Well, the worst case scenario is a wave of defaults, foreclosures, and forced sales, forcing home prices appreciably (depreciably?) lower.

Sounds like a good time to be a buyer!

Gee, I hope Carmella's Spec house wasn't variable mortgaged.

Heh.

Did you read the update?

A quick back of the envelope calculation shows that the resets ... are dwarfed by the much bigger macro issue of the loss of cash out refis -- which have been a major driver of consumer spending.

Former Fed Chair Greenspan estimates that over $600 billion in cash out refis took place in 2004 -- that dwarfs the increase in monthly payments. Goldman Sachs estimates that in 2005, it was $834 billion. The expectation is that consumers spent 68% of that money.

The Big Picture: Coming Soon: Mortgage Payment Resets

The Economics of Persistent Innovation presents papers that provide definitions of persistence in firm innovative behavior, establish the significance of persistence, present a theory of persistence, and examine empirical evidence regarding both the extent of, and the determinants of, persistence. They survey previous studies which have commented on persistence and present new data describing trends in the persistence in innovation.

The book discusses the main determinants of persistence and the reasons for its systematic heterogeneity across industries, technologies and countries. The book first focuses on the determinants of persistence in innovation. This topic is analyzed in several ways, including a Markovian model of innovation. The characteristics of persistent inventors as revealed in patent data are explored for many industrial countries. An evolutionary theory of persistence in innovation is proposed. In conclusion we draw some policy implications for support and development of innovation.

The Economics of Persistent Innovation

Many Americans do not seem to believe they are living beyond their means, as long as the value of their houses are rising. But spending freely while the house appreciates is not saving for the future. It is betting that boom-time gains will last indefinitely.

They will not.

Will Your Money Last?

The United States takes great pride in the vitality of its economy, which forms the foundation of our high quality of life, our national security, and our hope that our children and grandchildren will inherit ever-greater opportunities. That vitality is derived in large part from the productivity of well-trained people and the steady stream of scientific and technical innovations they produce. Without high-quality, knowledgeintensive jobs and the innovative enterprises that lead to discovery and new technology, our economy will suffer and our people will face a lower standard of living. Past economic studies have estimated as much as 85% of measured growth in US income per capita is due to technological change.

Today, Americans are feeling the gradual and subtle effects of globalization that challenge the economic and strategic leadership the United States has enjoyed since World War II. A substantial portion of our workforce finds itself in direct competition for jobs with lower-wage workers around the globe, and leading-edge scientific and engineering work is being accomplished in many parts of the world. Thanks to globalization, driven by modern communications and other advances, workers in virtually every sector must now face competitors who live just a mouse-click away in Ireland, Finland, China, India, or dozens of other nations whose economies are growing.

Dig it. A free book that will keep you from becoming obsolete.

Rising Above The Gathering Storm

Decius wrote:
Our cities may have grown up around shipping and transportation, but this isn't the 1700s anymore. Modern cities are successful due to an interplay between culture, capital, and educational institutions, not transportation routes.

I don't disagree with your larger point about New Orleans, but you go further than is necessary to make your case.

If you think shipping isn't critically important to the economic health of Los Angeles, you need to spend more time in Los Angeles. The transportation business brings more money into the city than the entertainment business does.

Take a look at this briefing:

Los Angeles is by far the most important city in the US for combined import and export activity. It alone is responsible for over 20 percent of all US container traffic and has seen that share expand steadily in recent years. The local economic impact of port activity in Los Angeles is also considerable. The Port of Los Angeles employs 259,000 people in Southern California and generates nearly $27 billion in industry sales annually. Long Beach is second on the list, which means that the combined LA/Long Beach area is responsible for an astonishing one-third of all container traffic in the nation.

There's a lot more to the report; it's worth a look. Keep in mind that the 259k jobs and the $27B is just for the Port of LA. The Long Beach port has numbers that approach those for LA. See also: liner shipping facts and figures.

As one point of comparison, BLS reports that "In 2002, there were about 360,000 wage and salary jobs in the motion picture and video industries. Most of the workers were in motion picture and video production." At the most, half of those jobs are in the Los Angeles area. As another data point, one source says that "In 2001, worldwide gross revenues generated by motion pictures in all territories and media (including music and ancillaries) amounted to over $40 billion." I don't know how reliable that number is, but it's a rough indicator.

On the Continuing Importance of the Shipping and Transportation Industries

Q. Wow. Wait, what exactly are those numbers?

A. What? What kind of question is that? This is just the kind of foot-dragging that's kept you paying rent on the same roach-infested closet for years while your home-owning friends have gotten fantastically wealthy. Did you know that we homeowners are having Champagne-and-caviar parties every weekend and not inviting you?

Q. Come on.

A. It's true. And sometimes we hire the White Stripes to play. That's right, the White Stripes. You love the White Stripes, don't you? Then buy a house!

Bubble? What Bubble?

Glenn Fletcher was genuinely pleased to be paying almost $56 to fill his tank Wednesday afternoon because he recognized that the prices on the pumps on the Garden State Parkway were unusually low. He had caught on to an anomaly that many drivers never notice: The price of gas on New Jersey's two main toll roads changes only on Fridays, usually just before the morning rush.

Since Aug. 10, the average price of a gallon of regular gas in New Jersey has set a new high - unadjusted for inflation - every day, hitting $2.49 yesterday, according to AAA Mid-Atlantic.

New Jersey already has among the cheapest gas prices in the country because of its low fuel taxes. But at the eight rest areas along the Garden State Parkway, which pump Mobil gas, and the 12 that line the New Jersey Turnpike, which sell Sunoco, the price was lower still, stuck at $2.38 since Friday morning.

The price is the same up and down the two toll roads, the result of the contract the New Jersey Turnpike Authority has with its fuel vendors.

"I will get on the parkway just to get gas because it's so cheap. Isn't it weird?"

Pricing Quirk Means New Jersey's Cheapest Gas Is on Its Toll Highways

Publishers Weekly Starred Review.

Forget your image of an economist as a crusty professor worried about fluctuating interest rates: Levitt focuses his attention on more intimate real-world issues, like whether reading to your baby will make her a better student. Recognition by fellow economists as one of the best young minds in his field led to a profile in the New York Times, written by Dubner, and that original article serves as a broad outline for an expanded look at Levitt's search for the hidden incentives behind all sorts of behavior.

Dubner and Levitt deconstruct everything from the organizational structure of drug-dealing gangs to baby-naming patterns.

Underlying the research is a belief that complex phenomena can be understood if we find the right perspective. Levitt has a knack for making that principle relevant to our daily lives, which could make this book a hit. Malcolm Gladwell blurbs that Levitt "has the most interesting mind in America," an invitation Gladwell's own substantial fan base will find hard to resist.

Freakonomics : A Rogue Economist Explores the Hidden Side of Everything

On every day except graduation day, young people are taught that their futures depend not on following their bliss, but on mastering dutiful (and less lovable) abilities like crunching numbers and following rules.

But this year is different. The students graduating this spring will operate in a labor market that increasingly confers an economic advantage on the activities that people do out of a sense of intrinsic satisfaction -- designing cool things, telling stories and helping others. For the class of 2005, "Do what you love" is no longer a soft-hearted sentiment. It is also a hard-headed strategy.

What's going on?

Pomp and Circumspect

"It's kind of troubling, like you were a physicist studying the laws of motion and you see an object that ignores gravity."

It's Not a Bubble Until It Bursts