Washington DC trip 2013 Christmas

Dec 20 Arrival D.C.10pm

Dec 21 (Sat) Conservatory, American Indian Museum, Capitol Hill tour
rest in the jungle
all three branches of government - executive, legislature, supreme court - are all in the Capitol in the early days of US.
corn and tobacco are important crops in the history of this country
elk, fish, maize - main food.
tepees, kayak and canoe

Dec 22 (Sun) Museum of Natural History
Hope diamond
http://www.si.edu/Encyclopedia_SI/nmnh/hope.htm
Human evolution
http://humanorigins.si.edu/exhibit

Dec 23 (Mon) Museum of Air and Sapce
Pratt &Whitney wasp engine
Jet Turbine engine
Wright Flyer

Dec 24 (Tue) National Gallery of Art
Rotunda, fountain, and plants
Monet, Renoir, Cezanne, Van Gogh, Gauguin, Henri Rousseau, Rembrandt, Italian landscape, Sybolism

Dec 25 Christmas - drive back to Apex, NC

Macroeconomics and Medicine

Macroeconomics is not a science. If you want to compare it to science, it is similar to medicine. The purpose is to solve practical problems: when someone is sick, doctors try to prescribe medicine for patient's better recovery. But diagnosis can be difficult and depends mostly on experience. You see symptoms: high fever, body ache, but there are so many possible reasons that you don't know for sure what is the cause. If you are a doctor, you need a lot of science training. With those training you guess it from your understanding of science. You try to find more evidence supporting your guess of a certain disease, and if you found evidence, and your guess is close enough, you prescribe something that worked in the past. Sometimes your prescription worked but for the wrong reason: antibiotics can kill many different types of bacteria. But your diagnosis of an infection is still in the right direction. Sometimes your diagnosis is correct, but the patient simply do not respond to the medicine you prescribed, due to other reason. Some medicine is effective in the past but can kill certain patients. There is a need to weigh risk and benefit.

The Man Who Was Treated for $17,000 Less

In this article the author made an important observation: 3rd party pay system caused the healthcare inflation. that includes all the private insurance on the market today. Instead of requiring everyone to have insurance, government should make health insurance with a deductible less than $20,000 illegal. That is only way to remove 3rd party pay system. The author's intention is to criticize Obamacare, but the system before Obamacare wasn't working, and the author knows that.

http://online.wsj.com/article/SB10001424127887324139404579017113415486176.html

Careful investment on higher education

The high cost of higher education in the US is a significant financial burden on middle class parents and students. Therefore the investment needs to be carefully considered. Just like any business decision, smart investment means limited resources is allocated in areas that demand is stable or growing, and the supply side is not overcrowded by excess capacity. Students need help to get these information and college has a responsibility to provide.

Misallocation of resources, be it housing, steel mills or individual skills, will make the society less productive and everybody poorer. People in position to guide others should take on the responsibility to help our youth make wise decisions.

One more thing to add: we should encourage our youth to start using Coursera and EDX as early as possible. A lot of practical wisdom can be learned from there with very little cost.

Department of Justice sue to stop the merger of American Airline and US Airway today, citing consumers being hurt by higher prices and lesser choices. The market share of the companies: Delta (22%), Southwest (21%), United (17%), American (13%), and US Airway (12%), all others (15%).

The purpose of merge is to reduce industry wide capacity. Passengers are likely to face less choice and higher price.

While colluding to raise price is illegal, horizontal merger is not necessarily so. It is a complicated issue.

Argument for the merger 

Mom and Pop investors, stop trading!

Need to Know News subscribers were able to make split second trades to gain as much as 16% in value, according to WSJ, using government data they got a few seconds before everybody else. If you are investing in the stock market, your best chance is buy and hold a diversified portfolio that has low expenses. If you try hard to follow the economic news and trade on it, mostly like you will lose big.

Need to Know News under Federal Investigation

What kind of news service you would pay $375,000 to subscribe? 

"Need To Know News"!

Need to Know News under Federal Investigation 

Mortgage rates rised more than one percent in June

Treasury International Capital (TIC) published yesterday for June. China and Japan combined sold $42 billion of treasury security, likely in response to Bernanke's talk of tapering QE. The sudden rise of mortgage rates in June is certainly influenced by the two big creditors of the US. World economies are so interlinked today that policy coordination can not be over emphasized. We live in an interdependent world.

Why Indians are craving for gold?

India gold imports hit a record 162 metric tons in May as global prices fell, prompting government to impose a duty increase to 8 percent. The government wants to hold bullion imports this year to "well below" last year's figure of 845 metric tons. Indian Prime Minister Singh: "We seem to be investing a lot in unproductive assets." The real problem behind the appetite for gold is India's high inflation, running at 6% currently, and a depreciating Rupee. A slowing economy makes stock investment riskier. Gold becomes the asset of choice for saving.

A knowledge based economy where people live long lives

Labor participant for teenagers 16 to 19 years old are down: from 51% in 2000 to 42% in 2007 before the recession. Youth are staying in school for more years.

At the same time labor participation at old age (65 and up) are up significantly. People are retiring later in life.

This is probably due to the economy has evolved toward automation and knowledge intensive work.
Service robot will replace more and more menial service that teenagers often do.
And if people are graduating with Ph Ds at their 30s, you would like to see them work into their late 60s or early 70s so that investment in human capital has a longer effective life.

Why default on Treasury is likely

Jeffry Hummel: why default on Treasury is likely

http://econlib.org/library/Columns/y2009/Hummeltbills.html
http://www.independent.org/aboutus/person_detail.asp?id=565

http://www.sjsu.edu/economics/faculty/jeff.hummel.html

Reflationary Monetary policy

Hard working, frugal men who save by purchasing bonds and holding cash are doomed by central bank's reflationary monetary policy. Inflation will rise and the purchasing power of his saving from frugality will be eroded significantly. It is a sacrifice wasted. Wealth is transferred to the borrower who spend and invest.

Government policy favors investors and consumers. It is especially true with countries that run a big deficit. As an investor you need to watch out for inflation.

FOMC March statement

"Exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

FOMC, March 20, 2013


“I don’t think that I’m the only person in the world who can manage the exit,” Bernanke said

to read

The Org: The Underlying Logic of the Office - Ray Fisman; Hardcover

Revisionist historian

Amity Shlaes, conservative ideologue and revisionist historian, who believes cutting taxes will solve all the economy's problem, including government debt caused by severe recession and wars.

Her idea certainly works for the rich and well endowed and that explains her conservative appeal.

If you simply starve the poor to death when they are out of job and short on cash you can reduce government's healthcare and pension cost. Simple logic.

But there is a better solution: tax those who caused the financial crisis to pay for the poor's transition period until they can stand on their own feet. This is a solution that conservatives hate, but a just one.

Fortunately a majority of Americans have the good sense to make that call.