Will Taylor

Social vs Economic Issues: US vs NZ Elections

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Greg Mankiw has blogged about young voters abandoning the republican party in the recent Presidnetial election, citing this graph from Andrew Gelman

When discussing why he thinks this happened he cites anecdotal evidence from talking to undergrads at Harvard that

It was largely noneconomic issues. These particular students told me they preferred the lower tax, more limited government, freer trade views of McCain, but they were voting for Obama on the basis of foreign policy and especially social issues like abortion. The choice of a social conservative like Palin as veep really turned them off McCain.

I found this interesting as I generally fall into the same category, my utility function probably places a greater weight on social and foreign policy issues then economic issues. Since there is such a gulf between the democrats and republicans on social issues I generally tend to vote democrat in the US.

On the other hand, (despite what the parties say!) we don’t have anywhere near as much of a politcal divide on social issues in New Zealand so I generally vote based upon economic policies. Which, as you will have seen from our TVHE political quiz results, means I usually vote National.

As an aside, isn’t it random that a “Red State” is a Republican state when red is the socialist colour? According to my good friend wikipedia this just happened by accident and was a result of the the US news stations.

Matt Nolan

Why the Fed shouldn’t worry about inflation – but should we?

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Complaining about inflation now may seem to be similar to the captain of a boat complaining about pushing the engine too hard when the ship is sinking – but I’m going to do it anyway 😉

Bank in September Fred Mishkin wrote an article for the Wall Street Journal (ht Economists View and Greg Mankiw).  In it he mentions that the concern should not lie with headline annual growth in the consumer price index, but a more generalised and persistent increase in the price level.  Looking at core inflation, nominal wage growth, and the such in the US indicates that they are not truly suffering from an inflation problem.

Heading into the recent crisis this still seemed to be the case.  The October NBNZ Business confidence survey (which I will discuss tomorrow) still had elevated inflationary pressure, and I suspect the labour market data we have seen today and back on Monday (note that I haven’t seen this data when I wrote this) would indicate a strong inflationary undercurrent.

The truth is, even with a drastic slowdown in domestic economic activity, there is the risk that some form of underlying inflation mark-up is occurring during the wage negotations of the firm and the price setting behaviour of other firms.  I think this is evident in changing marketing strategies – with a “fixed price contract” now seen as an amazingly special deal by electricity retailers.  Purging this from the economic environment is difficult and costly – and is the ultimate cost of loose policy over the past six years.  If our recession is deeper than that experienced by the rest of the world, we can probably put it down to a historical failure by our central authorities.

The US may be able to relax about inflation – but we still can’t 🙁

Will Taylor

Credit Crunch jokes

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It’s good to know investment bankers still have a sense of humor. I just these jokes in an email from some friends in finance. From the Wall Street Journal apparently.

Given that a major NZ investment bank has just had a large culling of its staff I guess they need something to lighten the mood around the office!

Enjoy!

Agnitio

Gallows humor. Wall Street might have lost tons of money, but that doesn’t mean traders have lost their ability to laugh. Some faves making the rounds:

— What’s the definition of optimism? An investment banker who irons five shirts on a Sunday evening.

— What is the capital of Iceland? About $3.50

— I tried to get cash from an ATM today, but it said “insufficient funds.” I don’t know if that meant them or me.

— What’s the difference between an investment banker and a large pizza? The pizza can still feed a family of four.

— What does a hedge-fund manager with no fund to manage say? Would you like fries with that sir?

— The credit crunch is getting bad, isn’t it? I mean, I let my brother borrow 10 bucks a couple weeks back. It turns out I’m now America’s fourth-biggest lender.

Will Taylor

Political Quiz Part Deux: Obama vs McCain

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So you’ve probabaly read with great interest Matt’s post on the NZ election political quiz. I also noticed that the same quiz has a verison for the US presidential election so I thought it might be fun for us to repeat the exercise.

You may be surprised by the results:)

Agnitio: Obama (79%), Nader (72%), McCain (72%).

Agnitio Comment: Given I voted for Obama (I also hold US citizenship) I’m not surprised by this. I’m also not particularily surprised I have a high rating with McCain given I generally lean a little to the right economically.

Goonix: Barr (73%), McCain (59%), Nader (53%), the other candidate (53>x>38%), Obama (38%)

Goonix Comment: Consistent with my results of the NZ version of the quiz. There is no way I could vote for the economic policies of either major parties’ candidates (especially Obama). Similarly, I could never vote for the archaic social policies of the Republicans, or their pro-war stance (one which Obama seems to be pretty keen on now too). But I still can’t believe Barr is standing as the Libertarian candidate and is anti-choice!

Matt:Nader (68%), McCain (63%), McKinney (60%), Barr (60%), Obama (60%)

Matt Comment: Although my results were in a narrow band the politicians did very differently in the individual components I choose. Overall, this gives me the impression that US politicians are inconsistent “between-issues” at least in my little slice of reality. Thank goodness I live in Aotearoa – where politician’s inconsistency is equally spread between all the facets of governance 😉

Matt Nolan

Fed cuts rates to 1%

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The Fed lopped 50 basis points off its cash rate, taking it to 1%.  With real interest rates already well in negative territory I’m not sure this sort of action is really necessary – maybe they want to stabilise consumer confidence or something of the like.

Anyway, our concern here is New Zealand – so what did it do?  The TWI went up to 59 from a low of 56 – the $US/$NZ got to $0.59 from a low around $0.54, so it helped to stabilise the FREE-FALL in our currency lately (just before I’ve gone on holiday).  Oil prices also bounced back – but still lie at the “relatively” low level of $67US a barrel.  For New Zealand this might imply some stability in our commodity prices – this is an essential issue so we can only hope!

All this is a sign that the market has initially taken the rate cut well, with the DOW now up 1200 points from its low about 36 hours ago (*).  If this lasts, then we could finally be in for a time of stabilisation – if it doesn’t, who knows 😛

All I know is that the Fed will print as much money as it can to prevent a “Great Depression”, ignoring the future consequences.  I will aim to discuss this more next week.

Matt Nolan

Depression contract

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Intrade has launched a US depression contract (ht Institutional economics).

This depression is defined as:

a cumulative decline in GDP of more than 10.0% over four consecutive quarters

Do you think NZ’s very own iPredict would like to make up a similar contract for NZ?