Opportunity Cost

Posted on 31 August 2011 by Erik Hare | 12 Comments

You can’t have your cake and eat it, too. It’s a silly old saying with a huge dollop of folk wisdom hidden in the middle of it. But money spent is sometimes more than just money gone – in an integrated world it’s a choice to make one connection when another one might have been a better choice.

Rather than just measure how much money is going in and out, it might be better to understand what we could buy with the same money. The technical term for this is “Opportunity Cost”, or what we give up by making the choices we do.

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Ben Bernanke

Posted on 29 August 2011 by Erik Hare | 28 Comments

The economy, as a great big thing, is mysterious. The lives of millions of people connect into one big system that has its own ways apart from any one of them. But there are people who have positions of power and influence, those whose job it is to keep it all keepin’ on.

Chief among them is the Chief, Ben Bernanke. Who is this guy?

More people every day are asking that question. The press, for its part, gave his introduction a long time ago – and rarely go back over the same ground. That’s a shame because now we have a track record to examine.

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Connections, Revisited

Posted on 26 August 2011 by Erik Hare | 14 Comments

The clock goes off at a pre-set time, maybe launching a radio station that fills the air with familiar patter and music that you’ve come to rely on. You wander to the bathroom where the tap has hot water waiting and you can start your day on a schedule. If you timed it right there’s time for a cup of coffee from Colombia, maybe a banana from Costa Rica or a swallow of orange juice from Brazil. You might have some processed food taken from a box and reheated in a Chinese made appliance.

These are the systems you’ve come to rely on – as much as the systems have come to rely on you to be part of them.

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Stock Pigeons

Posted on 19 August 2011 by Erik Hare | 10 Comments

Stock markets around the world react to every news report like pigeons in a park. Huddled together in one strutting mass they move slowly around, clockwise, until the smallest cue strikes them. Suddenly, there is a small panic and the flock races counter-clockwise in a feathered flurry. They stop, and then the heads all bob clockwise again for a moment. After a few scratching moments a blind panic sets in and boom! Counter-clockwise with a few desperate flaps of wings.

You may think that pigeons are not rational enough to run a financial system. But if you want to find something in the news to explain the market’s behavior, you might as well consult the mooching birds at the nearest park. Everything that stock markets are reacting to has been in the news for a very long time – they suddenly decided, for their own reasons, to start taking it seriously.

As today starts, the movement is staying very counter-clockwise. The pigeons seem to have a purpose.

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Fear the Dragon?

Posted on 15 August 2011 by Erik Hare | 26 Comments

The casual joke turns on China knocking on our door in the middle of the night on a repo call. Like a lot of jokes it’s a way of laughing off a genuine fear – that they US is slowly being owned by a nation that isn’t exactly friendly and we have no reason to trust. Paranoia sometimes sets in when people wonder why China would loan us all this money in the first place – has this been a plot all along?

A hard look at the Chinese Dragon shows that not only is there little to fear from them, they have far more reason to be afraid of us. And they’re pretty open about it, too.

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