Macau

Excerpts from an interesting article at The Guardian:

You won't find the Paiza Mansions on TripAdvisor. You can't even book the world's plushest hotel – it chooses you. The 6,000 sq ft suites (the size of five semi-detached houses) are reached by private elevator, and come with two butlers and a masseur. Yet it costs nothing to stay there. The surprisingly tasteful suites (despite the 60in end-of-bathtub TVs) are completely free. There's just the small matter of a HK$10-15m (£800,000-£1.2m) that invitation-only guests are required to spend downstairs at the casino.

The Paiza Club and Mansions are part of the Macau Venetian, the world's largest casino, and the fifth biggest building on the planet. And every time you buy something with a Made in China label, much of the money eventually ends up here.

Las Vegas is puny in comparison. Chinese punters bet around £70bn on Macau's baize tables (they prefer baccarat) last month alone. This year it could reach £1tn, an almost unimaginably colossal sum. Think of all the cash issued from all the UK's ATMs last year. Then multiply it by five...

The other rather less acknowledged factor is money-laundering. The junkets take in Chinese renminbi (which cannot be converted on the world's money exchanges) while the casinos can pay out in dollars. Some critics believe Macau is a gigantic operation for secreting money away from the eyes of the Chinese state. Suitloads of dollars take the short hop from Macau to Hong Kong, much of it pouring into the city's white-hot property market. Even bigger sums are believed to head into offshore tax havens. The authorities, for now at least, turn a blind eye. The casinos are a huge cash cow for the Chinese state, too, which levies tax at 39%...

Macau's casinos are the world's most profitable – some repay billion-pound construction costs within a year.

Voting patterns and income

Data from CNN's 2010 exit polls, via Frum Forum and The Daily Dish.

Huge public sector pensions

These aren't severance bonuses; these are annual pension payments.  Grist for the mill in the current debate re union salaries and benefits, from SF Weekly.  The discussion at the link focuses on Police Chief Heather Fong:

According to the San Francisco Employee Retirement System (SFERS), Fong actually earns two city pensions: One of $566 per month for her (brief) time as a miscellaneous-class employee and a second of $22,572 per month for her 30-plus years as a safety worker. Doing the simple math that's $23,138 per month or $277,656 per year.

Where does the federal government get its money ?

Found at Mother Jones.

Top lawyer fees exceed $1,000 per hour

Excerpts from an article in the Wall Street Journal:

Leading attorneys in the U.S. are asking as much as $1,250 an hour, significantly more than in previous years, taking advantage of big clients' willingness to pay top dollar for certain types of services.

A few pioneers had raised their fees to more than $1,000 an hour about five years ago, at the peak of the economic boom. But after the recession hit, many of the rest of the industry's elite were hesitant, until recently, to charge more than $990 an hour...

Harvey Miller, a bankruptcy partner at New York-based Weil, Gotshal & Manges, said his firm had an "artificial constraint" limiting top partners' hourly fee because "$1,000 an hour is a lot of money." It got rid of the cap after studying filings that showed other lawyers surpassing that barrier by about $50.

Today Mr. Miller and some other lawyers at Weil Gotshal ask as much as $1,045 an hour. "The underlying principle is if you can get it, get it," he said...

Such rates are contributing to inflation across the $100 billion-a-year global corporate-law industry as the slow economic recovery has left many law firms struggling to finance the hefty pay packages they award their stars. Since most law partners bill roughly 2,000 hours, those asking $1,100 hourly will bring in $2.2 million, a few million short of the $3 million or $4 million in annual compensation star attorneys get at many big firms.

To help fill the gap, the firms rely on the profit they often reap on the work of junior attorneys, or associates. Dozens of associates at a time can work on a single case, and some firms bill as much as $700 an hour for their time, according to Valeo Partners, a Washington consulting firm that maintains a database of hourly legal rates in fields such as litigation, corporate law and intellectual property.

More at the link.

"The underlying principle is if you can get it, get it."

Health care spending adjusted for GDP

It should be intuitively apparent that in "richer" countries, health care will tend to be more expensive, but this graph from The Incidental Economist shows the huge degree to which the United States is an outlier:

The 30 non-US OECD countries line up in a pretty good line, with increasing spending per person as their GDP gets higher. In fact, as I show in the chart, you can make a pretty good line that fits the relationship between GDP and health care spending...

It’s not that we shouldn’t spend more than other countries. We should. We are richer than almost anyone, and we should spend more on health care. The problem is that we’re spending so much more than everyone else, even after taking into account our GDP. We’re literally off the chart. And we’re not getting better outcomes for that money.

Via The Daily Dish.

Why the U.S. should raise taxes on gasoline

This very informative graph was posted at The Economist.  Most Americans grudgingly admit that higher gasoline taxes could be used to improve transportation infrastructure in the U.S., but there are even broader implications:

Petrol prices in America are substantially below levels elsewhere in the rich world, and this is almost entirely due to the rock bottom level of petrol tax rates. The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

There are any number of good reasons to raise the petrol tax rate. The current rate no longer brings in enough money to cover current highway spending... But a higher tax rate would also diminish the possibility that a sudden rise in oil prices would throw the economy into recession. That would be a nice risk to minimise! And yes, higher tax rates would hit consumers just like rising oil prices. But those prices are rising anyway; better to capture the revenue and use it, all while improving behaviour.

It's hard to take any fiscal hawk seriously so long as this measure isn't on the table. It's as close to a win-win solution as one is likely to find.

Via The Daily Dish.

Watson solves the debt crisis

Credit to Nate Beeler, The Washington Examiner, with a big hat tip to The Pajama Pundit.

Why Americans haven't noticed rising food prices. Yet.

What I've noticed has been package-shrinking, so that you get less product for a similar apparent price. But a Slate article notes that another factor is insulating the U.S. from the effects now being noted (and protested) in the third world:

One way or another, it's clear the food price bubble has reached crisis levels. But why hasn't it reached America? For one, Americans and residents of other industrialized nations consume higher proportions of processed foods—Doritos, hot dogs, and the like. A large part of the price of these foods comes from labor, packaging, and marketing, making them less sensitive to changes in food costs. They're less food than food-based products. Economist Mark Perry produced a chart that helps demonstrate the phenomenon. Food prices for raw goods (like wheat) fluctuate wildly, while prices for processed goods (like breakfast cereal) are far less volatile.

The graph referred to in the paragraph is embedded above, and comes from this Carpe Diem article.

The price of food in the high arctic

The photos embedded above are from a set of nine posted this week at (Canadian) CBC News, highlighting the jaw-dropping cost of food in the arctic regions of Canada.

These grocery shelves in the High Arctic community of Arctic Bay, Nunavut, have people talking this week — $38 for cranberry cocktail, $29 for Cheez Whiz, and a whopping $77 for a bag of breaded chicken.

The article goes on to discuss the effects of a change in the food subsidy program for the region; what it reminds me of is stories of how, during the gold rushes in California and Alaska, great wealth was accumulated - by those who sold eggs and food staples to the miners.

Via J-Walk.

Obama's budget proposal in graphic form

One thing I like about the New York Times is the ability of their staff to present complex data in understandable graphic forms.  That's true of this presentation of the proposed 2012 budget.  The colors depict which parts of the budget have been cut (red shades) or increased (green shades).

Don't rely on the embed above.  If this subject matter interests you, go to the interactive graphic itself, at this NYT link, where you can mouse over the components of the chart and zoom in for details.

I won't offer any personal commentary, but will cite a few passages from an article on this subject from the Washington Post:

Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger under the president's plan.

The soaring bill for interest payments is one of the biggest obstacles to balancing the federal budget, pushing the White House and Congress to come up with cuts deeper than previously imagined. Unlike with discretionary spending or even entitlement programs, the line item for interest payments cannot be altered except through other budget cuts...

The explosion of interest payments comes from a double whammy of economic factors. First, the nation's debt is growing faster than the economy. Second, interest rates are rising. Over the next decade, net interest payments will amount to nearly 80 percent of the debt added, an indication of how past borrowing is forcing the country deeper into debt...

...combined federal, state and municipal debt in the United States is at a record high, beyond the famous post-World War II levels. Unlike interest payments made then, however, a huge portion of interest payments are flowing to investors in other countries, draining funds out of the U.S. economy...

More at the link.

A proposal to increase taxes on the super-rich

A proposal by economist Robert Reich:

My proposal to raise the marginal tax to 70 percent on incomes over $15 million, to 60 percent on incomes between $5 million and $15 million, and to 50 percent on incomes between $500,000 and $5 million, has generated considerable debate. Some progressives think it's pie-in-the-sky. Here, for example, is Andrew Leonard, a staff writer for Salon:

A 70 percent tax bracket for the richest Americans is pure fantasy - even suggesting it represents such a fundamental disconnect with the world as it exists today that it is hard to see why it should be taken seriously. I would be deeply worried about the sanity of a Democratic president who proposed such a thing.

Fantasy? I don't know Mr. Leonard's age but perhaps he could be forgiven for not recalling that between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent...

Will the rich avoid it? Other critics of my proposal say there's no way to have a truly progressive tax because the rich will always find ways to avoid it by means of clever accountants and tax attorneys. But this argument proves too much. Regardless of where the highest marginal tax rate is set, the rich will always manage to reduce what they owe. During the 1950s, when it was 91 percent, they exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent. Yet that's still substantial by today's standards. The lesson is government should aim high, expecting that well-paid accountants will reduce whatever the rich owe.

Besides, the argument that the nation shouldn't impose an obligation on the rich because they can wiggle out of it is an odd one. Taken to its logical extreme it would suggest we allow them to do whatever antisocial act they wish - grand larceny, homicide, or plunder - because they can always manage to avoid responsibility for it.

The rest of the argument is at TPM Cafe.

Questions raised about Saudi oil reserves

This topic has been in the news because of a Wikileaks release:

The cables, obtained by WikiLeaks, urge Washington to take heed of a warning from a former Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 40 per cent.

US diplomats reported that Sadad al Husseini, the ex-head of exploration at Saudi oil monopoly Aramco, "disagreed" with Aramco's analysis that it had reserves of 716bn barrels that would rise to 900bn barrels in 20 years.

The video from Al Jazeera reports the data, then adds a brief interview with a the former head of energy studies from OPEC, who indicates that the doubts raised in the cables are not really news; this question has been asked by oil analysts for many years, and the question of reserve capacities applies not only to the Saudis, but to other oil-producing countries as well, since independent confirmation of such data is generally not available.

Misremembering President Ronald Reagan

This weekend will be Ronald Reagan's 100th birthday.  Joan Walsh at Salon is presenting a series of articles about the former president.  Here are some excerpts from today's article:

Despite his reputation as a tax slasher, Reagan raised taxes three times, and tripled the deficit during his eight years in office. Sadly, his working-class "Reagan Democrat" admirers don’t seem to remember that one of his tax hikes raised payroll taxes, which hurt poor and middle-class Americans and shielded the wealthy. The main reason he's remembered as a tax-cutter is because of what he did to tax rates for the uber-rich: He slashed the top rate from 70 percent to 28 percent, and income inequality has soared ever since...

If that 70 percent rate sounds a little high, it's useful to remember that the top rate was 94 percent at the end of World War II, and after a brief drop to 82 percent, it stayed in the 90s under Republican Dwight Eisenhower; it was Democrat John F. Kennedy who slashed it to 70 percent... Those are the tax rates that powered the postwar boom -- the expansion of public education and universities, highway construction and home-ownership, government-funded research and development -- that we think of as the American dream...

To review: Under Reagan, income inequality began to grow, household savings dwindled, household debt correspondingly began to rise, and the clout of the financial industry exploded. The top 0.1 percent of Americans saw their share of income climb higher than it was before the Great Depression. And here we are...

More at the link.

Tax rates in Britain "could rise to 83%"

From a column at The Guardian today:

Nearly a million people will see their tax rates soar as the government's austerity package kicks in this spring, potentially to as high as 83%.

Analysis from the Institute for Fiscal Studies today reveals that changes in April will drag 750,000 people into the 40% tax bracket. Meanwhile, little-publicised tax credit cuts will push the marginal rates of 175,000 working parents up above 70%. In theory, effective tax rates in Middle Britain could reach 83%, the rate that Labour levied on Britain's top earners before 1979...

This is on top of the extra VAT which families at all income levels have been paying since the start of the year....

Not to mention the austerity-related cuts in public spending. Some lessons for the U.S. here, for those willing to learn.  More at the link.

Is organized crime scavenging used refrigerators ??

Over the last several months, 22,741 New Yorkers contacted the city’s Department of Sanitation and arranged for the pickup of refrigerators, air-conditioners and freezers. In more than 11,000 instances, the machines vanished before sanitation workers arrived in their white trucks to pick them up...

Deepening the mystery, these were neither the latest Sub Zero behemoths, sleek Bosch nor stylish retro Smeg refrigerators. They were garbage, quite literally — discarded appliances left at the curb for pickup by the Sanitation Department...

Behind those losses, some in the industry — by some accounts an $85 billion annual business in 2008 — see the hand of organized crime, although no one can point to hard evidence. New York’s enduring and resourceful mob families have long played a role in both the recycling and scrap industries and have a knack for turning up where the money is.

The rest of the story is at the New York Times. I wish the malefactors would come to our neighborhood; we have to pay to get large broken appliances hauled away.

How China will create a mega-city

City planners in south China have laid out an ambitious plan to merge together the nine cities that lie around the Pearl River Delta. The "Turn The Pearl River Delta Into One" scheme will create a 16,000 sq mile urban area that is 26 times larger geographically than Greater London, or twice the size of Wales...

Over the next six years, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion)...

Twenty-nine rail lines, totalling 3,100 miles, will be added, cutting rail journeys around the urban area to a maximum of one hour between different city centres...

In the north, the area around Beijing and Tianjin, two of China's most important cities, is being ringed with a network of high-speed railways that will create a super-urban area known as the Bohai Economic Rim. Its population could be as high as 260 million...

As the process gathers pace, total investment in urban infrastructure over the next five years is expected to hit £685 billion, according to an estimate by the British Chamber of Commerce, with an additional £300 billion spend on high speed rail and £70 billion on urban transport.

Mind-boggling.  More at the Telegraph.

Why you shouldn't believe low inflation numbers

From an article in the Wall Street Journal:

... the official inflation numbers should be taken with a fistful of salt. Over the past 30 years, the federal government has made a lot of changes to the way it calculates inflation. It's taken place under presidents of both parties...

... if we still calculated inflation the way we did when Jimmy Carter was president, the official inflation figures would look about as bad as they did when ... Jimmy Carter was president. According to Mr. Williams's calculations, if we counted inflation under the old system the official rate wouldn't be 1.5%. It would be closer to 10%...

Under the official calculations, if steak prices boom, the government just assumes you buy cheaper hamburger instead. Presto—no inflation!

Or consider the case of Apple computers... The cheapest Mac laptop today costs $999. A few years ago, it also cost $999. So the price is the same, right?  Ha. Not according Uncle Sam. Using a piece of chicanery called "hedonics," Uncle Sam calls this a price cut. His reasoning? You're getting more for the money. Today's $999 Mac is lighter, fancier and faster than last year's $999 Mac. So the government calculates that the "real" price has actually fallen..

... look at raw materials. Around the world prices are skyrocketing, from copper to cocoa. The United Nations Food Price Index has just hit a new record high. Oil's back near $90 a barrel. Wheat prices have nearly doubled since last summer... Sooner or later this is going to show up in your supermarket, or at the mall, in higher prices...

We are flooding the world with extra dollars. The Fed simply invents as many as it likes. In the past couple of years, to try to keep the economy out of a tailspin, it has more than doubled the size of the so-called monetary base...

The first argument - about unreliable inflation data - was explained at more length in an article in Harper's, which I highlighted at this link.  Highly recommended reading for those interested in this subject matter.

"The rich are different from you and me"

The title is a slightly abbreviated misquotation from the short story "The Rich Boy" (1926), by fellow-Minnesotan F. Scott Fitzgerald: "Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft where we are hard, cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand."

A good example is given in yesterday's Wall Street Journal account of the divorce of a fund manager:

* The couple owned six homes–including a $4 million home in Rancho Santa Fe and a penthouse in Manhattan–and had two more under construction. The total value of the homes was more than $40 million...

* Mr. Brandes owned 10 Ferraris (valued at more than $4.4 million) and an “extremely long driveway” to race sports cars, dirt bikes and ATVs.

* She had gambling bills of as much as $30,000 a month.

* Mr. Brandes paid Elton John somewhere from $1 million to $1.5 million to perform at his wedding when he remarried in 2006. He paid Christina Aguilera $1 million to perform at a Halloween party...

While the investments generated about $154,881 a month, she said she needed more, citing her clothing budget ($70,000 a year), art spending and gambling bills. Her support increased to $500,000 a month, or $6 million...

She may indeed be entitled to far more than she has already received, since his monthly income is reported to be more than $16 million.

Yet hearing someone say that $6 million a year isn’t enough to live on shows just how removed the economy of the rich has become from the rest of the country...

And today the Telegraph features a story about how "wealth inequality" is under discussion at the Davos summit:

“The increase in inequality is the most serious challenge for the world,” Min Zhu, a special adviser at the International Monetary Fund and a former deputy governor of the People’s Bank of China, told delegates at the Davos gathering...

Nouriel Roubini, professor of economics at New York University, also warned that inequality “exacerbates political instability”...

Mr Zhu said raising taxes on the rich would not address the core of the problem. “It’s not just about tax, we need to go further. We need to look back at how and where this wealth is being created,” he said...

Commodity price inflation

I've written about this topic a number of times in the blog, but  two interesting articles just appeared this week.  One in the Wall Street Journal explains how the increases jump across categories:

It's getting pricier to throw some ribs and burgers on the grill. And you can blame the surging price of corn. That's because much of the corn grown in the U.S. is used as animal feed. And "we're using $6 corn to feed hogs right now," up from about $4 last year... So if you "want barbecue ribs," he adds, "you're going to have an extra $10 attached to it."...

The United Nations' Food and Agriculture Organization's monthly Food Price Index, which monitors the monthly change in a basket of commodities including meat, dairy and sugar, rose for the sixth straight month in December to its highest level since 1990....

In some cases, prices may not rise, but you will see fewer discounts or get less for your money. For instance, because of sugar prices' 30-year high in late December, packages are expected to shrink to a four-pound bag, from a five-pound bag, Mr. Swanson says. "You're getting 20% less" for the same price, he says....

Cotton futures prices skyrocketed 92% in 2010, thanks to growing demand as well as floods in Pakistan and heavy rains in China that damaged crops... Retail prices of jeans are expected to increase this year by 4.3%, socks 2.7%, sweatshirts and sweatpants 2.4%, polo shirts 2% and T-shirts 1.8%, according to industry group Cotton Inc.

Mens' clothes, in particular, are expected to get a bigger price bump because more of the garments contain cotton (compared with apparel for women and children) and they're a heavier weight with a higher cotton content....

And an article at the Guardian suggests that it's not just bad weather and increased demand that increases commodity prices. There is also pressure generated by speculators:

The same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate. The charge against them is that by taking advantage of the deregulation of global commodity markets they are making billions from speculating on food...

When this process of "hedging" was tightly regulated, it worked well enough. The price of real food on the real world market was still set by the real forces of supply and demand. But all that changed in the mid-1990s. Then, following heavy lobbying by banks, hedge funds and free market politicians in the US and Britain, the regulations on commodity markets were steadily abolished. Contracts to buy and sell foods were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. In effect a new, unreal market in "food speculation" was born...

...the markets are now heavily distorted by investment banks: "Let's say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [a bushel]. [But] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs...

Last year, London hedge fund Armajaro bought 240,000 tonnes, or more than 7%, of the world's stocks of cocoa beans, helping to drive chocolate to its highest price in 33 years. Meanwhile, the price of coffee shot up 20% in just three days as a direct result of hedge funds betting on the price of coffee falling...

More at the link.  Sounds like the plot of a Frank Norris novel I read in college.