Year: 2010

Learning from Horses

This guest post is contributed by someone very different to the profile of the rest of the LfD authors.  AJ is a young American girl.  It’s a pleasure to publish her Post.  I am told that almost every little girl goes through the ‘horse phase,’ but very few actually take it to the next level. The few who do generally end up competing, but for many different reasons. Most kids are doing it for the title. But then there is a small group of them who compete for the love of the sport and the relationship you form with your horse.

AJ (age 13) jumping Penny 3 ft 6

My name is AJ Easton and I have been riding since I was five, in other words for eight years now. I have been around some pretty incredible horses, one of whom became my best friend. Her name is Heads Up Penny (more fondly known as Penny) and she is my life. She is a 14.2 hand (a hand is four inches, so she is 4’10” tall), red dun Grade Pony. My father purchased her for me in 2005, just before I turned nine. She cost only $2,650, but to us, her disposition alone is worth millions.

AJ (age 6 ) riding Chip

My first horse, Chocolate Chip, died a year before we bought Penny. Chip and Penny taught me almost everything I know about horses, but that isn’t all I have learned from them.  Chip taught me about letting go, and how important it is to show the special people and pets in your life how much you love them.  Penny has taught me how to be responsible, patient, understanding, and so much more. She has also given me endless amounts of love; she always has a look on her face that can melt your heart. Penny always tries her hardest to please and has gone way beyond our highest expectations.

We bought her to help me perfect the basics of riding to see where I might want to go with my riding career, but she has turned out to be one of the most incredible pony jumpers I have ever seen. I still remember being excited about jumping 2’6” in my first year of showing, but now we are sailing over 4′ fences together.   Remember, she is only 4’ 10” tall!  We have so many new goals for her this year, now that she is going consistently over 3’3”, which is what she needs to be able to do to compete successfully in the top Pony Jumper shows.

This year we are trying to qualify for the 2011 USEF [United States Equestrian Foundation. Ed.] National Pony Jumper Finals, the show where all of the top jumpers come together and compete to be the best. We don’t expect to win, or even place, but being able to show in it would be one of the greatest honors ever, especially if I was able to do it with my best friend, Heads Up Penny!

By AJ Easton

We may need a new term for Fed “Profits”

It’s more than semantics to understand what we mean by The Fed’s profits.

The Federal Reserve, it has been reported, earned record “profits” of over $46 billion in the year ending December 31, 2009.  The previous record profit was $34.6 billion in 2007. The Fed earned $31.7 billion in 2008. The financial crisis has apparently been very good for the Fed, although, as a non-profit entity, all its profits are turned over to the Treasury.  As an aside, I wonder what the Treasury plans to do with its windfall?Reduce taxes? Hmmm.

Be careful, however.  “Profits” are a bit of a misnomer for the Fed’s activities, because they pay for what they do by creating money out of thin air.  To buy a financial instrument such a treasury bill or mortgage-backed security, which is added to the left-hand-side of their balance sheet as an asset valued at cost, they create (and I do mean “create,” in the true sense of the word) an equivalent amount of deposits on the right-hand-side of their balance sheet. It does not “cost” them resources as it would you, or me, or a business.  The “expense” is deducts from revenues to arrive at this period’s profits consist mainly of employee salaries.  Fed BS Dec 2009

So if the Fed purchased a bunch of assets with reserves that they created, where do the “profits” come from?  Keep in mind, there are two major drivers of profits.  One is efficiency, or doing more with your resources. The second is pricing power, being able to charge an above-competitive price for a good or service either because you own something scarce or you make up the rules of the game.

First, two minor sources of income to the Fed are the interest and fees it charges for operating the financial system, such as check clearing and interbank electronic payments, and those it charged participants in the emergency loan programs it undertook to support credit cards and auto loans.

By far the largest source of revenue to the fed, however, came from its open market operations and the purchase of toxic assets.  The Fed had about $1.8 trillion in U.S. government debt and mortgage-related securities on its books by the end of 2009, four times the level in 2008, and the interest payments it collected on this huge pile of assets generated much of their (so-called) profits.  But interest payments are only one source of returns on financial assets. The other is “capital gains” or “price appreciation.”  If and when the Fed sells these assets, some of them considered “toxic,” there is a real risk that they will incur significant capital losses.   For example, the central bank recorded a $3.8 billion decline in the value of loans it made in bailing out Bear Stearns and AIG.

So the Fed’s profits are this period’s interest income minus the Fed’s minimal operating expenses; the capital base on which it earns income is basically “free.”  And all of these figures focus on one-period accounting entries, ignoring the huge potential negative stock of value the Fed’s activities are generating.

Don’t misunderstand. The Fed provides an invaluable service to the national and world economies, and they generally execute those services very well.  But when they begin to try to act like a business, replacing existing investment banking with their own activities, and parade around profit figures as if they meant the same thing as private industry profits, we must step back and take a moment to understand that Fed profits mean something entirely different from corporate profits.

By Sherry Jarrell

President Obama: A Tax Increase Does not Reduce Costs!

A novel, and incorrect, way to lower costs.

The latest from Washington on Health Care Reform is the Senate’s version which taxes insurance companies on plans valued at over $8,500 for individuals and $23,000 for couples.

President Obama has defended the tax as a way to drive down health costs.  “I’m on record as saying that taxing Cadillac plans that don’t make people healthier but just take more money out of their pockets because they’re paying more for insurance than they need to, that’s actually a good idea, and that helps bend the cost curve,” the president said in an interview with National Public Radio just before Christmas. “That helps to reduce the cost of health care over the long term. I think that’s a smart thing to do.”

Huh?  Mr. President, you need an Econ 101 primer. Let’s begin now, with supply and demand:Leftward shift in supply

Supply is an upward-sloping marginal cost curve, and includes the taxes and fees a business must pay to the government.  By imposing this tax, the supply curve of insurance companies will shift up and to the left, as shown in the graph, representing a higher cost per unit of insurance coverage.  The demand curve slopes down, so when intersected by a more costly supply curve, the final price to consumers rise and the amount of insurance coverage falls.   Period. End of story.  Indisputable fact.  And nothing Obama or the Senate says will change this fact, though they will try.

By Sherry Jarrell

Bananas and common sense!

This is more than about the problems with Toyota.

The Economist is a newspaper.  It was first published in September 1843 which, of itself, makes it a notable newspaper.  Many years ago, more than I can recall just now, I became a subscriber to the newsprint version of this weekly paper.  It has become such a companion, so to speak, that when I left the UK in September 2008 to come to Mexico I made arrangements to continue receiving The Economist each week.

However, the Mexican postal system, despite being thoroughly reliable, is rather slow and, rather logically if you muse on it, the postman always only delivers when there is more than one item.  Thus the particular copy of The Economist that carried the story about Toyota arrived late and with three other editions!

Let me turn to the point of this article.

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Simplifying our lives

Smell the roses

Actually I don’t watch the television at home, so when I am away and staying in a hotel it is novel to turn on the TV.

I am amazed at the similarity between productions, whatever country you are in. The practice now seems to use 4-second clips, with movement across the screen, together with a moving strip, rotating bill board, and a moving back drop, moving camera, and to cap it all constant music.

I have no need for this, in fact I have little use for any of it! Am I informed? – well yes to a point, but beyond a certain amount of scrambled information my own brain becomes confused.

Shopping is another area where a wealth of choice confuses me, but yet I lack nothing.

So often we are faced with pressure to have something.  Well I have found that the less I have, the less I have to worry. Indeed, more to the point, I work on the principle: if it hasn’t been used for two years it can go. I have made a conscious choice to keep certain items, those which I believe are of use, but the rest is sold, given away, or recycled.

In this modern world, we have so much thrust upon us forgetting however that our parents were happy with what they had.  I am also learning that our children are far more healthy, as a result of having love and time to do all manner of things together, being free of modern extras.

It is interesting to write down what you think you need, or what you would take with you if you had half a day to vacate your house.

Health and happiness come as a result of different things, but keeping up a program of work, or living a lifestyle that is gruelling will take it’s toll.

An expression that I recall being said by a friend once was: ”It was time to stop and smell the roses.” Well of course they will always smell, but it takes time to throw away other time consuming things to realise simple pleasures.

A quiet walk, time for a chat, slowing the pace down, some reading, music: I am happy.

By Bob Derham

More Shenanigans on U.S. Health Care Reform

Is this really what the Founding Fathers had in mind for America?

This topic may seem to be more about politics than economics, but anything related to health care reform is squarely rooted in the most important of economic issues:  the costs of doing business, the size of the government, and the potentially oppressive role of government in private industry.

To that end, the following is a must-read, and should make you angry, no matter what your political persuasion.

In this article, we see how the Senate Democrats are going to do whatever it takes to get their version of health care reform through, even if it comes down to ‘stealing’ votes.  Could the timing of this Massachusetts special election, to replace the temporary replacement put in for the late Senator Edward Kennedy, be one of the reasons that the Senate wants to rush this reform through before the President’s State of the Union Address, typically set for mid-January, though the White House is curiously reluctant to commit to a date….  ?

By Sherry Jarrell

Dad, what job am I going to do?

Approaching that big boundary between learning and earning.

It seems like only yesterday that my first daughter Natalie was born.  Now Natalie is approaching 17, going to college and will soon be learning to drive. She did very well in her GCSE [UK exams taken around the age of 16. Ed] exams, but at the moment has no real idea of what she wants to do.

Perhaps not what you would expect her Dad to say but I think that is great.  Because she can continue with a broad based approach to learning and from this she will eventually channel her interests and knowledge in a particular direction.

For A levels [University entrance exams taken around the age of 18. Ed] she is taking French, Psychology, Law, and Textiles!

Clearly for a young person another language enhances the ability to communicate with the wider world.  Psychology is an interesting and a useful insight into fellow humans.  Law will help to make her aware of what she will be expected to deal with but textiles, that was an initial puzzle to me.

The college were very unhappy about Natalie taking up textiles because she had not done art at school but, to be honest, that was because the school, at the time, had put pressure on her to drop art in favour of another subject that fitted into the weekly program of lessons.

But in just three months Natalie has shown great flair for textiles and I am amazed by the work she has produced. However, when I called her this evening from abroad (I’m currently in the Middle East), she was feeling very unsure because her form master has been putting pressure on her to decide what she wants to do when she leaves college.

If you are lucky enough to know your career path then life is easy but actually I am pleased that my daughter is building her knowledge in an open way. I only ask that she does her best.

Exam results might seem important on the day of announcement, and they may well be of serious consideration when applying for jobs in competition with other applicants, but who is the person?

Social awareness is hugely important, and trying different jobs earning money in the school holidays has given her an insight into various ways that people earn their living.

My suggestion is for her to not even worry about exams.  Just enjoy the information she is learning.  In France last year she was chatting away to locals in French, and laughing, because the level of understanding was already there.

Take the pressure off ! Make learning fun. Take the subjects you want. Enjoy education. There is greater variety with regard to work these days.  Natalie will not end up in an office as she fears. Her general level of education and happy disposition will guide her to something different.

It is difficult to try an explain all this, but success in adult life is not a multitude of qualifications and lots of money, it is a balance of finding something that is of interest, pays a suitable wage, and makes you happy.

When I was at school nobody suggested making stained glass windows, or restoring paintings, or moving to Greece and working with different textiles but many things are possible now.

I only hope that she will trust herself, and then when she finally discovers something she really likes, she will be happy.

By Bob Derham

U.S. Health Care Reform: The Ultimate Intrusion

US health care reform comes with strings, nay chains.

Once a single-payer health care program is enacted into law, the US Government will assume the right to tell us how to live our lives.  Our health will be their responsibility.  Government officials will feel empowered to tell us what to eat and drink, what risks to take, whether we can smoke, how much weight we can gain and how much exercise we must get.

If you have any doubt, consider the following statements from the Obama administration over the last year. The clear message is if the government pays for something with tax dollars, it has both a right and a responsibility to tell the recipients of those dollars how to conduct themselves.

  • This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success,” Obama said. “But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”
  • President Obama challenged top bankers to explore “every responsible way” to increase lending, saying they were obliged to help after being rescued by taxpayers. He asked them to “take a third and fourth look” at their small-business lending. He also exhorted the executives — both in private and in public — to drop their opposition to an overhaul of the nation’s financial industry.  “If they wish to fight commonsense consumer protections, that’s a fight I’m more than willing to have,” Obama told reportersin the Diplomatic Reception Room of the executive mansion.
  • Obama said it is “wholly unreasonable to expect that American taxpayers would or should hand this administration or any administration a $700 billion blank check with absolutely no oversight or conditions, when a lack of oversight in Washington and on Wall Street is exactly what got us into this mess.”  Obama said taxpayers should be treated like investors if they are being asked to underwrite the bailout.
  • “What’s really frustrating me right now is that you’ve got these same banks who benefited from taxpayer assistance who are fighting tooth and nail with their lobbyists up on Capitol Hill, fighting against financial regulatory control,” Obama added.

By Sherry Jarrell

Time Flies!

Family echoes.

Today is my 54th birthday.  I am now the age that my mother was when she died, on January 8th, 1985.  I knew then that she died too young, that she had so much more living to do.

Two weeks before her death, I visited her in the convalescent hospital where she had been for months.  She was going home!  The doctors had given her a clean bill of health.   She ordered a new skirt to celebrate and had it shipped to her home.  We got out maps of London and made plans to take a trip there together, as adults, as friends, the following summer.  I went back to school, happy to have had such a nice visit, happy she would soon be going home.

About ten days later, on January 5th, 1985, I got a call from my brother, telling me that mother had septic shock, that she might not make it, and that I needed to get there, fast.  I bought a one-way ticket and packed a dark suit.   She was still alert when I finally arrived.  The nurses remembered me, and let me stay with her, even when visiting hours were over.  I got to talk to her, and ask her what she wanted me to do for her, what she wanted the doctors to do for her, what measures she wanted taken.  She wanted to live.  She was getting weak, working to breath, waiting for the antibiotics to work. Or not. The doctors recommended a ventilator, to help her conserve her strength.  Before they put it in, she had one last thing to say:  “I love my children.”   She died that night.

Lillian Harris, Sherry's mother, at age 20 with her first child Brenda

I remember thinking at the time how sad it was that she had never gone to college, never had a career, never fulfilled her dreams.  That she had fallen in love at 18, gotten married, and devoted her entire adult life to her children.    That her last thought was of her children. I was single and doing odd jobs while earning a doctorate.  I had a cat and helped take care of my 90-year-old neighbor, but having children was the furthest thing from my mind.

Fast forward to today, January 12, 2010.   I am now the age my mother was when she died.  I did go to college, I do have a career, and I have chipped away at those dreams.    But those are the side bars of my life.  Like every parent out there, the moment my first child was born, I understood what my mother meant.  I understood how much you could love someone, how you could put their interests ahead of your own,  and how you could not be happy unless they were okay.  And, as the years go by and I get older, I understand what a precious gift my mother gave me when she said those last words.  She taught me that time flies, and you never know what day might be your last.  She taught me to treasure every second with your children because, before you know it, they have grown up and are out the door. Just yesterday, they were toddlers; blink, and they are turning 30.

Time passes so fast.   Make it worth it.

By Sherry Jarrell
[Readers may find that an earlier Post by Sherry fits very beautifully with this moving account published today. Ed.]

Criminals or enemies of the State?

A reflection on what ought not to be a legal difficulty

Yesterday, Dr Sherry Jarrell strayed outside her normal field of economics and voiced the feelings of an ordinary US citizen.  That is that the “underwear” bomber should be seen as a combatant, not as a common criminal.

It’s easy to share the frustration of others that someone who allegedly was committed to blowing up an American airliner was clearly behaving as an enemy of the State and, therefore, should be treated and tried in a military manner.

What is the history of such definitions as combatants?  WikiPedia provided an answer.  (NB.  Good reporting should cross-check a source with another source.  I spoke with a Barrister friend of mine and he confirmed that the entry under WikiPedia appeared to be legally correct and reliable.  Readers are asked to make up their own minds on this issue.)

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