Guy Berger

This story, which has been in a few of the national newspapers but probably hasn't made much impact outside of Florida (or has it? I don't watch cable news), is absolutely staggering.

The NY Fed just published a preliminary study on the effect of payday lending bans in GA and NC. The authors claim they found that these bans had negative effect on borrowers. In addition, the doubling of the loan size limit at Hawaiian payday lenders supposedly had a positive effect on borrowers. However, I have not given the econometrics or the welfare metrics they use enough thought to judge whether their conclusions are sound. Here is the paper's introduction:

Not strictly true (I am really just picking nits***) -- the revolt itself was successful in chasing the Syrian Greeks out (with occasional setbacks) and creating a Jewish kingdom in Judea. However, about a century later the rulers of that kingdom (descended from the Macabees) fell into bickering and when Pompey the Great brought Roman legions into the Levant he "settled the dispute" by sucking Judea into the Roman orbit. Guy ***I am sure Larry's parenthetical comment was just intended as a summary of my paragraph.

If by "fascinating" you mean it royally pisses you off, I agree. Well, I am wearing my "social scientist" hat. Plus I am lucky enough not to be living in a country stupid enough to put price controls on food. As far as the outlook for Africa -- not very good, though South Africa and other food exporters will be big beneficiaries in the aggregate and wise policies (a big if) could spread that benefit around. Guy

It's a little chilly today at 68 degrees but it looks like we will be in the mid 70s for the beginning of next week. I love winter! Guy

Extremely interesting article. I figure that in 30-50 years we will see this as a temporary deviation from trend, but for the short and medium term higher food prices are probably here to stay. I also find the implementation of inferior policies like ethanol subsidies and price controls to be fascinating.

I have to say that getting rid of the politics forum strikes me as a bad idea. It's a steam valve (or perhaps "sewer" is a better word) for the rest of the board -- all the really heated controversial stuff goes there so we don't have to read it in the other subforums. Eliminate it, and it will pop up elsewhere on the board. Cesspits serve a purpose. Guy

Wow. I know I haven't been as active on the board in the past 4 months as I was in the previous 4 years, but one of the things I look forward to when coming home from work is reading what all of you have to say. It's a great community and I've learned a ton. You guys are awesome! Jim, I really hope you reconsider. But even if you don't, you deserve our deepest gratitude for keeping this thing running for as long as you can. All the fun we've had is a testament to your dedication and patience. Guy

Thanks fellas. I am watching my Chanukkiah lit as I write this. Guy

I was listening to Aiee the Phantom yesterday -- "Theme to the Mothership" is a smoking performance (and a great tune). Guy

About a month ago I ordered a "like new" copy of S Turrentine's Never Let Me Go from an amazon seller with a very high rating. The description mentioned that it the case was scratched but I didn't care about that. However, when the CD arrived I noticed that it was scratched. Not completely scuffed but there were 7 or 8 noticeable scraches. Fortunately the cd itself plays fine. So today I finally got around to logging onto amazon and gave the transaction two stars, noting that while the CD plays fine, I felt that the seller's description was dishonest. I got the following response: 1) Did I act inappropriately? I don't buy a ton of used CDs so I am not fully aware of the ethics involved. 2) Should I accept the quid pro quo of the refund for removing the feedback comment?

In college I picked up six Tangerine Dream albums -- Alpha Centauri, Zeit, Atem, Phaedra, Rubycon, Stratosfear. Alpha Centauri is great -- late 60s Floyd taken to the next level. "Fly and Collision of Comas Sola"! Zeit -- wow. I don't know if I have ever listened to it closely the whole way through, but it's an experience. Sort of the equivalent of Ascension for this (very different) style of music. Those moaning cellos on the first track. Atem I have not gotten into that much, but I picked it up after the previous two and haven't listened to it as closely. Phaedra and Rubycon are classics. Perhaps not as raw as the earlier albums, but there is something about the combination of those throbbing synthesizer lines and the dissonant mellotron backdrop. Stratosfear -- geez, their music got a lot worse and only one year had passed since Rubycon. Guy

Don't have the primary source , so can't vouch for the methodology , but the correlation is mentioned here and here . Whatever the numerical value of the correlation actually is , the important point is that it is not - 1.0 , which is what your initial assertion , "a 20% depreciation of the dollar against the euro will cause the price of oil to go up by 20% in dollars and remain unchanged in euros " implied . As I said , given present conditions I agree with your point , but not with your reasoning in support of it - reasoning which if it were sound , would rule out any contingency in your statement . What conditions would have to change to make my point invalid? You say my argument is contingent -- contingent on what? (Let's leave out the following: exchange rate or commodity markets collapse; either the dollar or the euro becomes a highly illiquid currency). Of course not ; nothing I wrote supports such an imputation in my view . OK. "Exchange rate movements don't generate large unexploited profit opportunities by buying oil in one currency and selling it another" implies "it doesn't make a difference to oil producers what currency oil is priced in".

If the currency used for pricing were irrelevant , how then to explain the - 0.7 correlation between movements in the dollar/euro cross and the dollar price of oil ? I'm curious -- what is the source for that -0.7 number? I assume that is not a simple correlation (which would suffer from serious omitted variable bias), but would like to make sure. Regardless, as I conceded, the relevant relationship is between the ratio of dollar/euro prices of oil (not the actual dollar price) and the dollar/euro exchange rate. That would certainly be consistent with the correlation you mention -- for example, if the dollar depreciates by 20% against the euro, the dollar price of oil goes up by less than 20%, and the euro price of oil falls to make up the difference. None of this changes my main point -- that there is little to be gained by pricing oil in another highly liquid currency. As Jan asked -- are you seriously arguing that exchange rate movements generate large unexploited profit opportunities by buying oil in one currency and selling it in another? Guy

I'll be in the market for a new car in the spring and will probably check out the hybrids. The Prius is way too small for my taste but it looks like there are some larger hybrids on the market. Guy

Winter sucks. We might not crack 60 degrees next week (and it gets pretty cold at night) but no place is perfect. Guy

That is obvious, but it isn't what Guy asserted. What he asserted is if the value of the dollar drops by X%, then this will have an X% upward impact on the dollar value of oil prices. Other forces could have additional upward or downward impact on prices. I stand by my criticism of Guy's original assertion ( and by extension , your reformulation ) . Guy's statement contains two elements . First , he asserted the existence of a - 1.0 coefficient of correlation between the dollar-euro exchange rate and the price of oil - when the dollar weakens against the euro , the price of oil increases . Please note that my criticism of Guy's assertion does not rest ( as you supposed ) on a claim that it cannot explain all of the rise in the price of oil . Two , he asserted , that the slope of the regression line has a unity value - if the dollar depreciates by 20% against the euro , then the price of oil increases by 20% . Both these claims are false . The price of oil is set in world markets. Therefore when the dollar depreciates by 20% relative to the euro, it must be that the ratio of oil prices in dollars vs euros must also increase by 20%. Otherwise there would be a risk-free profit opportunity, buying oil in dollars and selling it in euros. You are correct (and I was incorrect) that because of other cross-rates it is possible that the dollar price of oil would increase by less than 20%. However, the change in price ratio would be 20%. And the price of oil in dollars relative to the price in other currencies would move exactly by the same amount as the dollar's movement relative to those currencies. I don't think any of this undermines my original argument. Guy

Well, by most estimates the US has been borrowing too much from the rest of the world in the past decade or two (a great deal for us!) and some decline in net borrowing from abroad, as long as it is not too sudden, would be a good thing.

Not sure about that. The Japanese Yen, Deutsche Mark (sp) and Swiss Franc have generally been more stable. The problem is that those nations have kept interest rates low. The dollar was primarily used because it was the main source of foreign reserves for nations. Why? Well is was somewhat stable, but more importantly, it offered a nice mix of relative stability plus nice return on the treasury notes. OK, I should have phrased that more carefully. During the period in which the decisions were made which led to the dollar being the standard pricing unit for international commodities markets, the dollar had a history of being the least volatile currency in large supply. I think this is also a relic of the post-WW2 Bretton Woods system which set up exchange rates fixed to the dollar. By the time the system was abandoned in the early 70s the dollar had effectively become the reserve currency even though exchange rates were no longer fixed. However, things can change. Guy

I am not sure this is true. I would guess that most who trade oil contracts use such large volumes that the transaction costs are tiny in relative terms. FWIW, I should probably explain the sunspot term for the non-economists (sorry, MG, you're one of the "economists" whether you like it or not) -- what I mean is an event which triggers a change in agents' behavior (and consequently the equilibrium) even though it doesn't directly affect their payoffs. For example, one morning there is a sunspot, everybody who trades dollars sees it and decides they no longer want to hold dollars. Because nobody wants to hold dollars, the value of the dollar collapses. This is despite the fact that the sunspot itself did nothing to alter the value of the dollar. Guy

This myth pops up from time to time and I won't reference any particular sources since many are political (you can google them if you want -- I think the movie Syriana even referenced it with a straight face). However, the ramifications are not necessarily political so I'll start the discussion here and hopefully it won't get out of hand. There are various strands and offshoots of this myth, some incredibly nutty (but probably more appropriate for the politics forum), but it usually springs from at least one, and often both, of these propositions: 1) Because of the US dollar's sharp depreciation in the past few years, pricing oil in USD is bad for oil exporters. 2) If oil were suddenly denominated in another currency (the Euro is most frequently mentioned) that would cause a complete collapse of the dollar. Let's tackle these one at a time. 1) Currencies are just measuring units. If you halve the size of the measuring units, what you are measuring doesn't double in size. To tie it to currencies and oil -- if the dollar's nominal exchange rate depreciates by 20%, then the dollar price of oil will increase instantaneously by about 20%. This will be true if oil is priced in euros, dollars or coconuts. If oil is priced in dollars, you are selling it, and you want the income in euros, you can easily and quickly carry out a foreign exchange operation to achieve your goal. What this means for oil-producing countries is that it doesn't matter in which currency oil is priced. Regardless of whether oil is priced in euros, dollars or coconuts, a 20% depreciation of the dollar against the euro (or coconut) will cause the price of oil to go up by 20% in dollars and remain unchanged in euros (or coconut). 2) The value of currencies is determined, like most things, by supply and demand. So when demand for a currency falls off relative to another currency, that exchange rate will depreciate. So, to the degree that it is necessary to own a currency in order to buy oil contracts denominated in terms of it (this degree may equal close to zero), repricing oil in a different currency will reduce demand for dollars. However, as a percentage of total dollar transactions taking place daily, I am guessing that oil is a relatively small fraction. So IF repricing oil in terms of euros, Ukrainian Hryvnia or coconuts reduces demand for dollars (a big IF), it will not reduce demand for dollars by very much. It is possible that this kind of move would trigger a dollar panic (what game theorists call a sunspot effect), but in and of itself it won't make much of a difference. ------------------------------ This is totally unrelated to the question of whether oil-producing countries should peg their currencies to the dollar. The answer is "probably not", unless they want to experience depreciation of their currency and inflation. Guy Guy

When I first started listening to a lot of music, I was really into classic rock which of course included the Beatles. At the time I didn't think much of Ringo as a drummer, and I think this is a pretty common attitude among rock fans who rank drummers by how flashy/fast/loud they play. (I don't know how jazz fans feel.) Around college my attitude really started to turn. A while back I pulled out the Beatles' second UK album (With the Beatles) and man -- Ringo was just great on this. Nothing especially complex or flashy, but the epitome of taste, attention to detail and versatility in this context. Two songs that particularly stood out were "All I've Got to Do" (the shift from a Latin/soul rhythm on the verses to a straight rock beat on the chorus) and "Money" (that bit in the outro where he starts bashing the cymbals after barely touching them in the previous 2 minutes is just brilliant). Anyway, while I hate to rag on fans of modern rock or pop music, I get the feeling from talking to them that they are mostly deaf to this kind of thing. Too bad. Guy