On a tour of North Korea, "silly white folks 'working with the people.' " North Korean Economy Watch

 

On today's Planet Money:

-- When you arrive as a tourist in North Korea -- yes, it's been done -- they don't tell you the news, says Curtis Melvin. They tell you the state of the economy. And yes, they do have one. Melvin knows because he tracks it on his blog, North Korean Economy Watch. His biggest boosts come from YouTube and Google Earth, which let him watch what passes for economic development.

-- The "efficient market" hypothesis holds that everyone trading stocks is generally trying to take in the same information about companies, and the result of all that thinking is the price of stock. The efficiency of the market makes it hard for any individual to beat the market over the long haul. So why would anyone pick stocks at all, or listen to a professional stock picker like CNBC's Jim Cramer? (Further fun: Video of Cramer rebutting an academic study of his performance.)

Bonus: Paycheck bounces, life falls apart and video of a North Korean market

Download the podcast; or subscribe. Intro music: Metric's "Sick Muse." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: N. Korea's Hidden Market" >

"Slow Inevitable Death of American Muscle," in video at Opposition Art

 

Chrysler's on its way out of bankruptcy. GM's on its way in. This seems as good a Friday afternoon as any for video of a super-slow-motion car crash with no passengers. Opposition Art's got it.

(Thanks to listener Chris Hoge.)

Cash or charge, please. John Jordan

 

John Jordan writes:

I work in a state capital bureau of a major newspaper. One of the things I do is try to keep my colleagues all coffee-ed up, and sometimes I buy a pound of coffee for the bureau from the Starbuck's downstairs, using the petty cash checkbook. Just now I went downstairs to get some, and they pointed at this sign (attached) and asked me if there was another form of payment I could offer.

I asked the barrista why (I know those nice folks there pretty well), and he said, "Most of the checks we've been getting here lately have been bouncing, and I guess it's happening everywhere else, too."

In the past few days, we've heard from a couple of different sources about something that's creeping out from the campus of Harvard Business School. It seems that a group of MBA candidates at HBS, surveying the wasteland that that has been made of their soon-to-be profession, have decided that new business managers should hold themselves accountable to something more than insane short-term growth and ridiculous bonuses.

And so, this month, the MBA Oath was born. It's sort of "a management equivalent of the Hippocratic Oath," writes Max Anderson, a 2009 HBS grad, on the website. Anderson notes that while graduates of law or medical schools are admitted into guilds like the Bar Association or the American Medical Association, no such organization exists for MBAs.

The oath is strictly voluntary, but so far it's been signed by over 100 recent HBS grads, plus a handful of new MBAs from other institutions around the country. The short version of the oath is after the jump:

Continue reading "First, Do Not Steal From Shareholders" >

The new ghost town. Justin Viglianti

 

Justin Viglianti, an architect in the Boston area, sends a picture from that city's Downtown Crossing. He writes:

What you see is the crater that was the famous Filene's Department Store. If you're not familiar, a few years ago there was a big push to get more residences into the heart of Downtown Boston. The area would turn into a ghost town after 6PM, evidence that Boston was becoming or maybe has always been a very car-centric commuter city. So with help from the Mayor's office this site was to be a huge tower of businesses, restaurants, a theater, and apartments that would make Downtown a destination again. But when the economy hit bottom and the housing sector took a nose dive into deep debt, the project stopped.

This hole has been festering for 6 months at least with no plans of remedy anytime soon. I go by here everyday and it just kills me that it's become the exact thing the city was trying to avoid, a deterrent for street life, for business, for anything beneficial to the city of Boston. I look at this from the perspective of an architect, not an economist, but I can see that there are definite parallels here between housing, money, and quality of life.

The Commerce Department says the country's gross domestic product fell at a seasonally adjusted annual rate of 5.7 percent in the first quarter of 2009. A 6.1 percent GDP drop had been predicted. From the Commerce Department:

The smaller decrease in real GDP in the first quarter than in the fourth reflected a larger decrease in imports, an upturn in PCE (personal consumption expenditures) for durable goods, and a smaller decrease in PCE for nondurable goods that were partly offset by larger decreases in private inventory investment and in nonresidential structures and a downturn in federal government spending.

Consumer spending, which makes up a significant part of GDP, increased 1.5 percent this quarter, after a 4.3 percent drop in the fourth quarter.

The North Korean electrical grid, as viewed by Google EarthFrom North Korea Economy Watch

 

On today's podcast we're talking to Curtis Melvin about his excellent blog on North Korea's economy.

My first thought was, hunh, they have an economy? And, of course, they do. It's a strange one: an official, top-down Stalinist centrally controlled system alongside a chaotic, bottom-up and awfully meager market system.

Melvin created a great plug-in for Google Earth that identifies key features in North Korea. You can see the huge estates of the elite and the explosive growth of public markets. You can compare the nice neighborhoods in big cities to the near absence of development in the North East mountains.

He says you can actually get a really good sense of the tensions within North Korea from any computer with an internet connection.

Continue reading "The Economy of North Korea" >

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TEXT.

Last week, we issued our Recession Haiku challenge, and you responded with vigor -- on the blog, on Twitter, on Facebook (x2), over e-mail. At this rate, we'll get to our millionth Recession Haiku by the time the economy turns around.

We gathered a dozen of our favorites for the gallery above. My personal honorable mention is after the jump.

Continue reading "Our Favorite Recession Haiku" >

I had a fascinating lunch and interview with economist Ariell Reshef. The interview will be on the podcast next week, but I thought some folks might enjoy reading his paper (feel free to skip the Greek-letter math formulas) that, he says, shows actual mathematical evidence that Wall Street folks really do make too much money.

OK, OK, I know that most of you don't need any proof. You're already convinced.

But Reshef is an academic. He can't just say he's convinced. He has to show the proof.

So, how does he do it?

Continue reading "This Just In: Wall St. People Really DO Make Too Much Money" >

Christina writes:

I, like many young NPR listeners, reluctantly count myself as among those with the slightly pejorative label 'hipster.' When I heard the lady on the last podcast say that one can shop at consignment shops and Goodwill, I thought, "Hey I do that... why am I still not able to save money?"

I think one of the most ironic things about a subculture that loves irony, is that the image, like any image, is difficult to keep up. While most of my friends and I live in a way that would reflect thriftiness, there are still expenses beyond thrift store clothes and couches dragged in from the street.

Continue reading "It's Hard Being A Hipster " >

Advanta is wrapping up its credit card business, quickly. News of the company's plans to cut off credit were reported earlier this month, and the company said would notify customers at "the appropriate time prior to June 10." Apparently the appropriate time was yesterday. My boyfriend received a second day air letter at our apartment informing him that his card was being cut off -- in just two days. The Philadelphia Inquirer reports:

Advanta Corp. said yesterday that it expected to move up the date after which its customers would no longer be able to use their credit cards, to next Saturday from June 10.

The Spring House company, which specializes in credit cards for small businesses, said last week that it was freezing nearly one million accounts to cut its losses and preserve its capital reserves.

Continue reading "The End of Advanta " >

From the Dayton, Ohio, Daily News, "AP Source: GM to announce 14 plant closures Monday." The lede:

A person briefed on General Motors Corp.'s plans says the company on Monday will identify the 14 factories it will close as it heads toward a likely Chapter 11 bankruptcy protection filing.

The person says United Auto Workers officials in Detroit have told plant-level union leaders that the company will make the announcement, not the union.

The paper reports that a GM spokesperson wouldn't comment.

The Detroit Free Press say the GM board meets this week to decide whether to file for bankruptcy. UPDATE: GM and Treasury have reached a deal with major bondholders giving them more equity in exchange for not fighting the government's bankruptcy plans.)

(Thanks, @maple_fan, who lives outside Dayton and tweets, "This is surreal in an ex-GM town.")

In the 1940s, a big catch. Now, cheap like lunch meat. KGBKitchen

 

Just got this economic indicator from my in-laws:

"We were in Maine over Memorial Day weekend. Lobstermen are upset because lobsters are selling for the same price as bologna."

Trucks on the side of the road were selling them for $4 a pound.

This news story from Canada (headline: "Bologna, $7.69/kg; Lobster, ditto") blames the economy.

No commerce in Columbus. daneyocco/Planet Money Flickr pool

 

On today's Planet Money:

-- Chrysler went to bankruptcy court in New York City today. At issue was the question of whether Chrysler can sell a significant portion of itself to the Italian automaker Fiat. As Frank Langfitt tells us, there's much more at stake, not just for Chrysler, but for GM and the future of American capitalism.

-- Jim Higgins has a lot to lose from Chrysler's bankruptcy. The Chrysler dealership he works for, in Fairfax, Virginia, learned this month that it's among the 789 the company plans to close.

-- Think your elders are more frugal than you? Listener Jean Jakab commented on the blog that her son, Steve Jakab, had just lost his job and was floundering, and that all you really needed to do was be careful with his money like Mom and Dad. We got Jean and Steve on the phone, and lo and behold, Steve was already following their advice -- and had been for a while.

Bonus: A indicator from academia.

Download the podcast; or subscribe. Intro music: Say Hi's "One, Two . . . One." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Listen To Your Parents " >

F is for foreclosure. Love in the Time of Foreclosure

While we try to figure out the best way to keep track of your struggles to get your mortgages modified, check out this blog of one couple's journey -- Love in the Time of Foreclosure. Here's a taste:

In today's mail, we received 7 more NOTICES OF TRUSTEE'S SALE.

Seven. Enough to form an F.

As though the 12 total notices we've received via mail so far weren't enough, there was another posted on our garage door today for all the world to see.

We discovered it as we were leaving to see a movie-- an attempt to carve out a little bit of fun in this long weekend. We stepped out onto the driveway and there it was. In plain view. BAM! The thing that we've been trying desperately to avoid for months.

I tore it down immediately out of embarrassment. Hoping none of our neighbors would see. It wasn't until later in the day after having some time to cool down that I taped it back up for purposes of this photo.

How I felt? Like a big loser. Like a failure. And afraid.

Apparently, it's all about cash.

Overgrown in Los Angeles. xomeo/Planet Money Flickr pool

 

Louise shares this economic indicator:

20 - the percentage of people I work with who have closed on their first home in the past 2 months. Out of a work group of 25 people, five have finalized a home purchase recently. We work in IT for a state agency in Texas, so our jobs are fairly stable right now. The real estate market in Austin has begun perking up after a mini-slump during the past 6 months, and between the low interest rates, lower home prices, and tax incentives, the young professionals I work with have decided that there is no better time to buy than now.

Where growth still = recession. Brown Brothers Harriman

 

This is what counts for a recession in China: an economy growing at only six percent. In the U.S., financial types are warning of a recovery in which gross domestic product tracks upward at just 2 percent, compared to the old norm of 3 percent.

But for China, which remains at once a poor nation and a trillion-dollar creditor for the U.S., growing at a quite high rate is the only way to provide jobs and a decent standard of living for all its citizens.

China has signaled that it intends to pull out of its slump in part by supporting its export sector. Key to that is keeping the yuan weak against the dollar, so Chinese goods remain attractive for consumers. China's State Council is welcoming a visiting Treasury Secretary Tim Geithner this week with news that it intends to keep the yuan "basically stable."

"In other words, China is warning Geithner not to make a big stink about the exchange rate when he comes," Thin says. "And to serve notice, China tweaked the exchange rate weaker this week."

They make you feel better. Steve Rhodes/Planet Money Flickr pool

 

Counting cash can make you feel better, at least according to this new study. In one experiment, the researchers had students count either money or paper, then plunged their fingers into hot water.

The students who had counted money felt less pain.

"Handling money . . . reduced distress over social exclusion and diminished the physical pain of immersion in hot water."

Apparently it doesn't even have to be your money.

Continue reading "In Pain? Count Cash" >

Behind the Peace Lutheran Church

 

Jim Oberstadt writes from Holland, Mich.:

Attached is a photo I snapped today of a homeless couple living on the outskirts of our church property (hidden behind a grove of trees between our parking lot and a school). The husband asked me today if we could give them a few more days to comply with the sheriff's eviction because he said there's no room at the local mission.

As an active member of our church I must confess feeling at best awkward, and at worst a failure in living up to the Gospel. We are a small and struggling parish, and I take some comfort in the presence of a very well-run city mission here in Holland.

Oberstadt adds that it's hard to know whether you're living up to your beliefs in a situation like this.

Lil Wayne brings, is the bling Kevin Winter/Getty Images

From the Wall Street Journal, word that the recession is really, seriously everywhere (except for maybe North Dakota):

In an attempt to keep up appearances, celebrity jewelers say rappers are asking them to make medallions with less-precious stones and metals. Some even whisper that the artists have begun requesting cubic zirconia, the synthetic diamond stand-in and QVC staple.

Which development has led 50 Cent to holler up competitors for pulling back from the bling, a term Lil Wayne is said to have coined. But the decline is only natural. "A lot of these rappers simply don't have the money for real stuff anymore," jeweler Jason Arasheben tells the paper. "It's to the point where they are wearing imitation jewelry, and that's ridiculous."

And my dad advised selling apples. Alan Cordova

 

Of all the financial advice I got from my father, this nugget seems most vexing. I'll paraphrase as best I can:

"If you have to get you a cart and sell apples on Capitol Street, don't ever work for anyone else."

I took Dad to heart on that one, then nearly starved as a freelancer and later fell in love with the teamwork that sometimes comes with staff gigs at big companies.

Alan Cordova looked at compensation data from the Small Business Administration and drew up this chart and the one after the jump. Their message: Bigger companies pay better.

I'll leave the arguing about the upside potential of entrepreneurship to y'all. A note from Cordova, and a second chart, after the jump.

Continue reading "Chart: Big Co's Pay Better" >

In Ramsey, Minn., unfinished business. Minneapolis Pro/Planet Money Flickr pool

 

Minneapolis Pro (or ElectroThompson, for the Twitter crowd), send this picture from 2007, of "an unfinished development in a suburb (or satellite city) of Minneapolis, called Ramsey. This picture was taken in 2007, I believe. Nowadays, such scenes are common in this area."

Lately, I find myself struck by the images you folks are sending of housing and commercial developments on ice. Send more, please. I'll try to do something amazing with them.

(Add photos of half-built America to our Flickr pool or Facebook page, Twitpic them and holler out on Twitter or e-mail them. Our moms thank you.)

Happy holiday: Lemonade stand, reinvented, in San Francisco's Mission District. Jim Bourke

 

On today's Planet Money:

-- On Monday, Jeff Nielsen told us about the trouble he'd had getting his mortgage reworked. He couldn't get an answer back from Wells Fargo, though his situation would seem perfect for President Obama's new program to keep people in their homes. After that podcast, wonder of wonders, Neilsen got a break.

-- Shipping executive Per Gullestrup wanted to rescue a crew of sailors from pirates demanding $7 million ransom. He ended up forging an unlikely business relationship with the negotiator, "Mr. Ali," marked by mutual respect and the gift of newborn livestock.

-- A haiku medley, written by you.

Bonus: Eating your own eats.

Download the podcast; or subscribe. Intro music: Here We Go Magic's "Fangela." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: And Three Baby Camels" >

Next door, but no longer a neighbor.

 

Jeff Rahn had gotten frustrated with living next to a foreclosed home in Sunnyvale, Calif., so he looked up the public records on it. He reports finding that the neighbors had taken out a pair of mortgages in 2006, then apparently stopped paying and moved away in 2007. The lender, American Home Mortgage, has since gone bankrupt and been sold for upward of $7 million.

In the foreclosure process, American Home Mortgage's creditors agreed to settle, leading to an auction in February 2008. Rahn's not sure why no one bought it and moved in, but the house remained empty. This week a demolition crew showed up, he writes. "Now the house has been reduced to rubble."

He wonders whether banks are just finding it so difficult to sell foreclosed houses that they'd rather bulldoze them. He writes:

I like the idea of banks getting their balance sheets in order, but is this what it leads to in the real world, houses being torn down?

Sold equipment, 2007 vs. 2008

 

Craig Vorster works in road construction in Central Florida. When the company has more equipment than it needs, it sells the extra. In 2007, as you can see from the folder on the left, it sold not so much. But in 2008?

"The handwriting was really quite on the wall," Vorster says. The work was drying up, and the company started selling off equipment, a move reflected in the larger folder on the right. And the guy whose job it was to sell the old stuff? Vorster says he was laid off.

Continue reading "A Central Florida Sell-Off" >

From Frankfort, Ill., news of an Irish pub that's closing because construction workers are no longer coming in.

Contractors building homes and commercial buildings in the Lincoln-Way area would drop in for lunch, and the dirt and mud clinging to their work boots would collect under chairs and barstools, said [Niall] Freyne, owner of Galway Tribes.

"Now there is no dirt under the barstools," he said Wednesday.

Last call's slated for May 30. Nationwide housing starts are running 54.2 percent below last year's pace. The leg bone's connected to the shin bone, I guess, and one of the toes is in Freyne's bar.

After the jump, another look at building in the region.

Continue reading "'No Dirt Under The Barstools'" >

Today federal regulators seized BankUnited in Florida. BankUnited was a thrift that was apparently critically undercapitalized. Its failure will cost the Federal Deposit Insurance fund an estimated $4.9 billion.

BankUnited was regulated by the Office of Thrift Supervision. It can now be added to the list of institutions that fell apart under OTS regulation, including Washington Mutual, Downey Savings and Loan and Countrywide.

BankUnited is the second most expensive failure of the crisis. The first? IndyMac, which cost more than $10 billion and was also, by the way, regulated by the Office of Thrift Supervision.

But he responded as part of his "Outrage of the Day" segment this week. (Video after the jump.)

I had called CNBC asking to interview Jim Cramer about this academic study that analyzed his stock picks on his show Mad Money.

The conclusion? Cramer got higher returns than the stock market indices, but only by taking on more risk.

The paper has been circulating for a while, but it's now getting published. Anyway, CNBC declined my interview requests. But then, like magic, Cramer starts talking about it on the show.

Continue reading "Cramer Wouldn't Take Our Call..." >

(Update: For a medley of Recession Haiku, check out Friday's podcast.)

This is making the rounds among modern Greek PhDs at the University of Michigan (my poet friend says so). It's an interview of sorts with Stephen Ziliak, an economics professor who believes "an economics without poetry is an economics that is blind." What poet doesn't like to hear that? Ziliak is a big fan of haiku because it's an efficient form where economy of words is valued. He assigns haiku challenges for bonus points on exams and holds haiku workshops as part of a course on rhetoric in economics.

We're assigning you a challenge: Write a haiku for the recession and drop it in the comments. It's 17 syllables, in three lines, with a pattern of five syllables, seven syllables, and five more.

After the jump, the interview with Ziliak -- in haiku.

Continue reading "Challenge: Recession Haiku" >

Spotted in Philadelphia. Mark Scott

 

Mark Scott writes:

I spotted this is Philadelphia's Rittenhouse Square on my walk to work. There's nothing sadder than pale, hungry, uncaffeinated poets. Where's their bailout?

We got this from Ming Lee, who writes about noticing something strange on an envelope:

I received my monthly mortgage statement from Franklin Bank, and usually I don't look too closely at the address window. But this week when I looked it read: Federal Deposit Insurance Corporation Receiver for Franklin Bank.

Since I don't have any deposits with Franklin Bank, only my mortgage, the FDIC receivership doesn't impact me, does it?

Yes, it does impact you, but not necessarily in a bad or scary way.

Continue reading "My Mortgage Lender Just Failed. Now What?" >

The Wall Street Journal greeted us with a roundup of the world's shrinking economies. In the first quarter, the U.S. was falling at 6.3 percent, Germany at 14.4, Japan at 15.2, and Mexico at 21.5. With America's biggest trading partners in that kind of swoon, it's no wonder the recession just keeps dragging on.

Layoffs continue to pile up, if more slowly. The Department of Labor reports 631,000 new claims in the week ending May 16, down 12,000 from the revised figure the week before. That means some 6,662,000 are drawing unemployment benefits. Economist Ian Shepherdson of High Frequency Economics notes that last week's numbers were revised upward, which suggests that "the underlying pace of claims is not slowing as much as appeared to be the case a few weeks ago."

Whatever the numbers, there's a whole lot of hurt out there. Glenn writes:

Continue reading "News From A World Of Hurt" >

Paging John Mellencamp. brandonshift/Planet Money Flickr pool

 

On today's Planet Money:

-- Imagine this whole darned economic crisis, or at least a major strand of it, started at a pink hotel in Boca Raton. A bunch of bankers from JPMorgan met there in 1994 to consider the future, and decided credit derivatives were it. Gillian Tett, the Financial Times writer and author of Fool's Gold, says the rest is history, miserable history.

-- How much would you pay to keep your job? Margaret Schultz works as a management consultant with General Motors dealerships. In December, she learned that her position had been given to a former manager, whose own gig had been cut. There was still a job for her -- three hours away from her husband and two young kids. Now she's staying in the new town three days a week, where she rents an apartment for $350 a month.

Bonus: A roast beef indicator.

Download the podcast; or subscribe. Intro music: Empire of the Sun's "Walking On A Dream." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Where It All Began" >

Seen any of this stuff around? Made-In-China

 

Today I learned to say acetonitrile, courtesy of chemist Derek Lowe. On his blog, In the Pipeline, Lowe has been covering a global shortage of acetonitrile, a solvent that chemists and pharmaceutical researchers depend on for experiments.

Lowe explains that acetonitrile is a byproduct of acrylonitrile, which is used to make industrial resins and plastics -- everything from Legos and cell phones to car dashboards. With the global slump, and especially the slump in the auto industry, companies stopped making acrylonitrile. Which meant they also stopped making its byproducts. And that's how the chemists found themselves without their favorite solvent.

Continue reading "A Global Shortage Of What?" >

As a lot of you probably know, it's pronounced totally differently -- hard H [KHah] like Challah or Chanukah. My parents are South African. That's kind of the only excuse I really have for them picking Chana for my name.

I figured it's about time I properly introduce myself and explain how I Ianded on Planet Money.

Last August, Adam Davidson sent me a message on Facebook. He was starting a cool new project and wanted to talk. I was reporting for KPLU in Seattle at the time and freelancing for NPR. This new project thing would be about the global economy, would help listeners understand complex economic concepts and would be really fun. Honestly, I had no idea what he was picturing.

Continue reading "It's Spelled C-H-A-N-A " >

Bridget Walsh has been listening to lawmakers say that the new credit card bill moving through Congress might mean higher annual fees and interest rates for consumers, but that people can shop around for better deals -- the market will make sure they have choices.

She writes:

I keep hearing that part of your FICO score depends on how long you keep a credit card along with how well you pay your bills and how many inquiries into your credit you have. So if cards that I have had for a long time (with no balance) now impose annual fees, it seems that either I will have to suck up and pay the fees or risk lowering my FICO score by closing that account and shopping around for better deals. Even though I have 3 cards with no balance and no annual fee, I might be tempted to close one or more accounts to keep from paying fees and thereby lower my score even more by reducing my credit line.

Gail Cunningham of the National Foundation for Credit Counseling has an answer, after the jump.

Continue reading "A Credit Card Dilemma" >

You know how there are those people that will turn blue or suffer for weeks before they will step foot in a doctor's office? Well, now there are more them. That's according to this survey from the American Academy of Family Physicians. More than half the docs reported that they are seeing fewer patients come in.

The real sad number that caught my eye in here -- 60% of doctors had "seen more health problems caused by their patients forgoing needed preventive care."

If you need some incentive to go to the doctor apparently you'll be spared a couple minutes of Muzak and bad magazines. The wait time is down.

In Bethlehem, Pennsylvania, a stalled hotel. Kim Shively

 

Kim Shively writes from Kutztown, Pennsylvania:

I am attaching three photos I took this morning, which seem to epitomize the history of the American economy over the last century. One picture features a photo of a half-finished hotel set against the backdrop of the old Bethlehem Steel Factory in Bethlehem, PA. Of course, Bethlehem Steel represents the manufacturing might of the United States for much of the 20th century. It was the second largest steel producer in the U.S. before its final closing in 1995, brought to its knees largely by cheaper steel imported from places like Russia and China. Still, much of the steel in the buildings in Manhattan, for example, was manufactured here, and of course, it was a major employer for the entire Lehigh Valley region.

But the casino's opening. Kim Shively

 

The hotel was under construction until September 2008, when the economic fiasco that struck the world brought the hotel construction to a halt. The developer is waiting for funds from the new Sands Casino that is opening this Friday here in Bethlehem in order to complete the hotel. The casino complex -- with shopping, restaurants and of course gambling -- is a much anticipated business that many have seen as the economic salvation of Bethlehem after the steel plant shut-down and the ensuing economic decline of the area. To me, though, this represents the great economic shift in recent American history -- from manufacturing useful material to extracting money from a service that produces nothing of value to anyone except profits to the corporate owners of the casinos and tax revenues for the city. Is this the 21st-century economic model for our country? I find it rather sad.

Continue reading "In Bethlehem, A Casino Rises" >

Sean from Illinois writes:

Here's a Planet Money indicator: zero. I got my Chase credit card bill this week and it had a $0 minimum payment, although I had had an abnormally expensive month. It didn't make much sense til I looked closer and found this on my bill:

"You have the flexibility to skip a payment. You must pay past due and overlimit balances immediately. However,the remaining minimum payment for this month has been reduced to $0. Finance charges will continue to accrue. To reduce your balance, feel free to make a payment."

Sounds like quite a nice ploy to dupe me into paying them interest!

Oh those friendly credit card companies.

Click to enlarge. via Calculated Risk

 

You've sent in lots of pictures of uncompleted housing developments and empty lots for sale, and now we've got the latest numbers to tell us just how bad the construction slowdown is. Housing starts fell to a record low last month, dropping 12.8 percent from the month before. Analysts had predicted a slight increase. According to the Census Bureau, housing starts were at a annual rate of 458,000 in April, a 54.2% decline from April 2008.

Over at Calculated Risk, they're comparing quarterly housing starts and new home sales:

In 2005, and most of 2006, starts were higher than sales, and inventories of new homes rose sharply. For the last six quarters, starts have been below sales -- and new home inventories have been falling.

There is one green shoot in the latest housing numbers -- single family housing starts increased 2.8 percent in April, the second increase in 2 months.

 

I just went to the water cooler here by the science desk and was looking at this chart which has been tacked up there for years. It was part of the absurdist Flying Spaghetti Monster campaign against the intelligent design folks.

But it now strikes me it might actually be true.

Correction! I read the chart wrong. More pirates should lead to lower temperatures.

The Obama proposal (being announced in a few minutes) to cut greenhouse gas emissions by imposing tighter fuel efficiency standards for cars is being hailed as one of those compromises everyone can live with. Auto execs from Ford, GM and Chrysler will attend, along with Governor Arnold Schwarzenegger from California which had favored tougher rules.

But there's still a battle brewing over the larger plan to put a cap emissions. And a battle over the economic models used to calculate those costs.

Here's an exerpt from a press release that just showed up in my inbox from the Republican side of the House committee on global warming.

A report by the Heritage Foundation... shows this bill could destroy as many as 1.9 million jobs and will cause electricity rates to rise by 90 percent, gasoline by 74 percent, and raise the average family's electricity bill by $1,500 a year.

The Republicans are also unhappy with some of the EPA's numbers.

Book value = $50. mezzoblue/Flickr

 

Elie writes:

As a kid growing up in the 1990's I collected NHL hockey cards. I would spend my allowance on a couple packs each week, collect entire sets, and then dutifully set the cards in plastic sheets for them to accrue in value. I looked up the going price in the Beckett catalog and dreamed of my future fortunes when I would sell the cards off a couple decades later. Originally, I only collected Topps and O-pee-chee, but then came Upper Deck, Fleer and even McDonald's started offering cards. The market become flooded with different varieties, but the Beckett guide said they were all valuable so I dutifully kept collecting.

Continue reading "Blame Wayne Gretzky" >

Neal Wolin is the new deputy Treasury Secretary. Wolin was confirmed by the Senate this morning. He previously worked as the Deputy Counsel to the President for Economic Policy and was general counsel for the Treasury Department from 1999-2001. A press release sent out by the Treasury Department reads:

"I am thrilled to have Neal return to the department. Neal brings a deep knowledge of the Treasury Department and strong managerial experience in both the private and public sectors, and I look forward to working closely with Neal at this critical moment in our nation's history." said Secretary Tim Geithner.

In Chicago, who's telling whom? katherine_of_chicago/Planet Money Flickr pool

 

On today's Planet Money:

-- Three months ago, Jeff Neilsen sat in his Salt Lake City living room and listened to President Obama announce a new program for homeowners who need to rework their mortgages. He applied to his lender, Wells Fargo, and heard almost nothing. Julia Gordon of the Center for Responsible Lending says his experience is all too typical. She suggests the system is plainly broken.

-- In the U.S., 6 million homeowners are flirting with foreclosure. NPR's Chris Arnold reports that in half those cases, foreclosure appears to benefit no one involved -- not the families and not the banks. With Alex Blumberg, he visits one loan servicer, Ocwen, that reworks 75 percent of its troubled mortgages, as opposed to the industry average of 10 percent. (Chris and Alex produced a segment about this for This American Life.)

-- Firefighter Bob Greiner works at a station in the Chicago suburb of Niles, where he reports a remarkable change since the recession began.

Bonus: You've been approved!

Download the podcast; or subscribe. Intro music: Suicidal Tendencies' "Institutionalized." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Your Future Mortgage" >

A recession lasting until 2010 is likely to "virtually undo" the progress the nation has made in the economic well-being of children since 1975, the Foundation for Child Development says in a report out today.

The philanthropy's report, coordinated by Duke University researcher Kenneth C. Land, uses a composite index of 28 indicators of child well-being.

Among its projections are that child poverty will peak at 21 percent in 2010, and that 27 percent of children will have at least one parent out of work by then. Also, the report forecasts a drop in median family income for all types of families, most significantly for single-parent households headed by men. The foundation projects that median income for those families will drop from $38,100 in 2007 to $33,300 in 2010, in constant 2007 dollars.

Along with declines in income, the report expects that this recession's housing crisis will disrupt the social relationships of poor children as more families must move or become homeless. The report also asserts that child obesity will rise as parents increasingly turn to lower-cost fast-food.

Clip art. cobalt123/Flickr

 

A listener writes from Austin, Texas:

I have such an indicator for you, 5. That is the number of live or dead cockroaches that I have seen in my workplace in the past 2 weeks. This is compared to 0, the amount I saw in the year before. This all just so happens to coincide with the announcement my company made about reducing to contract janitorial services by 30 percent to save money.

A man on the move. Michael Loccisano/Getty Images

 

Or maybe he marks himself to model. I'm not sure what you'd call this:

"My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling," [Donald Trump] told lawyers in the December 2007 deposition.

That's from a Wall Street Journal dispatch on Trump's suit over defamation. The real estate mogul claims he was libeled in 2005 when an author put his net worth at between $150 and $200 million instead of the billions he claims to be worth.

However Trump counts up his fortune, he's itching for damages in large nominal terms. He predicted in an interview with the Journal that "the publishing company will pay me hundreds of millions of dollars." The paper says that the author, Timothy O'Brien, declined to comment on the ongoing court case.

The New York Times Magazine had a great series of articles about debt this weekend. I really enjoyed Edmund Andrews' piece on his own "Personal Credit Crisis."

Andrews writes:

I felt like a crack addict calling up my dealer. It was April 2006, and I had just reached Bob Andrews, our once and future mortgage broker, on his cellphone.

I was surprised at how glad I was to hear his voice. In his own way, Bob knew more about my messy life than almost anybody else. He never seemed judgmental or condescending. Instead, he seemed to think that money trouble and failed marriages were natural parts of life, even for good people with decent jobs. I felt relieved to have the chance to unload my problems and ask for his advice.

Andrews' description of his interactions with his mortgage broker seemed eerily similar to the same techniques being used by credit card companies that Charles Duhigg described in his piece and on the Friday podcast.

Continue reading "A Personal Crisis " >

Hold up, computer programmers. Devin Dwyer

 

The class of 2009 is facing one of the toughest job markets in decades.

Just 19.7 percent of soon-to-be grads who have applied for jobs will actually have one at graduation, says the National Association of Colleges and Employers. And many haven't even started looking for work: Only 59 percent say they've started a job search, compared with 67 percent at this time last year.

If you're on the job hunt, recent grad or not, consider a career as a network data analyst or mental health counselor.

The Bureau of Labor Statistics predicts those jobs and others like them will be among those posting the largest percent increase in hiring over the next 10 years.

Other occupations projected to grow by 30 percent or more in the next decade include computer software engineers, veterinarians, and personal financial advisers.

Credit card companies love people who buy the best for birds they don't own. S and C/Flickr

 

On today's Planet Money:

Credit card companies have decided to become your friend, before it's too late. If they chat you up instead of sounding threatening when you call, they figure, you might pay them back first. That's the message from New York Times reporter Charles Duhigg, who just published What Does Your Credit Card Company Know About You?

While they're getting friendly with you, credit card companies have managed to learn a thing or two about exactly your ways. For starters, they're never happier than when customers buy premium bird seed, or put their kids' pictures on their credit cards. But if they hang out at Sharx, an upscale pool hall in Montreal? That's bad news.

With a special guest appearance by Laura Roberts, who has hung out at Sharx once or twice but prefers another place.

Bonus: Their last dollar.

Download the podcast; or subscribe. Intro music: Department of Eagles' "No One Does It Like You." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: They Know You" >

Pew Research Center

 

Yesterday we blogged a study from the Pew Research Center that showed younger people have had to cut back more than older ones. wonkguy responds:

The interesting story at the PEW website is the disparity in the impact of the recession in the elderly based on race. Which, I assume is linked to the disparity in incomes of the groups (white/black/hispanic) when they were working. We will be dealing with the impacts of economic racial disparity for a long long time to come.

Big Charts/MarketWatch

 

Our old friend the Ted Spread is at its lowest point since the crisis began. That's thanks to a lot of help from the government to unfreeze the credit markets.

But another indicator that's fun to check is still running high, the volatility index or VIX. Also known as the fear index, it measures what the market thinks might happen to the stock market. And if you do the math, it says people think the stock market could fall (or rise) 8% in the next month.

We are still in choppy seas.

From Oklahoma to credit derivatives. gem66/Flickr

 

There seems to be a battle brewing between Rep. Barney Frank (D-MA) and Rep. Collin Peterson (D-MN) over who gets to rule over derivatives.

Barney Frank, of course, runs the House Financial Services Committee. He is looking to fundamentally overhaul financial market regulation. We keep hearing that he wants to have ALL financial market regulation under his committee's umbrella. Which makes some sense: one system, one unified approach.

But then there's Collin Peterson. He runs the Committee on Agriculture. His most famous contribution is the controversial, much loathed and much loved (depending on your zip code) Farm Bill. Peterson wants derivatives to fall under his committee.

What do financial derivatives have to do with agriculture? And why are these two Dems fighting?

The answer might affect all of us.

Continue reading "City Versus Country Battle Over Credit Derivatives" >

One of the things I love about radio is that there will be a story I've read in the papers and thought I understood. But then I'll hear it put together well for radio and I'll realize I didn't feel it the first time round. I didn't really absorb it.

If you have a few minutes, I recommend pressing play on WNYC reporter Ailsa Chang's story about a homeowner who has entered Stage 2 of the housing crisis - filing a lawsuit.

Scott Olson/Getty Images

 

Stanley Balzekas, 85, above, learned this week that his Balzekas Chrysler dealership will lose its franchise. His father started the Chicago business in 1926. The Getty photographer who took the picture notes that Balzekas cried when he opened the letter telling him he was one of 789 dealers Chrysler is closing as it restructures.

Today, General Motors plans to notify 1,100 dealers that it won't be renewing their franchise agreements.

We've been studying the Obama administration's plan to rewrite how derivatives are regulated, and one big concern shows up.

The whole point is to prevent the AIG problem: where one big company has sold so many derivatives to so many financial institutions around the world that if it collapses the whole global economy might collapse.

But the administration's proposal doesn't seem to address all of the issues.

Continue reading "Is There A Huge Loophole In Obama's Derivative Reg Reform?" >

For a better recession, be older. Click for more stats. Pew Research Center

 

From Twitter pal @olevia, news that in the Great Recession, age matters:

[O]lder adults are living through what for them has been a kinder, gentler recession -- relatively speaking. They are less likely than younger and middle-aged adults to say that in the past year they have cut back on spending; suffered losses in their retirement accounts; or experienced trouble paying for housing or medical care. They're more likely to report being very satisfied with their personal finances. And they're less likely to say the recession has been a source of stress in their family.

Full read: Not your grandfather's recession -- literally

Mornings with NPR

 

Remember Mandy Dalton, the clown who was having trouble getting paid by bankrupt mall owner General Growth Properties? The blog Mornings with NPR turned our story about her into a cartoon.

It's hard to keep hunting. The Bureau of Labor Statistics.

 

New jobless claims went up last week by 32,000 over the week before, to 637,000. Apparently we can chalk that up to layoffs in the auto industry, especially at Chrysler. When the recession started, new weekly claims were in the neighborhood of 340,000.

Today, if you're buying groceries with unemployment benefits, you've got company -- more than 6.5 million souls' worth.

Meanwhile, from the Department of Obvious but So True, the Bureau of Labor Statistics reports that more people are giving up the search for new work, at least for a while.

An inventory glut in the 206. Seven_Null7/Planet Money Flickr pool

 

On today's Planet Money:

-- What happens when you take giant international corporations and try to give them a single regulator? Mike Roster, a bank regulatory lawyer, says you get a whole lot of folks being overly polite. Part of the problem, Roster says, is that people too quickly forget the disasters of the past.

-- Before there was Bernie Madoff, there was Ivar Krueger. In his new book, The Match King: The Financial Genius Behind a Century of Wall Street Scandals, Frank Partnoy reveals a riot of scandal that we'd all do well to remember.

Bonus: The full interview with Elizabeth Warren, and, after the jump, a Prius dilemma.

Download the podcast; or subscribe. Intro music: The Black Lips' "Bad Kids." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Scandals To Remember" >

Megan McArdle compares the retail sales numbers and the new record for foreclosures to the hunger for green shoots, and decides:

I don't want to push the Great Depression analogy too far, but what's surprising when you go back to primary sources from 1930 is the optimism. I don't mean to imply that everyone thinks things are just swell. But while you know that they are facing the worst economic decade of the twentieth century, they don't. They're expecting something more like the recession that followed World War I. People are cutting back, but they're still spending, particularly because companies are slashing prices to move inventory. It was the long grind of the years that followed, and the catastrophe of the second banking crisis, that scarred them permanently. And this shows up in the economics stats and the stock market, which did not, as we like to imagine, simply decline in a straight line.

How much so far. From Vice President Biden's report.

 

Vice President Joe Biden sent the boss a letter today, the first quarterly progress report on spending the $787 billion stimulus program. After which, the White House sent out a press release with highlights:

-- 150,000 jobs have been created or saved
-- More than $88 billion dollars has been made available for programs and projects
-- Over 3,000 transportation construction projects have been funded in 52 states and territories
-- Ninety-five percent of working families have begun seeing the benefits of the Making Work Pay tax credit in their paychecks
-- COBRA health insurance premiums have been reduced by 65 percent
-- Unemployment benefits have increased by $25 a week
-- States have drawn down $15.7 billion in Medical Assistance (FMAP) funds, allowing them to avoid budget cuts
-- Thirteen states have qualified for State Fiscal Stabilization Funds to improve education programs and save education-related jobs

But yes, we read the report itself. As of May 5, Biden writes, $28.5 billion "had already been outlaid." After the jump, who's been laying it out.

Continue reading "Stimulus Backs 150,000 Jobs" >

Elizabeth writes from Arizona:

Many years ago, in high school, one of my teachers was telling me that the way you can tell if a restaurant is doing well is by their napkins (at least the restaurants that use paper napkins). Think about a typical short order restaurant that has napkin dispensers, the ones with the paper napkins inside, at every table. This teacher told our class that all the napkin dispensers are pretty much one standard size and are usually filled with one size of paper napkins.

He stressed that a restaurant that was doing well always has the napkin dispensers crammed super full so that whenever a restaurant patron goes to get a napkin, they usually pull out 2-3 more than they really need and wind up wasting them. However, you can always tell a restaurant that is struggling a bit because the napkin dispensers are always less full, meaning that you only pull out one napkin at a time, waste fewer napkins, and save the place some money.

Continue reading "Indicator: Fewer Napkins " >

Making ourselves feel better.

 

I know, we've had signs like this all over the U.S. But I felt like I'd been seeing fewer signs, which I took as a good sign.

I guess they haven't worked through their stock, even at $3.99.

Click to enlarge. Calculated Risk

 

Shoppers spent 11.4 percent less in April 2009 than in April 2008, and .4 percent less than they had in March, the Census Bureau reports. As a category, retail and food fell 10.1 percent from last year.

Which brings us to the news from San Jose. From the AP:

An office worker cleaning a fridge full of rotten food created a smell so noxious that it sent seven co-workers to the hospital and made many others ill.

Firefighters had to evacuate the AT&T building in downtown San Jose on Tuesday after the fumes led someone to call 911. A hazmat team was called in. What crews found was an unplugged refrigerator crammed with moldy food.

Here's our question: Were more people bringing lunch to work and trying to save on buying food out? But if that's true, then why were so many lunches left to rot?

Picture this: You're on the road and heading to a comfy, homey destination where there will be plenty of good food. You stop to get gas. You're hungry. Those Fritos look really delicious. You look in your pocket and all you have is a $50 bill. Do you buy the Fritos?

OK, now picture this: Same scenario, but when you look in your pocket you've got a $5 bill. Or how about this: Your pocket is full of change!

I've got a story today on All Things Considered that some of you may recognize from the podcast about what's called the Denomination Effect. It's research by Priya Raghubir and Joydeep Srivastava published in the Journal of Consumer Research (sub required) that shows people are much more willing to spend the same sum of money if they had smaller denominations instead of one large bill. In other words you would totally buy those Fritos with a pocket full of change. You may go for it with your five. But there is no way you are breaking a $50 for a stupid bag of Fritos.

Like the Mexican folk saying that opens their paper: You should take care of small, loose bills, because large bills take care of themselves.

Continue reading "Large Bills Take Care of Themselves" >

Several of you have asked to hear the full interview with Elizabeth Warren, chair of the Congressional Oversight Panel.

We talked about it, thought about it, and decided to post it.

It is full and unedited, so there are not the normal intros, outros and transitions. It's just the raw tape.

Download the mp3, or listen with our player after the jump.

Continue reading "The Full Warren Interview" >

From Fail BLog

 

Sometimes Fail Blog just lights up your life.

Simple Size Me from hannah yi on Vimeo.

Ryan Kellermeyer says that despite our individual hardships, most of us are truly some of the richest people in the world. A few months ago, he downsized his diet to prove the point. Kellermeyer, who admits to carrying some extra pounds, has been eating a single bowl of rice each day and blogging about it as part of a fundraising campaign against hunger.

With a dozen other students at Columbia University J-school this semester, I worked on a series of stories about the economy, including his.

Source: Bureau of Labor Statistics

 

The number of Americans voluntarily giving up their jobs for reasons other than retirement, termination or death remained at an eight-year low in March.

The Bureau of Labor and Statistics reports that the so-called quits rate was 1.4 percent of the total U.S. workforce, the same percentage as February.

The number of quits has fallen in each of four regions of the country over the past year. People in the Northeast were leaving jobs at a rate of just 1.1 percent in March. The South was at 1.6 -- much lower than it was at this time last year, but still leading the pack.

H/T Calculated Risk

 

Douglas Elliott has been warning us that the big trouble for banks these days is not so much the exotic and toxic assets but from defaults on workaday loans to businesses.

Now one of the credit card bigs is shutting down accounts. Advanta, which provides cards for small businesses, will close off accounts for its million customers in June. Bloomberg reports the company faced uncollectible debt on some lines of 20 percent.

"Advanta's a nationally visible brand," one credit card executive told Philly.com. "It's going to be seen as a leading indicator. The first one to fall."

Calculated Risk notes that the Federal Reserve looked for losses of 18 to 20 percent for consumer credit cards -- ordinary folks who run up more debt than they can pay. "Advanta is seeing that in one year for some cards!" -- and it's the businesses that are having trouble paying.

Dreaming of a green New Deal. Steve Rhodes/Planet Money Flickr pool

 

On today's Planet Money:

-- The Planet Money crowd had a lot to say about our interview with Elizabeth Warren, most of it negative. Twitter pal Renee Rico takes the soapbox.

-- One set of not very popular folks is now suing another. It's bond insurer MBIA versus financial giant Merrill Lynch. At issue: whether the latter misled the former into selling insurance way too cheaply. Securities lawyer Zachary Rosenbaum decodes the briefs.

Bonus: Voters send Ohio school district an economic indicator.

Download the podcast; or subscribe. Intro music: MGMT's "Weekend Wars." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Follow Suit" >

PM editor Uri Berliner sends along this indecipherable business alert.

REUTERS SUMMIT-BATS EXCHANGE CEO SAYS POSSIBLE NEW OPTIONS MODEL WOULD BE MAKER-TAKER

Anyone know what this means?

Click to enlarge. Brad Setser/Council on Foreign Relations

 

Remember when Chinese Premier Wen Jiabao warned the U.S. to be careful with his country's investments in America?

As you can see from Brad Setser's rough chart, the U.S. is paying an increasing amount of interest to China. That's because China has loaned more than $1 trillion to the American economy in the form of Treasury bills and Fannie Mae and Freddie Mac bonds.

But, just as Wen worried, the overall rate of return is falling. The U.S. is paying less interest on the dollars it's borrowing. That's a result of the U.S. decision to lower the benchmark interest rate nearly to zero. It's supposed to get the economy going, but it also unnerves players like China with the prospect of inflation. China has been worried that its dollars won't buy as much when the U.S. pays it back; now Chinese leaders can worry about falling returns, too -- but as Setser argues, that's the risk they took.

Some soon-to-be-published research finds that CNBC's Jim Cramer's stock picks aren't so crazy.

Two professors at Northeastern University found that following Cramer's advice yielded a 12% annual return on average, compared with 7% for S&P 500 index over the same period.

Continue reading "Cramer, Not So Mad?" >

The other day at the ices stand (think snocone, Hawaiian shave ice, etc.), my seven-year-old popped a wiggly when they handed him his treat in a plastic cup instead of a paper one. Proving why you should never let a first grader do your taxes, he refused the already used plastic one on environmental grounds and walked away happy only when we poured the sugary concoction into a second (readily biodegradable) cup.

For him, plastic is a huge, huge problem.

In the New York Times today, I finally caught up with the apparent phenomenon of The Story of Stuff, a 20-minute take on the perils of consumer culture that has been making the rounds of American classrooms. Some call it an educational breakthrough, some an unfair takedown of capitalism, and I'm betting many economists will say its reasoning is flawed.

But since the next generation's watching The Story of Stuff at school, I'm thinking we might out to watch it together on the blog. I'll reach out to a couple of economists about it, to get their view. The full video's after the jump.

Continue reading "'The Story Of Stuff'" >

Planet Money listener and self-described "Michigan exile" Chad S. sends along the story of a Michigan couple who are using an economy themed essay contest to sell their home. With an entry fee of $750, the couple hope to raise enough money to sell the farmhouse and start a new life in South Carolina. Besides the fee, entrants are required to write a 500 word essay about how the economy has affected their lives and how winning the home would change that. The Flint Journal reports:

"We want to help someone start their life over, along with ourselves," he said.

Worley, 51, and Debra, 49, have lived in the farmhouse for five years.

He said the 1,200-square-foot home, built in 1892 and possibly eligible for designation as a centennial farm, is worth about $245,000, but he'd be lucky to get half that through a sale in the present economy.

Elizabeth Warren chairs the Congressional Oversight Panel. Chip Somodevilla/Getty Images

 

On today's Planet Money:

-- We're going to file this one under Intense Planet Money Interviews. Bailout monitor and Harvard law professor Elizabeth Warren sat down with Adam Davidson this week and went at least 15 rounds over what's really wrong with the economy and what should be done to fix it. Warren, chair of the Congressional Oversight Panel, says the problem is as much a credit crisis as a slide in conditions for average American families.

-- Engineer Jocelyn Lally works for a big firm in Chicago, where she says several of her colleagues have recently been made part-time. The resulting quiet has led to an unexpected economic indicator.

Bonus: From Philadelphia, a living indicator.

Download the podcast; or subscribe. Intro music: Fabolous "Its My Time." Find us: Twitter/ Facebook/ Flickr

Continue reading "Hear: Elizabeth Warren Checks In" >

Mother Nature used to look like this.This lady, progenitor of the Heat and Snow Miser follows the standard depiction of Mother Nature as a sylvan, earthy, vaguely counter-culture figure. Her clothes were loose and flowing, like a stream or breeze. Advertisers who used Mother Nature (she's a fair use ICON!) stuck to this basic script. Like this lady, who warns margarine users not to mess with Mother Nature, could have been outfitted from the same trunk as a summer stock production of Hair.

But look at how Mother Nature is showing up these days -- dressed in a sharp business suit.

-- Mike Pesca

Continue reading "What Happened To Mother Nature? " >

"Is is possible we have too many choices in America?" @not_yet

 

Twitter pal @not_yet wins the prize for economy caption of the week.

Industry underwater. Harpy/Planet Money Flickr pool

 

Several of you have called our Apology Line (202.371.1775.) to confess responsibility for helping drag down Detroit. The messages reflect a collective guilt of sorts for dwindling sales of U.S. cars and trucks from the Big Three. But the latest slew of news may not help assuage that guilt.

Just a week after Chrysler was ushered into bankruptcy, GM seems poised for another round of deep job cuts to avert a trip to bankruptcy court of its own.

And that comes as the Bureau of Labor and Statistics reports 29,100 automotive production-related jobs vanished in April, bringing the total number lost in the past year to 221,400.

From the Bureau of Labor Statistics

 

As the number of unemployed Americans continues to climb, so does the length of time many are out of a job.

The Bureau of Labor Statistics reports that 45.9 percent of unemployed workers this month have been idle for 15 weeks or more. That's up from 34.6 percent at this point last year.

Unemployment climbed again in April, from 8.5 percent to 8.9. The rate has risen 3.9 percent over the past year. For you watchers of U-6, the broadest measure of unemployment went up .2 percent to 15.8.

Unemployment's generally a lagging indicator, meaning we'll likely see the overall economy improve before businesses start hiring again. Fed chairman Ben Bernanke warned Congress as much this week.

I love this video, showing how much $100 million is compared to the US government budget. BTW, it's roughly comparable to how much those AIG bonuses are compared to the size of the economic crisis.

Kristin writes:

This is an example of the "My Wish" project done by my son's second grade class. There were a few of them with this same sentiment. It breaks my heart that the kids are stressing about the economy too. We're in Rochester, MI near Chrysler HQ, and many people in our neighborhood are in the auto industry. I see more dads on the playground picking up kids from school than in years past, which is nice in a way, but also makes it clear how many lives have been recently changed. (The author's nickname is "Little Mouse" in their second grade mouse world game.)

"It's as easy as AIG," is the slogan for AIG's Delaware-based savings and loan bank. Compared to AIG's huge insurance operations, the bank is tiny, but it was key in getting AIG assigned to its chosen regulator -- the Office of Thrift Supervision.

The Office of Thrift Supervision is a federal regulator that specializes in savings and loans. As we learned in our regulatory arbitrage show, federal regulators market themselves to institutions. For AIG, the OTS was an easy pick because they offered two key bonuses:

1. regulation of its holding company
2. international regulation

Continue reading "'It's As Easy As AIG!'" >

This week, President Barack Obama announced that he wants to change key parts of the federal system for student aid. Among the proposals is a move to turn Pell Grants into an entitlement program, similar to Social Security. A pair of Planet Money Twitter pals began (quite civilly) duking it out over the issue. We asked Eric Sipple and JL Johnson to take it outside the 140-character box. Johnson opposes the Obama plan -- you can find his response here.

Below, Sipple argues for it:

I was lucky. The savings account in my name was opened when I was an infant, funded by every check, bond and $20 bill slipped into a Christmas card throughout my life. Gifts I got to keep. Money? That went into the college fund, along with whatever extra money my parents had left over after the day to day expense of raising a spoiled only child. My four-year degree took me eight to earn but left me with less than $7,000 in debt. Like I said. Lucky.

The last two decades have seen a drift in the makeup of student financial assistance from grants to loans. When the Pell Grant was introduced in 1976, two years before my parents started my college fund, it covered 72 percent of the typical cost of four-year undergraduate education. By 1997, when I was sending out my college applications, it covered only 35 percent. It wasn't any better in 2006, the year after I finally earned my degree. President Obama's plan to tie Pell Grant increases to inflation is a step toward reversing that trend.

Continue reading "Entitled To A Pell Grant? Yes" >

This week, President Barack Obama announced that he wants to change key parts of the federal system for student aid. Among the proposals is a move to turn Pell Grants into an entitlement program, similar to Social Security. A pair of Planet Money Twitter pals began (quite civilly) duking it out over the issue. We asked Eric Sipple and JL Johnson to take it outside the 140-character box. Sipple supports the Obama plan -- you can find his response here.

Below, Johnson argues against the change:

In his book The Audacity of Hope, then U.S. Senator Barack Obama spoke heavily on values, values that in his own words "help realize opportunity." The values of self-reliance, self-improvement, drive, discipline, temperance, hard work, and personal responsibility, says Obama, are rooted in "a confidence that each of us can rise above the circumstances of our birth [and] society as a whole will prosper." Later he states:

"Our system of self-government and our free-market economy depend on the majority of individual Americans adhering to these values. The legitimacy of our government and our economy depend on the degree to which these values are rewarded."

Considering these words, written less than five years earlier, I find it troubling that now President of the United States Obama has sponsored the ambitious goal of making Pell Grants an entitlement program the likes of Social Security and Medicaid.

Continue reading "Entitled To A Pell Grant? No" >

Ian writes:

I am from suburban Detroit and felt that Mr. Langfitt's comments were definitely reflective of several aspects of the area and its connection to the auto industry -- and yes, it is true that nearly everyone has some relative that has worked or works for the "Big Three." That said, it should be noted that his comments seem to reflect, for the most part, only the views of UAW members. Of course I can only speak for my self, but anecdotally I know I am far from alone in having feelings of animosity towards the UAW and its overpaid members; this phenomenon of ill will is not isolated to cosmopolitan coastal cities.

Continue reading "Not Loving The UAW" >

We've been saying for weeks that these bank stress tests are a bit of a ... I don't want to say "joke." Let's just say that we've expressed the view that not many investors or folks on Wall Street take them all that seriously. We knew, in the beginning, that they aren't pass/fail, which we took to mean they are a bit of a whitewash.

I don't know what to think of them now. I do know that we'll find out soon how "the market" (that final judge, it seems) views them. And it should be clear, pretty soon, if we were wrong in saying these things are irrelevant.

Felix Salmon once told me that what he loves about blogging is that you get to find out very quickly how wrong you are. I'm trying to join him in feeling all excited about that.

The U.S. Department of Labor Commerce Department says new jobless claims last week fell 34,000 to 601,000. That's the lowest figure since Jan. 24, and way less than the 635,000 economists expected.

Ian Shepherdson sees real good -- and really good -- news in that:

A clear turn is now visible in the claims numbers. The eight-week moving average has now fallen for for straight weeks, and the four-week average has dropped by 36K from its early April peak.

This is too big a move just to be noise. Claims can probably fall a good deal further before they hit the wall; they surged by 200K as companies panicked in the six months after the Lehman bust. With activity now apparently bouncing as fear of another Lehman fades, layoffs will drop sharply. But a sustained fall to the sub-350K pace consistent with strong growth is still a very long way off. That requires household deleveraging and healthy banks, and that's not a story for this year.

We're getting there. Planet Money is spending much of the morning sitting around a table in a heavily guarded room, where we'll be critiquing past podcasts and the blog. The Treasury is expected to release whatever news we don't already know about the banks' stress tests -- thanks, Calculated Risk, for keeping score -- so we'll leave you for now with this comforting headline from the LA Times:

"Big banks' 'stress test' results to be reassuring, Geithner says."

In Philadelphia, "they even took down the letters." Brady Dale/Planet Money Flickr pool

 

On today's Planet Money:

In the best tradition of The Bachelor, financial institutions get to choose from a small flock of regulators. Those regulators collect fees for their work, so they're hot to woo potential companies. The Planet Money Players, with special guest Dina Temple Raston, show you how it's done as they vie for the affections of one Adam Isaac Gavidson, better known as AIG.

Bonus: A listener indicator from the office.

Download the podcast; or subscribe. Intro music: Yeah Yeah Yeahs' "Zero." Find us: Twitter/ Facebook/ Flickr

Continue reading "Hear: Regulate Me, Baby" >

Twitter pal @vigorousnorth forwards this dose of outrage, from a professed GM stockholder blogging at May Shrink or Fade.

At issue: GM's plan to (as Reuters put it) "wipe out current shareholders" by issuing 60 billion new shares to pay back the U.S. government, bondholders and the United Auto Workers Union. From the blogger:

For me, this will likely mean losing several thousand dollars. I currently own about 0.0004 % of GM; after, I will own 0.000004%.

Karl Marx said the revolution will be recognizable when the people-- or more specifically, the proletariat-- come to own the means of production. I can't think of any more obvious example than the UAW owning a third of GM. And taking my share in the company away seems not much different from the proletariat breaking down the door to my bourgeoisie house and hauling off my jewels for communal ownership. I guess it's slightly better than taking the current shareholders via ox-cart to the guillotine; but if I had all my money invested in GM, it would be about the financial equivalent of execution.

I've got an e-mail in to the author.

Jacqueline from Cleveland, Ohio, posted this economic indicator on our Facebook page:

5. The number of couples I know that have met and started dating since the economic disaster that began last September. Including myself, all 5 couples met either right before or right after being laid off or just "out of work". Normally, something as devastating as a loosing one's job would cause a brand new, fragile relationship to end. In these cases, however, the tough economic times have seemed to "pull" the couples together. Fewer hours stressed out at work, no commuting, less money for happy hour with single friends and a general desire for companionship during this rough patch -- has actually helped the relationships grow!

Continue reading "'Recessionships' " >

As it prepares to release the results of its stress tests tomorrow, the government has told Bank of America it needs $33.9 billion more in capital -- money it could either raise privately or derive from converting the preferred shares Uncle Sam holds now into common voting stock. Citigroup's reportedly on the hook for about $10 billion -- the smaller number comes in part because Citigroup already plans to swap the stock around. Reuters says the deals not done yet:

Citigroup may need less if regulators accept its arguments about its financial health.

Earlier this week, Brad DeLong won the prize for clarity on that point:

The banks should not be negotiating with the government over this.

From the Center for Public Integrity's "Meltdown" project.

 

The Center for Public Integrity rolls out a giant clickfest today, with Who's Behind the Financial Meltdown. The project tracks nearly 7.2 million subprime mortgages in search of the 25 lenders most responsible for the housing crisis. Bill Buzenberg, former NPR hand and current executive director of the CPI, suggests looking at the problem this way:

The truth is these mega-banks invested trillions, made billions, and took risks with their eyes wide open. Now, because they are deemed "too big to fail," they need trillions in government bailouts and guarantees to solve problems they helped create. But let's look at it another way: perhaps these mega-banks are simply "too politically connected to fail." Their unbridled political contributions and massive lobbying created the lack of regulation and oversight that led to this crisis. Where is the accountability -- of management and boards, of auditors and regulators -- for what has happened? It is time to set aside the myth of the mega-bank as victim.

Last fall I met Iris Glaze at a "Washington Mutual wake." It was a WaMu staff party organized after the thrift collapsed to "remember and celebrate the good times." Iris is a striking personality. She worked in investor relations at Washington Mutual, and you can tell she loves people the minute she meets you, hugs you and asks you for your life story. We met in this huge room full of talented, recently laid-off people -- but still, I thought Iris would charm someone else into hiring her, easily. Apparently not. She writes:

I'm okay. Still searching for a job. I started out looking for the perfect job (which I had at WaMu) but my standards are quickly lowering and now I hope to hear back about my application to be a Wal-Mart greeter. McDonald's turned me down for the fry cook job. Sigh.

Federal Reserve Chairman Ben Bernanke went to Capitol Hill today and confirmed the darker side of the rosy scenario. Economic activity could "turn up later this year," he said. And then:

Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.

Bernanke's full testimony is up at the Federal Reserve. Calculated Risk runs the factcheck on Bernanke's remarks about real estate -- the chairman does all right.

Avi Buchbinder writes:

I am a 25-year-old graduate student currently working on getting a PhD in chemistry. As you know, millions of college seniors will be graduating in the coming weeks. Presumably, they have had a difficult time finding jobs, a topic which you have touched on anecdotally in past podcasts. Yet, none of these college graduates will be receiving unemployment benefits, as they did not recently lose a full time job. Will unemployment statistics simply miss these hundreds of thousands of people becoming unemployed within the span of a month? If so the employment picture will be even worse than it looks for an outside observer.

The good news, such as it is, after the jump.

Continue reading "Do New Grads Count?" >

Mike from Parsippany, NJ writes:

My wife and I started looking for our first house just after we got married (October 2008). At first we found plenty of homes that had been on the market for several months, and we saw prices on those homes drop over the next couple of months as they remained on the market without any interested buyers. We took our time shopping around, knowing that we had the advantage in this buyer's market and confident that we would find a great deal.

Continue reading "Tales Of A First-Time Home Buyer " >

Nouriel Roubini, Tim Geithner, Fairy Godmother Getty Images

 

The Treasury isn't expected to release the results of its stress test on the nation's 19 largest banks until Thursday, but a basic outline has begun to emerge. Press reports have Bank of America and Citigroup out looking for more capital already. Today's Wall Street Journal says 10 of the 19 will soon be in the same boat.

Douglas Elliott of the Brookings Institute told me yesterday that the big question for him will be where the government's final assessment falls on the spectrum of forecasting. Is Treasury Secretary Tim Geithner leaning toward the pessimistic outlook of economist Nouriel Roubini, or is he moving more toward a gentler, rosier view? As Elliott writes in a new paper, he'll be watching for the final count of how much extra money the Treasury wants banks to raise:

The range I expect, of $100-200 billion, would be broadly in line with consensus expectations for the depth of the recession and the resulting credit losses. A smaller requirement would likely indicate the regulators and the Administration are more optimistic about the banking crisis. The $100-200 billion range is feasible within political constraints and therefore would not be avoided solely for political reasons. On the other hand, a larger figure might indicate that things are worse than the consensus believes. Imposing a larger total capital requirement would hit significant political barriers, particularly since it would probably force an eventual return to an unwilling Congress for more money. Doing this despite those political constraints would seem to indicate serious concerns.

The trickiest situation to analyze would be if the aggregate figure is in the expected range. This could either mean that this is the level regulators genuinely see as the right additional buffer or could reflect the political reality that Congress would be extremely reluctant to authorize more funds and would almost certainly add strings that the Administration would find onerous. It could be more appealing to operate within the present authorization and wait to see if that proves to be enough.

Funky shoes: $300 Clownsoport

 

On today's Planet Money:

-- Figuring a little cushion couldn't hurt, West Virginia's Centra Bank borrowed $15 million from the Troubled Asset Relief Program. Then CEO Douglas Leech decided TARP's restrictions weren't worth the hassle and moved to repay the money. Getting out cost the healthy bank $750,000, for complicated reasons. Now David Kestenbaum has the chance to live his radio dream: Stopping his NPR story midway so he can explain it for the rest of us.

-- When the Treasury announces the results of the banking stress tests this week, says Douglas Elliott of the Brookings Institute, we'll be looking at numbers based on a lot of information and a slew of judgment calls. Elliott, who's got a new paper out on the tests, says the real test for the economy isn't the toxic assets, but the growing defaults on far more ordinary loans.

-- It's tough out there for a clown. Mandy Dalton takes apart the business of buying $300 shoes for entertaining kids in the middle of a deep recession and a swine flu panic.

Bonus: The corporate tax loopholes President Obama wants to close.

Download the podcast; or subscribe. Intro music: Crystal Castles' "Untrust Us." Find us: Twitter/ Facebook/ Flickr

Continue reading "Hear: Fears Of A Clown" >

Judging from the messages you're sending, the Planet Money audience has fallen in love with this from the Onion: "Nation Ready To Be Lied To About Economy Again." Frank Carlson called it "writing lies to tell the truth" and picked out a key bit.

"I don't need to be constantly reminded that the lack of regulations on Wall Street compounded with failing institutions like AIG basically plunged the world economy into a global recession," said 32-year-old office manager Alexis Harrington. "What I want is for someone to tell me with a straight face that the GDP is through the roof so that I can feel better and instantly forget what all these terms even mean."

Our pal Dan Pashman shot this video on Thursday in Manhattan. Pashman writes:

On my way to work, I came across a long line. A really long line. A line that would make Walt Disney jealous. There's an unemployment office near my office, and a few months ago there was a pretty long line there for a job fair. So I figured this was probably for another job fair.

I was wrong. The line was for a Jimmy Choo sample sale.

Continue reading "Freak Out: Jimmy Choo Sale" >

Nonprofits across the country have seen a surge in volunteers since the recession started -- a sharp contrast after several years of a declining U.S. volunteer rate.

These days, when people get laid off, it seems the first thing many of them do is search for something to do, even if it's working for nothing.

Where'd everybody go?Jeff Erenstone

 

Jeff Erenstone writes:

I live in Lake Placid, NY, the site of the Ironman, USA. My house and office overlook the road that both the bike and run course use. Every year people flock to Lake Placid to train on the course before July 26th, the race date. In years past, as soon as the snow melted away and the weather gets nice, I would see hundreds of people training every weekend on the course. This year there are a lot fewer athletes.

This does not mean that there are fewer people doing the event.

Continue reading "Whither The Ironmen?" >

Road to recovery. Apripom/Planet Money Flickr pool

If you're looking for the news, take these: Citigroup and Bank of America are out in the weeds looking for $10 billion each in fresh capital, ahead of the stress tests results expected on Thursday. Fiat wants a chunk of GM, too, not just Chrysler. President Obama's intent on kicking over corporate tax havens, and on making Pell Grants for college an entitlement program like Medicare and Social Security.

But that's not where my heart is. I spent yesterday talking to a guy who's nearing the end of school and hoping to become a teacher. His advisor's telling him this is the worst year he has seen for placing new teachers in 20 years. I tried to tell him, hey, even your parents don't have a model for this kind of job market -- it's bound to let up at some point. And you could see it cheered him not a whit.

Then Paul Krugman got me today with his column on wage deflation. A lot of you have told us about cuts in wages, either in your same old jobs or in the new ones you were lucky enough to find after getting laid off. At NPR, we're looking at what feels like a modest pay cut, in the form of five furlough days and the ending of certain paid holidays. Krugman writes that furloughs may save jobs at the level of the individual company, but they're bad for the overall economy.

Continue reading "The Paradox Of Cutting Pay" >

Once the savior of Chrysler, now resting in Curtin, Ore. Curtis Gregory Perry/Flickr

 

On today's Planet Money:

-- Chrysler headed for bankruptcy today, pushed there by President Obama in the latest twist in the surreal saga of the American automobile industry. NPR's Frank Langfitt checks in from his rounds of UAW union halls, where we hear from a Chrysler worker who says the cars his company makes just aren't good enough. Another worker says he's surprised a UAW health care trust fund ended up as a majority owner of the company, since he sat through days of votes on wage concessions without hearing a word about it.

-- We asked whether you bore any blame for wrecking the global economy, and whether you were up for apologizing on our Planet Money apology line. You were. We're leaving the line open at 202.371.1775.

Bonus: Selling the K-Car.

Download the podcast; or subscribe. Intro music: Passion Pit's "The Reeling." Find us: Twitter/ Facebook/ Flickr

Continue reading "Hear: Blame The K-Car" >

Check the paneling, y'all. Jalopnik.

 

We're talking Chrysler on the podcast today, and along the way we stopped to remember the K Car.

Go ahead and raise your hand if you remember the last great model for saving the company. The K Car, we'll just tell you now, has its own fan club. Of course.

Rachel writes from KQED land:

As of a year ago, it was extremely rare for a contract attorney/document review job (particularly for large firms) to pay anything below $40/hour. That rate was standard across doc review agencies and felt extremely stable.

Now, the majority of the doc review job announcements for contract attorneys specify that the pay will be only $35/hour. Whether that reflects that firms are not willing to pay the agencies as much, or that firm clients are not willing to pay the firms as much, or that agencies are just trying to keep more of what the firms pay, I don't know. But it really stinks.

The U.S. manufacturing sector contracted further in April but at a slower rate than in March -- a sign the economy could be stabilizing.

The ISM Purchasing Managers' Index -- a composite survey of executives on changes in new orders, production, employment, inventories, and prices -- rose to 40.1 in April from 36.3 in March. A reading below 50 indicates contraction.

Economist Ian Shepherdson with High Frequency Economics predicts the index will continue to rise, hitting the 44 mark by June or July.

"That's immensely significant," he says, "because 44 is consistent with stable GDP." Shepherdson is quick to add, however, that "there are still deep problems in the economy."

Riding to the rescue? Fiat

 

It isn't likely to stave off plant closings or impending layoffs, but the Fiat 500 could be the car to ultimately save Chrysler.

Detroit Free Press columnist Mark Phelan predicts the Italian minicar could hit American streets early next year and that high-volume U.S. assembly of the 500 could make or break the Chrysler-Fiat alliance. He writes:

The best estimates are that Chrysler factories in North America may be producing between 400,000 and 600,000 Fiat-based vehicles a year by 2013 or 2014. That should be enough to keep two or three Chrysler factories open. Early indications are four plants are in the running for that work: two in the United States, one in Mexico and one in Canada.

Marc W. writes:

I went to see my regular seamstress today. She has a small shop in the middle of the upscale district in our city; she caters to a lot of doctors, lawyers, and their wives. I was getting a pair of suit pants hemmed. Normally a job like this would take 2-3 days, but she told me today that it would be almost a month before they would be ready. She said she's seeing a lot of older clothes that need alterations or repair, versus new clothes that just need to be tailored. She mentioned that a lady came in the other day that she had never seen before even though the woman lived less than three blocks from her shop. The lady was having a tear in a dress repaired. My seamstress said the woman was visibly shaken and mentioned that she had been watching CNBC all morning.

So maybe it's a green shoot for my seamstress, but not so much for upscale clothing retailers.

From the auto industry's hometown paper: "Chrysler bankruptcy slams state." Whatever the company's long-term viability, reports the Detroit Free Press, in the short run "pain rained down on metro Detroit." Like this:

Three metro Detroit plants -- Sterling Heights, Detroit Axle and Conner Assembly -- are to close by December 2010, along with three other U.S. plants. While Obama billed it as a "surgical" bankruptcy, stamping plants in Sterling Heights and Warren shut down Thursday afternoon because suppliers stopped shipping parts out of fear they won't be paid.

Chysler plans to close all its American plants for 60 days, starting Monday, while it gets reorganized.