From the WSJ’s editorial today Wall Street Reckoning: A CEO gets “marked to market”:
Washington is the one place where no one is being held accountable for the subprime boom and bust. That includes in particular the Federal Reserve, whose far too easy monetary policy created a subsidy for debt that fueled the housing and subprime mortgage excesses. One difference between Wall Street and Washington is that in the latter no one ever admits a mistake, much less suffers for it.
Pittsburgh Post-Gazette — When the housing market slows, some home sellers drop their asking price. Others give buyers allowances to cover the cost of upgrades or offer help with financing.
A Pittsburgh couple came up with a more creative twist: Whoever buys their four-bedroom, 3 1/2-bath home would get their money back after the couple dies.
From the Minneapolis-St. Paul StarTribune:
Year after year, the federal government sends farm subsidy checks to homes nestled in some of the most expensive neighborhoods in Minneapolis, far from any corn or soybean field.
The urban payments total millions of dollars out of the nearly $1 billion sent to Minnesota farmers in 2005, according to federal records sent to the Star Tribune under a Freedom of Information Act request.
The flow of federal largesse comes thanks to rules that allow landowners — including some 2,000 in the Twin Cities metro area — to collect subsidies without farming the land themselves, a legal and increasingly common practice as farm ownership has consolidated over the past few decades.
See map above of urban “farmers” in the Minneapolis-St. Paul metro area receving farm subsidies.
(HT: JJ Howe)
Carpe Diem Exclusive!
According to global stock market statistics from the World Federation of Exchanges, the world stock market capitalization reached an all-time record of $59.74 trillion in September 2007 (see graph above, click to enlarge). Comared to last September, world stock markets have increased in value by 31% over the last year, adding $14 trillion of new stock market wealth to the world economy in just the last 12 months.
Over the last five years, almost $40 trillion of stock market wealth has been created, as the global market capitalization rose from about $20 trillion in September of 2002 to almost $60 trillion in September 2007.
In other words, more global wealth (measured by stock market value) was created in the last 5 years ($40 trillion total, or almost $6,000 for every person on the planet) than was created during the thousands of years it took to create the first $35 trillion of stock market value, a level reached in 2000.
Not a bad record for globalization and the significant amount of wealth created in its wake.
Hindustan Times: The Indian-American community passed another milestone with the election on Saturday of Bobby Jindal to the governorship of Louisiana, the highest US political post any Indian community member has won.
Jindal, 36, will also be the youngest governor in the US and the first non-white to rule Louisiana since the end of the US civil war.
Washington — Bobby Jindal made history on October 20 when Louisiana voters chose him, the son of Indian immigrants, as their next governor. He is the first Indian American to be elected as a state’s chief executive.
(HT: Sanil Kori)
This CD post was cited on Greg Mankiw’s blog over the weekend.
Open-outcry pit trading (pictured above) traces its roots to 1848, when the Chicago Board of Trade was founded to trade agricultural futures contracts. But computers and electronic trading are rapidly replacing the 159 year-old tradition.
CHICAGO — With the consolidation of the Chicago Board of Trade and the Chicago Mercantile Exchange, the pork belly pit, formerly emblematic of Chicago’s open-outcry commodity trading, will close and begin operating exclusively by computer.
The open-outcry pits of other low-volume markets, including cash dairy products and South American bean futures, are also closing. Many traders believe that all commodity markets will inevitably follow suit.
Since 2000, open-outcry has declined from about 90 percent of the trades at the exchanges to roughly 22 percent.
From “Making Sense of Income Inequality” by Diana Furchtgott-Roth:
1. Percent of bottom quintile households who own their homes free of debt: 30%
2. Percent of top quintile households who own their homes free of debt: 17%
3. Percent of top quintile households who have two or more earners: 75%
4. Percent of bottom quintile households who have multiple earners: 2.6%
5. Average age of those in the lowest income quintile: 54 years
Conclusion #1: One reason that the top quintile of households collects more income is that these households tend to have more full-time earners. Census data show that the top quintile has two income earners per household, whereas the bottom quintile has about one earner for every two households. This means there are more than four times as many full-time workers in the top fifth of the income distribution as there are in the bottom fifth.
Women now earn well over half of all B.A. and M.A. degrees, plus half of all medical and law degrees. With higher numbers of well-educated women in the workforce, marriage often combines two medium-earning single-person households into one high-earning two-person household. Such demographic changes have increased both the number and relative wealth of two-earner couples.
Conclusion #2: The average age of the bottom 20% by income (54 years) suggests that the bottom quintile is actually a mix of: a) very young low-income earners and b) many older retirees who are probably in one the top quintiles by wealth (they own their homes free of debt at almost twice the rate as the top 20% by income) even though they might be quite wealthy and living off accumulated savings and investments.
Conclusion #3: In a dynamic economy like the U.S., people typically move among income groups as they grow older and advance in their careers, so a snapshot view of income statistics does not reflect Americans’ true well-being. Given the reality of income mobility, some low-income households arguably are not poor. They may be students who have yet to enter the workforce and whose earnings will rise, or wealth retirees.
Most people, even Bill Gates, Tiger Woods, Oprah and Howard Stern, start in the lowest income quintile early in their lives and careers, advance into one of the higher qunitiles as they become successful, and drop back to one of the lower quintiles by income later in life, even though they might be in one of the top quintiles by wealth.
Using data from this U.S. 2006 Department of Education report, the graph above (click to enlarge) shows average tuition at private schools (elementary and secondary) vs. average per pupil spending for public schools (elementary and secondary) for the 2003-2004 school year.
Average private school tuition ($6,600) was about 1/3 less than the spending per pupil in public schools ($9,620) in 2003-2004 (the most recent year available), and average Catholic school tuition ($4,254) was less than half of public school spending per student.
Not only was the average private school tuition between 1/3 and 1/2 less than the cost per public school student, the private schools had on average 18% more teachers per 1000 students (72.25 in private schools vs. 61 in public schools) in 2003-2004.
Bottom Line: Private schools can educate students at a lower cost, with more teachers per 1000 students, than the public schools. Reason: Private schools must have significantly fewer non-instructional administrative employees, and therefore significantly lower administrative expenses than their public counterparts.