Category Archives: Uncategorized

The Extraordinary Science of Addictive Junk Food

My favorite passage of the day from the NYtimes article entitled “The Extraordinary Science of Addictive Junk Food”:

To get a better feel for their work, I called on Steven Witherly, a food scientist who wrote a fascinating guide for industry insiders titled, “Why Humans Like Junk Food.” I brought him two shopping bags filled with a variety of chips to taste. He zeroed right in on the Cheetos. “This,” Witherly said, “is one of the most marvelously constructed foods on the planet, in terms of pure pleasure.” He ticked off a dozen attributes of the Cheetos that make the brain say more. But the one he focused on most was the puff’s uncanny ability to melt in the mouth. “It’s called vanishing caloric density,” Witherly said. “If something melts down quickly, your brain thinks that there’s no calories in it . . . you can just keep eating it forever.”

More here.

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The Insourcing Boom

Which raises a troubling but also thrilling prospect: the offshoring rush of the past decade or more—one of the signature economic events of our times—may have been a mistake.

More on that here.

I think it is great that manufacturing companies are seeing the value of being of close proximity to industrial supply lines, taking advantage of lean manufacturing techniques and benefiting from lower cost inputs that don’t involve labor. The product quality certainly benefits, but so do the employees and surrounding communities of these factories. There will be a tremendous amount of economic value added by the trend of in-sourcing however I don’t think it will  be a boon for employment. Labor productivity will sky-rocket but capital, albeit whether from human capital or robots, will always trump a large manufacturing workforce. Today’s manufacturing jobs will be highly skilled, specialized and demand higher wages than previous manufacturing jobs before. 

Video

Andrew McAfee: Are droids taking our jobs?

A great TED Talk by Andrew McAfee on rising labor productivity and technological efficiency among an economic environment of rising joblessness. I would comment, but I couldn’t say it any better than he has.

George Soros on European Malaise and What to Expect

George Soros has some interesting words regarding the debt meltdown of Europe. The original text can be found here.  

The worry is that Germany may lack the political motivation to look into the interest of bailing out Europe after austerity is not an option anymore for the surrounding nations.  

But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target2 by the end of this year, in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets – not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro – but nothing more.

The most poignant message Soros has offered is that it is in Germany’s best interest to save the Euro, despite how politically unpopular it may be.  Germany benefits in the near-term as a falling Euro boosts their exports and continues to drive their economy. Putting a stop to this would effectively be political suicide as it would mean that Germany’s current stellar growth and positive economic health would be put at risk. Yet, as Soros has said, Germany only has a year or so more of this until the European economy implodes on its self.

So, as Germany had destroyed Europe nearly 70 years ago, it now has a chance to help save it. I hope Germany can transcend its own nationalism for European interest, but as previously said, it is a tough sell politically. I suppose Germany will have the same mantra the U.S. had to recite during the bailouts: if we don’t do this, we will be worse for it. It will be a true test of leadership for the history maker’s. I really hope that Germany doesn’t fall prey to political cowardice like it did 70 years before. Our world won’t be a pretty place if we have to go through that again.

Lithium war? What lithium war?

Looks like China’s strategic lithium reserve (and those other counties too) won’t have such a valuable resource after all.

They’re some fairly bold claims, but a team of researchers at the University of Leeds say they’ve managed to develop a new type of polymer gel that could lead to batteries that are safer, cheaper to manufacture and more flexible than traditional lithium-ion batteries. That last detail could have some particularly interesting consequences, as the researchers say it allows for batteries that can “shaped and bent to fit the geometries of virtually any device.” What’s more, all of that apparently comes with no compromise in performance, and the team has already licensed the technology to Polystor Energy Corporation, which is now conducting trials to commercialize the battery cells. The only catch is that there’s not so much as a hint as to when such batteries might actually be available. Engadget.

Relevant.

Here’s a Graph to Chew On

From John Taylor’s blog, a scatter plot graphing the unemployment rate and investment to GDP ratio:
Unemployment rate vs Investment to GDP ratio
Hmmm. From Slate:

According to the Bureau of Economic Analysis, real corporate profits neared an all-time high in the last three months of 2010, with companies raking in an annualized $1.68 trillion in pre-tax operating profits. (After tax, that comes to $1.25 trillion, about equal to the GDP of India.) The Federal Reserve estimates that companies are sitting on about $1.9 trillion. At the same time, unemployment remains at 8.9 percent, and job growth is still anemic.

Now, to find a way to give those companies an incentive to invest that money. I’ll hold my tongue.

HT: Mankiw

EDIT: A nice commentary to help put some of this into perspective. (especially given the small sample size)

Stay skilled my friends. The economy so far…

These four graphs help illuminate where the economy is moving…

Employment graph from Econbrowser:

Employment isn’t trending anywhere near a high growth trajectory.  The econ blogosphere blames either the lack of AD (demand) or structural unemployment.  I say structural for several reasons.  First, the unemployment rate has edged lower, not because of the slight increases in employment levels, but because workers are leaving the labor force. Although the total amount of discouraged workers are low, it could also include stay at home parents, resorting to an underground economy, going back to school, etc…  Second, job openings are outpacing the employment growth rate, which means that there are jobs out there but employers are not finding people skilled enough for the job.  Anecdotal evidence from the news such as the lack of well-trained computer engineers and medical technicians help illustrate the point that these high-growth fields are having a tough time finding skilled hires.  Third, rising capacity utilization rates and business investment growth, both of which are indicators of an increase in AD, are on the rise. (see graphs below)

Capacity utilization rate, from Calculated Risk:

Gross Private Domestic Investment, from St. Lois Fed:

Aggregate demand is actually beginning to increase, without the lift from employment. Businesses are starting to take advantage of low interest rates in order to build more productive capital.

This leaves me to my last reason: Housing is providing most of the drag for the recovery in employment because construction workers have no where else to go.

Housing starts, from Calculated Risk:

As you can see, there is a huge gap from the peak of home building and its present level. A large share of construction employment was lost during that drop and the home buyer tax credit failed to bump housing starts any higher. There is no expectation for housing starts to rise back up to pre-recession levels. Those who were employed in the construction industry are pretty much screwed.

A recovery in employment is going to be terribly slow. Hiring skilled workers is going to be a slow process. Many of those who were employed in construction will have to face the decision of leaving the labor force, which is a decision that is even slower than the hiring process. Structural unemployment is exactly what is ailing the economy right now, but demand will continue upward as the economy reorients itself toward services.