Monday, March 31, 2008

Good news on congestion pricing

Well, good news in New York at least. Today the New York city council approved a congestion pricing measure to create a $8 charge for driving in downtown NY. If you're wondering why I'm such a big fan of a new tax, think of it this way.

Normal taxes raise money for the government and have the extra effect of discouraging work. Congestion pricing raises money for the government while ensuring that there won't be any traffic jams. Hopefully this policy will catch on in the rest of North America pretty soon.

Friday, March 28, 2008

Two prices in crop markets

A recent NY Times article highlights that future prices in crop markets have been selling significantly higher than the cash price. Typically economists would say that is impossible because traders could earn free cash buying crops at the cash price and selling them at the future price.

This would earn RISK FREE CASH for the trader, and the price differences would soon disappear. This isn't happening. Nobody knows why?. As far as I can figure, this is an investment tip if there ever was one. If any of you end up getting rich buy selling future contracts remember who gave you the information.

Thursday, March 27, 2008

Canadian automobile industry

A new report confirms that the auto industry will be turned on its head the next decade or so. Here's Rueters Canada:

Automobile production in emerging markets is set to outpace output in North America for the first time this year and the Canadian auto parts industry must adapt to the new reality, a study released by Scotia Economics on Thursday says.

Combined vehicle assembly capacity in the BRIC nations, Brazil, Russia, India and China, will climb to 20 million units this year surpassing the 17.4 million units of assembly capacity in place in North America, according to the Global Auto Report.

Get the full version here

--This is coming on the heels of the a announcement that ford was selling Jaguar and Land Rover to Indian car maker Tata. It's important to remember that protectionism is not the answer. If trade restriction are put up in the next couple years they will be very hard to get rid of in the future.

Yes, it would save jobs in the auto industry, but it will destroy jobs in other places and make it harder for families to buy fuel efficient cheap foreign cars. Not to mention hurt the incomes of people around the world that have it a lot worse than us.

P.S. Has anybody else heard the phrase "coming on the heels of" in any other context besides a news report?

Tuesday, March 25, 2008

Best Lyric Ever

"Them smokestacks reaching like the arms of God into a beautiful sky of soot and clay"-Bruce Springsteen, Youngstown

I think this is one of the best lines in all of music. It has alliteration, it has imagery, it has rhythm, it has economics.

Check it Out

Monday, March 24, 2008

Spectrum Auctions

Government spectrum auctions determine what cell phone companies get the right to broadcast at certain frequencies. This is boring, but it is also fairly exciting. ..Why?

Because the spectrum auction in the United States raised 20 billion dollars. Canada's should be around one tenth of that. None of this money is raised through taxes. All of it is payed for by the people who use it, cellphone users. Billions of dollars in public money, with no taxes. We need more programs like this.

Friday, March 21, 2008

When you're smiling

New study reports that people are happier spending money on other people than on them selfs:

Money can buy you happiness – as long as you're spending it on someone else.

New Canadian-led research, published today in the prestigious journal Science, says that spending your money on other people makes you happier than lavishing it on yourself.

"Spending on others can make people happy, yet people might not foresee this ahead of time," said Elizabeth Dunn, a psychologist at the University of British Columbia and the lead study author.

"When we asked people to predict which of our conditions would make them happiest, they tended to think they'd be happier spending it on themselves than spending it on others," Dunn said.

Recent surveys, the study notes, have shown people in Western societies have experienced few gains in their overall happiness level over the past several decades, despite a dramatic surge in real income.

Get the full version here

--This doesn't seem to make a lot of sense to me. If giving away money make us happier, wouldn't we do it more? The way I see it there are two possibilities.

  1. People are systematically stupid and can't figure out that philanthropy beats buying for yourself.
  2. The study is wrong
I doubt that people would be wrong on such a large level. We have huge amount of experience in buying things. If buying things for others makes us more happy, we would have figured that out by now.

My explanation, there is a survivorship bias. When people give things away they do it because it makes them feel better, but this is when people are making the choice. If we were to force people to give away money, it makes them unhappy. This is called taxation.

Wednesday, March 19, 2008

What a Treasury Bill really gets you

Interest rates in the United States have recently fallen to around zero after you adjust for inflation. Naturally you might wonder why people are willing to invest at such low rates. One good reason is that there's not many other places for the money to go.

Try to think of a list on countries you are exactly sure will be around in 30 years. It's pretty short. US, Japan, Western Europe, Canada (maybe). Africa is a no, so it the Middle East, and mainland Asia. Korea maybe. Latin America is a no.

This is why the United States doesn't have much of a problem selling their bonds at low return. It is about as close to risk free as you can get.

Monday, March 17, 2008

Sub-Prime claims another victim...Bear Stearns

Pretty amazing story, about a year ago the company was worth $160 a share. Sunday JP Morgan bought it for $2 a share. That's $236 million total. In other words, one of the world's biggest investment banks is now worth about the same as a junior hockey arena. This financial crises will be one for the books, there's no doubt about it.

Thursday, March 13, 2008

Can the resource boom last?

Mark Carney says no:

TORONTO — The high commodity prices that have shielded Canada from recessionary conditions in the United States are poised to weaken and drag down the Canadian economy, the Bank of Canada's new Governor warned yesterday.

Even though oil and gold have been trading at record levels over the past few days, Mark Carney said in an interview he is looking beyond the day-to-day market gyrations to determine how the U.S. slump will worm its way into Canada.

Already, Canada has felt the effects of plunging exports to the United States, and is gradually feeling the impact of tighter credit conditions spilling over the border, Mr. Carney said.

Now it appears the U.S. slump will be deeper and will stick around longer than the central bank had expected, and the pain is being felt around the world, Mr. Carney said.

Global demand for many of the commodities that have fuelled Canada's prosperity will be hit, he predicted in his first round of interviews since becoming Governor of the central bank last month.

“Ultimately, it means slower growth than otherwise would have been experienced in a range of markets, including in emerging market economies.”

“That will have an impact on the outlook for commodity prices and terms of trade – a dampening impact,” Mr. Carney said.

“You don't see it in spot markets right now but you will likely see it going forward. That's one channel through which this will come back into Canada.”

Get the full version here

--Historically we have seen resource prices decrease over time as economies move to other forms of production. However, the last few years this trend has reversed. Will it continue? Nobody knows, but history is not on our side.

Wednesday, March 12, 2008

Canadian Income Tax Rates

from the economist:

There you go. Tell your American friends to stick that in their pipe and smoke it.

Don't mention we pay higher sales taxes, higher gas taxes, and higher liquor tax. Don't mention these all fall heavily on the poor.

Tuesday, March 11, 2008

RESP plan

In case you haven't heard, the liberals have come out with a plan to make savings for college tuition tax deductible. Making college affordable is a worthy goal, especially for somebody in my position. This plan is not the right way to go about it.

Most middle class families are already saving for their kids education. For these people the plan is simply a tax cut. Putting more money into the hands of people that are already doing alright. I would be in favour of increasing financial aid for people who really need the money, the plan would be more effective and less expensive.

Either way, it doesn't stand much of a shot at becoming law.

Friday, March 7, 2008

Good news for Canadian jobs

Statistics Canada reported that the economy added 43,000 more jobs in February, beating predictions. Unemployment hit a 33 year low at 5.8%. Wages are up too.

More important to most Canadians, the United States lost 63,000 jobs. Stupid Americans, now we can finally get them back for....ummmm....eeehhhh......NOT KNOWING WHERE SASKATCHEWAN IS. Stupid Americans.

Thursday, March 6, 2008

Election in Canada's future?

With all the hubbub surrounding the new federal budget Intrade has recently added a new market to predict if there will be an election within the year. A whole one contract was traded today. An election is probably not a good idea for the liberals at this point. They are currently at 2 to 1 odds for losing the next election.

Tuesday, March 4, 2008

Canadian Labour Party?

I really wish that folks in the media would take more pride in their jobs

if there is anybody from MSCBC reading this let me clarify, this is the U.K:

It has a Labour party

This is Canada:

it does not

Monday, March 3, 2008

Does Harper want the GOP in power?

In case you haven't heard the story about Obama and NAFTA, there were reports that his campaign gave a wink and a nod to the Canadian embassy about Obama's recent attacks of NAFTA. Saying the attacks were political and not meant to be taken seriously. The campaign denies this.

Now rumors are flying that this was a stunt by the conservatives in an effort to embarrass Obama and try to give a hand to John McCain. I'm not sure. Besides ideology, here are a the reasons I could think of that Harper would want to GOP in power:

  • Canadians generally think of themselves as more progressive than Americans. If the Americans elect a progressive leader, Canada might want one too.
  • Having a Republican in power makes America less popular and raises nationalistic sediment in Canada, this could work in favour of the head of state
  • The GOP is generally more free trade and therefore would make it easier to resolve running trade disputes.
  • A left wing government in the U.S. may hold more contempt for a right-wing Canadian government, and therefore be harder to work with.
  • The continuation of the war is Iraq will cause greater political instability in the middle east, driving up the price of oil and profits for Alberta.
All of these reasons are purely speculative, I'm not claiming that I have any evidence to show what is really happening, but it is always worthwhile to look at the incentives facing your government.

Sunday, March 2, 2008

Gall-Peters Projection

I saw this map for the first time yesterday and stared at it for about 10 minutes. The Gall-Peters projection shows land masses in their true proportion and has 90 degree lat-log interceptions.

I'm accustomed to looking at a Mollweide projection (lower). I bet you didn't picture Germany being that far north. I didn't. I think I need to go back to grade two.