What I Learned in 2011

In 2011 I learned
That attention is artfully earned
By enhancing the text
With verses well-sexed,
Where economists' blogs are concerned.

As 2011 draws to a close, I would like to thank all the supporters of Limericks Économiques; those who read the blog, all you e-mail subscribers, Facebook fans and Twitter friends and followers. In particular, I would like to thank Professor Greg Mankiw, whose clarity in writing economic textbooks cannot be matched, though it can evidently be sexed up a little. Prof. Mankiw's Ten Principles of Economics inspired Dr. Goose's most widely read rhymes this year - The Ten Limerick Principles of Economics. To all those who inspired and encouraged these limericking efforts this year - thank you.

Happy New Year to one and all!

Happy Holidays from Internal Auditing

It's required, in bank regulation,
That each trader have two weeks' vacation;
While preventing their burnout,
An audit may turn out
A case of a "rogue" operation.

During the holidays (or the dog days of August), when the thoughts of some bankers turn to carefree vacations, others contemplate... forensic accounting. Bank regulations call for every employee to take two consecutive weeks off each year, to give internal auditors sufficient time to uncover whatever financial fraud they might secretly be working on. This is based on the observation that such frauds usually require the frequent oversight of one or more conspirators, whose forced, temporary removal may cause the scheme to unravel.

Slow Week

Said a stock market man named O'Toole:
"Never trade in the week after Yule;
For liquidity's thin
When the traders aren't in,
Which, for now, is the general rule."

Discussion of stock market trading in the week between Christmas and New Year's invariably touches on the low market volume. For example, Tuesday's New York Stock Exchange volume, at two billion shares, was half the normal daily figure of 4.3 billion shares traded. This is caused not only by the fact that half of the market participants are on vacation, but also by the fact that most of them will have already "cleaned up" their balance sheets for year-end financial and regulatory reporting, and are loath to untidy them again. Interest rates for short-term funding over year-end can be volatile and expensive as well, another encouragement simply to take the week off.

The Fight before Christmas

'Twas the week before Christmas and all through the House
Each rep wished to go home to children and spouse;
When what to their wondering eyes should appear,
But a tax cut expiring at the end of the year.

The Speaker maneuvered to tie its extension
To a pipeline Obama would rather not mention;
But the President managed to win to his side
The bulk of the voters, who fitfully cried:

"On Boehner, Pelosi, McConnell and Reid -
Put cash in the pockets of workers in need!"
And Republicans claimed, 'ere they drove out of sight:
"We had all the votes, but Barack won the fight!"

House Republicans finally caved in the latest high-stakes Washington duel, over a two-month extension of the cut in payroll taxes to 4.2% from 6.2%. The issue provided a means for President Barack Obama to combine middle-class advocacy with tax cutting, a feat of political jiu-jitsu he could use in undermining the GOP House majority. Speaker John Boeher's bid to combine a year-long extension with the controversial Keystone XL oil pipeline failed, as both the press and the public saw his party as the obstacle toward tax relief for the average family. 

* * * 

As the Night Before Christmas approaches, Dr. Goose wishes a Happy Holiday to all those who will celebrate around the world this weekend, and joins you is wishing Peace on Earth and Goodwill to All.

Los Arcos Dorados

Said a friendly investment advisor,
As to where the best stock market buys are:
"Just look to Brazil,
Where, intriguingly, still
The best markets for burgers and fries are."

Investment advisor Josh Brown, whose nom de blog is The Reformed Broker, was among the stock pickers helping Investor Place to select the Ten Best Stocks for 2012. The reformed broker's pick? Arcos Dorados (NYSE: ARCO), the world's largest McDonald’s franchisee, with more than 1,750 locations, largely in Latin America Mr. Brown shines a light on the southern hemisphere's expanding consumer spending, particularly in Brazil (50% of $ARCO revenues), where a thriving middle class of 100 million people gives the company "incredible room for growth." Well done, Mr. Brown, but we can only hope that Brazilians' waistbands are equally expandable.

U-1 = Unemployed / Workforce

When the rate of the jobless declines,
The message is one of two kinds;
Either jobless are fewer
(The positive view) or
They gave up the job-seeking lines.

When reading of the unemployment rate, also known in the US as U-1, one must always be mindful of the fact that both the numerator - the jobless - and the denominator - the workforce - can fluctuate. As a recent Wall Street Journal headline ("Unemployment Eases, Jobs Still Scarce") reminds us, the unemployed can lower the jobless rate by becoming too discouraged to look for work. In this sad state, they no longer count in the denominator of the U-1 equation, and thus lower the unemployment rate.

On a brighter note, let us pause to wish all of our Jewish friends a Happy Hanukkah (regardless of their employment status)!

An Il Wind from North Korea

To the President whispered the Queen,
As the Dictator passed from the scene:
"The foe that we know
Is preferred to the foe
that we don't, If you see what I mean."

The death of North Korea's "Dear Leader" Kim Jong Il incited mass displays of hysterical grieving in that country. Reactions among the global political and military elite tended more toward anxious calculation, as each country tries to figure out what the passing of the torch to Kim Jong Un, the late dictator's youngest son, will mean for them. China, in particular, would like to sustain its neighbor's government, both to avoid a flood of North Korean refugees in the event of that state's collapse, as well as to act as a buffer against South Korea, Japan and the US. The latter three are hoping, first and foremost, that "a 27-year-old running a repressive regime with nuclear weapons" (in the words of a US defense official) does not do anything rash.

France Defends Its Credit Rating

Said the Banque de France Gov'nor Noyer,
On the risk to the French "triple-A":
"But ze debts of ze Brits
Are so deep in ze sh£ts,
For comparison's sake, if I may."

French central bank head Christian Noyer may have sparked a war of words with Britain. Responding to S&P's putting his nation on negative credit watch, with the possible loss of its prestigious AAA rating, Mr. Noyer commented:

"A downgrade doesn't seem justified to me when you look at the economic fundamentals, or else a downgrade should come first for the U.K., which has a greater deficit, as much debt, more inflation, and less growth than us, and collapsing credit."

Trying to keep a stiff upper lip, a spokesman for Prime Minister David Cameron's Conservative government noted the credibility of the UK's deficit reduction plan. In truth, the British have nothing to gain by rising to Mr. Noyer's bait, since their public deficit, at 9.4% of GDP, is far above France's 5.8%.

Overheard at FedEx

"A drop in the pricing of oil
Should sweeten the fruit of our toil,
But since shipping has slowed
In the air and the road,
The fruit of our toil may spoil."

When should shippers not rejoice in the falling cost of fuel? When it indicates a slowing economy, according to the Wall Street Journal's Kelly Evans. Her Ahead of the Tape column points out that lower oil prices have coincided with weakness in the price of $FDX and the S&P 500 generally. Although cheaper fuel is clearly a benefit when looked at in isolation, it may be correlated with global economic activity, as is the shipping business.