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	<title>Real World Economics</title>
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	<link>http://www.edlotterman.com</link>
	<description>By Ed Lotterman</description>
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		<title>The distance between China and the Iron Range just got shorter</title>
		<link>http://www.edlotterman.com/2012/01/22/the-distance-between-china-and-the-iron-range-just-got-shorter/</link>
		<comments>http://www.edlotterman.com/2012/01/22/the-distance-between-china-and-the-iron-range-just-got-shorter/#comments</comments>
		<pubDate>Mon, 23 Jan 2012 02:00:19 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3392</guid>
		<description><![CDATA[The next time I am in Silver Bay or Two Harbors, I might see people checking prices from the new iron ore exchange announced by China earlier this week. When commodities trade globally, events in one corner of the world can affect people profoundly in another corner. I was struck by this six years ago when, trying to file a column on vacation, I found myself in an Internet cafe in a small city in the Brazilian state of Goias, watching price quotes on soybean futures from the Chicago Board of Trade crawl across a display above the coffee machine. Changes in Chicago Board soybean prices can have as large an effect on the farmers around Caldas Novas, Brazil, as around Jackson or Fairmont, Minn. And changes in spot prices for iron ore at Chinese ports can have as great an effect on Minnesota&#8217;s Iron Range as on mining areas of Brazil or Australia. This is true even though very little ore from northern Minnesota iron mines ever gets as far as China, just as no Brazilian soybean ever gets to Chicago. Those are irrelevant details. Whenever a relatively standardized commodity is traded internationally, it is overall global supply and [...]]]></description>
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		<title>Shipwreck revives old questions about safety at sea</title>
		<link>http://www.edlotterman.com/2012/01/19/shipwreck-revives-old-questions-about-safety-at-sea/</link>
		<comments>http://www.edlotterman.com/2012/01/19/shipwreck-revives-old-questions-about-safety-at-sea/#comments</comments>
		<pubDate>Fri, 20 Jan 2012 01:58:55 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3394</guid>
		<description><![CDATA[The wreck of the Costa Concordia off the Italian coast illustrates key questions in the never-ending debate about whether government regulation of private economic activity is necessary and about its costs and benefits. Tragic as this incident is &#8211; a couple from White Bear Lake is still missing &#8211; loss of life in passenger ships is exceedingly rare, especially in contrast to a century ago. So it may not prompt the same calls for new regulation that the sinking of the Titanic did in 1912. But issues of safety at sea, both for ships carrying passengers and those carrying goods, provide an interesting lens through which to view debates about public regulation. Well into the 19th century, there was little call for such regulation. This was due in part to passive acceptance that seafaring was dangerous. Moreover, traditional principles of laissez faire economics predominated, including a belief that markets automatically provided incentives for safety. Sinkings were so common in the mid-1800s that often a thousand British seamen died each year, often because ships were overloaded. A coal merchant and member of Parliament named Samuel Plimsoll advocated regulation in the form of lines painted on ship hulls indicating how deeply a [...]]]></description>
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		<title>Search for safe investments drives economic distortions</title>
		<link>http://www.edlotterman.com/2012/01/15/search-for-safe-investments-drives-economic-distortions/</link>
		<comments>http://www.edlotterman.com/2012/01/15/search-for-safe-investments-drives-economic-distortions/#comments</comments>
		<pubDate>Mon, 16 Jan 2012 01:57:11 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3396</guid>
		<description><![CDATA[Nearly a century ago, Thomas Marshall, Woodrow Wilson&#8217;s vice president, remarked, &#8220;What this country needs is a really good 5-cent cigar.&#8221; Today what our country and the rest of the world need is a good risk-free store of value. The current paucity of such investments is creating harmful distortions around the world, fueling unsustainable increases in the prices of items as diverse as Minnesota farmland and the Swiss franc. It is evident in a recent sale of German short-term bonds, in which investors accepted a negative rate of interest. In other words, they were willing to pay the German government to store their euros for them temporarily. That is a sign of a &#8220;disturbance in the force&#8221; of global finance if there ever was one, although the same thing happened with U.S. Treasury bills in late 2008. The fact that it now happened with German bonds but not T-bills shows concerns about another volatile variable, the dollar-euro exchange rate. The vital importance of having a risk-free and relatively liquid way to store wealth is something people don&#8217;t think about much in modern economies. Yet it has bedeviled societies for millennia. Until the late Middle Ages, the primary alternatives were precious [...]]]></description>
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		<title>When weak companies fail, are takeovers to blame?</title>
		<link>http://www.edlotterman.com/2012/01/12/when-weak-companies-fail-are-takeovers-to-blame/</link>
		<comments>http://www.edlotterman.com/2012/01/12/when-weak-companies-fail-are-takeovers-to-blame/#comments</comments>
		<pubDate>Fri, 13 Jan 2012 01:55:56 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3384</guid>
		<description><![CDATA[Predators and scavengers play vital roles in healthy ecosystems by culling weak individuals. But the process can be pretty repulsive to watch at times. Similarly, private equity firms and corporate raiders can play vital roles in market economies by reorganizing or shutting down businesses that fail to create value. This frees up resources for other uses. But it isn&#8217;t pretty, either. The role of private equity has come to the fore as part of the ongoing bloodletting among Republican candidates over the record of Mitt Romney and his former investment firm, Bain Capital. But the issue is much broader than one executive or company and of longer term than one primary campaign. There are times when such firms destroy value for society as a whole, even though they themselves benefit. The knotty problem is that it often isn&#8217;t easy to tell what is happening in any specific case, even after the fact. Did a given restructuring or liquidation cause a net benefit to society as a whole or a net loss? Recognize that some companies inevitably get into trouble because they are badly managed or because circumstances change so drastically that activities that worked at one time no longer do. [...]]]></description>
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		<title>Are gaps between the rich and poor necessary for growth?</title>
		<link>http://www.edlotterman.com/2012/01/08/are-gaps-between-the-rich-and-poor-necessary-for-growth/</link>
		<comments>http://www.edlotterman.com/2012/01/08/are-gaps-between-the-rich-and-poor-necessary-for-growth/#comments</comments>
		<pubDate>Mon, 09 Jan 2012 01:53:12 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3386</guid>
		<description><![CDATA[At a time when there&#8217;s much talk about the 99 percent versus the 1 percent, it&#8217;s worth noting that many economists believe income inequality is not only a good thing but also necessary for strong and sustained economic growth. Before we take a closer look at that argument, some perspective is in order. A century ago, income was distributed very unequally in our country. The highest-income households got many times the income of the poorer ones. From the end of the Great Depression to the mid-1970s, it became more equal. Now, it is moving sharply back in the other direction, and we are returning to a degree of inequality not seen in decades. Most of the increased national income over the past 20 years has gone to the highest-income 20 percent of the population and an unprecedented share of that to the top 1 percent. Some economists, myself included, think this is one of the most important issues of the day. But surveys of the general public show less concern about income inequality per se. (However, if you ask them about abolishing such programs as Social Security, unemployment insurance or farm subsidies that were established to reduce inequality, they generally [...]]]></description>
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		<title>Silver&#8217;s value is far from a sure thing</title>
		<link>http://www.edlotterman.com/2012/01/05/silvers-value-is-far-from-a-sure-thing/</link>
		<comments>http://www.edlotterman.com/2012/01/05/silvers-value-is-far-from-a-sure-thing/#comments</comments>
		<pubDate>Thu, 05 Jan 2012 21:40:50 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://www.edlotterman.com/?p=3377</guid>
		<description><![CDATA[Silver or gold can serve as a hedge against inflation, but be wary if anyone tells you they are sure-fire investments. The problem is that anything, whether bread, a haircut or a house, has value only because it meets peoples&#8217; needs or wants. It has no absolute value in itself. The same is true for gold and silver, even though these often are described as having &#8220;intrinsic value.&#8221; Because they are scarce and durable, gold and silver can perform the classic functions of money as &#8220;a medium of exchange and a store of value.&#8221; Yet, these metals&#8217; &#8220;values&#8221; are not given from on high. They depend on relative scarcity, which varies over time, and on people&#8217;s preferences. Their prices yo-yo relative to each other and to quantities of various sets of goods and services. All this is prompted by inept personal finance advice I saw over the weekend in the &#8220;Everyday Cheapskate&#8221; column by Mary Hunt under the headline, &#8220;Reader learns lesson about inflation.&#8221; A reader asked, &#8220;If you had $500 for investing, what would you do with the money? Should I buy gold?&#8221; The columnist responded that because gold was so expensive, silver might be a better option. She [...]]]></description>
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		<title>Get ready for another bumpy ride in 2012</title>
		<link>http://www.edlotterman.com/2012/01/01/get-ready-for-another-bumpy-ride-in-2012/</link>
		<comments>http://www.edlotterman.com/2012/01/01/get-ready-for-another-bumpy-ride-in-2012/#comments</comments>
		<pubDate>Mon, 02 Jan 2012 04:26:43 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://69.89.31.74/~edlotter/?p=3275</guid>
		<description><![CDATA[A year ago, I said that &#8220;2011 may be an exciting year but probably not a comfortable one.&#8221; Budget problems in Europe, here in Minnesota and in Washington, D.C., bore that out, although things might have been much worse. I continue to be a pessimist about prospects for the national and global economies over the next few years. I think there is a strong likelihood that conditions will be worse at the end of 2012 than they are now. As much as I appreciate people listening to my views, take them with a cupful of salt. We continue in a situation that is dominated by uncertainty, and no economic forecast merits much confidence. That is a problem, because there are times when such forecasts are useful for ordering the affairs of households, businesses and governments. But all forecasts, whether they are based on formal econometric models or seat-of-the-pants opinions from experienced analysts, depend on an assumption that established past relationships or patterns will hold. That is valid at times, but not at others. Unfortunately, we live in an era when such patterns and relationships are not particularly relevant. My pessimism is based on a subjective reading that upside potential for [...]]]></description>
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		<title>Taxes that vary with value a time honored tradition</title>
		<link>http://www.edlotterman.com/2011/12/29/taxes-that-vary-with-value-a-time-honored-tradition/</link>
		<comments>http://www.edlotterman.com/2011/12/29/taxes-that-vary-with-value-a-time-honored-tradition/#comments</comments>
		<pubDate>Fri, 30 Dec 2011 04:28:21 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://69.89.31.74/~edlotter/?p=3281</guid>
		<description><![CDATA[Property taxes certainly excite the passions, at least judging by the spate of communications I have received &#8211; positive as well as negative &#8211; in reaction to columns that I and my counterpart Joe Soucheray wrote recently. Before we move on to other topics, here are a few of the issues that merit additional comment. The central one seems to be whether it is fair that people with more expensive houses pay more for local government than those with less expensive houses. Some argue that since everyone benefits the same from police or fire protection, parks, etc., everyone should pay the same flat fee. Forcing owners of more valuable property to pay more means they unfairly must carry other free riders on their financial shoulders, the argument goes. Like it or not, this is the way our real estate tax system, rooted in late Middle Ages England, has always worked. And economists have no objective basis on which to determine whether it is fair or not. But most, along with most philosophers and theologians, argue that taxes owed generally should vary at least somewhat with wealth. Adam Smith held this view, often to the surprise of modern libertarians who see [...]]]></description>
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		<slash:comments>1</slash:comments>
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		<title>Often, the market is already a step ahead of you</title>
		<link>http://www.edlotterman.com/2011/12/25/often-the-market-is-already-a-step-ahead-of-you/</link>
		<comments>http://www.edlotterman.com/2011/12/25/often-the-market-is-already-a-step-ahead-of-you/#comments</comments>
		<pubDate>Mon, 26 Dec 2011 04:27:48 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://69.89.31.74/~edlotter/?p=3279</guid>
		<description><![CDATA[Fevered controversies about economic policies often constitute much ado about nothing. That&#8217;s because market outcomes often automatically offset things about which people waste much time wringing their hands. At least that is the way economists look at markets &#8211; as wonderfully useful social institutions that often are difficult to understand. Take the current debate, here in St. Paul and elsewhere, about whether high real estate taxes will drive homeowners out of the city. That may well happen, though I think the likelihood is much overstated. Selling to move to the suburbs might be a mistake, however, because markets for houses already price in related costs like real estate taxes, quality of public services, commuting costs and myriad other factors. If taxes in one jurisdiction go up relative to those in another by an unanticipatedly high degree, market forces will drive down housing values in the higher taxed area and raise them in the less-taxed area. There won&#8217;t be any opportunity for arbitrage. That is, one won&#8217;t be able to improve one&#8217;s overall well-being by property-tax shopping between one city and another. This may sound like bunk to the average person. But pay attention to the logic, because far more important [...]]]></description>
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		<title>Lake Pepin problem goes deeper than sediment</title>
		<link>http://www.edlotterman.com/2011/12/22/lake-pepin-problem-goes-deeper-than-sediment/</link>
		<comments>http://www.edlotterman.com/2011/12/22/lake-pepin-problem-goes-deeper-than-sediment/#comments</comments>
		<pubDate>Fri, 23 Dec 2011 04:27:08 +0000</pubDate>
		<dc:creator>Ed Lotterman</dc:creator>
				<category><![CDATA[Other]]></category>

		<guid isPermaLink="false">http://69.89.31.74/~edlotter/?p=3277</guid>
		<description><![CDATA[Lake Pepin is filling with sediment, slowly but steadily. That hurts Minnesotans and Wisconsinites in particular. Yet, the only policy measures currently available to reduce this are unfair and economically wasteful. This need not be. Twenty years ago, the nation had an opportunity to move to more market-friendly methods of dealing with environmental problems. Economists finally had convinced many Democrats of the advantages of approaches such as emissions taxes and tradable permit systems that had long been advocated by environmentally knowledgeable Republicans. There was a core of bipartisan support in both houses of Congress for sensible reforms to environmental policy, just as there was for health care and other problem areas. But a golden window of opportunity closed, never to open again, in 1990 when President George H.W. Bush&#8217;s chief of staff, Richard Darman, told Congress the administration had nothing else it wanted to accomplish in the remaining two years of its term. It had no policy reform initiatives at all: none, nada, zip. Why does this matter? Lake Pepin, on the Mississippi River downstream from St. Paul, is a valuable resource not only for its scenic beauty and recreation opportunities but also as a vital part of the river&#8217;s [...]]]></description>
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