i.want.world

What does it take to be a Victoria’s Angel?:

She sees a nutritionist, who has measured her body’s muscle mass, fat ratio and levels of water retention. He prescribes protein shakes, vitamins and supplements to keep Lima’s energy levels up during this training period. Lima drinks a gallon of water a day. For nine days before the show, she will drink only protein shakes – “no solids”. The concoctions include powdered egg. Two days before the show, she will abstain from the daily gallon of water, and “just drink normally”. Then, 12 hours before the show, she will stop drinking entirely.

“No liquids at all so you dry out, sometimes you can lose up to eight pounds just from that,” she says.

To be dumb also has its merits. In economics, where central decisions affects the lives of all, the discipline's technical side must be explained to the lay people. Definitely not on par with physics but one needs talent to be able to communicate the essentials to the average Joe.

Not much of a challenge for most disciplines, where there's not much technical information to be relayed. The problem becomes apparent in economics where most seem to have rather an opinion of the matter - sometimes a very strong one. A useful exchange of ideas thus requires one to understand where their opinions are rooted and the logic behind them.

Their opinions must not have possibly sprung from thin air so an investigative mind must see the logic behind the wrong ideas. This process requires one to be sufficiently dumb to gauge the others perspective and their conclusive operation that formed their position. The reasoning for this is explained through the notion that an extremely intelligent person may have never entertained those ideas and/or have considered them unworthy of lengthy analysis.

Contrarily, you must be smart enough to see where and why the other's logic is incomplete. Albeit, that's usually isn't so challenging. The challenging part comes when you must do both; you must be sufficiently dumb and smart enough to explain to the regular person and the smart people on the other side.

During my time in school, the ideas that were transferred to me were at the time seem impervious to error, handed from the all knowing teacher whose mercy I beg to impart with when it came time for me to be graded. As it is always said and deemed to be common sense for quite some time, demand and supply balances out resulting in an economic equilibrium of quantity and price. That's however never apparent for most of everyday commodities.

Examining the concept of demand from what others have stated, it has always been assumed that the actors in the economic system are rational beings where in fact demand is the result of human actions which can never be predicted. That in effect adds to this economic model a stochastic variable which, in turns, confronts one to see the economic model of supply and demand in a probabilistic way. If demand and supply were to be balanced, on average, the probability of you finding your coffee and sugar in a store shelf would be just 1/2. That is to say that half of the shelves in a store would be empty. However, we all know that this isn't the case. In the western world, shelves in supermarkets are always stocked with our favorite commodities. We can infer that supply is very much in excess of demand in such stores - or half of the population is in starvation.

This observation logically tells me that such properties of supply and demand can be described using a phase transition view; there exists two phases: excess supply and excess demand. From what we can observe from physical systems, phase transitions become exceedingly volatile at their phase transitional points in a continuous system. This, in economics, has counterparts that similarly resembles that of the open stock markets or foreign currency exchange markets.

Indeed, one can observe from past data of these markets and see the fluctuations that occurs at the critical points of the underlying continuous phase transition. It is due to current intrinsic market properties that markets remain almost always around the critical point. i.e. when there are more buyers than sellers, the market price goes up causing decrease in the number of buyers and increase in sellers. As actors in markets only care about the relative price of a market - up or down - the absolute price of the trading good becomes meaningless as it cannot be used to determine the market price. The fluctuations around the critical point does not stabilize the absolute value of the market price but merely stabilize the statistics of market price fluctuations to follow and stick to the critical point. The amplitude of these fluctuations can theoretically reach infinite and thus no determination of market price projections can ever be made nor settled upon.

The EU is rethinking things:

The European Union intends to increase tariffs on developing countries including China, India and Brazil under a plan to give only the neediest nations preferential access to the world’s biggest market.

The European Commission proposed to deny faster-growing emerging economies tariff reductions granted through the Generalized System of Preferences, under which the EU imported 60 billion euros ($86 billion) of goods in 2009. That figure would fall to about 38 billion euros under the proposal to limit the trade benefits to 80 nations instead of the current 176, according to the commission, the EU’s executive arm.

The EU, battling a Greece-triggered debt crisis after emerging from a recession in 2009, says overhauling decades of trade policy for poorer countries is justified by the economic rise of such nations as China, India and Brazil. Russia and Saudi Arabia are also among the nations that would lose GSP benefits under the proposal, which needs the support of EU governments and the European Parliament.

“Global economic balances have shifted tremendously,” EU Trade Commissioner Karel De Gucht said today in Strasbourg, France. “If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits.”

More here: http://trade.ec.europa.eu/doclib/press/index.cfm?id=707

If you understand this then you were, for the most part, part of the blue line. Prices of education is long due over to burst. It's reported that student debt in the USA is approaching a trillion dollars, five times what it was ten years ago. One thing for sure though is you cant just maneuver your way out from educational loans by declaring bankruptcy. Mind you that this is way worse than a bad end of a mortgage.

graph @CAPE DIEM

The Economist's Free Exchange blog has a handy table showing you when China's GDP will overtake America's. You can manipulate it by changing the projected growth figures, though under any reasonable assumption, China will become the world's largest economy in the next 8-12 years.

Dropping to second won't in itself hurt the US — it's not a zero-sum game and Americans, individually, will continue to be much wealthier than Chinese. But how to manage the transition from one global leader to the next?

Exactly once in the history of the industrialised world has a dominant great power lost its status to another dominant great power, and that already tiny sample size is of limited use in informing us about the future. Britain and America shared a language, a culture, and a general political philosophy of liberalism and democracy. They were explicit friends and allies. Perhaps most important, they were both rich, in per capita terms. Chinese culture is alien to Americans, and its primary political values appear to be quite different from those of the world's current hegemon. The two countries are not enemies, but their relationship is explicitly adversarial. And while America is rich, hundreds of millions of Chinese citizens will remain extremely poor at the time China assumes the top spot in the GDP league tables.

The Economist has written on the challenges likely to accompany this looming handover, but I think it's easy to underestimate just how unprecedented and historic a peaceful transition would be. The natural urge is to advise both countries to plan ahead, so as to make the process as easy as possible. But there is little in the way of past experience to suggest what the best approach ought to be. I'd generally recommend that America invest time and energy in building international institutions. But Americans are likely to view this as a preemptive relinquishing of power, and the Chinese may rightly see it as an attempt to tie their hands. Every step is fraught. One can only hope that the two nations perceive the clear mutual benefits of a cooperative relationship. But the clear gains from peace and trade did not prevent a breakdown in the international order in 1914.

“The money supply is too large,” said Andy Xie, an economist based in Shanghai who formerly worked at Morgan Stanley. “They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”

In Shanghai, where the average monthly wage is about $350, a gallon of milk now costs about $5.50.

The article is a good survey of some Johnny-come-lately China skeptics.

The website "The Economics of Seinfeld" (notice the URL is yadayadayadaecon.com) is operated by three economics professors (two at Eastern Illinois University and one at Baker University), and they explain it here:

"Seinfeld ran for nine seasons on NBC and became famous as a “show about nothing.” Basically, the show allows viewers to follow the antics of Jerry, George, Elaine, and Kramer as they move through their daily lives, often encountering interesting people or dealing with special circumstances. It is the simplicity of Seinfeld that makes it so appropriate for use in economics courses. Using these clips (as well as clips from other television shows or movies) makes economic concepts come alive, making them more real for students. Ultimately, students will start seeing economics everywhere – in other TV shows, in popular music, and most importantly, in their own lives."

Dozens of Seinfeld episodes are identified for highlighting specific economic principles like price ceilings, incentives, imperfect information, moral hazard, marginal analysis, cost-benefit analysis, game theory, arbitrage (the famous "Bottle Deposit" episode), free entry and exit, etc.

via Carpe Diem

If you take a look here at this Wired article where the announcement of PayPal was made, one may have just brushed over it and think nothing of substance but another eventual dintless foray of an internet startup's attempt at pitching their next idea during the last internet craze. Fast forward to more than a decade later, PayPal is looking much more like a bank, which is making quite a few people angry.

LAS VEGAS-Credit unions must unite against PayPal by offering alternative payment services that members are willing to pay for-before the online giant makes off with all the profits. That was among the sentiments share at the recent CUNA Technology Council Summit here. The TMG CUSO "is working with some credit unions to explore alternative payments and to compete against PayPal," Russell added. "Payments are the key to your future with your members," and will most likely migrate to the mobile channel. With non-sufficient funds and interchange fees dropping, credit unions need to make money by charging for services, he continued. "Free checking is over. How do we create a bundle of services that our members are willing to pay for?"

Nonetheless, PayPal had always posed itself to be a challenger of the dormant banking institutions and even governments, as Peter Thiel puts it: "The founding vision of PayPal centered the creation of a new world currency, free from all government control and dilution — the end of monetary sovereignty, as it were."

Jim over at NetBanking says that PayPal's may just become the dial tone of internet and mobile banking. True, but that's only if Facebook does not partake in the action. With an estimation of a billion dollar in potential revenue with just Facebook Credits, if executed right, Facebook can in due time take PayPal for its money (pun intended).

Facebook Credits are poised to be this generation’s American Express: an “affordable luxury” lifestyle brand and credit card with reward programs, frequent flier miles, and other incentives built right in so that the more you use it, the more you earn. ”Facebook Platinum”, anyone?

In any case, last week the "PayPal dial-tone" got even louder with the announcements at their second annual PayPal X convention for developers of a few initiatives:

• PayPal Mobile enhancements: PayPal Digital Goods: Two-click checkout for low-value digital goods eliminates the hassle of logging in
• PayPal Embedded Payments: Pay without leaving the merchant's app PayPal Business Payments: Electronic payments (non-credit card) of any size for just $0.50 per transaction
• PayPal Apps: Allows companies to embed applications into the PayPal website: where Expensify, and Bill.com are participating.

Including a partnership with Discover that provides Discover cardholders with the ability to send money to family and friends directly from their Discover online account or mobile device. The Credit Unions seem to be already in disarray and looking for innovative ideas to hold on to their diminishing shares of the payment market. In all likelihood, I'll hold my bets on a device, most likely the iPhone, which relies on the Facebook platform or iTunes credits which is funded by PayPal - the online financial transaction company.