One good thing about taking time to recuperate is the time for concentration and ideating (my favorite verb!).

But the bad thing about recuperating with an ear infection, arthritis in the back and a plain cold is not much concentration can be had.  

So spare me judgement, I’m just trying to get some writing out there.  Since I have no creative ideas right now, I figured I would like to share that my old professor is trying to get my paper on the Czech Republic’s energy sector published!

Wow, now wouldn’t that be awesome?  That’s my life goal, to be published.  I didn’t expect the opportunity to come to me so early!

I know I don’t reach many people – but if you have the time – navigate to ‘latest workings’ and give me suggestions on how to improve it?  Of course, I would want to update it with more current information.

Thanks all wish me luck!

Dear Timothy Geithner,

It’s tough to say how well you will do as Treasury Secretary for the Obama administration.  Clearly you are qualified.  Yet it’s quite “coincidental” how you misinterpreted your tax obligations (and you even worked for the Treasury, come on…).

But that’s beside the point.

Read this article »

The Worldly Philosophers!

Please navigate to the “B-con book club” for more information

I finally got it started up!  After months of mulling it over, forgetting about it, then energy being revived!

For those interested and in the Boston area – 6:30 tomorrow at Black Seed Cafe near the Park St Station.  

I intend on posting while reading.  If I don’t, keep me honest!  And, hopefully, a separate page for the book club

Anyone interested in joining me and a handful of dorks and starting a book club based in economics? It’ll be funnn!

Shoot me an email.

With the amount of economic blogs I follow, I was bound to face a cringing reality that some of my ideas are not all that original after time has passed.

One topic I’ve written a couple of papers on is the topic of one blog I am fond of reading – Econompic Data. He talks about one currency, and the issues it poses on a single monetary policy for multiple countries. In particular: the eurozone.

Back in my time in Prague, I looked at how bond prices converged after the adoption of the euro in 1999. A year or so after, I looked at what issues the Czech Republic would face when adopting the euro (monetary policy being one of them).

There are many requirements to join the EMU to begin with – inflation, FDI, public debt and budget deficit, interest rates, exchange rates, etc. I was more concerned with interest rates, with the government needing to raise more debt, at a higher rate, at a rate not within the bounds of the EMU. As seen in 1999, the spreads between countries’ bond prices widen, not as expected. Meaning one country was seen as riskier than another. Wait, that’s not supposed to happen, right? A euro is a euro is a euro, it shouldn’t matter what country issues it, right? But it does. And it’s evidence that a single monetary policy can not float all boats.

Econompic quotes about 10 year spreads of Belgium over Germany widening, as has the Dutch, Spanish, Italian and French (fyi Germany has traditionally considered the benchmark with it’s former deutschemark being one of the strongest in Europe). Even wider if we go shorter on three month maturities.

This makes me wonder though how all countries are comparing to each other, without Germany, since Germany’s economy is slipping a bit with no effort to lend a helping hand. Actually – maybe that’s what’s going on. German investors are nervous, buying government bonds, buying down the yield as what’s happening in the US. Perhaps that is why many countries’ spreads are widening. Not because European countries have a cheaper bond, but because Germany is currently more expensive to hold. The wider spread in the shorter term is evidence of that. It shows that perhaps maybe right now it’s a bit shaky to invest elsewhere within Germany, but later on it’s considered more of the benchmark.

Am I making sense in this mild stream of conscious?

I totally forgot the original thought I had. Oh well, good enough of an argument for me!

Finally – sorry – the last pillar of the basel II agreement.

The third pillar – it’s pretty simply – it requires banks to be more translucent with their reporting, allowing markets to get a better grasp of what’s going on inside the bank.

Let’s take a step back on the topic – why do I care?  Not just because banking is a rather important topic of conversation lately.  This is an international document that lacks the ability to be enforced.  Different cultures, different government regulations that affect banking more directly rather than an elusive, global document.  It’s worth talking about, getting familiar with, just as international accounting standards are being adapted to global companies. 

But overall – this is pertinent to current times.  I’d like a clearer definition of what a bank considers its assets before I invest.  I’d like to know how Lehman Brothers developed its CDOs and derivative products. Or how banks managed their risks, what they were exposed to, what to expect for risk in the future and how it’s pieced together.  

Smart people can develop complicated financial models to outsmart the market, to dissipate risk and create a win-win situation.  But let’s have regulations that piece together all of these, to understand CDOs and what-if situations of unwinding them.  Of conceiving irresponsible rating agencies inflating MBSs or plain company bonds.  Well, I guess I’m getting a little ahead of myself.

But a clearer presentation to the market of internal activities would allow the possibility of smart people to conceive these possibilities of failing banks, poor loan practices and the overall ripple effect on others.

I don’t think it’s too much to ask for a free market with free information.

I got this petite book for Christmas, requested out of curiosity - The Case Against the Fed.

My advice – don’t bother.

I’ve read the first 30 or 40 pages this morning, and one term comes to mind: ridiculous.  Let me make the point that it is geared towards people that do not know anything about banking.  The author takes that point of view in order to point out how inefficient and poorly managed the Federal Reserve is ran.  If you did not know much about banking, it would be easy to be sucked into this book.

It alarms me that the author dwells on counterfeit money, and then uses the act of counterfeiting money to compare to what the Treasury is doing on the Fed’s request – printing money.  The book says printing money is legal counterfeit. Um, alright.  Oxymoronic at first – just plain dumb when the thought actually sets in.  It speaks of inflation as a bad thing, that the current supply of money is optimum and no additional money is needed.  That price deflation, essentially, is positive. (Mind you – the author bases price deflation on purely technological advances.  Of course the TV I bought last year will be cheaper this year after new technology replaces it.  That is not price deflation).  

It’s one of the Fed’s tools – to control inflation.  But control inflation to be moderate and expected.  If we did not have inflation, the economy would not grow, would not evolve, would remain stagnant.  

The author fails to explain how counterfeiting (the illegal kind) is actually handled.  It is assumed that counterfeit money is not ever controlled.  It is said that the criminals make the money, and buy goods, making the supply of money artificially increase.  And that people down the chain of exchanging goods for the counterfeit money will lose purchasing power, not because the counterfeit money is detected and withdrawn from the people’s hands, but because at the beginning, the criminals were able to buy goods, artificially buying up the demand for the product, while the people later down the chain will have to pay more for that same product.  The author uses this image to poorly construct what goes on with inflation.

Right.

Has this person taken an econ class?  

Inflation is not the timing of money changing hands, where people at the end of the ladder lose out compared to the people who touch the money first.  Inflation is the increase of general prices of goods & services over time.  There isn’t a person that loses out because he or she is the last to receive a dollar in a chain of buying and selling goods/services.  It is where everyone will be paying more overtime for products or services that once were cheaper in the past.  The author uses the government fiscal spending as a poor example to illustrate the point again – that one aspect of fiscal spending is for government projects, then those projects are undertaken by contracts with private sector, where the direct families of those benefiting from the contracts are the ones that get the opportunity to spend the money first, and so the ladder continues down.  Supply & demand does not react that fast, where someone buying a product today will affect the price of it tomorrow.  It is plain not possible.  

At least I know which school I know not to go to for my PhD.

*shaking head in shame*

Inspired by This American Life

What’s a love life worth to someone?  To me, perhaps?

$20 for two movie tickets, $8 for popcorn & a soda, $4 for the round trip T ride.  Then another $30 for dinner afterwards. So $64 total. The movie is about what, two hours? a meal, an hourish.  So that’s about $21/hour for his time.

Stopping there, that seems a bit pricey.  Honestly, that costs more than what I earn hourly-ish.

But then take into account the time spent after that night.  We go home, fool around for another hour.  That winds down to about $15/hr.  Soaking in all the passion, the sweat, the short burst of cardio, that may be worth it.  Soon following, a sweet moment of cuddling.  Both currently living in the present, breathing in the smell of pheromones and cooling down.  A sense of satisfaction, accomplishment and a shit eating grin.  OK that could definitely be worth it.

Then time passes on.  Dates add up.  Money on time racks up, but the same level of satisfaction maintains.  Appreciation for each other wears down and now it’s $62 for 4 hours of fake time spent with each other.  The $15/hr isn’t returning the same outcome as before.

It starts to dwindle down, drifting apart.  And then it happens – the official parting.

Initially hours a day are spent upset over the lost relationship.  Opportunity cost lost.  The losses first are large, spending time alone rather than reaping the benefits of being out or being productive.  Time thought over the loss of the relationship dwindles down, maybe only one hour a day, then maybe a few minutes before the day starts with a quick reminder of waking up alone.  

In the end, the pain of the break up is enormous.  It adds up, lots of tolls on the mind and body.  It nearly outweighs that of the time spent enjoying each other.  One because the time spent in pain adds up, and two because of the zero chance of returning to the same nook that I cuddled in.  

The opportunity costs equal, or could very nearly outweigh the ‘investment’.  Why do people continue to jump back in the game when they very well know the possible ending will negate all that of the investment?

This is a very cold way of looking at relationships.

But really – is your time better spent elsewhere?

Continuation of previous post – Basel Accords

The second pillar pretty much gives regulators better tools to regulate banks with their credit risk assessment approach.  So I guess the internal approaches are regulated.  …how well are they, though?

It also defines other risks: systemic, pension, concentration, strategic, reputation, liquidity and legal risk.  Systemic risk is quite current today – defined as the collapse of an entire system or market.  There are clear interdependencies within the banking system.  Some even believe that banks are just a public extension of the Fed (which, kind of makes sense…).  Seen today – when the housing market burst, that was a clear (and anticipated, but somewhat ignored) blow to the banking system, illustrating that of systemic risk.  An individual example would be Lehman Brothers, with all the derivatives unwinding after their collapse.