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The Bureau of Labor Statistics (BLS) Inflation Calculator

This very fine example of a $20 St. Gaudens gold piece was minted in 1913, the earliest year for which the Bureau of Labor Statistics' inflation calculator has data available.  Since we were on the antiquated system of commodity money back then, it is an interesting exercise to see what $20 in 1913 would buy in today's dollars - particularly with the rise in gold prices over the last few years.  Obviously we're not using the gold standard, but let's take a quick peek at what inflation can do over a long period of time and compare it to the price of gold.

Overall Inflation

Using the BLS inflation calculator, the buying power of $20 nearly a century ago would now purchase $440.76 of goods and services today.  This represents a 22-fold increase in consumer prices as measured by the consumer price index.

Melt Value

Next, let's see what the melt value (the value of the gold if the coin was melted) would be.  The amount of pure gold in a $20 St. Guadens coin was 0.96750 ounces.  With spot gold at $1,243.40 as of June 24th's close, that would equate to a value of $1,202.99.

Collectible Value

Obviously the melt value is substantially more than the inflation adjusted value.  However, there is also some numismatic value to a the gold piece pictured above.  As of this writing, it was listed on eBay for the low, low price of $6,875!!!  Not bad at all.

Wrapping Up

Going through some inflation calculations is a valuable exercise because we can see how consumer prices have changed over time.  If you ask someone in their 70s or 80s how much they paid for their first home, there's a good chance that they paid more for their last car.  By using the inflation calculator, you can begin to understand the importance of accounting for inflation in your planning for retirement and college.

Critical Thinking

• If the gold standard were still being used in the United States, how would that impact the value of gold?  Would the $20 gold piece depicted here be value nearer the inflation adjusted price or the melt value?
• Gold is often touted as a hedge against inflation.  Based on this single calculation, it would appear that this claim is correct.  But what if you purchased gold at $700 per ounce in 1980.  Would you be ahead of or behind inflation today?
• Gold has seen two major price spikes since 1975.  One happened in the late 1970s and early 1980s, the other is happening now.  Should gold be a major part of your portfolio today?

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Why Tiger Woods is NOT a Sex Addict - The Economist's View

Economics is often thought of as a boring subject, and we'll grant you that it's not as exciting as tabloids covering stories like that of Tiger Woods.  But with the U.S. Open underway at Pebble Beach, we thought we'd throw a little spice on consumer preference theory by giving you the economist's view on claims that Eldrick is a sex addict.  Using some simple tools, we'll show that the greatest golfer of our generation is not a flesh addict, just another individual guilty of infidelity.

Consumer Preference Theory

In a nutshell, within the broad subject of economics is something known as consumer preference theory that is used to explain how consumers go about making choices among competing alternatives.  Each of us has limited means and unlimited wants, and economists seek to understand how we allocate our scarce resources in maximizing our happiness.  Of course, economists could never use such a simple word as 'happiness', they instead use the word 'utility' to describe how much satisfaction we receive from a particular course of action.

Diminishing Marginal Utility

One of the core principles of consumer preference theory is that of diminishing marginal utility.  The easiest way to understand this is through a basic example.  We all need to eat, and let's say that our food of choice today is pizza.  When we're hungry, the first slice of pizza makes us feel less hungry.  The second, a little less, and so on until our hunger is satiated.  However, with each successive slice that we eat, our satisfaction gained from each slice of pizza is reduced until at some point we are worse off by eating the next slice.

This is the principle of diminishing marginal utility.  While we may be hungry and in the mood for pizza, there is a limit to how much we can eat and still feel better after doing so.  Eating too much pizza makes us miserable, but eating just the right amount (the optimal choice) is very satisfying.  Graphically, we can show diminishing marginal utility as follows:

Real Addicts

The example above is for someone that isn't addicted to pizza.  But what about a meth addict?  In their world, there simply is never a point at which more meth is a bad thing.  The meth addict that is jones-ing for the next high will be initially relieved to get that first hit.  However, this is just the beginning, as the addict continues to get higher and higher.  There is no stopping point; there is no diminishing marginal utility.  For comparison purposes, an addicts utility increases with each successive fix as shown here:

Wrapping Up

In looking at Tiger's situation, would it appear that he is an addict or not?  We would contend that it is less likely that he is an addict and more likely that he is just a man that made some mistakes.  Had he been a true to life addict, he would never be satisfied and likely would have hundreds, if not thousands of people coming out of the woodwork instead of the dozen or two that have surfaced thus far.  While economics can be boring, it's principles, theories, and laws can be applied in many ways - even to claims of sex addiction.

NOTE:  We make no judgments on Tiger Woods' choices, and are merely exploring the subject of economics through the headlines from the last several months.  Any diagnosis of addiction is better left to those in the field of psychology.

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What is an Economic Externality? BP's Massive Gaffe in the Gulf

The British Petroleum (NYSE:BP) oil spill is shaping up to be one of the largest environmental disasters in human history as millions of gallons of crude are spewed into the Gulf of Mexico, threatening to spread into the Atlantic and wash up on coastal areas that treasure their beaches.  While this is an environmental tragedy to be sure, it is also beginning to take a very real economic toll on the fishing and tourism industries.  As such, now is a good time to better understand economic externalities and how to prevent problems of this sort in the future.

What is an Economic Externality?

To answer this question, let's take a quick step back to understand the economy and how market participants interact.  In the case of oil, we all need it for our vehicles - oil to lubricate the engine and gasoline to make it run.  We purchase these products at service stations and pay a few dollars per gallon.  The parties involved in this business include us (consumers) and all of the people, land, and equipment that produce the gasoline (factors of production).  Anyone or anything not directly involved in the production or purchase are considered 'external' to the transaction.

The previous sentence is a layman's version of the definition, but to really answer the initial question, let's expand this into terms used by economists.  From Baumol and Blinder's Economics Principles and Policy, 11th Edition:

    "An activity is said to generate a beneficial or detrimental externality if that activity causes incidental benefits or damages to others not directly involved in the activity, and no corresponding compensation is provided to or paid by those who generate the externality."

This expands our previous definition by recognizing that no compensation is provided to or paid by the party that generates the externality.  This is an important distinction, as external parties may either receive beneficial externalities (a neighbor improves her house, increasing property values for all in the neighborhood) or detrimental externalities (a neighbor abandons his house that is later vandalized, lowering neighboring property values).

Example:  BP's Massive Gaffe in the Gulf

While smaller externalities exist and play out each and every day, the Gulf oil disaster is a very large scale look at the downside of externalities.  Not only is BP losing money from the loss of oil, but the company will also be required to pay for much of the cleanup.  However, it remains to be seen if BP will also be held responsible for losses in the fishing industry or the decline in summer tourism along the Gulf Coast.  We suspect that over the next several months or even the next few years, the external costs of this gaffe will be uncovered and be the subject of many academic papers, news articles, and books.

Wrapping Up

As Congress and the Obama Administration continue to struggle with how to handle BP's abysmal efforts, they will no doubt have a long line of injured parties seeking damages from the company.  Whether or not these parties receive any compensation will be a matter of law, but it is likely that no one will be made whole.  The problem with externalities is they exist outside of the pricing of the markets.  Until financial incentives and disincentives are put in place, we will continue to see problems like those in the Gulf occur time and again.

Book Review: The Return of Depression Economics and the Crisis of 2008 by Paul Krugman - a superb big picture guide to the crisis

In Paul Krugman's illuminating work, The Return of Depression Economics and the Crisis of 2008, the financial crisis that continues to play out is explained in surprisingly easy to understand language. He offers readers a history of past financial crises to setup his view of the causes, effects, and possible solutions to our current economic woes. While the title may seem ominous, Krugman maintains a positive, albeit tenuous outlook for the future.

The chief goals of this updated edition, as highlighted in the book's introduction, are to answer three important questions:

1. How could this catastrophe have happened?
2. How can the victims recover?
3. How can we prevent this from happening again?

In reading through his extensive treatise of past financial crises and their commonalities, he does a terrific job in answering the first question. Additionally, his prescription for preventing future calamities of this sort is sensible and built on sound principles. However, the book lacks details in explaining exactly how victims of this round of financial instability are to recover. Overall, the book offers an important and timely look at the nature of financial crises and is likely a timeless exposition on the subject.

Elements of a Financial Crisis

The first four chapters of the book examine major financial crises in varying detail that include the Panic of 1907, the Great Depression, the savings and loan problems of the 1980s, the Latin American Crisis of the mid 1990s, the Asian Flu of the mid to late 1990s, and Japan's Lost Decade. Within these stories, themes emerge that bear striking resemblances to one another. Virtually all involved an attractive story to bring in new capital to fund rapid economic expansion, loose credit, asset bubbles, a loss of confidence, investor biases, currency complications, and of course, the eventual unraveling of the financial system.

Among these, the most disconcerting is the role that confidence plays in feeding a financial crisis. As Krugman explains, this is a four step, circular process that acts as a feedback loop into a microphone – the sound of feedback grows until it becomes an unbearable screech. The confidence loop is described as follows:

1. Begin with confidence
2. Feeding the financial markets
3. Feeding the real economy
4. Then, back again to confidence

Perhaps the most interesting aspect of this phenomenon is the fact that it works in both directions. To fuel economic booms, participants in the economy have a great deal of confidence, so much so that during economic expansion, large bets are placed on the prospects of continued success. However, a financial crisis begins with a seemingly small change that chips away at confidence, eventually turning into a pit of panic.

These facts are explained in detail through the historical accounts given by Krugman. In each case, there was a spark that moved confidence to ever greater heights, only to have it all come crashing down. This process leaves a kind of stain on the minds of investors, policymakers, and everyday people alike. As illustrated with Japan's Lost Decade or the Great Depression, confidence, once lost, can be difficult to regain.

The Power of Speculators

Of course, where these surges and eventual collapses in confidence occur, the power of speculators can be found on full display. As Krugman outlines, speculators often go by the name of 'hedge funds', but these profiteers rarely do much in the way of hedging. Rather, they are fully engaged in turning a profit wherever opportunities exist and at whatever the social costs may be. In the cases of Latin America and Southeast Asia, hedge funds played an important role in the rapid descent of these financial markets and economies.

The basic strategy of hedge funds is to exploit markets by shorting safer assets and then buying long in riskier assets. However, when a market is ripe for a financial crisis, these speculators will engineer trades that will shake the stability of a country's financial markets with currency being a prime target. In each of the cases outlined by Krugman, hedge fund managers leveraged positions up to 100 to 1 in an effort to devalue a target nation's currency. Indeed, they created windfall profits for themselves in virtually every instance.

Unfortunately for those living in targeted countries, speculators' profits meant an enormous amount of economic pain. As a singular example, Argentina's currency lost 70% of its value due, in part, to the role of hedge funds. This devaluation caused a great deal of pain and hardship for Argentinians, but social costs are irrelevant to profiteers.

Regulatory Blindness

This brings into focus the question of regulation. If hedge funds offer no social value (or in this case, create social harm), how can they be allowed to operate so freely? The answer to this question is hedge funds are largely unregulated and take great care to stay away from the watchful eyes of regulators. With free reign to operate as they please, these speculators can wreak havoc around the world without fear of any serious repercussions.

As disheartening as this may be, hedge funds are not alone in taking advantage of regulatory blindness. Krugman skillfully parallels the so-called shadow banking system with the operations of hedge funds. In both cases, profits were the motivation, leverage was used at mind boggling levels, each engaged in some form of risk arbitrage, and in the end, both created widespread financial destruction. The only difference between them is hedge funds profited from the downward spiral while once venerable companies like Lehman Brothers collapsed.

This is where Krugman does a superlative job in writing. It would require many volumes of text to fully explain the shadow banking system and the complex schemes and instruments used, but Krugman gives the right level of detail so readers can understand how the world was blindsided by a banking system that few knew existed. At one point, he estimated that the traditional banking system had $6 trillion in assets while the shadow banking system accounted for another $4 trillion. It is almost unimaginable that a banking system with $4 trillion was completely unregulated.

The World, Blindsided

High finance is littered with very intelligent people, but left unchecked, a financial train wreck is the inevitable outcome. Just as hedge funds had laid waste to Southeast Asia and Latin America in the latter half of the 1990s, so too did the shadow banking system – only this time, it was not confined to a region, but became a global calamity that few saw coming.

Drawing on the themes of financial crises past, this current wave of panic bore a striking resemblance to all its predecessors. Profit was available, leverage multiplied profits, a bubble popped, confidence was shaken, and finally, disaster. The only difference was that this crisis had its roots in the United States, a previously unthinkable possibility.

As the largest economy in the world, many believed that the problems of subprime mortgages could be contained. In fact, Treasury Secretary Paulson issued just such a statement in September of 2007. As it turns out, his assessment of the size and scope of the problem was terribly off the mark.

Once the subprime crisis was in full swing, a crisis of confidence developed. The shadow banking system – largely dependent on borrowings between banks – began to show signs of great duress. With rapidly falling confidence in financial institutions, companies attempted to deleverage quickly, selling off assets and abandoning loans to other institutions. This compounded the problem, following the same cycle of confidence degradation that all financial crises share. The net result was the deepest recession in a generation.

The Return of Depression Economics

It is at this point that Krugman offers some advice on what must be done to move out of recession or at minimum, avert a depression. His recommendation for the immediate future is to get credit flowing again and to prop up spending by any means necessary. In addition, he believes that depression economics must be used and that policy should focus on demand side macroeconomics. Outside of the immediate needs, Krugman proposes global, coordinated financial reforms for any financial institution or market that meets a very plain definition: anything that needs to be rescued in a financial crisis must be regulated.

The Answers

What were the answers to Krugman's three important questions? The catastrophe was hatched in a $4 trillion unregulated market and eventually collapsed under a downward spiral of confidence. This crisis had victims in all corners of the globe, but there is no clear path towards recovery. The flow of credit and fiscal stimulus are good starting points, but much more will be needed. Finally, to prevent another crisis of this magnitude, regulation will play an important role, but it would be foolish to believe that this will be the last.

Left with Wanting

The Return of Depression Economics and the Crisis of 2008 is a fantastic work that can be easily comprehended by anyone with a basic understanding of economics. However, the book leaves the reader wanting a more detailed proposal for what must be done to repair the damage created by this crisis. With respect to Krugman's call for a return to depression economics, greater elaboration on what this would look like is needed. In the end, this is a book that richly rewards the reader, but could have been improved with an extra chapter to expand on some of the potential solutions – solutions that likely have not been seen in many, many years.

Our Rating:  4 Stars - A superb big picture guide to the crisis

To read this book, get it at Amazon, Audible, Barnes & Noble, or Borders.

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Book Review: In Fed We Trust by David Wessel - a must read for financiers and politicians

In David Wessel's book, In Fed We Trust, he delivers a riveting play-by-play account of the worst financial crisis since the Great Depression by narrating the actions of the key persons tasked with managing it – Federal Reserve Chairman Ben Bernanke and Treasury Secretaries Hank Paulson and Tim Geithner.  In the Great Panic, as Wessel has termed it, the role of the Federal Reserve was pushed into prominence as it acted as first, and often times, only responder to the financial crisis.  Calling upon its broad powers in new and unorthodox ways, the Fed was able to avert a complete and utter meltdown of the global financial system – a situation that would have shaken the very foundations of capitalism.

Overview of Contents

To summarize the contents of Wessel's brilliant narration, he immediately takes readers into the fire with a look at the most pivotal moment of the Great Panic – September 14th through 18th when Lehman Brothers was left to fail and the crisis took a dramatic turn.  Following this is a brief account of panics past, the Federal Reserve's history, Greenspan's role, and Bernanke's rise to become Fed Chairman.  Once the stage is set and main character identified, Wessel moves through the events of the Great Panic chronologically as it began in August of 2007 and continues until it showed signs of abating twenty-two months later.

Key Players

Three men played critical roles in managing the Great Panic and Wessel takes readers beyond a simple recounting of their actions; he details each man's personality characteristics and how this shaped outcomes.  This adds a great deal of depth to the work, as the key players' personalities made a significant impact on the effects their decisions had on the financial system, and more importantly, the psyche of the markets.  With Bernanke's calm demeanor contrasted with Paulson's more boisterous and, at times, impetuous personality, Wessel is able to show how well each performed in what he termed the 'theater' aspect of the job.

In a financial crisis, not only do the key figures need to get the substance – changes to interest rates, the money supply, etc. - right, but they must also convey these actions to the markets on a very public stage.  If the right policy decision is made but is poorly conveyed to the markets, it can negate its effectiveness.  As Wessel points out, this happened on more than one occasion with Paulson and Geithner more prone to gaffs in the public eye than Bernanke.  The results of these missteps were added financial pain and a deepening of the crisis.

Perhaps the greatest problem on stage for the three men was in the seemingly always changing game plan on how to handle the Great Panic. They acted to save Bear Stearns, but left Lehman Brothers to fail. Wachovia found shelter, but Washington Mutual was left to its demise. As Wessel explains, there were good reasons for this, but the net effect of their performance was to temporarily erode market confidence as it appeared there was little consistency in their decisions.

However, even with these issues, the three were able to get more right than wrong.  Once the Great Panic was in full swing, they adopted the mantra of 'whatever it takes'.  This meant they would do what was necessary to stop the unhinging of the financial system, using a variety of tools and powers that were previously either never used or hadn't been seen in a very long time.  On balance, the key players did enough right to get the job done.

The Federal Reserve's Role

Traditionally, the Federal Reserve has the function of controlling the money supply and thereby setting key interest rates – on the surface, a boring endeavor.  During normal market conditions, the Fed is primarily charged with keeping inflation under control and promoting policies that will help the U.S. economy grow at reasonable and sustained rates.  This is generally accomplished through targeted interest rates that signal to the market what can be expected in the near term.

A critically important aspect of the Federal Reserve is that it operates independently of the political process.  This is by design, because when the Fed was established nearly a century ago, legislators wanted to be sure that it could act swiftly and decisively to stabilize the financial system whenever a panic arose (panics were common prior to the Fed's creation).  This would prove to be invaluable over the course of the Great Panic, as Wessel shines a bright light on the stark contrast of the Fed's ability to act versus that of Treasury and Congress.

Expanded Powers, Creativity

Though the Fed's role during normal circumstances can appear relatively mundane, when a financial emergency arises, it can become the most dynamic organization in the world of finance.  During the crisis, the Fed acted as first responder to the panic that was laying waste to the markets.  This was the quick and decisive action that legislators had planned for when the Fed was created and its powers expanded over the following decades.

However, the Great Panic demanded far more from the Fed than could previously have been imagined.  As Wessel points out, the Fed had to push the limits of its powers and become increasingly creative in the formulation of its response to the greatest threat to the American financial system since the 1930s.  The chief problem facing the Fed was a rapid decline in the flow of credit among financial institutions.

To get credit flowing again, the Fed assumed its role as “lender of last resort” and created new lending facilities on the fly.  After cutting interest rates by a total of 5.25% over a short span, the Fed continued to face seizing credit markets.  As a result, much more needed to be done.

This resulted in the creation of a number of new lending facilities with varying acronyms to help the Fed fulfill its role in fighting the crisis.  Among these newly created facilities were the Term Auction Facility (TAF), the Term Securities Lending Facility (TSLF), and Primary Dealer Credit Facility (PDCF).  Through these lending facilities, hundreds of billions of dollars were pumped into the markets in an effort to get the flow of credit moving.

The Fourth Branch of Government

The fact that the Fed could unilaterally create hundreds of billions of dollars in money with no oversight or Congressional review demonstrates that it is the fourth branch of government.  Though this may appear to be a frightening proposition, the Fed's unique role in the economy demands this to be so.  Without this level of independence, it is clear that its response time in an emergency would be slowed and this would be disastrous to the financial system.

This truth may be easily understood by those familiar with history or economics, but it appeared to be lost on the general public.  There was a loud and growing sentiment on Main Street that the Fed and Treasury were pawns of Wall Street.  This could not be further from the truth.  What happens on Wall Street was, is, and always will be inextricably linked to Main Street as would be demonstrated in the months following the height of the Great Panic.

An important note should be made here. While the Fed certainly pushed the boundaries of its power, it also recognized its limits.  When the Fed and Treasury went to Congress to ask for help to the tune of $700 billion in taxpayer funds, the Fed knew that it had reached the edge.  This respect for the boundaries of the Fed's power is important to understand as many are now calling for closer oversight of the Fed – a grave mistake should these actions be taken.

As the process of passing the Troubled Asset Relief Program (TARP) clearly demonstrated, politics should never be inserted into the emergency response to financial crises.  The House of Representatives voted down the measure on Monday, September 29th and the consequence was a loss of $1.2 trillion in wealth in a single day.  Though TARP would eventually be signed into law, this delay at the hands of politics remains the loudest endorsement of protecting the Federal Reserve's independence.

Decision-making Under Pressure

When the subprime crisis escalated and was transmitted to other parts of the financial system, it became clear that unusual action would need to be taken.  With frozen credit markets that were proving difficult to thaw, financial institutions were buckling under the strain.  The first major institution to receive a 'bailout' was Bear Stearns, a large investment bank that was under attack because of its exposure to complicated financial instruments related to subprime mortgages.  Unable to obtain credit to finance its portfolio, the company was in serious trouble.

This was crunch time for the Fed, as a Bear Stearns failure would dramatically accelerate the financial panic that was underway.  With only a few days to make a decision, Bernanke and Paulson determined that Bear must be saved. To make this happen, the Fed had to find a buyer – a process that would normally take months – in just four short days.  JP Morgan-Chase was the only candidate that was willing to absorb Bear, but the Fed had to do it at a price.

As Wessel walks through the litany of major financial institutions that were either saved or lost, he makes the assertion that the Fed was forced into the business of picking winners and losers.  Who would be saved and who would be allowed to fail was not always at the discretion of the Fed.  On at least one occasion, Washington Mutual, Bernanke and Paulson were overridden by FDIC head Sheila Bair.  On another occasion, Lehman Brothers, a buyer could not be found.  Regardless of the outcome, Bernanke, Paulson, and later, Geithner would have to make snap decisions with enormous impact to the financial system.

The Results

While it is still too early to give an authoritative response, Wessel is generally positive in his assessment of the Fed's handling of the Great Panic.  He acknowledges that its initial response was timid and that the Fed greatly underestimated the scope of the problems facing the financial system. However, his overriding belief is that the Fed's “whatever it takes” attitude and its bold actions ultimately saved the financial system from certain failure.  In the closing pages, he asks (paraphrasing), “If the Fed had not acted so boldly and decisively, what would the world look like today?”  Just a guess, but the world would likely be a far, far worse place.

Our Rating:  4 Stars - a must read for financiers and politicians.

If you'd like to read the book, get it at Amazon, Audible, Barnes & Noble, or Borders.

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What is Economics? The Surprising Definition

Mention the word economics to someone and you'll likely get a response that it has something to do with money and the economy.  However, few are able to get to the core of the definition with clarity.  We even took to the Merriam-Webster Dictionary and Investopedia to try to find a good explanation for 'What is Economics?'  What we found was a garbled mess that could only be cleared up by Federal Reserve Chairman, Ben Bernanke.

Merriam-Webster

    "a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services."

Investopedia

    "A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers."

Ben Bernanke

    "Economics is, at its very roots, a study of how to improve human happiness and sense of satisfaction in life."

Our Take

Yes, economics is all of these things above, but Bernanke gets us to the heart of the matter - it's all about happiness.  The better you use your resources to maximize your happiness and satisfaction in life, the better off you'll be.  To do this, you need to pay some attention to how you're utilizing your resources - time, income, and assets.  Often, when we look at our dissatisfactions in life, we'll find that we're poorly utilizing our resources - just think how dissatisfying credit card interest is and you'll know what we're talking about.

Critical Thinking

• What does economics mean to you?
• Are you maximizing your happiness?  If not, what should you change?
• It has been said that, "Happiness in life can more often be improved by what we take out of it, rather than what we put into it."  What are some things that you could take out of your life to make it better?

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GDP Growth Forecasts from the IMF - China Leads

The Economist has published another nice looking graph of GDP growth forecasts from the International Monetary Fund (IMF).  Unsurprisingly, China continues to lead the major economies, and for those of us in the United States and much of the developed world, below average growth rates are expected for 2010 and 2011.  The Eurozone continues to struggle with paltry growth rates, and with the ongoing issues in Greece, Portugal, and Spain, it would appear this will be the status quo for some time.

View the GDP Forecasts Graph from The Economist.

One of the positives from this graph is that most of the revisions (on the far left of the graphic) are upward revisions with the IMF noting that the recovery is a bit more robust than previously thought.  Also on the bright side, the United States, even after a nightmarish financial meltdown, is only slightly behind the global GDP growth rate.

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The Best Unemployment Page You'll Ever See

You gotta take your hat off to The Wall Street Journal for its interactive graph on unemployment.  It plays the timeline of the recession and unemployment rates in each state on a map of the U.S.  In addition, it traces the national unemployment rate and allows you to compare up to five states against the national rate.

The reason this is so great is that you can see how things went from normal to terribly bad in just a couple of years.  Also, by comparing states, you can begin to understand where the pain was felt as states with heavy reliance on construction, manufacturing, and transportation were hit hardest.  Even if you don't care about economic issues, it is one of the best graphics on unemployment that we've seen.

To view the article on the WSJ Real Time Economics Blog, click here.

To go straight to the interactive graph, click here.  Press the play button on the map to see the recession unfold.

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Among Exporting Nations, The U.S. Ranks #....What?!

 As you probably know, the United States runs a rather significant trade deficit meaning that we import a lot more than we export.  With that in mind, where would you say the U.S. ranks in terms of total exports worldwide?  Do you think we beat South Korea?  How about China?  Japan?

Well, believe it or not, the United States is the number three exporter on the planet.  While our appetite for imports remains nearly insatiable, we do a pretty sizable business in exports at over $1 trillion annually.  In fact, according to the World Trade Organization (WTO), as reported in The Economist, the U.S. owns 8.5% of the world's export business.

Where do South Korea, China, and Japan fit in?  To find out, click here to see the chart from The Economist that lists the top 10 exporting nations.