Price Of Books

Walking into a book store last week my geekiness naturally drew me to checking the price spread between the US and Canada on a couple new releases. To my surprise the Canadian price was still about 30% higher than the American one. Granted the store had 30% off stickers on some of the new releases, but not all. I suppose they did this for two reasons, first for marketing, and second to keep people from buy the books at the American price on Ebay. I take this as meaning the book publishers aren't expecting the loonie to remain at parity with the dollar (setting prices is a long term commitment). It would be interesting to see if other import industries are behaving the same way.

Carney Gets It Right

From CBC.ca:

It would be a "mistake" to peg the Canadian dollar to the U.S. dollar, according to the incoming Bank of Canada governor, Mark Carney.

Carney told a parliamentary committee Wednesday that it's not surprising there are calls to adopt a fixed exchange rate, given the loonie's recent volatility.

"In my opinion, it would be a mistake to do so," he told members of the House of Commons finance committee.

"It would mean that, de facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments," he said.

Carney said floating exchange rates make it easier to adjust to global economic forces.

"A floating exchange rate helps to smooth that process and to minimize the adjustments in other areas of the economy."

-Get the full version here

--Personally I would replace the words "global economic forces" with rapid changes in energy prices. Though, "global economic forces" sounds a lot cooler. Canada was one of the first countries to adopt a floating exchange rate system and there was a reason for it. Canada's economy is very different from the US in that Canada mainly exports commodities while the United States exports highly refined goods. Exporting commodities makes the economy very venerable, and a floating exchange rate helps to mitigates that venerability.

Business Verses Academic Culture

I just got kicked out of the schools computer lab, which happens all the time, but this was the first time I've been kicked out by someone in business. He walked into the lab, smiled big, and gave an enthusiastic, "Hi, I'm going to be teaching a class in here. So you can leave, or you can pay a fee, in that case I suppose you could stay." He was funny and authoritative at the same time. When academics want to kick people out of the lab, the script is usually, "excuse me, I'm going to be starting a class in hear in a couple minutes, so if you could all pack up that would be great." Academics are polite only as authoritative as they need to be. If anybody else has a story relating to this feel free to leave a comment below.

On The Subprime Crises

From the NY Times:

Attorney General Andrew M. Cuomo of New York has subpoenaed major Wall Street firms including Merrill Lynch, Morgan Stanley and Deutsche Bank, seeking information about the business of packaging and selling subprime mortgages, according to people briefed on the subpoenas.

The subpoenas, sent out in late summer, are part of a wide review of the mortgage industry by Mr. Cuomo’s office into the mortgage business. The subpoenas were reported today by The Wall Street Journal.

Wall Street has played a major role in the boom in lending to buyers with weak credit records. It has extended credit to mortgage originators to allow them to offer more mortgages, bought companies that originate and service mortgages, and perhaps most importantly, packaged the mortgages into securities to sell to investors.

--It would be nice if they would have done something five years ago before we got into this mess. This political environment reminds me a lot of the post Enron period, where politicians talked a lot but did very little to solve the incentive problems. Get the full version here.

Animal Living Standards

Strangely enough, the model proposed by Malthus, that people are doomed to poverty because higher living standards brings higher reproduction rates, turned out to be true for animals and not people. Wild animals have to spend almost all their waking hours trying to stay alive. This fact was confirmed for me when I watched the discovery channel series "planet earth" (recommended). The only exceptions to this seem to be when people get involved. For instance, my golden retriever doesn't have to work all that hard to stay alive. The new book In The Company Of Crows and Ravens, takes a look at some of the survivorship patterns in birds. Credit to the folks at Marginal Revolution.

Good News For Canadian Education

From Economist.com

FINLAND produces the best science students, according to the OECD's three-yearly Programme for International Student Assessment (PISA). The survey, conducted in 2006, compares the performance of 15-year-olds in 57 countries in science, but also includes mathematics and reading. Finland, where new teachers require a masters degree and are paid well, is consistently ranked near the top in all three. Britain has pumped money into education in recent years, but has slipped down the rankings by ten places since the last science-based study in 2000. Its pupils do score above the country-average of 500, however, unlike those of other rich countries such as America and Italy.

Shutterstock

--I'm assuming that this study is based on average scores. It would be interesting to see what the median score is for every country, and how much variance you see based on things like income, race, geography...ect. Get the full version here

Viva la Capitalism

Venezuelan bonds jump with the defeat of Chavez's proposed constitutional reforms. From Bloomberg.com

Venezuelan bonds gained the most in three months after voters rejected President Hugo Chavez's plan to implement a new constitution that would have eliminated presidential term limits and given him more power to seize private property.

Investors drove up bond prices as a bet that the referendum defeat will limit Chavez's ability to implement socialism in the South American country. The gains, which sent yields on benchmark dollar bonds due in 2027 to a two-week low, pare a tumble that has made Venezuelan debt the world's worst performer this year, according to data compiled by Bloomberg.

--I know this gives the opportunity for people in English departments to repeat their mantra, "not everything is about money," but economic growth is the best indicator of living standards. What happened yesterday will lead to better lives for millions of Venezuelans. Get the full version here.

Why Economists Can't Predict Anything

People are always dogging on economists for their inaccuracy in predicting recessions. However, the problem isn't economist themselves, it's the dynamic nature of economics. Unlike the weather, economies change based on information. If companies knew for sure that a recession was coming, they would start laying off workers and cutting material orders now. Therefore, by the time you know a recession is going to happen, it's already happening. All that economists can do is say what MIGHT happen, not what WILL happen. This is also why you shouldn't take any ones economic predictions that seriously. I use prediction markets like Intrade to guess what will happen, you should too.