.

Although no longer necessary, the "receipt-tearing" practice continues to this day at almost every retail store in Russia out of an old Soviet-era habit! Makes it a little inconvenient when you need to present receipts back in the USA for reimbusement!

ABCDs in India

NPR: In this broadcast we talk to a bunch of American-born Indians and their local friends who discuss what it's like to come "home" and what it's like to be invaded by Americans who want to rediscover their "Indian-ness". The locals have a nickname for these Americans —they call them "ABCDs." That's an acronym for American-Born Confused Desis. Desi is slang for an Indian guy or gal, and the term basically means kids from America who return a little mixed-up about who they are.

The conversation, as you'll hear here, explores all kinds of issues: the advantages of an American accent in India, the value (and limits) of Western experience in attacking pollution and poverty, the importance (or not) of movies and popular culture in creating social change, and why Indian women (some of them) like beef-eating men.

Free Trade

"Freer Trade Could Fill the World’s Rice Bowl," by Tyler Cowen in The NY Times

"America Needs to Make a New Case for Trade," by Lawrence Summers in The Financial Times