Exchange Problem

I'm taking the family to Japan over Thanksgiving.  I spent about 9 months in Iwakuni, Japan back in the early 1990s during my time in the US Marine Corps.  Iwakuni is a small town about 25 miles south of Hiroshima.  If all goes well, I take the kids to see firsthand what an atomic bomb can do to a city.  (Do you think the A-Bomb was a silver lining for the Japanese economy?)

However, before we go, I'll want to get some Japanese Yen.  Fortunately, Seoul has no shortage of money exchangers.  Here's the situation: I gave the money exchanger $300 and asked for Yen.  I was given 24,400 Yen and 3,500 Korean Won.  Apparently, the smallest Japanese Yen bill they deal with is 100 Yen.

Here's your homework.  At 1 USD to 1,088 Won, what was the USD to YEN exchange rate I received?  (I want to know how much Yen $1 buys)

So You Want to Tax the Rich

Obama believes that his re-election grants him moral authority to raise taxes (rates).  After all, he ran on a platform of raising taxes (rates) on the rich, and the people sent him back to 1600 Pennsylvania.  Using the same logic then, the people also returned the GOP to the House and ergo they then must have a mandate to cut spending, no?

The clamor to raise taxes on the rich seems to grow louder every day.  And so I must ask – for what end? To improve the economy? To reduce the deficits?  Because it’s only fair?

Who among us ascribes to the philosophy that confiscating more income from the top X percent will improve overall economic conditions for the 1-X percent?  Or said another way,(the taxers believe that) removing money from an economy will allow economic indicators to rise.  If this theory holds true, let’s take all their income!  

Perhaps the majority of the cheerleaders for higher tax rates believe we should use the revenue to reduce the deficit.  Ah, seems like a worthy goal, but can it be done?  In other words, can the government confiscate enough income from the rich to meaningfully reduce the deficit?  I remain skeptical:

Government Bails out Hostess Brands, Saves Twinkies

Today, the Obama administration bailed out the ailing Twinkie and Ding Dong maker in a surprise move.  Under conditions of the agreement, Hostess Brand will receive some loan guarantees and lots of taxpayer funds in exchange for union job protections.  A nationwide strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union had all but drained the ailing confectionary of financial resources.  Without taxpayer funds, some 18,000 workers would have lost their jobs, and more importantly, there wouldn’t be any more Twinkies.

Under precedent used in the GM reorganization, the striking union will receive most of the funds while the bondholders, who are normally protected as secured creditors, will receive nothing save a lifetime supply of Twinkies.

A spokesperson for the Obama administration said that saving the Twinkie brand meant more than just saving jobs.  A recent Gallup poll showed widespread support for saving the iconic Twinkie brand.  After all, what would we deep-fry at county fairs across America had Hostess gone under?  Fortune cookies?

Seeking Gas (and rents)

Major players in the natural gas industry are pressing their case to get the federal government to either allow or forbid the exportation of natural gas.  Big consumers of gas, like Dow Chemical that depend on cheap supplies, would rather see all that gas stay put.  Producers of gas, seeing limited demand in the United States (the US is considered the ‘Saudi Arabia’ of natural gas) would like to sell their gas to eager buyers, like Japan.  The government is expected to make a decision soon.  Let’s hope they vote in favor of free trade.

It comes as no surprise that big users of gas, like Dow Chemical, want cheap inputs.  Lowering the cost of production is a desire of all firms.  However, lobbying the federal government to protect Dow’s access to cheap gas is naked rent seeking. 

 

Of course, that the government has to be consulted in this matter at all is nonsense.  Gas producers should be free to sell their wares to any buyer – those here at home and those abroad without interference from politicians. 

 

Whatever the decision, rest assured it will be wrapped and sold as “in our national interest”, which is code for “jobs.”  You can bet government bureaucrats are busy modeling both scenarios and the model that nets more jobs will win.  Whether this “win” is for free trade remains to be seen.

Too Bad to Be True?

We’re all familiar with the ‘too good to be true’ axiom, but unfortunately the opposite is sometimes true.  What I’m about to tell you defies human comprehension.

An Italian court has just convicted six prominent scientists and a government official of manslaughter.  Their crime: failing to predict an earthquake.  Their sentence: six years in prison.

That sound you hear is the stampede of scientists racing to flee the country.  Click here for the story.

I wonder what's next - prosecuting finance professors for failing to predict any future market corrections, economic recessions, or budget crises.  Or how about jailing the astronomers for failing to predict any meteor strikes. 

Hopefully, during the almost-certain-to-occur appeals process, one judge with an ounce of decency and commonsense can be found to reverse this perverse ruling.