Sunday, December 13, 2009

Paul Samuelson Dies at 94

Paul Samuelson, the first American Nobel laureate in economics, died at 94.

Tuesday, November 24, 2009

What Makes a Nation Rich?

I think this is the best article I had read of the year. An article about institution, economic growth, and US foreign affairs from Daron Acemoglu.

Saturday, November 14, 2009

Time Series of the US Political Spectrum

From WSJ.

Health Care Systems in Other Countries

PBS made a great program about helath care systems in UK, Japan, Taiwan, Germany and Switzerland.

Tuesday, November 10, 2009

Surprising and Interesting Freakconomics

The Impact of Minimum Wage Rates on Body Weight in the US.
In short, declining real minimum wage --> fast food stores prosper --> more obesity.

The Fed Is Already Transparent

By Anil Kashyap and Fred Mishkin

Tuesday, November 3, 2009

Market Prices for Health Care

I found a good website (Healthcare Blue Book) to real the market prices of health care services.
WSJ also have a good survey.

Efficient Market Theory and the Crisis

Jeremy Siegel makes it clear for this issue.

Sunday, October 18, 2009

Monday, October 12, 2009

Economics Nobel 2009

Elinor Ostrom and Oliver Williamson got the Nobel Prize of Economics in 2009.
Michael Spence had a good introduction.
To be honest, I never heard these two scholars. But when I check in Google Scholar, I understand why. Williamson's work got 18669 citations!!!

China’s Dollar Problem

By Kenneth Rogoff.

Sunday, October 4, 2009

Kocherlakota to be the Minneapolis Fed President

The new president is the same economist in my previous post.
Here is the WSJ article; here is Mankiw's comment.

Thursday, September 17, 2009

Sunday, September 13, 2009

Wednesday, September 9, 2009

Obama’s Health Care Speech to Congress

Health care reform speech to congress by President Obama.
I predict that Obama's health care reform bill will be passed in this year.

Thursday, September 3, 2009

Krugman Made Economists Nervous

How Did Economists Get It So Wrong? by Paul Krugman.
"As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth."

Wednesday, August 26, 2009

Tuesday, August 25, 2009

8 Investment Lessons

The Mistakes We Make—and Why We Make Them by Meir Statman.


No. 1 Goldman Sachs is faster than you.
There is an old story about two hikers who encounter a tiger. One says: There is no point in running because the tiger is faster than either of us. The other says: It is not about whether the tiger is faster than either of us. It is about whether I'm faster than you. And with that he runs away. The speed of the Goldman Sachses of the world has been boosted most recently by computerized high-frequency trading. Can you really outrun them?
It is normal for us, the individual investors, to frame the market race as a race against the market. We hope to win by buying and selling investments at the right time. That doesn't seem so hard. But we are much too slow in our race with the Goldman Sachses.
So what does this mean in practical terms? The most obvious lesson is that individual investors should never enter a race against faster runners by trading frequently on every little bit of news (or rumors).
Instead, simply buy and hold a diversified portfolio. Banal? Yes. Obvious? Yes. Typically followed? Sadly, no. Too often cognitive errors and emotions get in our way.

No. 2 The future is not the past, and hindsight is not foresight.
Wasn't it obvious in 2007 that financial institutions and financial markets were about to collapse? Well, it was not obvious to me, and it was probably not obvious to you, either. Hindsight error leads us to think that we could have seen in foresight what we see only in hindsight. And it makes us overconfident in our certainty about what's going to happen.
Want to check the quality of your foresight? Write down in permanent ink your forecast of tomorrow's stock prices. Do that each day for a year and check the accuracy of your predictions. You are likely to find that your foresight is not nearly as good as your hindsight..........

No. 3 Take the pain of regret today and feel the joy of pride tomorrow.
Emotions are useful, even when they sting. The pain of regret over stupid comments teaches presidents and the rest of us to calibrate our words more carefully. But sometimes emotions mislead us into stupid behavior. We feel the pain of regret when we find, in hindsight, that our portfolios would have been overflowing if only we had sold all the stocks in 2007. The pain of regret is especially searing when we bear responsibility for the decision not to sell our stocks in 2007. We are tempted to alleviate our pain by shifting responsibility to our financial advisers. "I am not stupid," we say. "My financial adviser is stupid." Financial advisers are sorely tempted to reciprocate, as the adviser in the cartoon who says: "If we're being honest, it was your decision to follow my recommendation that cost you money."
In truth, responsibility belongs to bad luck. Follow your mother's good advice, "Don't cry over spilled milk."
Where am I leading you? Stop focusing on blame and regret and yesterday and start thinking about today and tomorrow. Don't let regret lead you to hold on to stocks you should be selling. Instead, consider getting rid of your 2007 losing stocks and using the money immediately to buy similar stocks. You'll feel the pain of regret today. But you'll feel the joy of pride next April when the realized losses turn into tax deductions.

No. 4 Investment success stories are as misleading as lottery success stories.
Have you ever seen a lottery commercial showing a man muttering "lost again" as he tears his ticket in disgust? Of course not. What you see instead are smiling winners holding giant checks.
Lottery promoters tilt the scales by making the handful of winners available to our memory while obscuring the many millions of losers. Then, once we have settled on a belief, such as "I'm going to win the lottery," we tend to look for evidence that confirms our belief rather than evidence that might refute it. So we figure our favorite lottery number is due for a win because it has not won in years. Or we try to divine—through dreams, horoscopes, fortune cookies—the next winning numbers. But we neglect to note evidence that hardly anybody ever wins the lottery, and that lottery numbers can go for decades without winning. This is the work of the "confirmation" error.
What is true for lottery tickets is true for investments as well. Investment companies tilt the scales by touting how well they have done over a pre-selected period. Then, confirmation error misleads us into focusing on investments that have done well in 2008.
Lottery players who overcome the confirmation error conclude that winning lottery numbers are random. Investors who overcome the confirmation error conclude that winning investments are almost as random. Don't chase last year's investment winners. Your ability to predict next year's investment winner is no better than your ability to predict next week's lottery winner. A diversified portfolio of many investments might make you a loser during a year or even a decade, but a concentrated portfolio of few investments might ruin you forever.

No. 5 Neither fear nor exuberance are good investment guides.
A Gallup Poll asked: "Do you think that now is a good time to invest in the financial markets?" February 2000 was a time of exuberance, and 78% of investors agreed that "now is a good time to invest." It turned out to be a bad time to invest. March 2003 was a time of fear, and only 41% agreed that "now is a good time to invest." It turned out to be a good time to invest. I would guess that few investors thought that March 2009, another time of great fear, was a good time to invest. So far, so wrong. It is good to learn the lesson of fear and exuberance, and use reason to resist their pull.

No. 6 Wealth makes us happy, but wealth increases make us even happier.
John found out today that his wealth fell from $5 million to $3 million. Jane found out that her wealth increased from $1 million to $2 million. John has more wealth than Jane, but Jane is likely to be happier. This simple insight underlies Prospect Theory, developed by Daniel Kahneman and Amos Tversky. Happiness from wealth comes from gains of wealth more than it comes from levels of wealth. While gains of wealth bring happiness, losses of wealth bring misery. This is misery we feel today, whether our wealth declined from $5 million to $3 million or from $50,000 to $30,000.
We'll have to wait a while before we recoup our recent investment losses, but we can recoup our loss of happiness much faster, simply by framing things differently. John thinks he's a loser now that he has only $3 million of his original $5 million. But John is likely a winner if he compares his $3 million to the mountain of debt he had when he left college. And he is a winner if he compares himself to his poor neighbor, the one with only $2 million.
In other words, it's all relative, and it doesn't hurt to keep that in mind, for the sake of your mental well-being. Standing next to people who have lost more than you and counting your blessings would not add a penny to your portfolio, but it would remind you that you are not a loser.

No. 7 I’ve only lost my children’s inheritance.
Another lesson here in happiness. Mental accounting—the adding and subtracting you do in your head about your gains and losses—is a cognitive operation that regularly misleads us. But you can also use your mental accounting in a way that steers you right.
Say your portfolio is down 30% from its 2007 high, even after the recent stock-market bounce. You feel like a loser. But money is worth nothing when it is not attached to a goal, whether buying a new TV, funding retirement, or leaving an inheritance to your children or favorite charity.
A stock-market crash is akin to an automobile crash. We check ourselves. Is anyone bleeding? Can we drive the car to a garage, or do we need a tow truck? We must check ourselves after a market crash as well. Suppose that you divide your portfolio into mental accounts: one for your retirement income, one for college education of your grandchildren, and one for bequests to your children. Now you can see that the terrible market has wrecked your bequest mental account and dented your education mental account, but left your retirement mental account without a scratch. You still have all the money you need for food and shelter, and you even have the money for a trip around the country in a new RV. You might want to affix to it a new version of the old bumper sticker: "I've only lost my children's inheritance."
So here's my advice: Ask yourself whether the market damaged your retirement prospects or only deflated your ego. If the market has damaged your retirement prospects, then you'll have to save more, spend less or retire later. But don't worry about your ego. In time it will inflate to its former size.

No. 8 Dollar-cost averaging is not rational, but it is pretty smart.

Bring Him Home: Rethinking Outsourcing

Coming Home: Appliance Maker Drops China to Produce in Texas from WSJ.

HOUSTON -- Farouk Shami, a Palestinian-born hairdresser who built a $1 billion manufacturing company around a popular line of hair irons, is moving all of his production of hand-held appliances from China to a sprawling new factory here.
The move flies in the face of conventional wisdom, which says gadgets like this are best made in a low-cost country. But, he says, outsourcing has led to a loss of control over manufacturing and distribution.
"We'll make more money this way -- because we'll have better quality and a better image," says the 66-year-old, who says his company, Farouk Systems Inc., spends about $500,000 a month fighting counterfeits, most of which he says originate in China. The company collects the fake products and tracks the source, and then brings action in China to shut down illegal producers.....

Monday, August 24, 2009

I Told You So

Obama decided to nominate Ben Bernake to second term of Fed Chairman. And it proves my prediction correct.

Saturday, August 15, 2009

How to Find the Cheapest College Textbooks

Students must read this. It suggests a good website: Campus Books.

Saturday, August 8, 2009

Edifying Editing

A good article by Preston McAfee, the co-editor for Economic Inquiry and American Economic Review.

Thursday, July 30, 2009

Wednesday, July 29, 2009

A Letter to The Queen

Queen asked a question when she visited London School of Economics: why had nobody noticed that the credit crunch was on its way? The British Academy wrote a letter to answer the question later on. On paragraph caught my eyes:

All this exposed the difficulties of slowing the progression of such developments in the presence of a general ‘feel-good’ factor. Households benefited from low unemployment, cheap consumer goods and ready credit. Businesses benefited from lower borrowing costs. Bankers ere earning bumper bonuses and expanding their business around the world. The government benefited from high tax revenues enabling them to increase public spending on schools and hospitals. This was bound to create a psychology of denial. It was a cycle fuelled, in significant measure, not by virtue but by delusion.

Sunday, July 26, 2009

Should Bernake Be Reappointed?

I agree with Nouriel Roubini that Bernake should be reappinted next year. And I guess that he will be.

Trust Government or Companies?

Mankiw raises a good question which has been in my head for a while.

Tuesday, July 21, 2009

Wednesday, July 8, 2009

Friday, July 3, 2009

Organizing Your Financial Life

Merrill Lynch provides a pretty good form to help people organizing their personal finance. Nevertheless, I think some items are oversold.
Source: A day to tackle the financial to-do list from NYT.

Tuesday, June 23, 2009

Thursday, June 18, 2009

An Interview with Paul Samuelson

The 94-year-old Nobel Laureate is a very smart and intesting economist.
Part 1.
Part 2.

Monday, June 15, 2009

Samuelson's Short Comment

Paul Samuelson had a short comment about the current and future status of US economy.

Fama and French on Investment

Fama and French explained again the "inconvenient truth" of investment -- the passive investment always wins over the active investment. There is no alpha in active investment in aggregate.
Fama (54 mins) with Chicago Business School Dean.
French (5 mins).

Thursday, June 11, 2009

The Gettysburg Powerpoint Presentation

A very interesting powerpoint presentation as an example of concise and successful presentation.
Here are some useful suggestions from UC Berkeley professor about an academic talk.

Friday, May 29, 2009

Krugman Says No Worries about Inflation

The Big Inflation Scare from Paul Krugman. He siad, "...the only thing we have to fear is inflation fear itself."

Thursday, May 28, 2009

Is China's One-Child Policy to Blame for the Subprime Mess?

A interesting research. The paper is here.
China's sex ratio is now 120 boys to 100 girls. That is very imbalanced.

Monday, May 25, 2009

What's New in Econometrics – Time Series 2008

NBER Summer Institute 2008: Whats New in Econometrics – Time Series
NBER Summer Institute 2007: Whats New in Econometrics?

I should watch these lectures during the summer. I love Internet.

Sunday, May 24, 2009

Bernamke's Commencement Address

Bernake's speech at the 2009 Commencement of the Boston College School of Law, quite a soft and personal speech.
He mentioned a good quote from John Lennon: "Life is what happens to you while you are busy making other plans."

Capitalism In China Today

Made In China: The People's Republic of Profit, a video for 45 mins
from CNBC Originals.

Saturday, May 16, 2009

What Does Your Credit-Card Company Know About You?

A very interesting article about credit card business and its use of human psychology. It also provides some interesting example of correlation, for example:
Less-likely default cardholder: buy felt-pad, visit dentist, getting married, having a child.
More-likely default cardholder: buy chrome-skull, go to bar, pawnshop, marriage therapy.

Hedge Fund Manager’s Farewell

A pretty good reflection of a hedge fund manager.

"....Although Mr. Barsky has clearly gotten rich, he was surprisingly clear-eyed about the societal imbalances of hedge fund mania. The industry, he told me, “was part of this huge trend towards the celebration of wealth. Hedge fund managers overearned. It just became too easy. There has been a massive misallocation of human resources. I have so many smart guys here who were making seven figures. And I think it is a fair question to ask: what would they have been doing in 1948 — going into the foreign service? If Obama does anything, the best thing he could do is change a generation’s values.”
He continued: “I have a friend whose son is a senior at Princeton. She said all his friends want to work for Goldman Sachs.” He added, “We have an overground railroad to finance. It is not the best way for a society to be run.”..........."

Thursday, May 14, 2009

A New York Times Reporter's Credit Crisis

A very sad story of personal finance crisis in housing bubble. It is a lesson we should learn and keep in mind. This story also reminds me of a movie: "Thank you for smoking (2005)." There is a memorable quote in the movie: "Everyone's got a mortgage to pay."

Tuesday, April 21, 2009

Thursday, April 16, 2009

Robert Merton on Finance

Observations on the Science of Finance in the Practice of Finance by Robert Merton.
An insightful lecture in MIT.

Sunday, April 12, 2009

The Theory of Moral Sentiments

Many people know that Adam Smith wrote "the Wealth of Nations" (1776) and became the Father of Economics while few know that he also wrote "the Theory of Moral Sentiments"(1759) and edited it until he died in 1790.
Here is an article to introduce the Adam Smith's masterpiece.

Monday, April 6, 2009

From Bubble to Depression

A unique and insightful analysis by Steven Gjerstad and Vernon Smith (Nobel Laureate).


How could this happen? In 1983, the Bureau of Labor Statistics began to use rental equivalence for homeowner-occupied units instead of direct home-ownership
costs. Between 1983 and 1996, the price-to-rental ratio increased from 19.0 to
20.2, so the change had little effect on measured inflation: The CPI
underestimated inflation by about 0.1 percentage point per year during this
period. Between 1999 and 2006, the price-to-rent ratio shot up from 20.8 to
With home price increases out of the CPI and the price-to-rent ratio rapidly increasing, an important component of inflation remained outside the index. In 2004 alone, the price-rent ratio increased 12.3%. Inflation for that year was underestimated by 2.9 percentage points (since "owners' equivalent
rent" is about 23% of the CPI). If home-ownership costs were included in the
CPI, inflation would have been 6.2% instead of 3.3%.

Earlier, during the downturn in the equities market between December 1999 and September 2002, approximately $10 trillion of equity was erased. But a
measure of financial system performance, the Keefe, Bruyette, & Woods BKX index of financial firms, fell less than 6% during that period. In the current downturn, the value of residential real estate has fallen by approximately $3 trillion, but the BKX index has now fallen 75% from its peak of January 2007.
The financial sector has been devastated in this crisis, whereas it was almost completely unaffected by the downturn in the equities market early in this decade.
How can one crash that wipes out $10 trillion in assets cause no damage to the financial system and another that causes $3 trillion in losses devastate the financial system?
In the equities-market downturn early in this decade, declining assets were held by institutional and individual investors that either owned the assets outright, or held only a small fraction on margin, so losses were absorbed by their owners. In the current crisis, declining housing assets were often, in effect, purchased between 90% and 100% on margin.
In some of the cities hit hardest, borrowers who purchased in the low-price tier at the peak of the bubble have seen their home value decline 50% or more. Over the past 18 months as housing prices have fallen, millions of homes became worth less than the loans on them, huge losses have been transmitted to lending institutions, investment banks, investors in mortgage-backed securities, sellers of credit default swaps, and the insurer of last resort, the U.S. Treasury....................

Friday, April 3, 2009

Fannie, Freddie Set to Pay $210 Million in Retention Bonuses

My goodness! When will this end? Fannie and Freddie stock prices are traded around $0.7 and they are talking about retention bonus to keep the talent?! Where will they go? It is good enough for them to have a job right now.
Aagain I think this is very very bad corporate governance!!

Wednesday, April 1, 2009

Market-Based Regulation

Oliver Hart and Luigi Zingales propose this market-based regulation on large banks.
In addition to all these financial system overhauls, I propose an easy market-based regulation to prevent "too big to fail." We could impose "too big to fail" tax on banks based on the size of their assets.

Sunday, March 29, 2009

General Theory

Here is the ebook - The General Theory of Employment, Interest, and Money by John Maynard Keynes.

Monday, March 23, 2009

Economics Is the 'Just Right' Liberal-Arts

See here by David Colander, chair of the economics department at Middlebury College.

Friday, March 20, 2009

Quantitative Easing Explained

A good explanation of unconventional monetary policy, which the Fed is using now - Quantitative Easing.

Tuesday, March 17, 2009

AIG Bonus

Here is the interesting news of the reaction of AIG $165 million bonus.
Of course these AIG leaders will not take a deep bow and then commit suicide.
I think 100% tax on the 2008 bonuses paid by those firms who accepted government money is a very good idea.

Monday, March 16, 2009

Bernake on 60 Minutes

The Fed Chairman is on the TV interview for the first time.
The interview is about the Fed, financial crisis, Ben's personal life.
Click Part 1 and Part 2.

Friday, March 13, 2009

US Household Wealth

WSJ had a nice graph and an article for the US household wealth.

Wednesday, March 11, 2009

Thursday, March 5, 2009

Stress Tests on Banks

Treasury announced the details of stress tests.

Monday, March 2, 2009

New Era of Responsibility

Since President Obama announced his ambitious 2010 deficit budget (titled: the New Era of Responsibility), the landscape shaped by President Regan of macroeconomic policy and government's role for 30 yeasrs had changed significantly.

Foreign Portfolio Holdings of U.S. Securities

Treasury just released the survey data for foreign portfolio holdings of the US securities: equity and debts up to June 30, 2008.

Wednesday, February 25, 2009

Passive Management

Finance masters teach us a golden rule of finance, which few people believe and follow.
What do they mean for "passive management"? I think they mean index fund.

The Formula That Killed Wall Street

A very good article about Gaussian copula function by David X. Li and its impact on financial meltdown. Li's paper is here.
Is it another reason to blame China for the financial crisis?

Tuesday, February 24, 2009

How China Helped Create the Financial Crisis

Here by Moritz Schularick.

Brooks on Obama

David Brooks had a good piece on Obama in NYT.
Update: After watching President Obama's speech to Congress tonight, I think Obama is really willing to do all these ambitious reforms and will have a chance to be successful for many of the plans in the long run. Why? Becuase I think he understands the current core problems of the US and he really can talk!

Tuesday, February 17, 2009

Is America's Banking Cisis Worse Than Japan? had a good analysis.

Obama Signed the Stimulus Bill

As I predicted in December and in January, the stimulus plan was passed and signed into law today. In this website, we can see and track the detials of the plan.

Saturday, February 14, 2009

Interview with Simon Johnson

PBS Bill Moyers interviews with Simon Johnson, MIT professor.
I agree with his suggestions, one of which is the anti-trust law on big banks.

Thursday, February 12, 2009

Wednesday, February 11, 2009

Saturday, February 7, 2009

Rogoff on China

Rogoff had an insightful piece about Chinese economy. One interesting sentence caught my eyes in particular:

.... men in China today feel compelled to save in order to find a bride. The same week, a former student of mine who lost his lucrative financial-sector job explained that he had no savings because it was so expensive to date in New York!
An example of cultural difference about savings.

Sunday, February 1, 2009

Interview with Paul Samuelson

Paul Samuelson, the first Ameican who won the Nobel prize in Economics (1970), was not happy with President Bush. His view is very similar with Paul Krugman, the latest Nobel prize winner.

Thursday, January 29, 2009


President Barack Obama believes the multi-billion dollar bonuses that Wall Street banks awarded themselves for 2008 are "outrageous." Read here.

I have two questions. First is that how dare they are. Second is how could the government let this happan again. If you read WSJ everyday, you could exactly know they are doing it. On the one hand, we have greedy private sectors; on the other hand, we have a sleepy government. And the financial crisis in September didn't change this nature.

Updated: Another angry man about Wall Street.
My third question: Do you trust Wall Street now?

Wednesday, January 28, 2009

Who Gets What from Stimulus Package


Update: Here is some information about states budget shortfall.

A War on Fiscal Stimulus

There is a war on fiscal stimulus plan in academy. Here is the log.

Monday, January 26, 2009


The New Republican had an interesting article about John Maynard Keynes.

Saturday, January 24, 2009

An Interview with Robert Engle

Robert Engle talks about the financial crisis. He argues that the coordinated stimulus policies all over the world are needed!

But the faculty at University of Chicago don't agree.

Tuesday, January 20, 2009

Shopping Vouchers

Taiwan government distributes $100 shopping voucher to each resident in Taiwan to stimulate the economy. It will be interesting to see the multiplier effect of this fiscal policy.

A Letter to New Treasury Secretary

Luigi Zingales wrote a letter to new Treasury Secretary Geithner.

Sunday, January 18, 2009

The Future of Banking Industry

It will go back to a normal (boring) industry said NYT.

The Future of Hedge Funds

Unhinged eedge funds from NYT.

Krugman Wrote A Letter to New President

Paul Krugman wrote a Letter to new President: What Obama Must Do.
He suggested several things, three of which are as follows
1. Rescue the economy (I agree)
2. Universal health care (I agree)
3. Increase union power (I am skeptical)

Thursday, January 15, 2009

Fiscal Stimulus Plan

American Recovery and Reinvestment Plan.
One part is about higher education:
Education for the 21st Century: To enable more children to learn in 21st century classrooms, labs, and libraries to help our kids compete with any worker in the world, this package provides:
• $41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).
• $79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education.
• $15.6 billion to increase the Pell grant by $500.
• $6 billion for higher education modernization.

Arnold Kling's Lectures on Macroeconomics

Arnold Kling had his Lectures on Macroeconomics available.

Wednesday, January 14, 2009

Suggestions for WSU Budget

Our school asks for suggestions for our 2010-2011 budget under the current recession and the staggering buget shortfall of Minnesota State. Here is the email I wrote:

Dear Sir or Madam,

I have three suggestions:
1. Based on the Obama's "the Job Impact of American Recovery and Reinvestment Plan" released on January 10, 2009, one of the key components of $775 billion will be spent on state fiscal relief designed to alleviate cuts in healthcare, education, and prevent increases in state and local taxes (p.4). I predict that this stimulus package will be passed by Congress soon (no later than February 2009). Therefore, I suggest that WSU, MnSCU, and Minnesota government (congressmen) should work together to make sure that our state will get the appropriate proportion of this federal handout sooner than later. Our WSU 2010-11 budget should be planned based on this practical assumption.
2. In addition to our projected budget shortfall, the stimulus money will be desperately looking for shovel-ready investment projects which will enhance country’s long-term productivity (such as infrastructure, school repair etc) because of its timely mission fighting recession. So now WSU could prepare and get these kinds of projects ready and then we can do it right away when the possible stimulus funding is handed.
3. I expect that WSU's enrollment will probably increase in 2010-11 for two reasons. First, under the current recession, opportunity cost of being a student is lower (wage is lower, unemployment is higher), so enrollment will go up. Second, some private-college students will come (transfer) to WSU for a relatively lower tuition cost. WSU should plan the budget based on this assumption.
Basically I think that the current budget crisis and recession bring WSU more resources if we could understand the big picture of the stimulus package and use it well.

Wei-Choun Yu, Assistant Professor
Economics and Finance Department, College of Business

The Funniest Prediction

A Russian Professor predicted that the US will split into 6 countries in 2010. That is the most ridiculous prediction I have ever seen.

Sunday, January 11, 2009

John Taylor on Financial Crisis

A friend of mine forwarded this insightful paper from John Taylor. One of the conclusion that the paper suggests is that the loosen monetary policies in the US and Europe are the main cause of the financial crisis. The evidence looks persuasive.
Other related works could be found in the working group of Hoover institution.

Saturday, January 10, 2009

American Recovery and Reinvestment Plan

Today, Obama team announced the American Recovery and Reinvestment Plan (Finally!). The plan will focus on:
  • Investments in infrastructure, education, health, and energy
  • Increases in food stamps and expansions of unemployment insurance
  • State fiscal relief to alleviate cuts in health care, education, and prevent increases in state and local taxes (I hope state governors read it!)
  • Business investment incentives
  • A middle class tax cut

The plan also shows the detailed breakdown of the stimulus impact on employment increases. It is a little bit weird that it didn't show the breakdown of money spending. It seems missing something. Anyway, it looks OK.

Update Interview with Romer (CEA chairman) about the stimulus plan as well as Obama's talk about the plan.

Brad Setser on Global Imbalance and Financial Crisis

If one asks me to narrow the causes of global financial crisis down to two major reasons, I will say that the first cause is naive financial regulation and the second cause is the global savings glut. Setser had a fabulous analysis on this issue.

Wednesday, January 7, 2009

On Stimulus

Again, Hal Varian and Ed Glaeser have the same opinion as mine on the role of stimulus for states spending. It is odd to me that Obama team have not yet mentioned any specific proposals on state budget crisis while we are hearing that California, New York, Washington, Minnesota, etc. are announcing spending cut or raising tax every day.

Thursday, January 1, 2009

The Chart for Four Bears

Based on the history, the current bear market doesn't look good.
From dshort.