Credit ratings agencies, the debt ceiling, and AA+

So, apparently Standard and Poor's (S&P) downgraded the U.S. credit rating from AAA to AA+, the first time America has been listed as anything but AAA. Now, there are problems with this move - for one, S&P seems to have screwed up their calculations by at least $2 trillion. They are also the only credit rating agency to downgrade the U.S. to AA+. That being said, this may have an impact on the global financial markets come Monday. Those things are as stable as Charlie Sheen on a bender these days, and this will probably be yet another factor that messes with them (though I suspect the problems in China [where the government is attempting to control an economic growth slowdown], and Europe [where it seems likely that Greece will default, possibly leading Spain and Portugal to default as well], are really what is driving the markets tanking) come Monday. So, you know, panic! There are two points from all of this that I find interesting. One is the main critique from S&P re: the U.S. downgrade. The other is the credibility of credit rating agencies.

Podcast Episode 1: The Revolts in the Middle East

On this edition of the There is No Spoon show, we discuss the unrest in Egypt and how it relates to the region as a whole. We cover the Muslim Brotherhood, American foreign policy, authoritarian persistance, social movements, and political and economic roots of the uprisings. Our guest is Hesham Sallam, a PhD candidate at Georgetown who studies the persistance of authoritarian regimes, comparative Middle East politics, and is the co-editor of Jadaliyya, and online e-zine produced by the Arab Studies Institute - it is a great resource for analysis of the Middle East. Now that Mubarak has resigned, listen to the podcast and be informed about the issues that will develop in the coming days, weeks, and months.

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Episode 1 was recorded on February 8th, 2011 at 11pm EST.

We're SUPPOSED to Lose those Jobs Overseas

Stephen Colbert had a piece on the other night about goats stealing American jobs (see below) that cracked me up, but also got me thinking about posting on this topic. So much has been made about Americans losing their jobs to illegal immigrants (though this isn't exactly true - they do the jobs few Americans are actually willing to do) and workers in China and India, especially in this tough economy. Many candidates use the "I'll keep American jobs at home" line while campaigning. (Other popular campaign tactics this year: bigotry, profanity, and porn - Carl Paladino does all 3! Way to go, Carl!). Of course, the dirty little secret is: we're supposed to lose these jobs. It is a function of larger economic issues. The truth is, you can't fix this problem simply by going at corporations - yes, I know, I can't believe I just wrote that. You have to address the education system, instead, something that most ignore.

So, here's how it works. We're a rich country. We happen to be capital rich (vs. labor rich), like most (if not all) developed industrial countries. If we do the economically efficient thing, we should focus on capital, not labor - capital is our comparative advantage. In the long-run, we want to export our abundant factor, capital, while importing the scarce factor, labor. Pretty simple...do what you're best at, and buy from others the thing you're not so good at (labor), which they happen to be best at. Each part of this maximizes economic efficiency, which lets us all get optimal goods for the lowest price (labor rich countries get capital for lower prices than they would if they decided to produce these factors themselves - hence the importance of international capital in poor countries).