A Higher Heel to Combat the Economy Downturn? – the High Heels Economic Indicator

HighHeel As the world-class luxury shoes designer Jimmy Choo said: “the right shoe can make everything different”.  It seems the high heels now are not just women’s “last touch of elegance” (quoted of legend designer Coco Chanel), but also the weapons women are using to fight against the economy recessions.

IBM conducted a computer-based analysis project on billions of social media posts about about shoe trends, heels are about to go down. The report came out at 2011. In the report, the researchers claimed that the higher the heels, the worse off the Economy would be.

“Usually, in an economic downturn, heels go up and stay up – as consumers turn to more flamboyant fashions as a means of fantasy and escape,” said Dr. Trevor Davis, a consumer products expert with IBM Global Business Services. “This time, something different is happening — perhaps a mood of long term austerity is evolving among consumers sparking a desire to reduce ostentation in everyday settings.”

According to an article published by the Christian Science Monitor from CNBC wire, the several big recessions of the U.S. Economy in history have shown the correlation between the economy status and the height of the heels.

In the 1920s, women were wearing high-heel pumps and platforms to get their confidence back during the Great Depression. In the 1970s oil crisis, platforms came back en vogue as the low-heeled sandals of the late 1960s were cast aside. In the 1990s, the low, thick heels of the “grunge” period were replaced by “Sex and the City”-inspired stilettos just as the dot-com bubble burst.

1920-1970-1990

From left to right: wall deco in 1920s; the popular platform shoes in 1970s; vintage stilettos from 1990s. 

From the report published in 2011, an analysis of the four years (from 2008 to 2011) of social media showed that discussions of increasing heel height peaked towards the end of 2009, and declined after that. For example, key trend-watching bloggers between 2008 and 2009 wrote consistently about heels from five to eight inches, but by mid 2011 they were writing about the return of the “the perfect flat”. The sky-high heels were not gone yet; rather that, as the economy has bounced back a little, the bloggers were discussing as glamwear and not for the office or shopping trip.

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Source: IBM

As the statistic from the U.S. Bureau of Economic Analysis indicated , from the year of 2009 the U.S. economy slowly stepped into a recovery session. The GDP grew at an annual 2.2% rate in the first three months of 2012, considerably slower than the 3.0% increase in 2011’s fourth quarter.

USGDPchange2008-2012

From the comparison and analysis for these two groups of statistics, there seems to be a kind of correlation between the economy growth and the change of women’s heel heights. Nevertheless, according to the Huffington Post, there could be other possible reasons for the dropping of heel heights.”Women may simply be ditching their heels in favor of a more pain-free walking experience, or, for once, low heels may actually indicate longer-term economic woes,” quoted from the Huffington Post’s article.

The Times Magazine responded to the newly-born High Heel Economic Index with a multimedia project: The Hazards (and Power) of Higher Heels, where the magazine tried to analyze the societal and economy reasons behind the changes of high heels.

Fashion trends have become popular economy indicators these days. Dated back to 1926, economist George Taylor came up with the Hemline Theory, which himself explained as when women wore shorter skirts to show off their expensive silk stockings during good economic times, but longer hemlines were more preferable to cover bare legs during a recession. In the 2000s, Leonard Lauder, the chairman of Estee Lauder companies, introduced the idea after noticing that lipstick sales jumped in the aftermath of 2001 terrorist attacks, according to The New York Times. He developed the scenario as the Lipstick Index, which indicated that women turn to less expensive indulgences, like lipstick, when they felt less confident about the future.

When talking about economy, people relate to numbers, analysis reports and charts. Nevertheless, something that seems not related  to economy actually has its significance for the economy prediction. And wen it comes to shoes, perhaps they will be able to tell a lot.

The Big Mac Index

 

The Big Mac Index (BMI)012814_0348_2, was introduced by The Economist  in 1986 to “make exchange-rate theory more digestible” — tracking the over- and under-valuation of each currency against the dollar. The Big Mac Index was based on Purchasing Power Parity (PPP) Theory that a particular amount of dollars should be able to buy an identical basket of goods in each country. And that basket of goods here is the Big Mac.

If a country’s dollar price of a big mac is less than that of the United States, it means that the country’s currency is undervalued against the dollar. For example, in July 2014, $4.80 buys a Big Mac in the United States, while $2.73 buys one in China. Therefore, the yuan is undervalued by 43.13% ((2.73-4.80)/4.80*100%=-43.13%) .

McDonalds’ Big Mac is produced nearly in the same manner and held to the same standard in more than 100 countries, thus the index makes comparing many countries’ currencies possible.

Screen Shot 2014-09-02 at 12.50.26 AM

The BMI has been a heated topic with one of the highest annual growth rates among other popular economic indicators since it was introduced.

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Source: The Economist

In the map above,  Asia is the cheapest place to buy a big mac — Asian countries’ currencies are undervalued while European countries’ are overvalued. In 2014, the most undervalued currency is Hryvnia, undervalued by 66.09% against US dollar, and the most overvalued currency is Kroner, overvalued by 61.79%.

Screen Shot 2014-09-02 at 2.51.26 AM

Source: The Economist

The table above indicates the trends for the four East Asian currencies tracked consistently from 2000 to 2014. South Korea is still in as big an upheaval as it was ten years ago. It began with a valuation 7.87% above the dollar and ended up with a valuation 16.48% below the dollar with some ups and downs in between. The yen has had a bumpy ride too.

The Big Mac Index for South Korea

The Big Mac Index for South Korea

After being pegged to the dollar for more than three decades, the won became a floating currency in 1997. Also in 1997, South Korea was confronted with Asian Financial Crisis and the region’s currency depreciation (other three biggest victims are Thailand, Malaysia, and Indonesia). 1997 is one of the watersheds — the won’s BMI curve had been comparatively gentle by the end of 1997 but it dramatically plunged from 1996’s 25% to 1998’s -31%. After the IMF bailing out the country in 1998, South Korea ushered in a moderate economic growth. 2008 is another watershed. Influenced by the global economic crisis, the won ‘s BMI experienced a downtrend from -7.81% to -27.55%. More evidently, the won’s BMI curve goes hand in hand with South Korea’s GDP growth, sharing a precisely synchronized rise and fall.

Hong Kong dollar and Chinese Yuan have remained relatively steady over the last 14 years. Hong Kong’s relatively smooth curve (47.83% undervalued in 2000 to 43.14% undervalued in 2014) can be explained as “Hong Kong dollar is tied to the American dollar”.

Screen Shot 2014-09-02 at 2.51.39 AM

Source: The Economist

How about China? Its relative stability (52.36% undervalued in 2000 to 43.14% undervalued in 2014 with little movement in between) might be partly attributed to the steady economic growth even during the crisis. 

RMB

Source: The Economist

The Big Mac Index also reveals the rise and fall of the currency’s value under the mask of a Big Mac’s unvaried local price and exchange rate. Taking Chinese Yuan as an example, the exchange rate and the average local price of one Big Mac almost remained unchanged from 2000 to 2004, but the BMI implies that the yuan was undervalued to a varying degree during that period. The relation between BMI and RMB/dollar exchange rate has become more reasonable since 2005, because RMB/dollar exchange rate was tuned to be more “natural” by the Chinese government in 2005. This can be further explained by China’s changing currency policy.

In 1994, the Chinese government announced an initial RMB/dollar exchange rate of 8.70, which was raised to 8.28 by 1997 and remained constant until 2005. In 2005, the Chinese government modified the RMB’s exchange rate to become “adjustable,” adjusted from 8.28 to 8.11. China then halted its currency appreciation policy from 2008 to 2010 in response to the global economic slowdown, RMB being pegged to the U.S. dollar for roughly two years. In June 2010, Chinese authorities allowed the exchange rate to appreciate answering to market forces’ call.

Like any other economic indicator, the BMI has limitations. First of all, due to the different social status of fast food in different countries, the selected item may not be representative enough to see the whole picture of the country’s economy. Second, Big Macs are produced in various sizes with different ingredieants, and McDonald’s even use different commercial strategies around the world, which would result in a “non-identical basket” of goods.

With the popularity of the BMI, some similar indexes came into being. The alternative indicators based upon PPP Theory are iPad Index and iPod Index.

Japan shows 96.34% correlation between alcohol consumption and household income

Alcohol has never been seen as essential as the bread and milk for people’s life. But for a long time, alcohol consumption has played an important part in some country’s economy, and in some ways, helped indicate the economic growth, employment issue, and even social problems.

alcohol-pic

Alcohol has never been seen as essential as the bread and milk for people’s life. But for a long time, alcohol consumption has played an important part in some country’s economy, and in some ways, helped indicate the economic growth, employment issue, and even social problems.

Anton Reed, from Washington and Lee University, used Figure-1 demonstrating a strong correlation (79.5%) between household alcohol consumption and GDP. When GDP decreased and fluctuated afterward, in response, alcohol expenditure also decreases.

1st graph:  %change in Income and %change in Alcohol Expenditures 2nd graph: Japan's Alcohol Expenditure and Average Annual Household Income

Figure-1
1st graph: %change in Income and %change in Alcohol Expenditures
2nd graph: Japan’s Alcohol Expenditure and Average Annual Household Income

And the statistic implies more, when it touches on the drinkers, the consumers. Figure-2 reveals a correspondent increase/decrease between alcohol consumption and income. And the statistical correlation is as high as 96.34%.

1st graph: %change in Income and %change in Alcohol Expenditures 2nd graph: Japan's Alcohol expenditure and Average Annual Household Income

Figure-2
1st graph: %change in Income and %change in Alcohol Expenditures
2nd graph: Japan’s Alcohol expenditure and Average Annual Household Income

Similar results showed up in the study commissioned by the European Brewing Sector regarding beer consumption in European countries. An article named It’s a Beer Recession by Jack Ewing illustrated how unemployment rate and the European debt crisis influenced people’s drinking habit. Figure-3 shows that the EU brewing sector suffered from a severe economic downturn from 2008 to 2010, when Europe’s economy fell down under the strike from the U.S. Great Recession. People became pessimistic of European economy, and both government revenues as well as employment in brewing sector fell dramatically.

Developments in the Impact of the EU brewing sector 2008-2012

Figure-3 Developments in the Impact of the EU brewing sector 2008-2012

Along with that, in Figure-4, beer consumption decreased by nearly 9%, and the value of beer market and production also responded in the same way.

Developments in the EU brewing sector 2008-2012

Figure-4 Developments in the EU brewing sector 2008-2012

Ewing pointed out that “…the employment in the beer industry fell by 12 percent, or 260,000 jobs, the study said…Job losses can exacerbate the debt crisis because unemployed people typically collect benefits rather than pay taxes. When beer consumption declines, governments also collect less sales tax on beer sales.”

On top of Japan and European countries, China, considering its successful and tremendous alcohol market, also showed a trace of the relationship between alcohol consumption and economic growth. According to Consumer Trends: Wine, Beer and Spirits in China released by Manitoba government, off-trade* sales make up 80% of spirit sales in China, and the total expenditure increased by 7%. At the same time, the volume of on-trade spirits decreased from 2008 to 2009, because of reduced expenditure on entertainment during hard economic times.

Beer consumption in the world (billion liters), 1961-2007

Figure-5 Beer consumption in the world (billion liters), 1961-2007

Also, Felix Salmon from Reuters showed Figure-5 demonstrating a boost of beer consumption in China, as the broken line tilts up after 1977. Comparing beer consumption after 1995 with Figure-6, the statistic reveals a corespondent increase in both values. Salmon explained that, “what we’re seeing here is largely the China effect — and, more generally, a world where poor people, once they reach a certain minimum income, start hitting the hops.”

China's Minimum Wages in Shanghai and Beijing

Figure-6 China’s Minimum Wages in Shanghai and Beijing

Thus, from the above cases, we may see that once the country is in recession, the unemployment rate goes up, then people’s drinking money shrinks, then the alcohol consumption decreases. So if people want to know how a country’s economy looks like, they may take a look at its alcohol market, unless it doesn’t have a strong culture of drinking.

For an endnote, what’s interesting but opposite to the alcohol index is that, in the U.S., alcohol consumption goes up even when the economy goes down. Michael French from University of Miami found that binge drinking increased with a rise in the state-level unemployment rate. Driving while intoxicated and alcohol abuse and dependence also increased for both genders and across ethnic groups. This has been said that alcohol index is not enough for us to peep into one country’s economy.


 

*On-trade = alcoholic beverages sold in restaurants, bars etc.
 Off-trade = alcoholic beverages sold in retail stores

Lipstick Index – A New Economic Indicator Under Recessions

During the early 2000s recession, the chairman of the board of Estée Lauder, Leonard Lauder, was surprised to notice that the sales of lipsticks under its several brands increased rapidly compared with other cosmetic products produced by the corporation. Considering the financial difficulties people encountered at that time, Lauder believed that small items like lipsticks could serve as substitutes for luxury goods that people could no longer afford. This phenomenon was then named the “Lipstick Index,” and economists began to consider it a new economic indicator.

Applying red lipstick

However, in the most recent recession, lipstick sales seemed to contradict the golden rule of the “Lipstick Index.” According to the report released by market research firm Mintel, lipstick purchases continued to fall since the year 2007. People started to doubt whether the “Lipstick Index” was valid. Was the increase in sales in early 2000s a coincidence? The answer is “No.”

CWB739

In fact, one of the most famous cosmetic groups, L’Oréal,  saw its sales grow 5.3 percent in 2008, the heart of the most recent recession. This number indicates that beauty market was still active during the economic downturn. What’s interesting is that, as the sales of lipsticks underwent a certain decline, sales of nail decoration goodies like nail polish are up 65% since the first half of 2008, according to market research firm NPD Group. The unpredictable shift had to do with the glut of lipsticks on women’s dressers and their increasing demand for nail beauty. As a result, the “Nail Polish Index” has now become a new indicator of the economy.

alipstick4th

How do products like lipsticks and nail polish measure the economy? There are several rationales behind it. First, when people could no longer afford things they used to consume, they simply turned to inferior goods. For example, it might be hard for them to consume big-ticket items like houses, jewelry or autos, but as for inexpensive goods like lipsticks, they could absolutely afford it and enjoy the fun of shopping. After all, even lipsticks of top brands are under $40 nowadays. Second, according to a research conducted by the Texas Christian University, women are more likely to buy beauty products during recessions. This is because women feel more secure with makeup and nicer clothes while their bank account balances are under pressure. They try to compensate themselves with small and affordable indulgence, like lipsticks, perfumes, nail polish and others.

Since the emerging of these unusual indicators, more and more categories were defined as the indicator of future economy. The info graphic showed below lists some weird ways of gauging the economy, including sales of cheap spirits, underwear sales and lower hemlines. Although they are not as authentic as widely recognized indicators like GDP or unemployment rate, they actually provide us with a different view of the economy.

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What Asian Females Are Looking For When They Watch A TV Show

Just a few days ago, the Wall Street Journal ran a story about how a pair of Jimmy Choo shoes has gone on to become a global best seller after it appeared in a Korean TV show.

jimmy
[ The Jimmy Choo high-heel shoes made headlines after being worn by a leading character in a popular Korean TV show. ]

Korean TV series My Love From the Stars became a hit among Asian female viewers this spring. The story, which talks about a reputed actress’s encountering with a handsome alien guy with supernatural power, diverts little from what a typical Korean soap opera is: faithful love of good-looking couples.

But in the digital era, its commercial value has gone far beyond media coverage and fan meetings. Successful Korean soap operas have prompted the birth of a variety of revenue streams, ranging from sales hike of sponsoring brands to quick turnover of even the knockoffs.

When you have a female leading character whose profession is a star, it makes sense to package her with top-of-the-line fashion garments and accessories — the likes of Burberry, Celine and Lanvin. But when Korean film star Jun Ji-hyun, the actress who plays the role of the female protagonist, changes her outfit more than ten times in just one episode, you’d know how much business potential there is when you have a fad running on screen. The Hermès poncho she wears in episode 15 went out of stock just a few hours after it was broadcasted, and the news went viral on China’s social media. The makeups she uses in the show have gone to the top of Chinese girls’ shopping list.

hermes
[ Hermès poncho: one of the heavily sought after luxury items presented in Korean TV series My Love From the Stars ]

On Taobao.com, China’s biggest e-commerce platform owned by Alibaba, a new industry has emerged, and is now rife with churning out knockoff outfits advertised in TV shows. The moment a Chinese female viewer sees the Hermès poncho and falls for it, private production houses are already on their way to duplicate it at a lower cost. The client would find not just one, but many affordable alternatives within the next few days.

A search on Taobao for outfits from My Love From the Stars would come back with more than tens of thousands of options. The price of a red blazer that comes off its high-end original varies from 100 yuan ($16 dollars) to 700 yuan ($112 dollars), depending on the level of resemblance and the quality of textile. Chinese media reported in February that one of the online stores selling the blazer took in 280,000 yuan ($44,935 dollars) in revenue in just one month from selling 1,450 pieces at about 200 yuan ($32 dollars) each.

Then came the staggering jump in China’s import of Korean beer in March. The figure grew two fold from a year earlier after the combination of fried chicken and beer, a Korean snacking tradition in the show, caught on among Chinese youth. Perhaps Samsung will get some inspiration from this as it wrestles with Apple for the China market.

The Miracle of Corn

Ask the average, everyday American what they think the most important agricultural product the US produces and you might get several answers. Beef, perhaps, given due to the dominance of McDonalds in this country. Soybeans or cotton are also two fair guesses. (Ask the question in California, and you might even get the avocado as your answer.)

What many people don’t realise is that while the aforementioned products are important, their significance in the economy, in politics and indeed this very society pales in comparison to corn. Corn is the most produced crop in the US, with 84 million acres being dedicated to the harvesting of corn. The cash receipts from sales of corn alone amount to $63.9 billion per year. Indeed, the US produces about 34% of the world’s total corn, by far the largest corn producer and consumer of the world.

corn1

Corn almost literally makes the world go round – at least, in the case of the US. There are about 4,200 uses for corn. For the large part, corn is found in many food products, some medicine, starch, and alcohol. However, corn is also used in the production of plastic, glue, oil, and ethanol – a source of energy. Most of the nation’s livestock is also fed with corn which, in theory, drives down the prices of meat for the American consumer.

It is hardly a coincidence that the US is also the world’s “largest consumer of sweeteners, including high-fructose corn syrup.” High fructose corn syrup (HFCS) is just one of many uses of corn, and is found in an astoundingly wide array of foods in the US. Here is a list of 10 items that contains HFCS that you may or may not have expected:

  1. Yogurts
  2. Breads
  3. Frozen pizzas
  4. Cereal bars
  5. Cocktail peanuts
  6. Boxed macaroni and cheese
  7. Salad Dressing
  8. Tonic
  9. Applesauce
  10. Canned Fruit

The average American eats 35 pounds of high-fructose corn syrup per year. What is even more alarming is that medical studies have shown that HFCS – especially when consumed in such large quantities – is extremely hazardous to one’s health. First of all, excess consumption of sugar in any form is a leading cause for diabetes and obesity. Due to government farm bill corn subsidies, HFCS can be used as a cheaper, sweater substitute to cane sugar, increasing its presence in food products and therefore our daily intake of sugar.

corn2 corn3

 

(http://www.cornnaturally.com/economics-of-hfcs/)

Furthermore, despite what corn lobbyists may say, cane sugar and HFCS are not treated in the same way by our bodies. According to the Children’s Hospital Oakland Research Institute, “free fructose from HFCS requires more energy to be absorbed, and soaks up two phosphorous molecules from ATP. This depletes the energy fuel source in our gut required to maintain the integrity of our intestinal lining.” Despite the medical evidence, HFCS continues to be an integral part of our diet – whether we like it or not – due to the high tariffs the US places on imported sugar and the generous subsidies they grant the corn industry.

Corn clearly is an important part of the American economy – but at what price? There are some who argue that relying so heavily on one crop is dangerous; that America should expand and diversify its economy for security and practical reasons. However, the corn’s industry’s hold on US politics, governments, and decision making is strong.

An article by the Washington Post illustrated some examples that the corn industry influences society around us. Researcher and a Harvard-trained cardiologist who runs the Rippe Lifestyle Institute presented “30 peer-reviewed studies showing that there is no nutritional difference between sugar and corn syrup.” His research is not only funded by corn refiners, but he also personally receives a “consulting fee of $500,000 a year from the corn refiners.”

Furthermore, a non-profit group, the Center for Consumer Freedom, launched a television, newspaper and online campaign to defend corn syrup safety. The $3.2 million that funded the non-profit organization came from the corn refiners.

The influence the corn industry has on American politics most clearly manifests itself in the Presidential elections. The Iowa caucuses have historically been extremely important in the nominating process for the President of the United States. Since 1972, Iowa has been the first major electoral event, and serves as an early indication of which candidates will be successful in receiving the nomination of their political party in order to run for presidency.  Ethanol production consumes about 1/3 of Iowa’s corn production. Historically, presidential nominees have to support the ethanol production industry in order to win Iowa – and therefore even stand a chance of winning the election.

Whether we realise it or not, corn is around us. Who knew such a simple crop would have such a significant impact on our meals but the very economy, society and political environment we live in?

 

Additional Sources:

http://www.mercola.com/Downloads/bonus/danger-of-corn-syrup/report.aspx

http://www.huffingtonpost.com/2012/09/04/corn-syrup-foods-high-fructose-_n_1854790.html

http://www.economist.com/node/21562912

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/23/AR2007032301625_2.html

http://www.ers.usda.gov/topics/crops/corn/trade.aspx#.U2tEyvmICSo

http://www.economist.com/node/16220592

 

Bitcoin: the future of currency?

spending-bitcoins

 

It’s an interesting fact of life that we often take money for granted. While it is true that “money makes the world go around” (and is constantly the source of both misery and happiness for us), the concept of what money is and what it represented is not questioned. In the United States, we rarely consider the value of money and our currency in relation to others’. These are the sorts of issues that the government, currency traders, and corporations worry about – not the everyday citizen. However, what happens when these assumptions are challenged? What happens when the value of our currency can’t be protected or backed by our government?

This is just one of many questions which have been brought up in the wake of the advent of Bitcoin. Bitcoin is a relatively new form of currency that was created in 2009 by Satoshi Nakamoto (an alias created to disguise true identity of the individual(s)). Bitcoin is a unique form currency in many ways.

First of all, Bitcoin is an electronic form of currency. This means that one bitcoin can be split into almost infinitely smaller pieces, allowing people to spend just part of a bitcoin like they may spend part of a dollar in form of quarters or dimes. Bitcoins are stored in one’s secure wallet which has a unique address similar to a bank account number: disclosing the unique address to someone allows you to pay them or vice versa. Every legitimate transaction is kept on record on a public ledger called the ‘block chain.’ Each Bitcoin wallet involved in the transaction also ‘signs’ the transaction in order to prove that the transaction was approved by both parties and is coming from the owner of the wallet.

Bitcoin it also decentralised – there is no central bank or government that backs the value of bitcoin. In the U.S., for example, the U.S. Federal Reserve decides how much money should be circulating within the economy via interest rates in order to control inflation. Bitcoin, on the other hand, uses peer-to-peer technology in order to “operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network.” This implies that Bitcoin is a more democratic form of currency, whose value is dictated completely by the market and how much people are willing to pay for Bitcoins.

Because Bitcoin lacks a central authority to both regulate and provide the source of the money, the way in which bitcoins are created is also different. Bitcoins are created through the process of ‘mining’ – like how one might mine for precious metals. However in this case, miners use powerful computers in order to solve extremely complex computer algorithms. Upon solving these algorithms, the miner is rewarded with bitcoins. More specifically, bitcoin mining is the process of verifying bitcoin transactions.

As mentioned previously, every bitcoin transaction is verified and encrypted so that others cannot undermine the integrity of the transaction by changing its details (time, amount, etc.) Since there are many transactions that happen every minute, transactions are compiled together in a box which is secured with an electronic padlock – “block chains.” Miners run software on their computers which attempt to open the padlock. Once the padlock is open, the miner is rewarded with bitcoins. According to blockchain.info, the average number of attempts it takes to unlock a block chain is 1,789,546,951.05. With a GTX 680 GPU and at the current difficulty level, a single miner can expect to mine one bitcoin in 98 years.

Because bitcoins are ‘mined,’ there are is a finite number of bitcoins available. The code that was written ensures that there will be 21 million bitcoins available. Today, there are more than 12 million bitcoins in circulation. The fewer the bitcoins are to be mined, the harder and more complex mining becomes, decreasing the rate at which bitcoins are mined. Currently, the a maximum of 25 bitcoins are able to be mined every ten minutes.

 

block

 

Bitcoin is an attempt to address many of the flaws present in a traditional form of currency. Much like cash, using bitcoin is almost completely anonymous. One never has to disclose their credit card details, name or identity in a bitcoin transaction, so long as their bitcoin address is valid. There are also no required transaction fees or foreign exchange fees when using bitcoins. For larger transactions – where one may gather bitcoins from multiple addresses – a transaction fee is usually expected but still not mandatory. There is an incentive to pay and charge transaction fees, however; bitcoin miners who validate the transaction are the ones who receive the transaction fee. Paying a transaction fee is “an incentive on the part of the bitcoin user to make sure that a particular transaction will get included into the next block which is generated.”

However the advent of Bitcoin has also raised significant concerns and highlighted some controversy. Due to the relative anonymity Bitcoin provides, there are some who use Bitcoin to conduct malignant operations and purchase illegal goods such as drugs. The U.S. for example, has researched heavily into Bitcoin and has illustrated its concerns over the potential terrorist threat Bitcoin poses: “The introduction of virtual currency will likely shape threat finance by increasing the opaqueness, transactional velocity, and overall efficiencies of terrorist attacks.”

However, the U.S. is not alone in these concerns. Due to Bitcoin’s connection with illicit activities, Russia has banned the use of Bitcoin: “Systems for anonymous payments and cyber currencies that have gained considerable circulation — including the most well-known, Bitcoin — are money substitutes and cannot be used by individuals or legal entities.” Furthermore, Russia had emphasized that the Rouble is to remain Russia’s only official currency, and that any introduction of other currencies or other monetary units would be illegal.

Because Bitcoin’s value at this point is completely on of public perception, it is an extremely volatile form of currency. While the lack of a central authority controlling its value means that political instability or corruption won’t affect its value, it also means that there is no force that is able to stabilize its value. In October, 2013, one bitcoin was valued at about $126 USD. Just one month later, the value skyrocketed to almost $1010 USD. In April, 2014 the value dropped back down to $420 USD. The extreme volatility of the currency is a serious cause of concern for many, preventing Bitcoin from being a universally accepted currency. Bitcoin is accepted by a few online merchants as well as select businesses and individuals around the world (mostly in Europe.)

Bitcoin remains a complex, innovative and experimental form of currency. While there have been variations of Bitcoin (such as Lightcoin and Dogecoin), its feasibility as a widely accepted form of money has yet to be tested.

 

Sources: 

https://en.bitcoin.it/wiki/Mining_hardware_comparison

http://www.pcworld.com/article/2151261/beginners-guide-to-mining-litecoin-dogecoin-and-other-bitcoin-variants.html

http://www.huffingtonpost.ca/2014/01/26/what-is-bitcoin_n_4661604.html

http://www.reuters.com/article/2014/02/25/us-bitcoin-mtgox-factbox-idUSBREA1O21M20140225

http://money.cnn.com/infographic/technology/what-is-bitcoin/

https://bitcoin.org/en/faq#what-is-bitcoin

https://bitcoin.org/en/how-it-works

https://coinbase.com/charts

http://www.theverge.com/2014/2/9/5395050/russia-bans-bitcoin

Putting the “Profit” in “Non-Profit”: A Love Story

March madness made be over but the madness surrounding the NCAA has anything but cooled down.

Ever since Shabazz Napier made a public statement about him going to sleep hungry on more than one occasion, questions began circulating about the treatment of athletes and the rules placed by the NCAA.

More important that was the question about who actually does all the work and who reaps the benefits?

The exploitation of college players and their companion organization is an evergreen story.

But what is interesting here is the way in which the NCAA reacted to players like Napier attempting to unionize in order to receive better aid for not just playing at a competitive level but also winning for the organization as well; an organization that is a non-profit.

Mark Emmert, NCAA President, is obviously against players unionizing.” The notion of using a union employee model to address the challenges that do exist in intercollegiate athletics is something that strikes most people as a grossly inappropriate solution to the problems. It would blow up everything about the collegiate model of athletics,” he stated in an ESPN article.

Grossly inappropriate, especially considering the NCAA made somewhere along the lines of $750 billion in revenue from broadcasting contracts alone.

130213revenue

And how much of that goes to the athletes?

asgsdag

As the chart shows, not as much as they should.

But there are many more issues that come into this student athlete conversation.

1)      The fact that most colleges don’t even take academics as seriously for athletes as they should.

BBW_unc_chart_630inline

 

2)      The long line of racial disparities when it comes to the graduation rates from white student-athletes compared to black student athletes. It was recently reported that student-athletes at Columbia had a graduation rate of 85% compared to the overall school’s rate of 95% (even more disparity is seen with female athletes but that is another issue).

What is clear here is that there is an even distribution of wealth when it comes to student-athletes. Should they get paid? Do they deserve to considering they win the championships?

As Greg Johnson wrote in an op-ed article, “student athletes do not need salaries or monthly paychecks, even though the NCAA runs just like any other professional sports league. They should simply be allowed to operate within the free market like anyone else in America.”

The Future of America Rests on the Shoulders of Four-Year-Olds

President Obama’s State Union Address ignited a large (and pre-existing) conversation regarding universal preschool within the nation.

What has followed since is no longer a discussion of a better, earlier education for our nation’s toddlers, but a discussion about the benefits this will have for the whole nation.

To understand this we must first understand how it began. James Heckman, University of Chicago economist and winner of the Nobel Prize in 2000, was one of the first to advocate for a decrease in the “ability gap” in regards to college attendance amongst minorities when he was doing research on government jobs during the 1990s. What he discovered was that this gap was opened up strongly as early as children 3, 4 even 5 years of age.

Since then, there have been many articles as well as infographics that detail the educational benefits that preschool and early education provide to our children.

Blog Post#3RESIZED_LAUP-Kindergarten-Readiness-Benchmarks-FINALAnd while there is still a great emphasis on the educational standpoint that early childhood education advocates use as talking points, discussion is now gearing towards (and appealing to) the economic portion of the advocacy that comes from cultural optimism.

Even Heckman himself wrote a paper in 2004 of all the benefits “investing in young children” could bring forth for our country.

So how exactly do these toddlers become the heroes of our nation?

Taxes do not seem to be the answer to our nation’s search for preschool for all considering Obama’s proposition for this was to tax tobacco. A bit contradictory and also risky considering this implies people should be wasting more money in the tobacco industry; a majority of smokers are already part of the lower-income group (and counter intuitive if one mentions this universal preschool agenda seeks to benefit lower-income members of society).

No, the answer cannot stem from something entirely economic; the way of convincing people is the way it started—focus on the children (in order to secretly talk about everything else).

Putting the “Universal” in “Universal Preschool”

As Heckman mentioned in the 90’s, universal preschool begins by helping bridge the gap of “ability and access.

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Universal preschool would mean that all four-year-old children would have access to a quality preschool regardless of income. This would then help children of all color get the education that they deserve, which would mean they would do better in school and have less of a chance of actually needing extra help as they continue through their educational career.

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Children would then get older, but having gone to preschool, they would have less of a chance of being involved in crime, dropping out of high school or relying on government assistance as an adult.

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Change helps create more change and by starting at the bottom and working our way up, can one appeal to a broader audience.

It is only then, after making the point culturally, that one can begin to talk about it economically again. As Dicken’s wrote in 2009, Blog Post#4.4.4.4humancapital“well-educated individuals are more likely to be employed at all points in their lives and live longer than those who are less educated which in turn increases labor supply and influences long-term GDP.”

The benefits of preschool are with no question all positive ones. A majority of society is completely in favor of it.

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But to depend on children to be the solution to an issue that has always existed is a cycle we continue to place in their hands.

Because after all, “children are the future.”

No pressure, kids.

The Problem with Venetian Independence

A good while back, in March, an informal online plebiscite was held asking residents of Venetia, the Italian region in which Venice is situated and the core of what was once the Venetian Republic , whether or not they wanted to become independent from Italy.

Lots of people together waving flags always bothered me on some level.

A fairly misinformed article in the Atlantic blew this even way out of proportion. You can read it here:

http://www.theatlantic.com/international/archive/2014/03/europes-latest-secession-movement-venice/284562/

However it was enough to get my attention. When I found that the Italian media had completely ignored the plebiscite – which a significant number (several million) of Venetians participated in – I decided to investigate a little.

What I found was that this plebiscite was largely populist political move by the separatist Lega Nord (Norther League) neo-fascist xenophobic party. A party which has a large base of support in Venetia where there are many wealthy but relatively uneducated business owners.

I recruited a childhood friend of mine who attends Bocconi univerity and native Venetian to write an article explaining this Byzantine situation to a foreign audience — which he did quite brilliantly:

http://scinternationalreview.com/2014/04/venetian-independence-explained/

The problem is that this story hasn’t gone away. In fact it’s gotten more coverage in the foreign press. Not surprisingly The Scotsman published this article claiming the Venetians are inspired by Scots and Catalans:

http://www.scotsman.com/news/world/rich-venetians-hopeful-in-independence-poll-1-3341460

And then there’s this sensationalist fool:

http://globalcomment.com/will-venice-secede-from-italy/#

Both these articles really use the same arguments all of which are refutable.

“Venice would be the 7th largest economy in Europe” Really? As a part of Italy you can measure it that way but to claim that Venice would just chug along if it were separated from Italy… considering that Italy’s Infrastucture is national!  Furthermore an independent Venice would be dominated by far right political parties that would wreak their own political havoc on the new republic which would soon translate into an economic mess.

“Venice pays 1 billion euros in tax revenue to Rome” Yes, Venetia is an economically dynamic region of Italy — it has more economic activity so there is more activity to tax — this seems like more of indicator of an economically successful region.

“Venice would still be in the EU and NATO” Because an independent Venice gets automatic access to two of the most exclusive and powerful clubs in the international system? I think not.

Basically, Venetian Independence is political and economic suicide and should remain as the thought at the bottom of your last Spritz of the night.

I was surprised to find that this Italian Daily ran the following post with such a title: “Venetian Independence No Joke” – the article doesn’t really back that claim:

http://the-view-from-rome.blogautore.repubblica.it/2014/04/06/venetian-independence-no-joke/

This is the problem when wealth, stupidity and power conspire. There’s a lot of stupid people who don’t know what’s good for them. You can’t just quit on your nation because you’re richer — you’re richer because of your nation. I feel that this is a really obvious truism that “the rich” have forgotten in the globally increasingly polarized political-economic environment that separates the ‘haves’ from the ‘have-nots.’