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| Mon Jun 30 23:18:26 2008 Seizing up again |
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| Tue Jun 24 22:04:19 2008 Gas Prices |
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| Sun Jun 15 22:23:08 2008 Sasquatch 2008 |
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| Mon Jun 30 23:18:26 2008 Seizing up again The Fed confirms what I already said... |
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| Friday there was a
Yahoo story about the
Federal Reserve's moves to shore up Bear Stearns.
If you read Seizing Up Explained then you already know the story: the Fed felt it had to move because the entire investment banking industry was on the verge of collapse. The article was based on recently-released documents "providing insights into its private deliberations." The documents pull no punches, saying they feared an "immediate failure" of Bear Stearns, and such an event would cause an "expected contagion." I thought the "documents" were minutes of the meeting. They weren't, at least not verbatim. The Yahoo story didn't reference them, but I found the minutes on the Federal Reserve website. I was hoping (naively) for transcripts of the discussions. Instead, these are just bullet summaries, written after the fact (the documents reference other events that happened on April 1, for instance). So the "minutes" had the benefit of being written with considerable hindsight. My take on these? They are intended to support the Federal Reserve's decision to bail out Bear Stearns, and don't provide much insight into the decision making at the time. I don't think the Federal Reserve's documents are propaganda, but they have to be questioned. On the one hand, you can see that Reserve members were worried about a general collapse. On the other hand, a cynic could wonder if they were going out of their way to help a few investment banks that didn't deserve to be saved, and they are still trying to defend that decision. It is very clear that the entire banking system was not primed to collapse. There were a number of investment banks who were vulnerable, but any banks in that position deserved to fail. If a general "contagion" really developed, the worst that could happen is that investment banks would have a run on their funds. Don't get me wrong, that's pretty bad, but it would remind those who invested money there that those banks are not guaranteed. Of course, it is possible that by allowing commercial and investment banks to merge, the US has created a situation where instabilities in (poorly regulated) investment banks can jeopardize our (taxpayer-guaranteed) commercial banks. If that is true, then the solution is to force commercial and investment banks to stay separate, not to guarantee investment banks. If we've leared anything from the subprime mortgage mess, it's that investment banks are fraught with risk. After all, that's the path to higher returns. The solution is to make sure investors understand the risks, rather than pretend we can control them. Comments |
Related: > economics < Unrelated: books energy environment geopolitics lists mathematics predictions science |
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| Tue Jun 24 22:04:19 2008 Gas Prices They will just get worse... |
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| In
The Great Stagflation of 2008 I made the amazing prediction that gas prices would reach $4.50 per gallon
"before 2010." Well, I was right! Although I wasn't expecting it to happen
so quickly.
Today, I read a story on Yahoo that claimed we should start seeing lower gasoline prices "someday." In particular, they noted that high prices were causing a drop in demand in the US and China, Saudi Arabia was increasing supply, and Iraq was also beginning to increase supply. Great! But I still don't think we'll see lower gas prices anytime soon. For one thing, it does take a while for supply to come down. I predict US gasoline consumption will drop by around 20% between 2006 levels and 2010. But it will probably take 2 more years, since that's how long it took in the late 70's and early 80's for people to change cars, housing, and habits after the 1970 oil shocks. For another thing, gasoline prices still haven't caught up to oil prices. Crude oil prices have risen from around $11 per barrel in June 1998 to over $130 per barrel in June 2008 (see the historical prices at the US Energy Information Administration). That's a 12x increase in 10 years. Meanwhile, US gasoline prices have jumped from $1.10 per gallon in June 1998 to $4.13 per gallon in June 2008. That's a bad 4x increase, but only 4x. Gas prices haven't caught up to crude oil prices! Partly that is because crude oil is only part of the price of gas. But it is also partly because gasoline retailers aren't passing along the full costs of the gas. Even with the higher prices, many retailers are still selling at a loss! So I think it is reasonable to expect gas prices to rise another 25-30% in 2008. I'll make a new prediction: gas prices will reach $6 per gallon in the US before the end of 2008. And I think we'll never see gas prices below $5 per gallon again. There is a chance I'll be proven wrong in a year or so, as demand comes down temporarily. But once production declines begin, gas prices will really skyrocket. Comments |
Related: > economics < predictions energy Unrelated: books environment geopolitics lists mathematics science |
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| Sun Jun 15 22:23:08 2008 Sasquatch 2008 A geek's report on the music festival. |
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| Yes, I'm late! I was at the Sasquatch 2008 Music Festival over Memorial Day weekend (24 - 25 May), but I'm just now getting to writing it up. The weather varied between beautiful and bad. When beautiful, you remembered why you went to The Gorge--a dramatic landscape with beautiful skies. When bad, you were treated to cold and relentless rain. Another Sasquatch 2008 reviewer mentioned "fans put up with sideways rain," because of the wind. 
There was a great lineup (you can see for yourself). They had several great headlining bands, such as R.E.M. and The Cure. But I was most excited to see some of the other bands that I hadn't seen in concert before, such as Death Cab for Cutie and Modest Mouse.
Between bands, I would marvel at the crowds. From our vantage point (almost directly back from the center of the stage both days), we could see the thousands of people moving back and forth. It was a great example of emergent phenomena, watching all the invidivuals combine into an overall flow of people that could probably be well-modeled by fluid dynamics. In general, a band would play, and then there would be net outflow of people towards the bathrooms, food areas, and other stages. Towards the beginning of a set, the flow would reverse. As popular (and direct) routes got busy, people would naturally choose less congested routes.
A beer cost $8 (more for "premium" beers). The economics of food pricing at festivals is interesting. Of course, as a captive audience, you know you'll be charged an arm and a leg for average food--it's the same as the movie theater. In fact, this phenomenon (high price of popcorn at movie theaters) is well-known and studied by economists a lot. This recent blog entry has a long discussion on it! But the short answer is that the high prices are probably close to the real value--after all, thousands of people pay the prices that are charged! It's just that the real price of the item isn't usually related to the cost of the ingredients: instead, most of the price is the labor of making the item, and (most importantly) the convenience to the consumer. I brought my own food, but occasionally I wanted something hot. For the occasional hot snack, why not pay a bit more? The convenience factor was high. For beer, the choice was between their prices or no beer at all. So they picked a price point to maximize return, where higher prices would drive more people away, and lower prices would mean selling too cheaply. Of course, there is another cost that means festivals will charge more: drunk patrons are a pain to manage. But if you're going to talk about the economics of music, it's more than beer and food prices. It is the disintegration of the standard music distribution business (see this article from Fox News or this article from The Week). CD sales are plummeting, and digital revenue isn't coming close to replacing it. I'm not sure I care about the music distribution companies--their industry may disappear, and them with it. Today we don't cry about the disappearance of coopers (barrel makers), even though their industry long since collapsed (although did not disappear entirely). No, the danger is to bands themselves. How will bands make money in the future? Probably by a combination of live performances (which accounted for most of their revenue under the old system anyway) and their own direct digital sales of their music (like what Radiohead did). For a great summary, see this report, commissioned by the Department of Canadian Heritage. For an American, it's weird to see governments funding this sort of thing, but it is an interesting report.
Top 3 bands? This is my list, although I was only there for 2 days, and only at the Main Stage:
I hadn't heard of Tegan and Sarah before, but I thought they were excellent. I've since added a bunch of their tracks to my collection. Don't get me wrong: there were a lot of great bands there, and the Presidents rocked. But those are my top 3.
As much as I studied the crowd behavior and economics of festival food prices, I was also impressed by the selection of bands at the festival. The lineup was well-done, for the quality of (most) bands and especially for the variability. I guess putting together a festival lineup is a bit like making a good mix tape (or CD or playlist...), only much larger in scale. Comments |
Related: mathematics > economics < lists Unrelated: books energy environment geopolitics predictions science |
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