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Weekend Economists in the Market for a Change April 17-19, 2015
Well! What a week it was!
I'm talking about the weather, of course. The rest of the world went to hell in a handbasket, but Spring has returned to Michigan, at least the southern part. I saw the swans flying in; they nest on our ponds annually. The Daffodils are in bloom, and the birds are singing away. Ground crews are spiffing up the joint, and I've taken the plastic sheeting off the windows!
I even turned off the heat one night, but the next day was cloudy so there was no solar gain and I needed to turn it back on at night. It's off again, though!
Anyway, let's talk about the market--the Black Market. A Wikipedia definition would be in order:
A black market or underground economy is a market in which goods or services are traded illegally. The key distinction of a black market trade is that the transaction itself is illegal. The goods or services may or may not themselves be illegal to own, or to trade through other, legal channels. Because the transactions are illegal, the market itself is forced to operate outside the formal economy that is supported by the established state power. Common motives for operating in black markets are to trade contraband, avoid taxes, or skirt price controls. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat".
The black market is distinct from the grey market, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market.
The black market is considered a subset of the informal economy, of which 1.8 billion people worldwide are employed.
The literature on the black market has not established a common terminology and has instead offered many synonyms including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.
There is no single underground economy; there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Five specific underground economies can be identified:
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as drug trafficking, arms trafficking, and prostitution.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a "tax gap" of $450–$500billion.
The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to UN standard national accounting. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. But there is still little consensus concerning the size of the unreported economies of transition countries.
The "informal economy" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally. The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy. In developed countries the informal sector is characterized by unreported employment. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects. On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband is traded.
The black market is distinct from the grey market, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market.
The black market is considered a subset of the informal economy, of which 1.8 billion people worldwide are employed.
The literature on the black market has not established a common terminology and has instead offered many synonyms including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.
There is no single underground economy; there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Five specific underground economies can be identified:
- criminal drugs
- the illegal economy
- the unreported economy
- the unrecorded economy
- the informal economy
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as drug trafficking, arms trafficking, and prostitution.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a "tax gap" of $450–$500billion.
The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to UN standard national accounting. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. But there is still little consensus concerning the size of the unreported economies of transition countries.
The "informal economy" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally. The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy. In developed countries the informal sector is characterized by unreported employment. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects. On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband is traded.
Well, that looks like 10 lbs. of **** in a 2 lb. bag, to me.
Let's see if we can tease out the "allegedly illegal" from the "absolutely immoral" and the "Darwinian stupid". Let's find the contracts, express or implied, that underlie "legality" and see if anything is permissible at all....
82 replies
= new reply since forum marked as read
= new reply since forum marked as read
http://www.theblaze.com/stories/2013/11/08/in-case-you-were-wondering-heres-what-sells-well-on-the-black-market/
Where there is demand, there will be supply – even if that supply is illegal. The black market will always be with us. Indeed, even in normal, healthy economies, demand for illicit goods exists. But it’s when things start to get rough (i.e. when normal costs/access to goods and services increase) that the black market really thrives. So in this day and age of quantitative easing, high unemployment (both here and abroad), emerging markets, and shaky economic alliances, it’s interesting to see how the black market is performing. In short, it’s doing extremely well.
The number of jobs created globally by the black market is roughly 1.8 billion, according to Finance Degree Center, and illicit trade in the U.S. is valued at around $625.63 billion.
Here to help you visualize the health of the black market and its big movers and shakers is a chart from the folks at Finance Degree Center. Enjoy:
Number of jobs created by black market, globally: 1.8 billion
Total US illicit trade value: $625.63 billion
Some of the biggest markets:
Body Parts
The World Health Organization estimates that 10,000 illegal surgeries involving organs take place every year
106,879 organs were transplanted in 2010 (legally and illegally)
This is just 10% of global need
Average cost per part:
Pair of Eyeballs: $1,525
Scalp: $607
Skull with Teeth: $1,200
Shoulder: $500
Coronary Artery: $1,525
Heart: $119,000
Liver: $157,000
Hand and Forearm: $385
Pint of Blood: $337
Spleen: $508
Stomach: $508
Small Intestine: $2,519
Kidney: $262,000
Kidneys make up 75% of global illicit organ trade
Because of rising rates of diabetes, high blood pressure and other heart problems
Gallbladder: $1,219
Skin: $10 per square inch
The illegal organ trade has large markets in China, India and Pakistan
Exotic Pets and Animals
Many endangered animals are trafficked every year to be exotic pets, to be eaten or to be used for medicinal purposes
List of animal prices (USD):
Live chimpanzee – $50
Elephant – $28,000
Geckos in the Phillippines (used to treat asthma) – $2,300
Gorillas – $400,000
Ivory – $1,300/lb
Komodo dragon – $30,000
Polar bear skin – $7,760 – $9,930
Rhino horns – $97,000/kg
Shark fins (used in shark fin soup) – $100/kg
Snake venom – $215,175/liter
Live Tiger – $50,000
Dead Tiger – $5,000
Tortoises – $10,000 in China
Turtle eggs – $1 in Costa Rica
Drugs
More than 5 million people in the US abuse narcotic painkillers
Oxycodone and other prescription medications are among the most abused drugs
4,048 deaths in 2010
Strict DEA regulations force many people to get their drugs from the black market
Globally, cocaine generates $35 billion on the black market
Average US street value: $174.2/gram
Ecstasy – Average US street value: $35/tablet
Heroin – Average US street value: $200/gram
Marijuana – Average US street value: $20 – $1,800/oz
Meth – Average US street value: $3 – $500/gram
The contract killing of a civilian can cost up to $25,000 on the black market
Sperm
Canada’s 2004 Assisted Human Reproduction Act prohibits payment for sperm or eggs
Sperm banks across the country quickly ran dry
The black market gives no guarantee that sperm is safe or STD-free
Today, over 90% of Canada’s semen used for artificial insemination is from back-alley deals or from US for-profit sperm banks
Crude oil
US market value: $10 million
Strict government regulation has pushed some people to smuggle crude oil
Black market thieves sabotage pipelines and then sell by the barrel
In 2010, Mexican government oil monopoly Pemex detected 712 pipelines thefts
This was up from 2005’s 136 thefts
This caused crude oil prices to rise almost $100/barrel
In times of record high oil prices, crude oil can be sold on the black market for less than half of that on the legal market
Where there is demand, there will be supply – even if that supply is illegal. The black market will always be with us. Indeed, even in normal, healthy economies, demand for illicit goods exists. But it’s when things start to get rough (i.e. when normal costs/access to goods and services increase) that the black market really thrives. So in this day and age of quantitative easing, high unemployment (both here and abroad), emerging markets, and shaky economic alliances, it’s interesting to see how the black market is performing. In short, it’s doing extremely well.
The number of jobs created globally by the black market is roughly 1.8 billion, according to Finance Degree Center, and illicit trade in the U.S. is valued at around $625.63 billion.
Here to help you visualize the health of the black market and its big movers and shakers is a chart from the folks at Finance Degree Center. Enjoy:
Number of jobs created by black market, globally: 1.8 billion
Total US illicit trade value: $625.63 billion
Some of the biggest markets:
Body Parts
The World Health Organization estimates that 10,000 illegal surgeries involving organs take place every year
106,879 organs were transplanted in 2010 (legally and illegally)
This is just 10% of global need
Average cost per part:
Pair of Eyeballs: $1,525
Scalp: $607
Skull with Teeth: $1,200
Shoulder: $500
Coronary Artery: $1,525
Heart: $119,000
Liver: $157,000
Hand and Forearm: $385
Pint of Blood: $337
Spleen: $508
Stomach: $508
Small Intestine: $2,519
Kidney: $262,000
Kidneys make up 75% of global illicit organ trade
Because of rising rates of diabetes, high blood pressure and other heart problems
Gallbladder: $1,219
Skin: $10 per square inch
The illegal organ trade has large markets in China, India and Pakistan
Exotic Pets and Animals
Many endangered animals are trafficked every year to be exotic pets, to be eaten or to be used for medicinal purposes
List of animal prices (USD):
Live chimpanzee – $50
Elephant – $28,000
Geckos in the Phillippines (used to treat asthma) – $2,300
Gorillas – $400,000
Ivory – $1,300/lb
Komodo dragon – $30,000
Polar bear skin – $7,760 – $9,930
Rhino horns – $97,000/kg
Shark fins (used in shark fin soup) – $100/kg
Snake venom – $215,175/liter
Live Tiger – $50,000
Dead Tiger – $5,000
Tortoises – $10,000 in China
Turtle eggs – $1 in Costa Rica
Drugs
More than 5 million people in the US abuse narcotic painkillers
Oxycodone and other prescription medications are among the most abused drugs
4,048 deaths in 2010
Strict DEA regulations force many people to get their drugs from the black market
Globally, cocaine generates $35 billion on the black market
Average US street value: $174.2/gram
Ecstasy – Average US street value: $35/tablet
Heroin – Average US street value: $200/gram
Marijuana – Average US street value: $20 – $1,800/oz
Meth – Average US street value: $3 – $500/gram
The contract killing of a civilian can cost up to $25,000 on the black market
Sperm
Canada’s 2004 Assisted Human Reproduction Act prohibits payment for sperm or eggs
Sperm banks across the country quickly ran dry
The black market gives no guarantee that sperm is safe or STD-free
Today, over 90% of Canada’s semen used for artificial insemination is from back-alley deals or from US for-profit sperm banks
Crude oil
US market value: $10 million
Strict government regulation has pushed some people to smuggle crude oil
Black market thieves sabotage pipelines and then sell by the barrel
In 2010, Mexican government oil monopoly Pemex detected 712 pipelines thefts
This was up from 2005’s 136 thefts
This caused crude oil prices to rise almost $100/barrel
In times of record high oil prices, crude oil can be sold on the black market for less than half of that on the legal market
http://www.zerohedge.com/news/2015-04-14/one-chart-proves-obamacare-really-working-fascists
With the election cycle starting up again, we are going to be bombarded more and more with propaganda like this: 7 Charts That Prove Obamacare Is Working http://www.newrepublic.com/article/119623/obamacare-one-year-seven-charts-show-law-working
I submit to you that, below, is the one chart that proves Obamacare really is working (for the fascists)...Since the Obama administration began pushing the healthcare reform bill in early 2009, the stock prices of the Big Five health insurers have done remarkably well, even vs. the S&P 500, and even without taking into account their phenomenal dividend yields.
Question: How many patients did Cigna, BCBS (Anthem), Aetna, United Healthcare, or Cigna diagnose or treat last month? Last year?
Answer: Zero.
Read my article from last year: You have health insurance, but you cannot afford surgery? You should have bought HUM stock: http://www.zerohedge.com/news/2014-09-04/you-have-health-insurance-you-cannot-afford-surgery-you-should-have-bought-hum-stock
These are insurance companies...they are by definition intermediaries...not medical providers. They don't diagnose or treat anyone. They make money only by receiving premium payments, investing these payments, and by minimizing the physician reimbursements they make to the providers that actually provide healthcare. The insurance companies and their captured regulatory body, CMS, set the prices paid to doctors, not the providers. The doctors have essentially zero negotiating power. In fact, the fee schedule attached to the physician's contracts with the insurance companies is usually blank. No shit. Just think about the hubris of that for a while. Some large hospitals may have a little bit of negotiating power, in smaller markets, but not much....
With the election cycle starting up again, we are going to be bombarded more and more with propaganda like this: 7 Charts That Prove Obamacare Is Working http://www.newrepublic.com/article/119623/obamacare-one-year-seven-charts-show-law-working
I submit to you that, below, is the one chart that proves Obamacare really is working (for the fascists)...Since the Obama administration began pushing the healthcare reform bill in early 2009, the stock prices of the Big Five health insurers have done remarkably well, even vs. the S&P 500, and even without taking into account their phenomenal dividend yields.
Question: How many patients did Cigna, BCBS (Anthem), Aetna, United Healthcare, or Cigna diagnose or treat last month? Last year?
Answer: Zero.
Read my article from last year: You have health insurance, but you cannot afford surgery? You should have bought HUM stock: http://www.zerohedge.com/news/2014-09-04/you-have-health-insurance-you-cannot-afford-surgery-you-should-have-bought-hum-stock
These are insurance companies...they are by definition intermediaries...not medical providers. They don't diagnose or treat anyone. They make money only by receiving premium payments, investing these payments, and by minimizing the physician reimbursements they make to the providers that actually provide healthcare. The insurance companies and their captured regulatory body, CMS, set the prices paid to doctors, not the providers. The doctors have essentially zero negotiating power. In fact, the fee schedule attached to the physician's contracts with the insurance companies is usually blank. No shit. Just think about the hubris of that for a while. Some large hospitals may have a little bit of negotiating power, in smaller markets, but not much....
... I asked Giryavets for a simple chart of the overall index, credit extended, rejection of credit, and dollar amount beyond terms. He graciously created that chart for us, shown below.
Combined Index, Amount of Credit Extended, Credit Rejected, Dollar Amount Beyond Terms
Start of recession is denoted by vertical red line, end of recession by vertical green line.
Can Recession Be Far Behind?
NACM data only goes back to 2002. Also data prior to 2006 is not seasonally adjusted, while data from 2006 and later is seasonally adjusted. In the entire series since 2002, the only other time we have seen deep plunges in amount of credit extended and rejection of credit applications was deep in the middle of the last recession. Those are apples to apples comparisons, both seasonally adjusted.
Although comparisons between seasonally adjusted numbers and unseasonably adjusted numbers are technically invalid, if anything that would have led to more volatility between comparisons, not less. This is still more supporting evidence that a recession is on the way. Heck, we may even be in the start of one right now, just as everyone is expecting rate hikes.
Read more at http://globaleconomicanalysis.blogspot.com/2015/04/credit-crunch-underway-can-recession-be.html#ZB9u9GK5YJZlCtVc.99
http://wallstreetonparade.com/2015/04/wall-streets-wealth-transfer-system-is-imperiling-the-u-s-economy/
For nine years now we have written about Wall Street’s institutionalized system of transferring wealth from decent, hardworking Americans to the denizens of Wall Street and those it selectively chooses to favor in the one percent class. The methods of wealth transfer are as diverse as they are diabolical, thus even well intentioned members of Congress cannot stem the havoc on the financial well being of the average American and the overall economy.
One facet that all of these wealth transfer systems have in common is that they all masquerade under a benign sounding name. The 401(k) plan is viewed by most Americans as a way to save for retirement. That’s a good thing – right? It is not a good thing when two-thirds of your savings over a working lifetime end up in Wall Street’s pocket, as carefully demonstrated by Frontline and math-checked by us. The very same Wall Street banks that are asset-stripping 401(k)s are the same banks that asset-stripped the equity in homes across America through illegal foreclosures and mortgage fraud and then were allowed to decide on their own how much to pay their victims...If you attempt to legally challenge being ripped off by Wall Street, you will end up in a private justice system created by Wall Street lawyers and run by a self-regulatory agency. You will not be allowed to take your claim to one of the nation’s courts where juries are randomly selected from a large pool of fellow citizens. You will have limited discovery and the arbitrators of your claim do not have to follow legal precedent or case law. Even when serious financial crimes are committed against our cities and counties, causing mass layoffs and economic suffering to millions, no one will go to jail. Prosecutors will allow Wall Street to pay a fraction of the amount stolen and walk away.
After each illegal cartel on Wall Street is exposed, removing any doubt that this is an institutionalized wealth transfer system, new Wall Street cartels crop up faster than you can say “where are the customers yachts.” Today, Wall Street is under investigation for the following cartels: rigging interest rates (Libor); rigging precious metals trading; rigging foreign currency trading; hoarding physical commodities – and that’s likely just the tip of the iceberg. Add dark pools, high frequency trading, and stock exchange collusion to the 401(k), private justice system and cartel fleecing activity and you have an almost perfect system for criminal financial wealth transfers with impunity.
The proof that this institutionalized, unchecked, criminal wealth transfer system is destroying the economy of the United States resides in the fact that only twice in our Nation’s history has Wall Street been this corrupt – in the late 1920s and now. Simultaneous with this institutionalized corruption in both periods has come the greatest income and wealth inequality in the last century (see graph below); and Great Depression and Great Recession.
MORE
For nine years now we have written about Wall Street’s institutionalized system of transferring wealth from decent, hardworking Americans to the denizens of Wall Street and those it selectively chooses to favor in the one percent class. The methods of wealth transfer are as diverse as they are diabolical, thus even well intentioned members of Congress cannot stem the havoc on the financial well being of the average American and the overall economy.
One facet that all of these wealth transfer systems have in common is that they all masquerade under a benign sounding name. The 401(k) plan is viewed by most Americans as a way to save for retirement. That’s a good thing – right? It is not a good thing when two-thirds of your savings over a working lifetime end up in Wall Street’s pocket, as carefully demonstrated by Frontline and math-checked by us. The very same Wall Street banks that are asset-stripping 401(k)s are the same banks that asset-stripped the equity in homes across America through illegal foreclosures and mortgage fraud and then were allowed to decide on their own how much to pay their victims...If you attempt to legally challenge being ripped off by Wall Street, you will end up in a private justice system created by Wall Street lawyers and run by a self-regulatory agency. You will not be allowed to take your claim to one of the nation’s courts where juries are randomly selected from a large pool of fellow citizens. You will have limited discovery and the arbitrators of your claim do not have to follow legal precedent or case law. Even when serious financial crimes are committed against our cities and counties, causing mass layoffs and economic suffering to millions, no one will go to jail. Prosecutors will allow Wall Street to pay a fraction of the amount stolen and walk away.
After each illegal cartel on Wall Street is exposed, removing any doubt that this is an institutionalized wealth transfer system, new Wall Street cartels crop up faster than you can say “where are the customers yachts.” Today, Wall Street is under investigation for the following cartels: rigging interest rates (Libor); rigging precious metals trading; rigging foreign currency trading; hoarding physical commodities – and that’s likely just the tip of the iceberg. Add dark pools, high frequency trading, and stock exchange collusion to the 401(k), private justice system and cartel fleecing activity and you have an almost perfect system for criminal financial wealth transfers with impunity.
The proof that this institutionalized, unchecked, criminal wealth transfer system is destroying the economy of the United States resides in the fact that only twice in our Nation’s history has Wall Street been this corrupt – in the late 1920s and now. Simultaneous with this institutionalized corruption in both periods has come the greatest income and wealth inequality in the last century (see graph below); and Great Depression and Great Recession.
MORE
http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/13-interest-rate-term-premiums
Longer-term interest rates are quite low around the world. Figure 1 below shows ten-year government bond yields since 1990 for the United States, Canada, Germany, the United Kingdom, and Japan. The downward trend is clear. Moreover, further sharp declines in longer-tem yields have occurred over the past year or so. For example, in the US, ten-year Treasury yields have fallen from around 3 percent at the end of 2013, to about 2.5 percent during the summer of 2014, to around 1.9 percent today. The recent renewed decline was unexpected by most observers, including me. Why are longer-term interest rates so low? And why have they fallen even further recently, despite signs of strength in the US economy?
To explain the behavior of longer-term rates, it helps to decompose the yield on any particular bond, such as a Treasury bond issued by the US government, into three components: expected inflation, expectations about the future path of real short-term interest rates, and a term premium. At present, all three components are helping to keep longer-term interest rates low. Inflation is low and expected to remain so, so lenders are not demanding higher returns to compensate for anticipated losses in their purchasing power. Short-term interest rates are also expected to remain low, as bondholders appear pessimistic about growth prospects and the sustainable returns to capital in coming years. When short-term rates are expected to remain low, longer-term rates tend to get bid down as well.
The focus of this post, though, is on the behavior of term premiums—the third component of bond yields. Briefly, a term premium is the extra return that lenders demand to hold a longer-term bond instead of investing in a series of short-term securities (a new one-year security each year, for example). Typically, long-term yields are higher than short-term yields, implying that term premiums are usually positive (investors require extra compensation to hold longer-term bonds instead of short-term securities).
Term premiums cannot be directly observed but must be estimated from data on short-term and longer-term interest rates. Figure 2 below shows the ten-year yield on US government bonds and the associated term premium since 1961, as estimated in recent work by Tobias Adrian, Richard K. Crump, and Emanuel Moench at the Federal Reserve Bank of New York. For example, on January 2 of last year, an investor holding a ten-year Treasury bond earned a 3.2 percent yield, of which 1.6 percentage points (the estimated term premium) was the investor's compensation for holding a longer-term security. As the figure shows, like overall yields, term premiums have generally trended down since the early 1980s. The figure also shows the sharp decline in both longer-term yields and term premiums over the past year or so.
So what moves term premiums? The key factors are (1) changes in the perceived riskiness of longer-term securities and (2) changes in the demand for specific securities (or classes of securities) relative to their supply.
MORE
Longer-term interest rates are quite low around the world. Figure 1 below shows ten-year government bond yields since 1990 for the United States, Canada, Germany, the United Kingdom, and Japan. The downward trend is clear. Moreover, further sharp declines in longer-tem yields have occurred over the past year or so. For example, in the US, ten-year Treasury yields have fallen from around 3 percent at the end of 2013, to about 2.5 percent during the summer of 2014, to around 1.9 percent today. The recent renewed decline was unexpected by most observers, including me. Why are longer-term interest rates so low? And why have they fallen even further recently, despite signs of strength in the US economy?
To explain the behavior of longer-term rates, it helps to decompose the yield on any particular bond, such as a Treasury bond issued by the US government, into three components: expected inflation, expectations about the future path of real short-term interest rates, and a term premium. At present, all three components are helping to keep longer-term interest rates low. Inflation is low and expected to remain so, so lenders are not demanding higher returns to compensate for anticipated losses in their purchasing power. Short-term interest rates are also expected to remain low, as bondholders appear pessimistic about growth prospects and the sustainable returns to capital in coming years. When short-term rates are expected to remain low, longer-term rates tend to get bid down as well.
The focus of this post, though, is on the behavior of term premiums—the third component of bond yields. Briefly, a term premium is the extra return that lenders demand to hold a longer-term bond instead of investing in a series of short-term securities (a new one-year security each year, for example). Typically, long-term yields are higher than short-term yields, implying that term premiums are usually positive (investors require extra compensation to hold longer-term bonds instead of short-term securities).
Term premiums cannot be directly observed but must be estimated from data on short-term and longer-term interest rates. Figure 2 below shows the ten-year yield on US government bonds and the associated term premium since 1961, as estimated in recent work by Tobias Adrian, Richard K. Crump, and Emanuel Moench at the Federal Reserve Bank of New York. For example, on January 2 of last year, an investor holding a ten-year Treasury bond earned a 3.2 percent yield, of which 1.6 percentage points (the estimated term premium) was the investor's compensation for holding a longer-term security. As the figure shows, like overall yields, term premiums have generally trended down since the early 1980s. The figure also shows the sharp decline in both longer-term yields and term premiums over the past year or so.
So what moves term premiums? The key factors are (1) changes in the perceived riskiness of longer-term securities and (2) changes in the demand for specific securities (or classes of securities) relative to their supply.
MORE
the Coast Guard hauled in 14 tons of coke. That's a lot of coke. Yet it was not the CIA's coke.
Hi agent Mike.
Play Poem Video AT LINK: http://www.poemhunter.com/poems/flower/
Lovers, forget your love,
And list to the love of these,
She a window flower,
And he a winter breeze.
When the frosty window veil
Was melted down at noon,
And the cagèd yellow bird
Hung over her in tune,
He marked her through the pane,
He could not help but mark,
And only passed her by,
To come again at dark.
He was a winter wind,
Concerned with ice and snow,
Dead weeds and unmated birds,
And little of love could know.
But he sighed upon the sill,
He gave the sash a shake,
As witness all within
Who lay that night awake.
Perchance he half prevailed
To win her for the flight
From the firelit looking-glass
And warm stove-window light.
But the flower leaned aside
And thought of naught to say,
And morning found the breeze
A hundred miles away.
I went to turn the grass once after one
Who mowed it in the dew before the sun.
The dew was gone that made his blade so keen
Before I came to view the levelled scene.
I looked for him behind an isle of trees;
I listened for his whetstone on the breeze.
But he had gone his way, the grass all mown,
And I must be, as he had been,—alone,
'As all must be,' I said within my heart,
'Whether they work together or apart.'
But as I said it, swift there passed me by
On noiseless wing a bewildered butterfly,
Seeking with memories grown dim over night
Some resting flower of yesterday's delight.
And once I marked his flight go round and round,
As where some flower lay withering on the ground.
And then he flew as far as eye could see,
And then on tremulous wing came back to me.
I thought of questions that have no reply,
And would have turned to toss the grass to dry;
But he turned first, and led my eye to look
At a tall tuft of flowers beside a brook,
A leaping tongue of bloom the scythe had spared
Beside a reedy brook the scythe had bared.
I left my place to know them by their name,
Finding them butterfly-weed when I came.
The mower in the dew had loved them thus,
By leaving them to flourish, not for us,
Nor yet to draw one thought of ours to him,
But from sheer morning gladness at the brim.
The butterfly and I had lit upon,
Nevertheless, a message from the dawn,
That made me hear the wakening birds around,
And hear his long scythe whispering to the ground,
And feel a spirit kindred to my own;
So that henceforth I worked no more alone;
But glad with him, I worked as with his aid,
And weary, sought at noon with him the shade;
And dreaming, as it were, held brotherly speech
With one whose thought I had not hoped to reach.
'Men work together,' I told him from the heart,
'Whether they work together or apart.'
I saw this.
http://www.msn.com/en-us/news/crime/many-surprised-that-law-intended-for-gangsters-was-used-to-prosecute-educators/ar-AAb9ryi
Many surprised that law intended for gangsters was used to prosecute educators.
WASHINGTON — Congress passed the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO, in 1970 out of a concern over rising mob infiltration of unions and corporations.
It was aimed at jailing gangsters behind killings that were plaguing New York and New Jersey, and at seizing corrupt companies or criminal enterprises.
When eight Atlanta educators were convicted under a state RICO statute of manipulating their pupils' test scores and sentenced to prison Tuesday, many were surprised that the law had been stretched so far. Over the last half-century, the definition of a criminal enterprise has come to include Atlanta public schools. And "racketeers" could be teachers and school administrators.
"Almost any form in which humans can carry on human activity can be a criminal enterprise," Cloud said. "It can be a group of guys who meet on the corner."
Prosecutors like RICO laws because they carry tough penalties and make it easier to get at top officials or leaders who previously often escaped conviction. Before the laws existed, prosecutors found it more difficult to convict the person who ordered a slaying than the one who actually pulled the trigger.
Now, a person involved in a criminal enterprise commits at least two of a long list of crimes, is part of a pattern of racketeering activity, and can be sentenced to up to 20 years, and the ill-gotten gains of the enterprise can be seized. Certain individuals can also sue under RICO laws.
And the Justice Department says they didn't have enough evidence to convict Wall Street, I call bullshit.
FLOWER god, god of the spring, beautiful, bountiful,
Cold-dyed shield in the sky, lover of versicles,
Here I wander in April
Cold, grey-headed; and still to my
Heart, Spring comes with a bound, Spring the deliverer,
Spring, song-leader in woods, chorally resonant;
Spring, flower-planter in meadows,
Child-conductor in willowy
Fields deep dotted with bloom, daisies and crocuses:
Here that child from his heart drinks of eternity:
O child, happy are children!
She still smiles on their innocence,
She, dear mother in God, fostering violets,
Fills earth full of her scents, voices and violins:
Thus one cunning in music
Wakes old chords in the memory:
Thus fair earth in the Spring leads her performances.
One more touch of the bow, smell of the virginal
Green - one more, and my bosom
Feels new life with an ecstasy.
http://www.engadget.com/2015/04/18/comcast-gigabit-internet-bay-area/?ncid=rss_truncated
Comcast is bringing its twice-as-fast-as-Google-Fiber internet service to northern California.
Potential customers will need installation of professional-grade equipment to access it and, you'll have to be near its fiber network -- Fresno, Monterey, Sacramento and the San Francisco Bay Area are among the places on the list -- to qualify.
That's not all, either. Statewide, it's rolling out a 250 Mbps "Extreme 250" speed tier for cable internet customers. The telecom giant's also boosting speeds on its existing tiers as well, with lower priced-plans getting jumps from 25 to 45 Mbps depending on the package at no added cost.
Perhaps the best news about all this is that you won't have to wait too much longer for it all to take effect. Comcast says it'll start the cable internet upgrades in May with continued rollouts taking place the rest of the year, while the 2Gbps fiber service starts rolling out in June. And just like that, there's another gigabit competitor in Google HQ's vicinity with Fiber nowhere in sight.
http://o.aolcdn.com/dims-shared/dims3/GLOB/crop/3577x2537+0+0/resize/630x447!/format/jpg/quality/85/
I WOULDN'T CARE IF IT WERE GOLD-PLATED AND STAR TREK LEVEL...IT'S COMCAST!
Comcast is bringing its twice-as-fast-as-Google-Fiber internet service to northern California.
Potential customers will need installation of professional-grade equipment to access it and, you'll have to be near its fiber network -- Fresno, Monterey, Sacramento and the San Francisco Bay Area are among the places on the list -- to qualify.
That's not all, either. Statewide, it's rolling out a 250 Mbps "Extreme 250" speed tier for cable internet customers. The telecom giant's also boosting speeds on its existing tiers as well, with lower priced-plans getting jumps from 25 to 45 Mbps depending on the package at no added cost.
Perhaps the best news about all this is that you won't have to wait too much longer for it all to take effect. Comcast says it'll start the cable internet upgrades in May with continued rollouts taking place the rest of the year, while the 2Gbps fiber service starts rolling out in June. And just like that, there's another gigabit competitor in Google HQ's vicinity with Fiber nowhere in sight.
http://o.aolcdn.com/dims-shared/dims3/GLOB/crop/3577x2537+0+0/resize/630x447!/format/jpg/quality/85/
I WOULDN'T CARE IF IT WERE GOLD-PLATED AND STAR TREK LEVEL...IT'S COMCAST!
http://www.theautomaticearth.com/2015/04/the-weak-suffer-what-they-must-yanis-and-the-end-of-europe/
The fate of the global economy hangs in the balance, and Europe is doing its utmost to undermine it, to destabilize America, and to spawn new forms of authoritarianism. Europe has dragged the world into hideous morasses twice in the last one hundred years… it can do it again. Yanis Varoufakis, the newly elected Finance Minister of Greece, has a front-row seat, and shows the Eurozone to be a house of cards destined to fall without a radical change in direction. And, if the EU falls apart, he argues, the global economy will not be far behind.
Varoufakis shows how, once America abandoned Europe in 1971 from the dollar zone, Europe’s leaders decided to create a monetary union of 18 nations without control of their own money, without democratic accountability, and without a government to support the Central Bank.
This bizarre economic super-power was equipped with none of the shock absorbers necessary to contain a financial crisis, while its design ensured that, when it came, the crisis would be massive. When disaster hit in 2009, Europe turned against itself, humiliating millions of innocent citizens, driving populations to despair, and buttressing a form of bigotry unseen since WWII.
In the epic battle for Europe’s integrity and soul, the forces of reason and humanism will have to face down the new forms of authoritarianism. Europe’s crisis is pregnant with radically regressive forces that have the capacity to cause a humanitarian bloodbath while extinguishing the hope for shared prosperity for generations to come. The principle of the greatest austerity for the European economies suffering the greatest recessions would be quaint if it were not also the harbinger of misanthropy and racism.
Here, Varoufakis offers concrete policies that the rest of the world can take part in to intervene and help save Europe from impending catastrophe, and presents the ultimate case against austerity. With passionate, informative, and at times humorous prose, he warns that the implosion of an admittedly crisis-ridden and deeply irrational European capitalism should be avoided at all cost. Europe, he argues, is too important to be left to the Europeans.
THIS IS THE BLURB FOR VANIS' BOOK, DUE OUT NEXT YEAR:
“The strong do as they can and the weak suffer what they must.” —Thucydides
The fate of the global economy hangs in the balance, and Europe is doing its utmost to undermine it, to destabilize America, and to spawn new forms of authoritarianism. Europe has dragged the world into hideous morasses twice in the last one hundred years… it can do it again. Yanis Varoufakis, the newly elected Finance Minister of Greece, has a front-row seat, and shows the Eurozone to be a house of cards destined to fall without a radical change in direction. And, if the EU falls apart, he argues, the global economy will not be far behind.
Varoufakis shows how, once America abandoned Europe in 1971 from the dollar zone, Europe’s leaders decided to create a monetary union of 18 nations without control of their own money, without democratic accountability, and without a government to support the Central Bank.
This bizarre economic super-power was equipped with none of the shock absorbers necessary to contain a financial crisis, while its design ensured that, when it came, the crisis would be massive. When disaster hit in 2009, Europe turned against itself, humiliating millions of innocent citizens, driving populations to despair, and buttressing a form of bigotry unseen since WWII.
In the epic battle for Europe’s integrity and soul, the forces of reason and humanism will have to face down the new forms of authoritarianism. Europe’s crisis is pregnant with radically regressive forces that have the capacity to cause a humanitarian bloodbath while extinguishing the hope for shared prosperity for generations to come. The principle of the greatest austerity for the European economies suffering the greatest recessions would be quaint if it were not also the harbinger of misanthropy and racism.
Here, Varoufakis offers concrete policies that the rest of the world can take part in to intervene and help save Europe from impending catastrophe, and presents the ultimate case against austerity. With passionate, informative, and at times humorous prose, he warns that the implosion of an admittedly crisis-ridden and deeply irrational European capitalism should be avoided at all cost. Europe, he argues, is too important to be left to the Europeans.
THIS IS THE BLURB FOR VANIS' BOOK, DUE OUT NEXT YEAR: