Monday, January 31, 2011

The "Detroitification" of Detroit

From James Hohman at the Mackinac Center:

"Mackinac Center analyst Jack McHugh has called the long process of hollowing out a private economy to prop up an unsustainable government "Detroitification." Detroit's most recent comprehensive annual financial report shows just how much the title-city itself has been hollowed.

The report lists the number of jobs provided by the city's largest employers, which indicates how sensitive its finances are to the actions of a particular firm. In Detroit's case, six of the top 10 employers are not private businesses at all, but government entities: public schools, the city government, the U.S. government, Wayne State University, the State of Michigan and the U.S. Post Office (see chart above). Two others are health care providers intrinsically tied to government policy, the Detroit Medical Center and the Henry Ford Health System. The remaining two are automaker recipients of federal bailouts, GM and Chrysler.

This is a double blow to the city. Not only is it no longer the home of large businesses that have helped the city prosper, the governments that are now the city's largest employers are struggling."

HT: Colin Grabow

Dec. Restaurant Performance Index Back to Pre- Recession Level: Recovery is Gaining Firm Foothold

"Driven by expanding same-store sales and customer traffic levels as well as growing optimism among restaurant operators, the outlook for the restaurant industry improved in December. The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in December, up a strong 1.1 percent from its November level (see chart). In addition, December marked the third time in the last four months that the RPI stood above100, which signifies expansion in the index of key industry indicators.

The RPI’s solid gain in December was driven by improvements in each of the eight current situation and forward-looking indicators. Overall, the RPI stood above 100 for the third time in the last four months, which suggests that the recovery is gaining a firm foothold."

MP: The Expectations Index reached 102.4, the highest level for that indicator of future restaurant performance since March 2007, almost four years ago.  Expect 2011 to be a very good year for restaurants. 

Subway Escalators: Moscow vs. Washington D.C.

Anybody who uses the DC Metro system on a regular basis, like I have on almost a daily basis for the last 16 months, will appreciate this story from the Washington Post. The dependability and reliability of the Moscow escalators (Soviet efficiency?) seem almost too good to be true after experiencing the frequent (almost daily) breakdowns of the DC Metro system (capitalist inefficiency?):

"The trains get to stop every few minutes. Not the escalators. In a city tied together by its phenomenally jampacked subway system, the escalators here just keep on rolling - morning, noon and half the night. 

There are 643 of them in the Moscow Metro. This is a system, like Washington's, with deep, deep stations, but, unlike in Washington, passengers here are rarely left to hoof it on their own up or down immobilized stairways. It wouldn't work, because people don't walk fast enough. At rush hours fully loaded trains run on 90-second intervals; it's up to the escalators to get the passengers delivered, but just as important, to whisk them away again before they start bunching up and spilling off the platforms and onto the tracks.

"In my opinion, they're much more important than trains," says Sergei Likhachev. He would say that, though. He's the chief mechanic of the Moscow Metro's escalator division. 

HT: Lauren Johnson

Markets in Everything: ER Reservations?

KTLA News -- "Instead of showing up at the emergency room and risking a wait, why not make a reservation? Lakewood Regional Medical Center announced on Thursday that you can do just that.

Patients with non-emergency conditions can make an appointment for 90 minutes to 2 hours in advance using InQuickER at

Non-emergency patients can wait up to 2 hours if they just showed up at an emergency room, according to hospital officials. Those who use the online service will pay a $14.99 fee."

MP: Maybe I'm a little slow here, but why are people using the Emergency Room for Non-emergency conditions in the first place?

2010 United Van Lines Annual Migration Study

Highlights from the 2010 United Van Lines Annual Migration Study, released earlier this month (see map above, click to enlarge):

1. In 2010, the District of Columbia (64.3%) was once again the top destination in the United States for the third consecutive year. North Carolina (57.8%) was the only other mid-Atlantic state to experience high-inbound traffic, rising from No. 10 on the list in 2009 to No. 3 in 2010.

2. In the South, South Carolina (56%) appeared on the high-inbound list for the first time since 2008.

3. In the Western, region, only two states, down from six in 2009, captured high-inbound rankings. Oregon (59.5%) once again came in second and celebrated its 23rd year of high-inbound migration. Idaho (57.6%) appeared on the high-inbound list for the second consecutive year.

4. New Jersey (62.5%) claimed the top spot on the high-outbound traffic list. Also in the North East, New Hampshire (55.6%) had the seventh highest out-bound traffic.

5. The Great Lakes region continued to have the highest out-bound traffic levels in the nation, with four of the region’s states experiencing high outbound traffic. Michigan (62%), which was the top outbound state from 2006-2009, fell to No. 2 in 2010. Illinois (57.3%), Ohio (55.6%) and Pennsylvania (55.4%) also experienced high out-bound traffic.

MP: The number of interstate United household moves last year (146,837) was 2.5% above 2009 (143,194), but way below the numbers in 2008 (198,962) and 2007 (212,917). 

America's Poorest 5% = India's Richest 5%

Catherine Rampell features the chart above today on the Economix blog, taken from a new book "The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality" by Branko Milanovic.  The chart shows the relationship between a) the distribution of income by "ventiles" (5% groups) for the U.S., Brazil, China and India on the horizontal axis and b) the percentile of world income distribution on the vertical axis.  As Catherine comments:

"Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants (see dashed line in graph).

Now check out the line for India. India’s poorest ventile corresponds with the 4th poorest percentile worldwide. And its richest? The 68th percentile. Yes, that’s right: America’s poorest are, as a group, about as rich as India’s richest. Kind of blows your mind, right?"

MP: Yes, and shouldn't it also blow away a lot of our misguided concern about rising income inequality in the U.S.?

There's Hope: Online Job Demand Rises Above Pre-Recession Levels: Highest Since June 2007

"Online advertised vacancies rose 438,000 in January to 4,273,000 according to The Conference Board Help Wanted Online (HWOL) Data Series released today. With the January increase, labor demand has risen 1.44 million since the series low point in April 2009 (see chart). This increase now offsets approximately 80% of the 1.76 million drop in ad volume during the 2-year downturn period from April 2007 through April 2009."

“The very strong seasonal gain to start 2011 is welcome news following seven months of essentially flat U.S. labor demand,” said June Shelp, Vice Pres. at The Conference Board. “Last year, after a promising start (up about 350,000 in January 2010), labor demand fizzled, and the last half of 2010 was actually flat with no appreciable gains in job demand (see chart above). Hopefully the January 2011 increase suggests that employers are seeing a pickup in their businesses and labor demand will continue to improve throughout this year.”

List of 178 Cuban Private-sector Jobs

License now required for this Cuban guy.
"Cubans can now seek licenses 178 private-sector jobs, under economic reforms announced last year by President Raul Castro," see the full list here from the Associate Press, including:

6. Door-to-door knife and scissors sharpener
8. Mule Driver
14. Wagon or Pushcart Operator (to help move things)
17. Wheelbarrow Operator 
29. Public Bathroom Attendant 
62. Spark Plug Cleaner and Tester 
111. Automobile Battery Repair
116. Mattress Repair 
124. Umbrella and Parasol Repair
127. Doll and Toy Repair 
158. Fresh Fruit Peeler

MP: My personal favorite is the license for a wheelbarrow operator (see photo above). 

Wash Post Supports DC School Voucher Program

"An effort is being launched in Congress, aided by the considerable clout of House Speaker John A. Boehner (R-Ohio), to revive the District's unique program of federally funded private school vouchers. No sooner was it announced than Mayor Vincent C. Gray (D) attacked it as an assault on D.C. home rule. Others with opposing views called it a test of the Obama administration's promise to work across party lines for the good of the country. Both claims are unfair burdens for a program that should be judged by the only criterion that matters: whether it helps children. 

Too many parents in the District still have little choice but to send their sons and daughters to failing schools. If Congress is willing to give them an alternative, at no cost - in fact, at great benefit - to traditional and charter schools, what's the argument against? We'd like to hear Mr. Gray's explanation to those parents."

Sunday, January 30, 2011

Chart of the Day: Union Membership in the U.S. Falls Below 12% in 2010 for the First Time

Union membership in the U.S. fell to an all-time historical low of 11.9% of all workers in 2010, which is less than half of the 24.5% share in 1979, according to new data from the BLS.  I'll provide some additional charts later on the breakdown between private and public sector unions. 

Road Trains: Future of Highway Driving?

Reuters - "With the recent successful test of road-train technology in Sweden, developers say convoys of cars on Europe's motorways could become a reality within 10 years provided car makers can agree on a common standard."

HT: Bob Wright

Doubling U.S. Exports = Doubling U.S. Imports

Steven Landsburg points to the opening paragraph from Chapter 12 ("The Drive for Exports") in Henry Hazlitt's classic book "Economics in One Lesson":

"Exceeded only by the pathological dread of imports that affects all nations is a pathological yearning for exports.  Logically, it is true, nothing could be more inconsistent. In the long run imports and exports must equal each other (considering both in the broadest sense, which includes such “invisible” items as tourist expenditures, ocean freight charges and all other items in the “balance of payments”).  It is exports that pay for imports, and vice-versa. The greater exports we have, the greater imports we have, if we ever expect to get paid.  The smaller imports we have, the smaller exports we can have.  Without imports we can have no exports, for foreigners will have no funds with which to buy our goods. When we decide to cut down out imports, we are in effect deciding also to cut down our exports. When we decide to increase (double) out exports, we are in effect deciding to increase (double) our imports."

Professor Landsburg points out that "Encouraging exports is exactly the same thing as encouraging imports. And wouldn’t you expect that if you were out to encourage imports, your first step might be to stop discouraging imports, say by declaring an end to all tariffs and quotas on foreign-made goods? In a sane world, that’s indeed what you might expect. But somehow I don’t expect it."

Another thing that might happen in a sane world would be for Obama to push for finalizing the free trade agreements (FTAs) with Colombia and Panama, which Obama claims to support.  The Colombia FTA was signed in 2006, and languishes into its sixth year without getting final approval from Congress.  According to the Latin America Trade Coalition, more than $3 billion in tariffs have been imposed on U.S. exports to Colombia in the 1,531 days since the FTA was signed, but not finalized.  Under the FTA, most tariffs would be eliminated, and the U.S. could boost trade with a country that now has finalized FTAs with both Canada and Europe. 

Saturday, January 29, 2011

Google Trends: Tunisia vs. Egypt


New Mich. Governor Wants to End Tax Credits and Subsidies for Failed "Job Announcement Programs"

MIDLAND, MI — Gov. Rick Snyder’s flat corporate income tax proposal would eliminate Michigan Economic Growth Authority tax credits, including the film subsidy, and represents a victory for taxpayers and good government, said Mackinac Center Director of Fiscal Policy Michael LaFaive.

“This is a bold move to fix Michigan with a simpler business tax system and one that would eliminate ‘jobs’ programs that don’t create any,” said LaFaive.

The Mackinac Center has been the longest and most consistent critic of MEGA and other economic development programs. In 1995, Center analysts published a study that warned against undertaking the MEGA program. A 2005 Mackinac Center study found that for every $123,000 in MEGA tax credits offered, the program created just one construction job, but 100 percent of those disappeared within two years. The Center’s 2009 MEGA study found an association between manufacturing jobs and the program, but it was negative. That is, for every $1 million in tax credits actually earned by MEGA companies in a given county, there was an associated loss of 95 manufacturing jobs in that county.

“At best, MEGA is a job announcement program, not a job creation program,” LaFaive added.

Santana Saturday: 1969 Woodstock v. 2007 Mexico

Thanks to my friend Jaime Hoyos in Bogota, Colombia.

From the Plastic Age of Vinyl Records to the Digital Age: Your Phone is Now Becoming Your Wallet


NEW YORK (CNNMoney) -- "Credit cards may soon be as outdated as vinyl records. (Remember those?) And this is the year that the slow, steady march to oblivion begins.

You can already use your iPhone, Droid or BlackBerry to buy a hotdog at the ballgame, buy your Starbucks latté, or give a friend a few bucks by Bumping phones. But by the end of the year you may not even think twice about reaching for your phone to pay at the register instead of fumbling for your credit card."

"Your plastic card hasn't changed since the age of the vinyl records," said Michael Abbott, CEO of Isis, a new mobile payment network. "This is the chance to bring payments forward from the plastic age and the vinyl records age to the digital age." 

School Choice: USA (0) vs. Sweden (1)

1. USA: Convict an Akron, Ohio mother of a felony and sentence her to 10 days in jail for illegally sending her children to a school in a better school district.   

2.  Sweden:  "In 1993, Sweden introduced a system of school choice and vouchers, inspired by the ideas of American economists Milton and Rose Friedman. Even though the system was just as controversial then as any U.S. voucher proposal, the right to chose your school and bring the funding with you is today considered a natural right for families and is widely accepted by all political parties.

As American state legislatures begin to convene this winter and again consider education reform, they should empower families and create conditions for entrepreneurship. And as school choice gains popularity among parents and taxpayers, particularly as this is National School Choice Week in the U.S., vouchers should absolutely be on the agenda."

~ From the article "Sweden’s School Voucher System is a Model for America" by Odd Eiken, who was State Secretary of Schools in Sweden 1991-94 and helped develop the nation’s voucher reform. 

HT: Che is Dead

U.S. Real GDP Now Above Pre-Recession Level

WSJ -- "U.S. economic output finally regained the level reached before the recession, as growth sped up on stronger consumer spending and exports (see chart above). 

Gross domestic product—a broad measure of all goods and services produced—grew at a 3.2% annual rate in the fourth quarter. That's up from the 2.6% pace notched the quarter before and confirms the view held by many economists and stock-market investors that the economy is gaining enough momentum to start bringing down unemployment in the months ahead.

The expansion in large part was fueled by a jump in consumer spending—a crucial change from earlier in the recovery, when growth relied heavily on businesses investing and building up inventories. Final sales—a measure that gives a feeling for underlying demand in the economy by subtracting the change in business inventories from GDP—notched its biggest increase since 1984, growing 7.1% in the fourth quarter. This reviving demand bodes well for 2011, because businesses could take it as a signal to stock their shelves and hire workers."

Friday, January 28, 2011

Frightening Satellite Tour Of U.S. Foreclosures

Pretty scary satellite photo (click to enlarge) of Phoenix's foreclosures, each red dot represents a home currently in foreclosure, see more cities here.

Interactive Map of the Day

The lowest county I could find is Owsely, Kentucky, where just 4.57% of the residents had a college degree in 2005-2009.  Also, it's interesting to note that just 4.6% of adults in 1940 had a college degree, vs. 27.5% today.   

Charts of the Day: U.S. Adds Manufacturing Jobs in 2010 For the First Time in 12 Years, Since 1997

Following 12 straight years of declines, U.S. manufacturing employment increased last year by 136,000 jobs - the first annual increase in manufacturing employment since 1997 when 304,000 manufacturing jobs were added to the nation's payrolls.  Also notice that there were more manufacturing jobs lost during the 2001 recession (almost 1.5 million) than in 2009 (almost 1.3 million jobs).   And during the 2001-2003 recession and post-recession period, more jobs were lost (almost 2.9 million) than in the 2007-2009 period (almost 2.5 million).  

As incessantly as we have heard about the "worst economic crisis since the Great Depression," the manufacturing losses illustrated above suggest that the 2001 recession was much worse for the manufacturing sector than during the most recent recession.  

See related WSJ article about manufacturing being the "shining star of this recovery."

"Big Short" Paulson Continues to Be "Big Long"

Back in May, I featured a CNBC report about John Paulson going from "Big Short" to "Big Long":

"John Paulson, the hedge fund manager who reaped billions from the infamous ‘Big Short” against the subprime housing market and the American financial system, is now increasing his bet on their recovery, according to recent filings."

Today's WSJ reports on its front page today that:

"Hedge-fund manager John Paulson personally netted more than $5 billion in profits in 2010—likely the largest one-year haul in investing history, trumping the nearly $4 billion he made with his "short" bets against subprime mortgages in 2007."

"John Paulson, head of hedge-fund giant Paulson & Co., turned bullish on the U.S. housing market in early 2010. Now he’s got a fund that’s betting on a rebound. One of the firm’s latest projects has taken it into the Sonoran Desert in the American Southwest, in search of empty residential-development lots. In November, the firm finished raising capital for the Paulson Real Estate Recovery Fund, gathering roughly $315 million in commitments from investors. 

One of the fund’s main strategies is to buy undeveloped tracts of land that already have environmental and building permits. Roads, sewers and electricity may also be in place, but not homes, according to one of the people familiar with the fund.  If the real-estate market recovers enough for developers to start building more new houses, this may be the type of land they buy first. That’s because a lot of the costly, time-consuming preparation work already has been done, the person explained." 

HT: Mike LaFaive

The Near-Term Economic Outlook Has Improved

From the conclusion of the Dallas Fed's National Economic Update released yesterday:

Conditions Favor Growth
"Recent data indicate that the risks of a double-dip recession and deflation have ebbed. Although the regenerating channels of credit and finance remain vulnerable to shocks, renewed signs of a self-sustaining recovery in consumer and business spending are growing as the underlying factors behind the recession and subpar recovery continue to unwind. While housing, municipal finance and labor market slack continue to detract from a more robust recovery, the near-term outlook has improved."

HT: CME Group 

The U.S. Consumer is Back: 4.4% Growth in 2010:Q4 Consumer Spending Is Highest in 5 Years

Boosted by the strongest quarterly growth in real consumer spending (4.4%) in almost five years (see top chart above), real GDP growth rose 3.2% in the fourth quarter of last year (see bottom chart).  The 2.9% real GDP growth for all of last year was the highest annual growth in real U.S. output since a 3.3% growth rate in 2006.

See news reports from the Wall Street Journal  ("U.S. GDP Growth Accelerates") and Washington Post ("Growth Strengthened to 3.2 pct in Q4 of 2010"). 

Thursday, January 27, 2011

204 Businesses Left California in 2010, That's Four Times the Number in 2009, and Sets A New Record

According to relocation expert Joe Vranich, a record-setting number of business - 204 in total - left California in 2010, or re-directed substantial capital to build facilities in other states that would have expanded in California in earlier, more business-friendly years (see chart above).  That number of businesses leaving California is four times the number of businesses that left in 2009 (51).   

Amazon Has First $10B Quarter and It Totally Dominates the Retail Book Market by Market Cap

Founder and CEO of Amazon, Jeff Bezos said in a statement: "We had our first $10 billion quarter, and after selling millions of third-generation Kindles with the new Pearl e-ink display during the quarter, Kindle books have now overtaken paperback books as the most popular format on Last July we announced that Kindle books had passed hardcovers and predicted that Kindle would surpass paperbacks in the second quarter of this year, so this milestone has come even sooner than we expected – and it’s on top of continued growth in paperback sales."

Actually, Amazon sales last were quarter were $12.95 billion, an increase of 36% from the fourth quarter 2009 ($9.52 billion). Net income increased 8 percent to $416 million in the fourth quarter compared with net income of $384 million in the fourth quarter 2009, an increase of 8.3%. 

The total dominance of Amazon in the book market is illustrated in the chart above, which shows that the current market capitalization of Amazon at $82.8 billion, or 46 times greater than the combined $1.8 billion market value of Barnes and Noble ($928 million and 1,357 stores), Borders ($58 million and 511 stores) and Books-A-Million ($92 million and 223 stores). Call it a "Schumpeterian gale of creative destruction."

Quiz on a Legalization of Marijuana Poll

1. Which age group do you think would be most likely to favor the legalization of marijuana?

a. 18-34 years
b. 34-49 years
c. 50-64 years
d. 65+ years

2. What percent of Democrats and what percent of Republicans favor legalization of marijuana?

a. 75% of Democrats and 20% of Republicans 
b. 68% and 28%
c. 62% and 32%
d. 55% and 38%

Find out here, based on a recent survey in the state of Washington.

Obama Is Now Pro-Business. And That's Dangerous Because Businesses Really Don't Like Competition and They'll Use Government to Try to Restrict It

From Don Boudreaux's excellent editorial making a very important point that Obama should be "pro-growth," and not "pro-business":

"An economy’s success is best measured by how well it pleases consumers, not by how well it pleases businesses. Each business sees matters differently. It wants to profit as much as possible. In a free market, businesses profit only by pleasing consumers. But a business that obtains special favors from government can profit without pleasing consumers. And it’s here that trouble starts.

Consider Obama’s commitment to make America more “competitive.” “Competition” sounds good. But businesses don’t like competition; they like protection from competition – along with subsidies, special tax breaks, and other government favors that relieve them from the need to cater energetically to consumer demands. So a pro-business president is prone to curry favor with businesses by shielding them from competition.

Tariffs and other import restrictions are examples of pro-business policies. They increase the bottom lines of those businesses that no longer must compete vigorously against foreign rivals. Such pro-business policies are also anti-consumer and anti-market. They rob consumers of choice; they shrink consumers’ spending power by enabling protected businesses to raise prices; and they stymie economic growth, in part by channeling entrepreneurs’ efforts into lobbying government for favors and away from figuring out how to build better mousetraps.

The irony is that such policies – which really should be labeled “crony capitalist” – are often labeled “competitiveness” policies. Because these policies increasethe profits of some domestic businesses, they are mistakenly believed to make the domestic economy more “competitive” when, in fact, they make it less so."

Microsoft Employees 1978: Where Are They Now?

Find out here.

Euro Leading Index Reaches 3.5 Year High

The Conference Board announced today that its "Leading Economic Index (LEI) for the Euro Area increased 0.8 percent in December to 107.3, following a 0.6 percent increase in November and 0.2 percent increase in October," which was the highest level in three and-one-half years going back to the summer of 2007 (see chart above). 

Said Jean-Claude Manini, The Conference Board senior economist for Europe: “December brought a further increase in the Euro Area LEI, and all components rose during the latter half of 2010. But, the index remains on a slower growth path than in the prior 18 months, and current conditions, as measured by the Coincident Economic Indicator, remain very weak. Meanwhile, consumer expectations are weakening; particularly when viewed in the context of fiscal consolidation and rising inflation, this is a strong reminder that the Euro Area economy continues to face strong downside risks. The U.S. LEI showed even larger increases over the same two months, but it signals a more volatile growth path.”

Earlier this week, the Conference Board announced that the Leading Economic Index for Germany increased 0.9% in November. 

Markets in Everything: Smart Parking Meters

San Francisco is installing state-of-the-art 'smart' parking meters that will alert drivers to available meters via a smartphone app, which also lets folks add time to their meter from anywhere in the city. They'll also use dynamic pricing to try to make sure that 15% of the spaces in a given neighborhood are always available.

Wednesday, January 26, 2011

TED: Understanding the Rise of China

Speaking at a TED Salon in London, economist Martin Jacques asks: How do we in the West make sense of China and its phenomenal rise? The author of "When China Rules the World," he examines why the West often puzzles over the growing power of the Chinese economy, and offers three building blocks for understanding what China is and will become.

Tuesday, January 25, 2011

We're In A New Super-Cycle of Global Economic Growth. World Economy Could Double by 2027

The Standard Chartered Bank in London recently released an interesting study called "The Super-Cycle Report, which suggests that in 2000 we entered a new "super-cycle" of global economic growth that will last until 2030, where "super-cycle" is defined as:

“A period of historically high global growth, lasting a generation or more, driven by increasing trade, high rates of investment, urbanization and technological innovation, characterized by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world.”  

From the paper's introduction:

1. The first super-cycle took place during the second half of the 19th century, from 1870 until 1913, the eve of the First World War. At that time, the world economy witnessed a significant step-up in its rate of growth, rising 2.7% on average annually in volume, or real, terms. That was a full 1% higher than the average growth rate seen during the previous half-century. America was the big gainer, moving from the fourth largest to the largest economy. 

2. The second super-cycle was after the Second World War until the early 1970s. World growth averaged a huge 5% per annum, again in real or inflation-adjusted terms. Japan and the Asian tigers saw the biggest gains over this time. Japan, for instance, moved from 3% to 10% of the world economy.

The rapid growth seen during both of these periods reflected a number of factors. In particular, the first super-cycle saw greater use of new technologies that had emerged during the Industrial Revolution, and the emergence of a new major economy in terms of the USA. The second super-cycle reflected many factors, in particular the post-Second World War reconstruction, involving investment, rebuilding and catch-up, plus both the emergence of a sizeable middle class in the Western world and of exporting nations across Asia. That cycle was also characterized by cultural shifts and a baby boom. A super-cycle would also appear to need the backdrop of relative peace, or certainly no global war, and stable monetary policies.

The third super-cycle started – in our view – in 2000. The period between the second and third super-cycles, from the early 1970s to 2000, was characterised by ongoing economic challenges in the West, a slowdown in Japan, the collapse of the Soviet Union, debt and currency crises in Latin America, and the relatively small size of China and India, both of which were in the early stages of opening up. There was no dynamic driver for the world economy. In 2000 the world economy was $32 trillion in size. Now, following the global recession and financial crisis, the world economy is almost twice the size of a decade ago. There was a significant contraction as a result of the crisis and global recession, but now the world is back to its pre-recession peak. Next year, based on conservative growth assumptions, this could rise to $64.7 trillion. Global trade has also recovered to pre-recession levels.

By 2030 – the time period for this analysis – we believe that the world economy, on the projections laid out here, would rise to $308 trillion, which would equate to $129 trillion in today's prices and dollars, and would be $143 trillion, keeping prices constant but allowing for some emerging-market currency appreciation (see chart above).

These are big numbers. Really big."

MP: If these estimates are accurate, it would mean that the global economy will double from its current size of $62 trillion to $126 trillion by 2027. 

MinuteClinic Goes Viral, It Plans to Double the Number of Its Retail Clinics Over the Next 5 Years

DRUG STORE NEWS — "CVS Caremark's retail-based clinic operator, MinuteClinic, is experiencing exponential gains in utilization and posted a 22% increase in acute visits during the past year, according to Larry Merlo, CVS Caremark president and COO.
The increase, which reflects visits in comparable clinic locations, is especially significant in light of the lack of flu-related illnesses. MinuteClinic currently operates more than 550 clinics in 55 markets and, going forward, its important role in the U.S. healthcare system undoubtedly will grow increasingly vital. 

"Going forward, MinuteClinic will take on added significance," Merlo told investors. "Think about the growing shortage of the primary care physician population, along with the 32 million uninsured coming online with some type of coverage beginning in 2014."

MinuteClinic is gearing up to meet the increased demand by opening more clinics at a rate of about 100 clinics per year, beginning this year. This growth plan will enable the company to double the number of clinic locations over the next five years. By 2015, MinuteClinic estimated it will operate about 1,060 clinics in 100 markets."

MP: Maybe this is how we'll deal with the coming doctor shortage

IEA: A New Superabundance of Game-Changing Shale Gas Will Provide 250 Years of Natural Gas

BBC News - "The world may have twice as much natural gas than previously thought, according to the rich nations' think tank the International Energy Agency (IEA). The world may have 250 years of gas usage at current levels thanks to "unconventional gas" from shale and coal beds, Anne-Sophie Corbeau, senior gas expert at the IEA told BBC News. Estimates may even be revised upwards.

Studies are underway into newly-recoverable sources, Ms. Corbeau said. "The gas story is huge.
A few years ago the United States was ready to import gas. In 2009 it had become the world's biggest gas producer. This is phenomenal, unbelievable."
The U.S. achieved the change through a technological breakthrough in which firms found a way of using tiny explosions to free gas previously trapped in a common rock - shale. Miss Corbeau said other nations were now rushing to replicate the U.S. success by exploiting gas currently trapped in various types of rock where it was thought to be impossible to access."

MP: The chart above shows monthly natural gas production in the U.S., which just set a new all-time record high in October last year.

HT: CME Group Twitter

Occupational Licensing Gone Wild

Public Enemy and Criminal Barber Dale Smith

An 82-year old Oregon barber (pictured above) with more than half a century of experience cutting hair (he was first licensed in 1957) is accused by government authorities in Oregon of "criminal barbering" because his government license to cut hair inadvertently expired in 2006.  Now state regulators want him to go back to barber school and pass a series of exams before he will be allowed to cut hair again legally. His barber shop is currently shut down to protect the public from getting their hair cut by this unlicensed, criminal barber.  

HT: Wayne Sanman 

See related CD post here of armed government SWAT team raids on Florida barber shops last November.  

Monday, January 24, 2011

Copper Prices Rise to Record Highs, Thefts Rise Too

Paul Kedrosky reported yesterday that copper thefts are rising again, due to the all-time record high prices in recent months.  The chart above displays monthly copper prices back to 1980, and shows that copper prices have tripled from $1.40 per pound at the end of 2008 to recent highs this month approaching $4.50 per pound.  

According to a Google News search, there have been 545 news stories in just the last week containing the phrase "copper theft," and that compares to 665 stories during the entire year of 2009 when copper prices were between $1.50-$3.00 per pound, and 1,750 stories last year as prices rose above $4 per pound by the end of the year. 

NABE Survey: Economic Recovery Gaining Strength; "Net Rising Index" for Jobs Highest in 12 Years

WASHINGTON (AP) — "Industry economists say the U.S. economic recovery is gaining strength, with more firms expressing positive hiring plans than in over a decade. A new survey from the National Association for Business Economics finds that economists are more hopeful about overall economic growth, the job market and demand for companies' products and services by many measures than they have been since the start of the Great Recession.

The survey found that business decisions are now "being driven by the fundamentals of an improving economy," said Shawn DuBravac, an economist with the Consumer Electronics Association who analyzed the findings.

The quarterly survey includes the views of 84 economists for private companies and trade groups who are NABE members. The data are reported by broad industry group. Many results are expressed as Net Rising Index, or NRI — the percentage of panelists reporting better outlooks minus the percentage whose outlook is bleaker. The number of economists who saw hiring by their firms increasing over the next six months was 42 percent, compared with 7 percent who expected to lay off workers. The NRI of 35 was the highest in the 12 years that the question has been asked."

Dopey Strange: Protecting Us from Low Prices

Co-directed, co-produced, and co-written by Don Boudreaux. I nominate this movie for an Academy Award.

"Big Sugar" Cartel Cost Consumers $4.5B Last Year

In a recent Wall Street Journal letter titled “The Sugar Program Makes Sense,” the American Sugar Alliance’s chief economist claimed that “sugar policy operates at no cost to the government and is projected to do so for the next decade.” While it’s true that U.S. sugar producers haven’t tapped American taxpayers directly since the beet sugar farmers raked in more than $240 million in farm subsidy payments from 2000 to 2005, U.S. sugar policy did force American consumers to pay out $4.5 billion last year in higher sugar prices to support the “Big Sugar” cartel.

Read more here of my Enterprise Blog post today "Sugar Policy: Sweet Deal for Producers, Sour Deal for Consumers."

New Journal: The Journal of Universal Rejection

About the Journal
The founding principle of the Journal of Universal Rejection (JofUR) is rejection. Universal rejection. That is to say, all submissions, regardless of quality, will be rejected. Despite that apparent drawback, here are a number of reasons you may choose to submit to the JofUR:
  • You can send your manuscript here without suffering waves of anxiety regarding the eventual fate of your submission. You know with 100% certainty that it will not be accepted for publication.
  • There are no page-fees.
  • You may claim to have submitted to the most prestigious journal (judged by acceptance rate).
  • The JofUR is one-of-a-kind. Merely submitting work to it may be considered a badge of honor.
  • You retain complete rights to your work, and are free to resubmit to other journals even before our review process is complete.
  • Decisions are often (though not always) rendered within hours of submission.
Instructions for Authors
The JofUR solicits any and all types of manuscript: poetry, prose, visual art, and research articles. You name it, we take it, and reject it. Your manuscript may be formatted however you wish. Frankly, we don't care.

HT: Donald Coffin

There's A Coming Doctor Shortage. But Why?

From a recent Wall Street Journal editorial by Dr. Herbert Pardes, president and CEO of New York-Presbyterian Hospital:

"The doctor shortage was fostered in 1996 when Congress capped the number of new doctors Medicare would pay to train, a practice that continues to this day.

Health-care reform will add an estimated 32 million people to the ranks of the insured, driving them to seek medical attention that in the past they may have avoided due to expense. The aging population will also create much greater demand. The number of seniors who need more medical care is expected to soar to 72 million by 2020—nearly double today's number.

According to a 2010 report by the Association of American Medical Colleges, the increased demand means that our nation will need an additional 130,000 doctors, both general-practice physicians and specialists, 15 years from now. That's about 20% more doctors than we have currently.

Right now we train roughly 16,000 doctors a year. To keep pace with demand, this nation will need to train an additional 6,000 to 8,000 each year for the next 20 years. If we increased the number of training slots today, it would take seven to 10 years for the new doctors to see patients (four years of medical school, plus three years of residency and additional specialty training)."

MP: The chart above shows that the number of medical school graduates peaked at about 16,000 per year in the early 1980s, long before any Congressional cap of Medicare funding in 1996 for training doctors. Since the early 1980s, the U.S. population has increased by almost 80 million people, a 36% increase, which has taken place at the same time that the growth in the number of medical school graduates has been near zero.

Why is it that we only hear about current or pending doctor shortages, but we never hear about shortages of other highly-trained professional like lawyers, engineers, computer programmers, Ph.D. history or political science professors, architects, economists, accountants, etc.  For some professionals like lawyers and history professors, we actually hear about huge and rising surpluses.  On the other hand, we hear all the time about the proliferation of for-profit universities like the University of Phoenix, so the market for private, for-profit education is expanding and growing nationally to offer education for nurses and other medical careers. 

Q: What is it about the medical profession that prevents it from supplying an adequate number of doctors to meet the rising demand, when every other profession seems able to accomplish that outcome?   Why has the number of medical school graduates been basically flat for 30 years?  I'm guessing that there must be restrictions that prevent the number of medical schools from increasing, but I'd welcome comments about this.

And whatever those restrictions are that have kept the number of medical graduates fixed at the same level for thirty years in the face of a rising and aging population, they have to be a major factor in the rising costs of medical care. If we had artificially restricted the number of auto mechanics or hair stylists at early 1980 levels, we'd be complaining today with the rising costs of car repair and hair cuts. 

Sunday, January 23, 2011

International Study: Most Affordable Housing? Saginaw, MI. Least Affordable Housing? Hong Kong

The "7th Annual Demographia International Housing Affordability Survey: 2011" was just released for metropolitan markets in Australia, Canada, New Zealand, U.K., U.S. and Hong Kong, based on housing and income data for the 3rd quarter of 2010 for 82 major metropolitan markets (those with more than 1,000,000 population).  "Housing Affordability" is based on the median house price divided by gross annual median household income, and here are some of the results:

1. Housing affordability in 2010 was little changed from previous years, with the most affordable housing markets being in the United States and Canada. The United Kingdom, Australia and New Zealand continue to experience pervasive unaffordability.

2. The most affordable major market was Atlanta, with a median house price of $129,400, and a Median Multiple of 2.3 (see chart above). Indianapolis ($120,200) and Rochester, N.Y. ($121,500) tied for 2nd most affordable major market, at a Median Multiple of 2.4. Cincinnati, Cleveland and Detroit tied for 4th most affordable, with a Median Multiple of 2.5, followed by Buffalo, Las Vegas and St. Louis at 2.6. Eleven other US major markets were rated affordable, including fast growing Dallas-Fort Worth, Houston, Jacksonville and Nashville.

3. All major markets in Australia and New Zealand, as well as Hong Kong were severely unaffordable. Hong Kong ranked as the least affordable major market (82nd), with a median multiple of 11.4 (see chart above). Sydney ranked second most unaffordable, at a Median Multiple of 9.6 (81st), having slipped behind last year’s most unaffordable market, Vancouver at 9.5 (which ranked 80th). Melbourne ranked 79th, with a Median Multiple of 9.0. Plymouth & Devon, San Francisco, London and Adelaide all had Median Multiples of more than 7.0.

Why does housing affordability matter?

"The cost of unaffordable housing extends to metropolitan area competitiveness. This is illustrated by an analysis of housing costs, using the Median Multiple, for more than 500 United States metropolitan areas. Between 2000 and 2009, the more unaffordable metropolitan areas lost 9.6 percent of their residents (4.7 million) by domestic migration to other areas, nearly 10 percent of their 2000 population. By contrast, the less expensive metropolitan areas gained 4.2 million domestic migrants (2.3 percent of their population). Of course the migration of households between metropolitan areas is the result of a number of factors. But the unprecedented housing affordability differences that have developed in US metropolitan areas are strongly associated with domestic migration trends. All things being equal, households will be drawn to less costly metropolitan areas and away from more costly metropolitan areas, as they seek to enhance their overall standard of living."

What cities in the U.S. have the most affordable housing? See chart below, Saginaw, Michigan is #1, Flint, Michigan is #2 and four out of the top six cities are in Michigan:

What contributes to high or low housing affordability?  Land use regulation is one factor, and as expected, the more (less) restrictive the land use regulation, the higher (lower) the housing affordability, see chart below:

Quote of the Day

"The moral code, the moral compass of the state-controlled media is something to behold. Now, some of you may not know the 2009 Nobel Peace Prize winner hosted a state dinner last night (January 19) for Hu Jintao of China. Hu Jintao is holding the 2010 Nobel Peace Prize winner in prison in China. Not making it up. The 2009 Nobel Peace Prize winner hosted a dinner for the guy holding the 2010 Nobel Peace Prize winner in prison, and the media does not get the irony of this at all. They're too busy running around chasing Sarah Palin and radio talk show hosts over 'civility.'"

~Rush Limbaugh