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Current Topic: Economics

The America Invents Act and the individual inventor
Topic: Economics 6:30 pm EDT, Sep 18, 2011

The creation of a "micro entity" encourages the individual inventor to get back into the patent game by reducing the fees required for filing an application.

This is a nice idea but I think its a political move intended as an answer to critics who point out that "first to file" systems in other countries have reduced participation by individual inventors in favor of large corporate entities. Nevertheless, its useful for potential startup founders to be aware of these rules.

The America Invents Act and the individual inventor

RE: Further Down The Spiral
Topic: Economics 9:10 am EDT, Sep 15, 2010

noteworthy wrote:
In the short run, the only way to avoid a deep slump when almost everyone in the private sector is trying to pay down debt simultaneously is for the government to move in the opposite direction—to become, in effect, the borrower of last resort, issuing debt and continuing to spend as the private sector pulls back. In the heat of a Minsky moment, budget deficits are not only good, they are necessary.

Is there any credible economist who disagrees with this? If not - why has the Republican party aligned their entire strategy in opposition to this idea?

RE: Further Down The Spiral

A Dish Best Left Uneaten
Topic: Economics 8:36 am EDT, Jul  6, 2009

Martin Wolf:

The UK's fiscal position, with a deficit of 14 per cent of gross domestic product forecast by the Organisation for Economic Co-operation and Development for 2010, is radically unsustainable. Big spending cuts and tax increases, relative to GDP, are inevitable.

Paul Krugman:

Lost decade, anyone?

Mike Shedlock:

Today, Riksbank, Sweden's central bank cut the deposit rate to -0.25%, effectively charging savers interest on deposited money.

Ruins of the Second Gilded Age:

Martins, who creates his images with long exposures but without digital maniupulation, traveled from rural Georgia to suburban California, visiting large construction projects that began during the speculative boom years and then came to a sudden halt, often half-finished, when the housing and securities markets collapsed.

The abandoned or stalled developments -- and Martins's photos of them -- can be seen as signs of the hubris (and occasional criminality) that typified the boom and the economic and human damage that remained in its wake.

Tom Vanderbilt:

Sure, people were gullible, living beyond their means as Edmund Andrews admits to doing. But as Alyssa Katz reminds us, the real estate bubble was also a crime scene. The only trouble is delineating where crime ended and social policy began.

Richard Florida:

One thing we know about crises is they frequently bring about significant changes in the system of housing tenure. The Great Depression and New Deal innovations in housing finance and housing policy, plus the post-war boom and infrastructure building, brought a massive shift toward single family homeownership. My hunch is it's time for new hybrid forms of housing tenure which mix the benefits of ownership with the flexibility of renting.

Michael Spence:

What can we expect as the world’s economy emerges from its most serious downturn in almost a century?

Lower growth is the best guess for the medium term. It seems most likely, but no one really knows.

It is not inconceivable that the baby will be thrown out with the bath water.

Joel Stein:

There is so much you can't know about your spouse when you get married, like that one day she will want to eat her placenta.

A Dish Best Left Uneaten

The Quiet Coup
Topic: Economics 3:35 pm EDT, Mar 29, 2009

If you think "Russia" when you hear "oligarchy", think again.

By now, the princes of the financial world have of course been stripped naked as leaders and strategists -- at least in the eyes of most Americans. But as the months have rolled by, financial elites have continued to assume that their position as the economy’s favored children is safe, despite the wreckage they have caused.

Even leaving aside fairness to taxpayers, the government’s velvet-glove approach with the banks is deeply troubling, for one simple reason: it is inadequate to change the behavior of a financial sector accustomed to doing business on its own terms, at a time when that behavior must change.

Only decisive government action -- exposing the full extent of the financial rot and restoring some set of banks to publicly verifiable health -- can cure the financial sector as a whole.

This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem the U.S. faces -- the power of the oligarchy -- is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

Jules Dupuit:

It is not because of the few thousand francs which would have to be spent to put a roof over the third-class carriage or to upholster the third-class seats that some company or other has open carriages with wooden benches ... What the company is trying to do is prevent the passengers who can pay the second-class fare from traveling third class; it hits the poor, not because it wants to hurt them, but to frighten the rich ... And it is again for the same reason that the companies, having proved almost cruel to the third-class passengers and mean to the second-class ones, become lavish in dealing with first-class customers. Having refused the poor what is necessary, they give the rich what is superfluous.

Peter Schiff:

I think things are going to get very bad.

From the recent archive:

After jokingly asking "Time to buy gold, huh?", there was a pregnant pause. Then came the response: "Buy ammunition".

The Quiet Coup

Fed’s $85 Billion Loan Rescues Insurer -
Topic: Economics 11:38 pm EDT, Sep 16, 2008

Fearing a financial crisis worldwide, the Federal Reserve reversed course on Tuesday and agreed to an $85 billion bailout that would give the government control of the troubled insurance giant American International Group.

There was a lot of hand wringing that the Fannie and Freddie takeovers were communist, but my perspective is that there is no point in complaining about it when the crisis is actually happening. If you were opposed to that you should have been fighting the guarantees years ago.

This, however, is communist. The U.S. Government now owns an insurance company. AIG was not built with the moral hazards that F&F represent. The tax payer ended up eating this because the finance industry refused, and the systemic financial cataclysm that a failure would have set off would have hurt people like you and me a hell of a lot more than it would have hurt the people who own the big banks.

So, if we're going commie, I say why go half way. Never has the idea of progressive taxation seemed more just. Its not my fault. Its your fault. I ain't paying for it and I support taxing the crap out of your golden parachutes in order to cover it. Don't forget that the taxpayers have a monopoly on the use of force.

At least, until the spectacularly risky bet the Feds made yesterday by allowing banks to invest depositor's money in the stock market comes home to roost and the whole fucking system collapses.

Fed’s $85 Billion Loan Rescues Insurer -

naked capitalism: A Former Regulator on the Fed Allowing Deposits to Fund Investment Banking Operations
Topic: Economics 2:26 pm EDT, Sep 16, 2008

One of the emergency measures implemented by the Fed was the suspension of the rules prohibiting banks from using deposits to fund their investment banking subsidiaries.

This was obviously done in order to free up enough capital at BofA to buy Merrill, warts and all. It presents some serious risks, as some of BofA's deposits (10% of America's cash) is now being invested in equities. More worrying is what other, less obvious deals are being quietly made under this temporary rule suspension. The risk is that a stock mark crash can now make depository institutions insolvent, and the FDIC is required to bail them out.

So, lets say this doesn't work. AIG fails, it becomes difficult for businesses and individuals who have perfect credit to obtain financing because its hard to hedge credit offers (which is what AIG does), so this causes further economic contraction, which the market attempts to price, overshooting, of course, in a panic, therefore drawing down the assets owned by Merrill and some other investment entities, who loose capital that they owe to depositors like BofA, who are subject to small bank runs because of media scrutiny, and declare bankruptcy, calling in the FDIC... If they bet more than the FDIC could cover it would get out of control fast.

You get the feeling that these guys are right on the edge.. The pedal is too the floor and they are pulling on the wheel as hard as they can. I don't know enough about finance to know how many more tricks they have in their bag, but I know enough to know that this is one that was never, ever supposed to be used.

naked capitalism: A Former Regulator on the Fed Allowing Deposits to Fund Investment Banking Operations

How people flip houses.
Topic: Economics 4:30 pm EDT, Aug  4, 2008

In October, the house sold at auction for $304,500.

It resold in January for $625,000.

"They lied to us," he said of the sellers. "They said the house was really $500,000, but when I bought it, the papers said $625,000."

Gomez said someone else – he's not sure exactly who – paid the $125,000 down payment.

"I didn't pay any money down," Gomez said. "The man who sold it to me said, 'No money, no problem.' And later he told me I would get $30,000 for buying the house."

From an envelope containing his loan papers, Gomez produced a two-page document titled "Addendum to contract" signed by Praslin. The memo, mostly handwritten, said that if the purchase went through, Praslin would pay Gomez $30,000, cover the first three mortgage payments and throw in a 52-inch LCD television.

How people flip houses.

Why Does Gas Cost $4 or More a Gallon? -
Topic: Economics 3:40 pm EDT, Aug  1, 2008

There is no single answer to this question. A number of factors contribute to the price of oil:

Fantastic infographic!

Why Does Gas Cost $4 or More a Gallon? -

Subprime lending not main trigger of real estate bubble
Topic: Economics 8:52 am EDT, Jul 31, 2008

The researchers found that rising home prices up to 2003 could be explained by economic fundamentals, such as low unemployment rates, expanding household incomes and population growth. These factors fueled housing demand and, in turn, increased U.S. home prices. During this time, Fannie Mae and Freddie Mac actively issued and purchased conventional, conforming mortgage-backed securities.

But in 2003, political, regulatory and economic factors – including accounting irregularities that led to their senior officers’ resignations and the capping of their retained loan portfolios – forced the two entities to significantly slow their lending volume. Private funding in the form of asset-backed securities and residential mortgage-backed securities replaced conventional, conforming mortgage-backed securities as the prevalent source of mortgage capital.

The new credit environment allowed looser underwriting standards and increased tolerance for riskier, high-yield loan products. Such products included adjustable-rate mortgages with low initial “teaser” rates, Alt-A loans that did not require income verification and nonowner-occupied investor products. This borrowing climate provided previously marginal borrowers with additional access to credit.

Subprime lending not main trigger of real estate bubble

Clinton dismisses 'elite' economists on gas tax plan | Reuters
Topic: Economics 4:46 pm EDT, May  5, 2008

Democratic presidential candidate Hillary Clinton on Sunday dismissed the "elite opinion" of economists who criticized her gas tax proposal, using a term that has dogged rival Barack Obama in recent weeks.

This is so idiotic it feels like a Simpson's episode. Apparently the social hierarchy of American junior high schools has come home to roost in our adult society. Republicans have long attacked "elite" segments of society (by which they mean well educated, rather than rich) for being "out of touch." Now Democrats are doing it too. Its a bipartisan consensus! Being smart or informed is bad! We're going forward with our gas tax holiday, and damn those pencil neck nerds who say it won't work! What the hell do economists know about the economy anyway!? USA! USA! USA! Whoohoo!

Clinton dismisses 'elite' economists on gas tax plan | Reuters

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