Sunday, May 30, 2010

Personal bankruptcies in America

Every year, hundreds of thousands of Americans declare Bankruptcy (the inability or impairment of ability to pay their creditors). At 2009, almost one million and a half persons declared personal bankruptcies in the United States (200.000 only at California) Click on image to enlarge it.

Click on image to enlarge it.


Thursday, May 27, 2010

Current mortgage interest rates of the week: May 4th

Current mortgage rates at United States of 4th week of May. Click on the image to enlarge it:

Now, we'll bring you the current mortgages rates of every week at Economy Lessons. Come every Wednesday to see them. And, of course, every day of the week to read daily news about economy and business

May interest rates:


Wednesday, May 19, 2010

Current mortgage rates of the week: May 3rd

Current mortgage rates at United States of 3rd week of May. Click on the image to enlarge it:

Now, we'll bring you the current mortgages rates of every week at Economy Lessons. Come every Wednesday to see them. And, of course, every day of the week to read daily news about economy and business

May interest rates:

Current mortgage interest rates of the week: May 4th


HP unstoppable: Net income growth of 28% in Q1

Hewlett-Packard Co.'s, first computer company, remains unstoppable even in crisis, as their numbers prove it

Global crisis... competitors... nothing seems to be able to stop the computer's giant company Hewlett-Packard (or HP). Dived in crisis, Hewlett-Packard manages to not only save itself, but to experience an impressive growth. HP increased a 28% its net income the firsts quarter of 2010. Not expected by anyone, surpassed the most optimistic forecasts.

But how HP increased their benefits?

Besides of (a needed) high quality product, HP not limited himself to computers and started an aggressive expansion into more profitable areas, such as technology services and computer networking. More areas to 'fish', more profit, says the theory. And HP numbers.

HP numbers

- When Tuesday 18 marked closed, HP earned $2.2 bn, 91 cents per share. The same period one year ago, HP earned 'only' $1.7 bn, 71 cents per share. An improvement.

- HP earned $1.09 per share (excluding special items), when analysts expected $1.05 per share.

- Revenue increased 13% to $30.8 bn. Analysts expected $29.8 bn. In the same period one year ago, HP's revenue was $27.4 bn

HP's forecast

For this present year, HP expect a profit of $4.45-4.50 per share without special items.

Future of HP is to expand. Right now, the company acquired Palm Inc (smart-phone pioneer) for $1.4 in a bid to expand HP's small mobile business. Also, acquired 3Com Corp for $2.7.

HP's intentions is not limit only to computers, but expand to other related markets. And, if they keep the same path, they'll surely succeed

Read Also: The Seattle Times - HP net income jumps 28 pct; raises 2010 outlook

Related Articles:

Youtube: Is google making a profit?

. Share

Tuesday, May 18, 2010

Humor: Global crisis cartoons

More cartoons:

Special: Cartoons

. Share

Top 5 economic news, May 10-16 week, 2010

May 10rd - 16th week most important economics news compilation:

1) Greece Considering Legal Action Against U.S. Banks for Crisis

Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said this 16th Sunday.

2) Schwarzenegger’s Budget Addresses Few Structural Issues

Proposing a budget that would eliminate the state's welfare-to-work program and most child care for the poor, Gov. Arnold Schwarzenegger on Friday outlined a stark vision of a California that would sharply limit aid to some of its poorest and neediest citizens.

His $83.4-billion plan would also freeze funding for local schools, further cut state workers' pay and take away 60% of state money for local mental health programs. State parks and higher education are among the few areas the governor's proposal would spare.

3) A rise on US retail sales and employment, boost American hope

Retail sales rose by 0.4% in April, following an increase in March of 2'1%, said Commerce Department. April was the seventh month in row to have a retail sales increasing, making possible believe that the trend will keep in same direction.

The figures have increased hope that consumer spending, which accounts for two thirds of the US economy, will keep the recovery on track in coming months.

4) Growth, rate worries drive euro near 4-year low

The euro slid to a 19-month low of $1.2355 in late trading in New York, close to what would have been the lowest point in four years against the dollar.

Economists said the tumbling euro could reflect fears that the European debt crisis will turn into a replay of the Lehman Brothers disaster. The collapse of the New York investment bank in September 2008 spread panic through the financial system. Credit froze as a result.

5) Toyota miracle: $2.2 billion profit in 2009

After a year of security issues, global crisis and more, Toyota managed to made a profit of $2.2/€1.73 bn in 2009. Despite the global crisis, a series of recalls that brought a lack of trust on the company, even fines from U.S. government, Toyota managed to made a profit of $2.2 bn in 2009, and $1.2 bn on Q1, a breath of fresh air after 2008, when the company lost $4.73 bn.

Do you have any other important new?


Monday, May 17, 2010

Goldman Sachs: All you always wanted to know ... and a little more

Goldman Sachs company is at everyone's mouth. But what we REALLY know about the company? Is true or false what papers, radios, televisions, say about them? What you don't know? How much is Goldman's revenue? And assets? Know all you always wanted to know and much, much more about Goldman Sachs. Just relax, click, and read:

Click to enlarge. Source: Visual Economics

Also, you can read more about the same topic at our related articles.

Related Articles:

Special: Goldman Sachs crisis


Saturday, May 15, 2010

A rise on US retail sales and employment, boost American hope

With an increase of US retail sales and hiring, American people should have hope on the future.

Total retail sales rose by 0.4% in April, following an increase in March of 2'1%, said Commerce Department. April was the seventh month in row to have a retail sales increasing, making possible believe that the trend will keep in same direction.

James Cox, managing partner at Harris Financial Group in Virginia said that "This adds to a string of data we have received indicating that consumer spending is improving".

The figures have increased hope that consumer spending, which accounts for two thirds of the US economy, will keep the recovery on track in coming months.

US economic growth at first stage had been driven by business replenishing inventories. Now, the tendencies has changed, being more important the consumer spending, which accounts for two thirds of the US economy.

Also, motor vehicle purchases rose 0.5% in April, 6.7% in March. Remember the importance of motor sales: Show us important information about consumer spending trends, and the direction of the recovery o deterioration economy, as we said when we explained the Light Weight Vehicle Sales recovery in America.

On the working side, hiring has been increased too, specially manufactures: Industrial production rose 0.8% in April, surpassing economist's forecast of 0.6%.

As consumer spending, manufacturing hiring plays a leading role on the economic recovery, as manufacturing factories increased hiring, with 44,000 new jobs in April.

Of the 44,000 new jobs, most hiring belonged to heavy manufacture like metal products, machinery, electrical and electronic equipment, and food, paper and plastic products.

If you're eager to read more about this topic, you can read more about why is so important the Motor vehicles sales in America or about the first steps of United States recovery one month ago.

And, of course, we want to know your opinion, so comment!

Related Articles:


Friday, May 14, 2010

Euro Currency: Current state of the Euro at 2010

Visual Economics offer us today, an analysis of the past, present and future of the Euro currency. Click on the image to see the adaptation of the Euro currency since its start at 31 Dec, 2001, how evolved and Euro's weakening towards US Dollars:

Related Articles:

News: European debt crisis, who owes money?


Thursday, May 13, 2010

Welcome to the Euro, Estonia...or not?

Estonia meets currency's rules to adopt Euro currency, will they?

A fast-growing economy, free trade and a currency board for the ex-soviet Baltic country, gained the possibility to use the Euro. An increase of 14'1% Estonian GDP in 2009 proves that they deserve it. Some economists expected a devaluation of the Estonian economy but didn't happen: Flexible wages and prices gave to the country a sense of stability instead

While countries are near of bankrupt, Estonia, as well as Sweden, meet the requirements to use Euro currency. Why should they then, don't use it? That's why Commission gave Estonia the green light to adopt Euro at 2011.

  • Estonian numbers
Why Estonia meets European requirements? What are the numbers behind Estonian economy?

- Low inflation, 0.7% at 2009, compared to the 1% benchmark.

- One of the smaller national debt of EU, 7.2% of GDP.

- In the middle of a crisis, exportations are expected to grow a 1%.

So, in 2011, we'll say 'Hi!' to Estonia

Read Also: The Economist Share

UK: Interest rates raise, a feared and expected forecast

14 months in a row without a single change on the 0'50% British interest rates, how much UK Economy will resist?

At May, the interest rate was unchanged for 14 months in a row, as today 12 May, the Bank of England confirmed it. That means UK kept their target of an interest rates below 2%. Experts don't expect that this norm will break in less than one year, as minimum.

Reuters 'probed' economists about their opinions about the future of the UK economy:

Click to enlarge. Source: Reuters

As we can see, the interest rates will keep below 2% until later Q4, on 2011. Forecasts also expect the start of the change of interest rates will start at Q3, 2010.

Ok, we know now that Bank Of England wouldn't start to increase interest rates until Q3 2010, but why is so important that interest rates keep as low as possible?

  • Importance of low Interest Rates
Low Interest rates is a sign of a healthy economy: Borrowing is cheap, so companies can spend more, as well as consumers. On the other hand, high interest rates slow economic growth, as borrowing turns more expensive, so companies and consumers spend less, as high rates makes harder an profit.

Also, higher interest rates tends to stay on banks as saving, rather than invest in the stock markets.

Same goes for government bonds: A higher interest rate means more to pay yearly, less attractive to the investors.

Therefore, higher rates are sign of bad news in the short term. Keep them as low as possible, makes investors eager to spend, increasing the economic growth.


Wednesday, May 12, 2010

Taxing wages: Single vs Married wages

To encourage or discourage population growth, different countries apply differents tax policies to ease the 'burden' of having children.

Luxembourg and Switzerland have the highest overall net income and the highest average gross wage. South Korea, Turkey and Poland families has almost no benefit, and Mexico has no benefits at all (Probably, because the average family has 2.4 children and Mexican government wants to cut it down) .

Click to enlarge. Source:

Related Articles:

Average pay of U.S. jobs 2009

Meet the average american family....economicaly


Toyota miracle: $2.2 billion profit in 2009

After a year of security issues, global crisis and more, Toyota managed to made a profit of $2.2/€
1.73 bn in 2009.

'When dark times come, only the strongest will stand', how many times we heard this? Well, Toyota proves that's true. Despite the global crisis, a series of recalls that brought a lack of trust on the company, even fines from U.S. government, Toyota managed to made a profit of $2.2 bn in 2009, and $1.2 bn on Q1, a breath of fresh air after 2008, when the company lost $4.73 bn.

This is "still in a tough storm, but we are starting to see some sun on the horizon" Toyota President Akio Toyoda said.

But let's see the numbers:

  • Net revenues (Gross revenue minus returns and other negative revenue) decreased 7.7% compared to 2009, but thanks to cost-cutting measures, Toyota is profitable.

  • Vehicles sales for 2009 totaled 7.24 mn units, 330,000 less than 2008. While at United States and Europe, sales fell 114,000 and 204,000 (remember safety issues), sales were up by 292,000 units

Toyota's secret of exit is a change of his market, retreating from Europe and United States to sell at the 'secure' Asia and cost cutting measures. This, even Toyota recalling 10 mn of its cars due safety concerts about accelerator pedal and a $16,4 fine from the U.S. government, built a safe present and future for Toyota automobile company.

Toyota's future

Toyota mid-long term plans are focus on green cars. Other companies are starting to produce hybrid models, just like Ford plant at Almussafes, València.

Toyota also, will expand to emerging markets like China and India in 2011.

Related Articles:

Toyota again faces safety concerns and recalls 600,000 Sienna minivans

Toyota suspends temporally Lexus GX 640 sales to United States Share

Tuesday, May 11, 2010

European Economy: Weak growth for 2010-2011, according to an IMF forescast

While euphoria fades over Euro rescue, IMF sees a timid, small recovery of European markets.

International Monetary Fund sees a growth on European economy that will pick up in 2010, 2011 period, thanks to the €750 bn ($975 bn) bailout suggested yesterday, and an increase of EU exports.

In addition to calling for a stronger fiscal framework, the IMF report raised questions about the long-term sustainability of fiscal stimulus programs.

The bad news came today, after the unexpected worldwide increase of stock markets ( Yesterday Indexes ), Euro set foot on the ground and fell down to $1.267, down from $1.28 in Monday.

On June 4, German parliament will debate about Eurozone rescue. Sticky situation, as the country is divided."We cannot have a monetary union without an economic union", said EU Commission President Jose Manuel Barroso, who suggested a "More coordinated Europe"

FT's Lex Columnist, Vicent Boland, speaks on Bloomberg about €750/ $962 bn European help aid:

Related Articles:

Solve your questions about €750 European bailout

Special: Greek crisis updates


Humor: Greek crisis cartoons

More cartoons:

Special: Cartoons


Monday, May 10, 2010

Another rescue package: 750 bn to extinguish the flames of Greece

European ministers plan a €750 bn aid to strengthen the European economy.

Today, May 10, European ministers of economy and Ecofin ( Economic and Financial Affairs Council ) have agreed another 'rescue package' for Europe. This package will help to stop the currently spread of Greece crisis to other European countries (and non-European too), as bailout to countries heading to bankruptcy. On the other hand, the states with economy issues will commit to accelerate the public debt decrease.

This agreement was signed after eleven hours of conversations between 27 ministers, and EU will contribute with €500 bn while IMF will contribute with €250 bn, making a total of €750 bn ($975bn) to attend Eurozone countries, specially Spain and Portugal.

European Central Bank would buy public debt to stabilize markets, also.

Obama asked Angela Merkel and Sarkozy (Germany and French PMs) to take measures to stabilize markets and build trust.

Even this package will be activated in "some weeks", generated enough 'hype' to lead a great recovery of worldwide stock market, as you see below. Let's hope isn't just, 'hype'.

Click to enlarge. Font: CNN

Will last longer the good run thanks to the stability of a 'money cushion' or not? Comment it.

Related Articles:

Top 5 economic news, May 3-9 week, 2010

May 3rd - 9th week most important economics news compilation:

1) Wall Street: Dow Jones stocks fall nearly 10 pct

Due a (so-called) computer error, Dow Jones lost almost 1,000 points in less than 15 minutes. Later, Dow Jones recovered and finally 'only' lost one third of the original lose, almost 300 points. And the computer error wasn't a 'computer' mistake, but human one.

2) U.S Federal Reserve opens credit line to Europe

U.S. Federal Reserve, among some banks (Bank of Canada, European Central Bank, etc...) , are involved in dollar swap effort to help European economy. In this dollar swap, dollars are shipped to European Union through foreign central banks and, in turn, these central banks lends the dollars to countries that are in need of dollar funding to stabilize EU.

3) Greek €110 bn bailout arrives

Finally. 'rescue package' arrives at Greece. Would be enough to stop Greek crisis? Or will it spread further, damaging Europe?

4) Global globalization, global crisis

Global stock markets have dropped due Greece crisis, halting global economy recovery.

5) 12 Russians miners killed, dozens missed

Not related to economy, but an important and sad one. Two explosions at the largest underground coal mine at Raspadskaya, Russia, killed 12 miners and 83 were trapped inside. Poor safety standards, probably the cause of the incident.

Have you any other important new?


Sunday, May 9, 2010

Average pay of U.S. jobs 2009 (And, surprisely, Obama is on 1% top)

Kiplinger using U.S Bureau of Labor Statistics, sorted different jobs of American landscape. Here are some highlights:

- U.S poverty line is located at $10,830/year, for a single-person household. Under this line, lives 39.1 million people, a 12.65%.

- The real median household income in 2008, according to the U.S. Census Bureau.

- U.S.Minimun wage is $15,080.

- A laundry / dry cleaning worker earns $19,945 every year.

- A construction worker, $28,520.

- Registered nurse is the profession projected to account for largest number of new jobs between 2008 and 2018 due Obama's healthcare.

- Postal Service Mail Sorter is the profession projected to account for third-most lost jobs between 2008 and 2018.

- Obama's (or any U.S president) base salary is $400,000, President of a United States Public University $436,111. Of course, Obama's earnings aren't limited to his base salary, as he earns every year over $5 million, in diverse ways.

Click to enlarge


Saturday, May 8, 2010

Chinese economy sky-rockets: Sales in rural areas increases 510%

China started a subsidy program in February 2010 to increase Chinese rural areas. This program, while help poor rural areas, far away from malls and big supermarkets, increases the Chinese consumption and China economic growth, while Europe and United States still struggles to recover from their crisis.

And worked. More than expected. While the subsidy only covers 13% of total price, rural consumption increased.... a 510%! But let's discover how works.

  • Main points of China's subsidy
- Aimed to: Chinese families living in rural areas. The average rural Chinese family earnings are based in farming or works related to farming.

- Subsidy: Chinese government subsidy covers 13 percent of the price of some home appliances.

- Home appliances covered: Television sets, mobile phones, computers, air conditioners, water heaters, washing machines and kitchen appliances as micro-wave ovens, ovens and refrigerators

- Government, seeing the exit of this operation, added another six items: Electric bikes, DVD players, smoke exhaust ventilators, gas stoves, pressure cookers and electric cookers.subsidy.

  • Results?
Results were better than expected. While an increase of rural China purchases was expected, results are that the increase, in numbers, are more than 500%.

- Between January-April period, Chinese bought 20.84 millions sets of subsidized home appliances. 370% more than the same period at 2009.

- In April alone, 4.8 millions sets were sold, 170% more than 2009 April.

- Chinese economy ministry's website said total sales of subsidized appliances surged 510 percent year-on-year to 41.7 bn yuan ( €4.81 bn, $6.13 bn) during the period..

- Top sold appliances: Tv sets and refrigerators in January-April period totaled 3.2 bn yuan each. Computers 1 bn yuan, according to China's government.

This way, Chinese government increases sales, while Chinese rural areas families life quality multiplies and labor saving appliances give more time to do more productive work at factories, farms and offices, increasing the whole income of China.

Because labor saving appliances will free up workers to do more lucrative work at factories and in offices and increase the income of the country. No one wonders why Chinese economy is increasing.

Related articles:

China's economy grows nearly 12 percent

China oil demand 12.8% growth Share

Chart: Light Weight Vehicle Sales recovery in America

After a recession at US, Autos and other Light Trucks show a sign of slight recovery. Even that, there is room to improve and we're experiencing just the start of an America economic recovery (we hope).

Click to enlarge. Font: Economic Research

  • Why is so important?
Motor vehicle sales are a big part of American population spending, like at others first world countries, and can show us important information about consumer spending trends, and the direction of the recovery o deterioration economy.

So, an increase of the light weight vehicle sales, means an increase of the American families savings and, therefore, potential spending.

Friday, May 7, 2010

UK Elections: Conservative party wins with 306 seats, Labourist 258 seats and Liberal Democrats 57

Few minutes ago, David Cameron (Conservatives) won the election with 306 seats. Even Conservatives victory, they can't form government by themselves, so the next step would be start conversations with Liberal Democrats, key-party to form government.

Nick Clegg expects to receive succulent offerts to form goverment, and they'll decide the next UK government, conservative or labourist. The question is still unsolved and two words are being repeated over and over: Hung Parliament.

Labourists, if finally don't form government with Lib Dems, would be the biggest losers of the elections.

Results by country:

Click to enlarge. Font: BBC News


Click to enlarge. Font: BBC News

Due the death of UKIP candidate John Boakes, on 22 April, the poll at Thirsk & Malton was postponed to 27 May. Share

Thursday, May 6, 2010

News: European stock market Earthquake, for 3rd day

Today, May 6, European shares keep falling, as European markets fear a 'Greek infection' of their debt crisis. While Greek austerity bill passed and protestors marched and Jean-Claude-Trichet, European Central Bank President assured that Europeans will kept interest rates on hold at 1%, European markets fell again, for 3rd day.

  • State of European markets
All main European stock markets experienced a negative change. By country:

- Ibex-35, from Spain, -3%

- PSI-20, from Portugal, -2'60%

- CAC-40, from France, -2'20%

- FTSE-100, from England, -1'52%

- Swiss Market Index, -0'95%

- DAX 30, from Germany, -0'84%

  • State of World markets
- Nikkei 225, from Japan, -3.27%

- Shanghai Composite, from China, -4.56%

A surprise to all economist was the crash down of Dow Jones, that fell below 10,000 level, reaching a max loss of 9,875%. As fast DJ crashed, DJ recovered, but still lost a 2'84%.

We hope that investors recover almost as fast as Dow Jones, as when DJ reached its bottom level, some investors deserted Wall Street.

Update: Finally, Wall Street closed with a -3% loss for Dow Jones Share

Video: Keynes Vs Hayek "Fear the Boom and Bust"

Today, I've a bit more 'relaxed' update. Econstories.Tv made a video of the classic debate between Keynes and Hayek points of view in a form of a funny 'rap-debate'.

In the video, Keynes explains the paradox of thrift (Long story short: If people save money in recession times, then the aggregate demand falls, so total savings becomes lower. True or not, we'll discuss this later) and defend the 'steer markets', driven by governments, helping with stimulus.

On the other hand, Hayek denies this Keynes economics theories and states that economy contracts should be voluntary, not 'forced' by governments, just between individuals and the market.

Keynes and Hayek points of view are the center of a big number of economic discussions, as these points of view are opposed.

So, here's the video:


We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

[Keynes Sings:]

John Maynard Keynes, wrote the book on modern macro
The man you need when the economy’s off track, [whoa]
Depression, recession now your question’s in session
Have a seat and I’ll school you in one simple lesson

BOOM, 1929 the big crash
We didn’t bounce back—economy’s in the trash
Persistent unemployment, the result of sticky wages
Waiting for recovery? Seriously? That’s outrageous!

I had a real plan any fool can understand
The advice, real simple—boost aggregate demand!
C, I, G, all together gets to Y
Make sure the total’s growing, watch the economy fly

We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

You see it’s all about spending, hear the register cha-ching
Circular flow, the dough is everything
So if that flow is getting low, doesn’t matter the reason
We need more government spending, now it’s stimulus season

So forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift…


Business is driven by the animal spirits
The bull and the bear, and there’s reason to fear its
Effects on capital investment, income and growth
That’s why the state should fill the gap with stimulus both…

The monetary and the fiscal, they’re equally correct
Public works, digging ditches, war has the same effect
Even a broken window helps the glass man have some wealth
The multiplier driving higher the economy’s health

And if the Central Bank’s interest rate policy tanks
A liquidity trap, that new money’s stuck in the banks!
Deficits could be the cure, you been looking for
Let the spending soar, now that you know the score

My General Theory’s made quite an impression
[a revolution] I transformed the econ profession
You know me, modesty, still I’m taking a bow
Say it loud, say it proud, we’re all Keynesians now

We’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Keynes] I made my case, Freddie H
Listen up , Can you hear it?

Hayek sings:

I’ll begin in broad strokes, just like my friend Keynes
His theory conceals the mechanics of change,
That simple equation, too much aggregation
Ignores human action and motivation

And yet it continues as a justification
For bailouts and payoffs by pols with machinations
You provide them with cover to sell us a free lunch
Then all that we’re left with is debt, and a bunch

If you’re living high on that cheap credit hog
Don’t look for cure from the hair of the dog
Real savings come first if you want to invest
The market coordinates time with interest

Your focus on spending is pushing on thread
In the long run, my friend, it’s your theory that’s dead
So sorry there, buddy, if that sounds like invective
Prepare to get schooled in my Austrian perspective

We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

The place you should study isn’t the bust
It’s the boom that should make you feel leery, that’s the thrust
Of my theory, the capital structure is key.
Malinvestments wreck the economy

The boom gets started with an expansion of credit
The Fed sets rates low, are you starting to get it?
That new money is confused for real loanable funds
But it’s just inflation that’s driving the ones

Who invest in new projects like housing construction
The boom plants the seeds for its future destruction
The savings aren’t real, consumption’s up too
And the grasping for resources reveals there’s too few

So the boom turns to bust as the interest rates rise
With the costs of production, price signals were lies
The boom was a binge that’s a matter of fact
Now its devalued capital that makes up the slack.

Whether it’s the late twenties or two thousand and five
Booming bad investments, seems like they’d thrive
You must save to invest, don’t use the printing press
Or a bust will surely follow, an economy depressed

Your so-called “stimulus” will make things even worse
It’s just more of the same, more incentives perversed
And that credit crunch ain’t a liquidity trap
Just a broke banking system, I’m done, that’s a wrap.

We’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No it’s the animal spirits

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

John Maynard Keynes
The General Theory of Employment, Interest and Money

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

F A Hayek
The Fatal Conceit

I hope you've enjoyed it. Share

Blog first big update

As many readers noticed, I've 'tweaked' a bit the blog.

  • 1) New template
I changed the old, simple template by this one. I hope that now I seem a bit more 'pro'

  • 2) Twitter
Now, you can (should!) tweet any update to your friends. Also you can follow us on twitter. Add us and tell me so I can follow you as well:

  • 3) Facebook
Also, you can share with your friends our posts. As Twitter, just click at the Facebook button located at the top of every post and you'll share it.

  • 4) Facebook group
Join us at our Facebook group to contact with people of your same interest, talk, write at forum and socialize with people. Just click in the FB banner:

  • 5) RSS

Also, you can Syndicate us by our RSS channel:

Economy Lessons RSS Channel

  • 6) Thematic pages
Now, related posts are placed together at the same page, making easier to read related posts. At top-right corner right now are two specials: Special: Greek crisis and Special: Goldman Sachs crisis.

  • 7) Further contact
If you have a suggestion, an idea to enhance the blog or need contact, do it at:

Ki_Sap @ Share

Wednesday, May 5, 2010

Economy Lesson: The Lesson Restated, by Henry Hazlitt

Economics,, as we have now seen again and again, is a science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run.

This is the lesson that has been the special concern of this book. We stated it first in skeleton form, and then put flesh and skin on it through more than a score of practical applications.

But in the course of specific illustration we have found hints of other general lessons; and we should do well to state these lessons to ourselves more clearly.

In seeing that economics is a science of tracing consequences, we must have become aware that, like logic and mathematics, it is a science of recognizing inevitable implications.

We may illustrate this by an elementary equation in algebra. Suppose we say that if x = then x + y = 12. The “solution” to this equation is that y equals 7; but this is so precisely because the calculation tells us in effect that)? equals 7. It does not make that assertion directly, but it inevitably implies it.

What is true of this elementary equation is true of the most complicated and abstruse equations encountered in mathematics. The answer already lies in the statement of the problem. It must, it is true, be “worked out.” The result, it is true, may sometimes come to the man who works out the equation as a stunning surprise. He may even have a sense of discovering something entirely new—a thrill like that of “some watcher of the skies, when a new planet swims into his ken.” His sense of discovery may be justified by the theoretical or practical consequences of his answer. Yet the answer was already contained in the formulation of the problem. It was merely not recognized at once. For mathematics reminds us that inevitable implications are not necessarily obvious implications.

All this is equally true of economics. In this respect economics might be compared also to engineering. When an engineer has a problem, he must first determine all the facts bearing on that problem. If he designs a bridge to span two points, he must first know the exact distance between these two points, their precise topographical nature, the maximum load his bridge will be designed to carry, the tensile and compressive strength of the steel or other material of which the bridge is to be built, and the stresses and strains to which it may be subjected. Much of this factual research has already been done for him by others. His predecessors, also, have already evolved elaborate mathematical equations by which, knowing the strength of his materials and the stresses to which they will be subjected, he can determine the necessary diameter, shape, number and structure of his towers, cables and girders.

In the same way the economist, assigned a practical problem, must know both the essential facts of that problem and the valid deductions to be drawn from those facts. The deductive side of economics is no less important than the factual. One can say of it what Santayana says of logic (and what could be equally well said of mathematics), that it “traces the radiation of truth,” so that “when one term of a logical system is known to describe a fact, the whole system attaching to that term becomes, as it were, incandescent.”[*]

Now few people recognize the necessary implications of the economic statements they are constantly making. When they say that the way to economic salvation is to increase credit, it is just as if they said that the way to economic salvation is to increase debt: these are different names for the same thing seen from opposite sides. When they say that the way to prosperity is to increase farm prices, it is like saying that the way to prosperity is to make food dearer for the city worker. When they say that the way to national wealth is to pay out governmental subsidies, they are in effect saying that the way to national wealth is to increase taxes. When they make it a main objective to increase exports, most of them do not realize that they necessarily make it a main objective ultimately to increase imports. When they say, under nearly all conditions, that the way to recovery is to increase wage rates, they have found only another way of saying that the way to recovery is to increase costs of production.

It does not necessarily follow, because each of these propositions, like a coin, has its reverse side, or because the equivalent proposition, or the other name for the remedy, sounds much less attractive, that the original proposal is under all conditions unsound. There may be times when an increase in debt is a minor consideration as against the gains achieved with the borrowed funds; when a government subsidy is unavoidable to achieve a certain military purpose; when a given industry can afford an increase in production costs, and so on. But we ought to make sure in each case that both sides of the coin have been considered, that all the implications of a proposal have been studied. And this is seldom done.


Tuesday, May 4, 2010

Humor: Economy based cartoons

As every Tuesday, cartoons, because we can laugh too when we talk about economics:

More cartoons:

Special: Cartoons


Economy Lesson: Dollarization, a third way for Greek Crisis?

Tommy, one of our comenters, yesterday was surprised as he saw that Greek bailout arrived in form of €110 bn help and said that probably European Union and IMF will never get back the money. The exclusion or not of Greece from Eurozone made a lively discussion, but some experts suggested a third way: Dollarization.

  • What's dollarization?

Is the process of changing the currency of a country to a foreign one, or use a foreign currency in parallel of the domestic currency.

  • Benefits

The benefits of a dollarization process are numerous, being the main benefit a greater stability in the value of the new currency in exchange or addition of the domestic currency and also promoting fiscal discipline. This is generally used to stop inflation, reducing buying power of inhabitants of a country.

Other lesser reasons are to promote diplomacy with other countries using the same currency, or because the country is surrounded and/or have a big immigration of near countries, such as Andorra.

  • Drawbacks

The country 'dollarized' loses his influence on his own currency, as they adopted other one instead of the domestic one.

  • Countries using a foreigner currency

List of countries using U.S. Dollar:

British Virgin Islands, Cambodia (Cambodian Riel and US Dollars), East Timor, Ecuador, El Salvador, Liberia, Marshall Islands, Federated States of Micronesia, Palau, Panama, Turks and Caicos Islands, Zimbabwe

List of countries using U.S. Dollar:

Andorra, Kosovo, Monaco, Montenegro, San Marino, Vatican City.

Would have Greece had to change Euro to U.S. Dollar instead of asked for a 'Rescue package'? Share

News: European debt crisis, who owes money?

Yes, yesterday European Union and IMF helped Greece with a "rescue package" of €110 bn. But are these efforts enough to stop the debt of the Eurozone states? Sadly, no.

European countries are linked to each other with an intensity that can be confusing. New York Times helped us to draw the spiderweb that's the European chain of debt.

Click to enlarge it. Image by: New York Times

I hope now, European chain of debt is clearly than before. And, of course, is easy to understand why Germany wants Greece out of European Union, right?

Monday, May 3, 2010

News: Greek bailout arrives: Are €110 bn enough or would you like some more?

Finally, Greece short-term problems are solved. As you might know, Greece asked for a rescue package of €45 bn, €30 bn by Eurozone members and €15 of IMF. Even having to pay €300 bn to his investors, immediate repayment of €8'5 bn with May 19 as deadline, the government urge for an injection of money was high enough to go mad.

Luckily for Greek government, Greece signed today a rescue package of €110 bn ($147 bn) from Eurozone partners and IMF.

  • Conditions?
- Rescue package should be paid in 3 years

- 16 Eurozone members contribute with €80 bn, IMF lends €30

- Eurozone loans carry an interest rate of 5%

- IMF loans carry an interest rate of 3%

- Several austerity measures and high government spending cuts, that are currently creating trouble at the country.

Not being a condition by itself, but a help, Greek next steps should be save €30 bn between 2010 and 2013. Also, Greek government promised to freeze public-sector wages, raise 'sin' taxes as tobacco and alcohol, increase value added taxes, new taxes on business, raise retirement ages to 67 years (now the retirement age is 65 years) and cut pension payments.

Because these last actions, protestors marched yesterday against government actions and against European-IMF rescue package.

  • Impact on currencies
As Greek (and other European countries) economy are having trouble, Euro strength fades away. But also, other currencies are suffering. Australian dollar slipped to $0.92, Canadian dollar to C$1.016, and American dollar was down by 0.04 percent.

On the bright side, yen raised to ¥94,07.

Read more about Greek situation at our Greek debt crisis guide.

Related articles:

Special: Greek crisis Share

Economy Lesson: The Assault on Saving, by Henry Hazlitt

From time immemorial proverbial wisdom has taught the virtues of saving, and warned against the consequences of prodigality and waste. This proverbial wisdom has reflected the common ethical as well as the merely prudential judgments of mankind. But there have always been squanderers, and there have apparently always been theorists to rationalize their squandering.

The classical economists, refuting the fallacies of their own day, showed that the saving policy that was in the best interests of the individual was also in the best interests of the nation. They showed that the rational saver, in ma king provision for his future, was not hurting, but helping, the whole community. But today the ancient virtue of thrift, as well as its defense by the classical economists, is once more under attack, for allegedly new reasons, while the opposite doctrine of spending is in fashion.

In order to make the fundamental issue as clear as possible, we cannot do better, I think, than to start with the classic example used by Bastiat. Let us imagine two brothers, then, one a spendthrift and the other a prudent man, each of whom has inherited a sum to yield him an income of $50,000 a year. We shall disregard the income tax, and the question whether both brothers really ought to work for a living or give most of their income to charity, because such questions are irrelevant to our present purpose.

Alvin, then, the first brother, is a lavish spender. He spends not only by temperament, but on principle. He is a disciple (to go no further back) of Rodbertus, who declared in the middle of the nineteenth century that capitalists “must expend their income to the last penny in comforts and luxuries,” for if they “determine to save... goods accumulate, and part of the workmen will have no work.” Alvin is always seen at the night clubs; he tips handsomely; he maintains a pretentious establishment, with plenty of servants; he has a couple of chauffeurs, and doesn’t stint himself in the number of cars he owns; he keeps a racing stable; he runs a yacht; he travels; he loads his wife down with diamond bracelets and fur coats; he gives expensive and useless presents to his friends.

To do all this he has to dig into his capital. But what of it? If saving is a sin, dissaving must be a virtue; and in any case he is simply making up for the harm being done by the saving of his pinchpenny brother Benjamin.

It need hardly be said that Alvin is a great favorite with the hat check girls, the waiters, the restaurateurs, the furriers, the jewelers, the luxury establishments of all kinds. They regard him as a public benefactor. Certainly it is obvious to everyone that he is giving employment and spreading his money around.

Compared with him brother Benjamin is much less popular. He is seldom seen at the jewelers, the furriers or the night clubs, and he does not call the head waiters by their first names. Whereas Alvin spends not only the full $50,000 income each year but is digging into capital besides, Benjamin lives much more modestly and spends only about $25,000 Obviously, think the people who see only what hits them in the eye, he is providing less than half as much employment as Alvin, and the other $25,000 is as useless as if it did not exist.

But let us see what Benjamin actually does with this other $25,000 He does not let it pile up in his pocketbook, his bureau drawers, or in his safe. He either deposits it in a bank or he invests it. If he puts it either into a commercial or a savings bank, the bank either lends it to going businesses on short term for working capital, or uses it to buy securities. In other words, Benjamin invests his money either directly or indirectly. But when money is invested it is used to buy or build capital goods—houses or office buildings or factories or ships or trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption.

“Saving,” in short, in the modem world, is only another form of spending. The usual difference is that the money is turned over to someone else to spend on means to increase production. So far as giving employment is concerned, Benjamin’s “saving” and spending combined give as much as Alvin’s spending alone, and put as much money in circulation. The chief difference is that the employment provided by Alvin’s spending can be seen by anyone with one eye; but it is necessary to look a little more carefully, and to think a moment, to recognize that every dollar of Benjamin’s saving gives as much employment as every dollar that Alvin throws around.

A dozen years roll by. Alvin is broke. He is no longer seen in the night clubs and at the fashionable shops; and those whom he formerly patronized, when they speak of him, refer to him as something of a fool. He writes begging letters to Benjamin. And Benjamin, who continues about the same ratio of spending to saving, not only provides more jobs than ever, because his income, through investment, has grown, but through his investment he has helped to provide better-paying and more productive jobs. His capital wealth and income are greater. He has, in brief, added to the nation’s productive capacity; Alvin has not.


Sunday, May 2, 2010

List of countries by unemployment rate

Today, I'm going to list countries by their unemployment rates. Due the form of government or sovereign issues there are countries unlisted (as North Korea or Northern Cyprus), but almost every state is listed.

The information is based on CIA information, but the newest dates are from different (reliable) sources:

Unemployment rate by Country

Country / Region↓ Unemployment rate (%)↓ Source / date of information↓
Nauru Nauru 90.00 2004
Zimbabwe Zimbabwe 90.00 2009 (June)
Liberia Liberia 85.00; 88% among young Liberians 2009 (July)
Turkmenistan Turkmenistan 70.00 2008 (November)
Cocos (Keeling) Islands Cocos (Keeling) Islands (Australia) 60.00 2000
Mozambique Mozambique 60.00 2009
Tajikistan Tajikistan 60.00%; 80-90% among youth 2008 (August)
Djibouti Djibouti 59.00 2007
Zambia Zambia 50.00 2000
Senegal Senegal 48.00; 30% among adults aged 24 and under 2007
Lesotho Lesotho 45.00 2002
Gaza Strip Gaza Strip 44.00 2009 (April)
Nepal Nepal 42.00 2004
Afghanistan Afghanistan 40.00 2008 est.
Kenya Kenya 40.00 2009
Swaziland Swaziland 40.00 2009 (June)
Yemen Yemen 35.00 2009 (June)
Republic of Macedonia Republic of Macedonia 33.8 2008
Marshall Islands Marshall Islands 30.90 2000
Cameroon Cameroon 30.00 2001
Equatorial Guinea Equatorial Guinea 30.00 1998
Mali Mali 30.00 2004
American Samoa American Samoa (United States) 29.80 2005
Honduras Honduras 27.80 2007
Canary Islands Canary Islands 26.91 2009 (4th Trimestral)
Mayotte Mayotte (France) 25.40 2005
Grenada Grenada 24.50 2009 (June)
South Africa South Africa 23.5 2009 (April)
Dominica Dominica 23.00 2000
Federated States of   Micronesia Micronesia 22.00 2000
Cape Verde Cape Verde 21.00 2000
Gabon Gabon 21.00 2006
Spain Spain 20.05 2010 (April)
Bosnia and Herzegovina Bosnia and Herzegovina 20.00 2007
Comoros Comoros 20.00 1996
East Timor East Timor 20.00 2006
Mauritania Mauritania 20.00 2004
Saint Lucia Saint Lucia 20.00 2003
Latvia Latvia 19.7 2009 (September)
Serbia Serbia 18.80 2007
Sudan Sudan 18.70 2002
Iraq Iraq 18.00%; 28% among youth; 83% among women 2009 (February)
Kyrgyzstan Kyrgyzstan 18.00 2004
Saint Vincent and the   Grenadines Saint Vincent and the Grenadines 18.00 2009 (June)
New Caledonia New Caledonia (France) 17.10 2004
Netherlands Antilles Netherlands Antilles (Netherlands) 17.00 2002
Puerto Rico Puerto Rico (United States) 16.50 Aug. 2009
West Bank West Bank 16.30 2008 (June)
Dominican Republic Dominican Republic 15.40 2008
Pakistan Pakistan 15.2 2009)
Wallis and Futuna Wallis and Futuna (France) 15.20 2003
Saudi Arabia Saudi Arabia 15.00 2009 (June)
Montenegro Montenegro 14.70 2007
Saint Helena Saint Helena (United Kingdom) 14.00 1998
Tunisia Tunisia 14.00 2008
Republic of Ireland Ireland 13.80 2010 (March)
Lithuania Lithuania 13.8 2009 (June)
Georgia (country) Georgia 13.60 2006 est.
Colombia Colombia 13.5 2009 (April)
Estonia Estonia 13.3 2009 (June)
Cook Islands Cook Islands (New Zealand) 13.10 2005
Jordan Jordan 13.00 2009
Libya Libya 13.00 2005 (May)
Tonga Tonga 13.00 2003/2004
Turkey Turkey 13.00 2009 (October)
Algeria Algeria 12.90 2008 est.
Poland Poland 12.9 2010 (March)
Slovakia Slovakia 12.88 2010 (March)
Jamaica Jamaica 12.70 2008
United Arab Emirates United Arab Emirates 12.7 2008
Albania Albania 12.50 2008 est.
Iran Iran 12.50 2009 (May)
Hungary Hungary 11.8 2010 (April)
French Polynesia French Polynesia (France) 11.70 2005
Antigua and Barbuda Antigua and Barbuda 11.00 2001
Ghana Ghana 11.00 2000
Nigeria Nigeria 10.54 2009
Saint Pierre and Miquelon Saint Pierre and Miquelon (France) 10.30 1999
Morocco Morocco 10.2 2009
France France 10.0 2009 (December)
Lebanon Lebanon 10.00 2009 (July)
Turks and Caicos Islands Turks and Caicos Islands (United Kingdom) 10.00 1997 est.
Russia Russia 9.9 2009 (May)
Czech Republic Czech Republic 9.7 2010 (March)
United States United States 9.70 2010 (March)
Croatia Croatia 9.60 2009 (September)
India India 9.50 2009
Suriname Suriname 9.50 2004
Burma Burma 9.40 2008
European Union European Union 9.3 2009 (October)
Greenland Greenland (Denmark) 9.30 2005
Greece Greece 9.2 2009 (June)
Portugal Portugal 9.2 2009 (September)
Chile Chile 9.10 2009 (Nov)
Guyana Guyana 9.0 2009 (July)
Syria Syria 9.00 2008
Argentina Argentina 8.8 2009 (April-June
Peru Peru 8.8 2009 (April)
Egypt Egypt 8.70 2008
Belize Belize 8.50 2007
Finland Finland 8.5 2009 (November)
Romania Romania 8.36 2010 (March)
Canada Canada 8.3 2010 (January)
Ecuador Ecuador 8.3 2009 (July)
Guam Guam (United States) 8.30 2007
Indonesia Indonesia 8.25 2009 (July)
Anguilla Anguilla (United Kingdom) 8.00 2002
Barbados Barbados 8.0 2009 (July)
Central African Republic Central African Republic 8.00 2001
Mauritius Mauritius 8.00 2008
Sweden Sweden 8.0 2009 (November)
United Kingdom United Kingdom 8.0 2010 (February)
Uzbekistan Uzbekistan 8.00 2008 (December)
Belgium Belgium 7.9 2009 (September)
Iceland Iceland 7.7 2009 (August)
Bulgaria Bulgaria 7.60 2009 (September)
Fiji Fiji 7.60 1999
Israel Israel 7.6 2009 (March)
The Bahamas The Bahamas 7.60 2006
Bolivia Bolivia 7.50 2008 (December)
Botswana Botswana 7.50 2007
Germany Germany 7.5 2010 (January)
Philippines Philippines 7.5 2009 (April)
Italy Italy 7.4 2009 (July)
Kazakhstan Kazakhstan 7.4 2009 (May)
Uruguay Uruguay 7.38 2009 (January)
New Zealand New Zealand 7.3 2009 (December)
Malta Malta 7.20 2009 (September)
Armenia Armenia 7.10 2009
Aruba Aruba (Netherlands) 6.90 2005
Brazil Brazil 6.80 2009 (December)
United States Virgin   Islands Virgin Islands (United States) 6.80 2008 (March)
Luxembourg Luxembourg 6.6 2009 (September)
Venezuela Venezuela 6.60 2009 (December)
El Salvador El Salvador 6.40 2008
Panama Panama 6.30 2008
Montserrat Montserrat (United Kingdom) 6.00 1998
Cyprus Cyprus 5.9 2009 (September)
Slovenia Slovenia 5.9 2009 (September)
Republic of China Taiwan (Republic of China) 5.82 2009 (May)
Costa Rica Costa Rica 5.60 2008
Australia Australia 5.50 2009 (December)
Cayman Islands Cayman Islands (United Kingdom) 5.50 2010
Japan Japan 5.5 2009 (August)
Paraguay Paraguay 05.40 2008
Austria Austria 5.3 2010 (January)
Faroe Islands Faroe Islands (Denmark) 5.30 2010
Hong Kong Hong Kong 5.3 2009 (June)
Mexico Mexico 5.2 2009 (July)
Sri Lanka Sri Lanka 5.20; 18.3% among youth 2009 (June)
Namibia Namibia 5.00 2008 (December)
Oman Oman 5.00 2008 (May)
South Korea South Korea 5.00 2010 (January)
Saint Kitts and Nevis Saint Kitts and Nevis 4.50 1997
People's Republic of China China, People's Republic of 4.3 Jan 2009 est.
Denmark Denmark 4.20 2010 (March)
Palau Palau 4.20 2005
Vietnam Vietnam 4.20 2007
Brunei Brunei 4.00 2006
Niue Niue (New Zealand) 4.00 2008
Nicaragua Nicaragua 3.90 2008
Northern Mariana Islands Northern Mariana Islands (United States) 3.90 2001
Trinidad and Tobago Trinidad and Tobago 3.90 2008
British Virgin Islands British Virgin Islands (United Kingdom) 3.60 1997
Netherlands Netherlands 3.6 2009 (September)
Switzerland Switzerland 3.6 2009 (June)
Bahrain Bahrain 3.5 2009 (March)
Cambodia Cambodia 3.5 2007
Macau Macau (China) 3.5 2009 (May)
Malaysia Malaysia 3.5 2009 (July)
Norway Norway 3.3 2009 (december)
Singapore Singapore 3.3 2009 (June)
Guatemala Guatemala 3.20 2005
Gibraltar Gibraltar (United Kingdom) 3.00 2005
Mongolia Mongolia 2.80 2007
San Marino San Marino 2.80 2004
Bangladesh Bangladesh 2.50 2008
Bhutan Bhutan 2.50 2004
Isle of Man Isle of Man 2.50 2009 (July)
Laos Laos 2.40 2005
Jersey Jersey (United Kingdom) 2.20 2006
Kuwait Kuwait 2.20 2004
Ukraine Ukraine 2.2 2009 (July)
Bermuda Bermuda 2.10 2004
Moldova Moldova 2.10 2007
Thailand Thailand 2.1 2009 (April)
Kiribati Kiribati 2.00 1992
Papua New Guinea Papua New Guinea 01.90 2004
Cuba Cuba 1.80 2008
Vanuatu Vanuatu 1.70 1999
Liechtenstein Liechtenstein 1.50 2007 (December)
Belarus Belarus 0.9 2009 (March)
Guernsey Guernsey (United Kingdom) 0.90 2006 March
Azerbaijan Azerbaijan 0.8 2008
Qatar Qatar 0.60 2008
Andorra Andorra 0.00 2009 (June)
Monaco Monaco 0.00 2005

Click to enlarge it