Competitive Alternatives

I'm really bothered that in all debate around the topic centers on the concept that if one is against this bailout, then one is in favor of 'doing nothing.' I have not heard a single serious alternative even floated about how to fix this problem.

I want to hear more about capital requirements. The Chinese have lowered theirs while theEuropeans have raised theirs. Here is my proposition.

Complicated Proposition

The fed should decrease the reserve ratio from 10% to 8%.  That would change the liquidity multiplier from 10 to 12.5. There are 6.3 trillion in time deposits, which probably means there's 630 Billion in base deposits. Reducing the reserve ratio by 2 points would instantly create 1.58 Trillion in liquidity. The danger here is that doing this could inflate the dollar by a lot. To limit that, announce that the reserve ratio will rise by 1 tenth of a percent each quarter until the ratio is back at 10%.

Simple Proposition

The same thing just explained in more detail for the many who  don't follow all the terms  in the complicated version. Follow the link.

Food Crisis

I found some great commentaries here on the recent rise in food prices.
American Thinker | Financial Times: Economists Forum | New York Times: A Global Need...

Things to think about while listening to the news on the Food Crisis:

Since Gasoline and Biofuels are well on their way to becoming true substitutes, and biofuels are made from food, high oil prices will become directly related to higher food prices. Not only can food substitute for oil, but it apparently works the other way too. I should make a whole blog post just on that.
Wired

India, China, and South America are developing far wealthier populations who consume more of both food and fuel. Driving the demand of both, raising the prices of both.

Those same three regions are also using that wealth to increase their productive capacities. The US utilizes only 0.27% of the world's crop land, but produced 16.8% of all the world's grain in 2007. Which means the US produces grain 80 times more effeciently than the rest of the world, so there's room for 7978% improvement in global grain production without any new technologies. That's about 80 new earths to put that in terms Daniel W. Basse can understand.

I don't have many links to back this up, but it seems that as wealth passes some level, quality begins to take precedence over quantity to the average consumer. High class restaurants serve smaller portions than low class restaurants. Areas with higher average population have more Chipotle's and fewer Taco Bell's. If this is true, then as the West gets still wealthier, it will begin to consume fewer pounds of grain while expending far more in terms of other wealth to get it. That might relax demand for low priced grains for poorer areas.

Anti-anti-smoking Forces

Customers desert smoke-free restaurant

A restaurant owner in China started to ban smoking in the restaurant, and lost about 20% of his patronage.
Assuming that the smokers know how bad smoking is for their health (which might not be accurate, they might just not know) this owner can see the direct results of his policy in the patronage. It might be that the people that perfer a smoke-free environment just haven't heard about the restaurant yet, and will more than compensate for the 20% loss. But based just on the content of the article. I'd say he should let folks light up.

Inflation

BBC NEWS | Business | Chinese inflation at decade high

To my friends, please read the post before the article. This will sound boring but just think about it and it will make sense, then read the article and laugh.

Inflation is NOT just a rise in prices. Inflation means that your money gets less valuable overall.

M x V = P x Q

M = the amount of money in the economy
V = the speed that people spend that money after they get it

P = the general price level
Q = the quantity of real wealth on the economy

The idea works like this:

1. People use money to buy stuff, the more money there is relative to the amount of stuff, the more money you have to spend to buy each piece of stuff.

2. It takes time for people to buy stuff, the faster people use their money to buy stuff, the less stuff there seems to be to buy, but the same amount of money, so refer back to rule number 1.

Those two events are what cause prices to rise.

Parts of that article talk about how a disease in the pig population is causing a rise in price of food, and that it might spread to a rise in all other prices.

Now, a pig disease would decrease the amount of pig stuff there is for people to buy, which would raise the price of pig and stuff like it (aka, food), but can someone please explain to me how a rise in the price of pig meat would raise the price of a chair in the way that inflation would? Rising prices are a sign of inflation, not inflation itself.

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