Tuesday, March 23, 2010

Daylight Savings Time

I live in West Michigan, which is the western edge of the Eastern Time Zone. Summers are great, with it being light until about 10:00. But, with the earlier move to daylight savings, its been dark in the morning. My wife has often asked whether daylight savings actually saves energy. A recent study by an economist says no--daylight savings causes an increase in electricity usage. For many years, part of Indiana went to daylight saving time and part did not, so there was a natural experiment when the rest of Indiana went to daylight saving time. The result--greater electricity usage in the counties after they went to daylight saving. The counties that had been using daylight saving for some time were the control group. I understand it was Ben Franklin's idea originally, so even Ben could be wrong.

Friday, March 19, 2010

What Happended to Toxic Assets?

This is the most hectic semester I have had since arriving at Hope College. One result is that the quantity of posts to my blog is down. I will try to improve after spring break, during which I will be an expert witness and not catching up on my classes. I feel as if I am following the Japanese auto model--"just-in-time" teaching. I don't recomment it.

On another note. Sen. Dodd has put forward a plan for financial regulation. It made me wonder what ever happened to the toxic assets we heard so much about a year or more ago? A toxic asset is not necessarily a bad asset or a valueless asset. A toxic asset is an asset for which the value is unknown. It may be that the banks and other market participants now know the value of the assets, have written off the bad ones and are comfortable with the good ones. I don't know and haven't heard anything about it.

Another question I have concerns the failure of banks to extend loans. I understand that the number of loans is down. But there could be two reasons--people with a lot of debt already are not applying for loans, or people are applying but banks are turning them down. Actually, it is likely both are partially correct. But banks are more likely to be cautious if they still have toxic assets on their balance sheets, which brings me back to my first question. I am hopeful that recovery will build but am still concerned about some weaknesses that may still exist in the economy.

Tuesday, March 2, 2010

Trade Volume Increasing

A study by a Dutch group finds that the volume of world trade has been increasing rapidly. (See the Financial Times article here.) The increase in world trade is a good sign that the world economy is improving. Still, there are concerns with Europe and the problem associated with Greece, and in the sustainability of our own recovery. At this point, I am willing to take good news when it appears.

Interview of Larry Summers

The transcript of an interview with Larry Summers is available here. Karen Finerman of CNBC interviewed Summers, asking about the economy, Greece, and other current economic issues.