Economics Explains All!

your source to better understanding the world through the amazing and 'scientific' world of economics

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Why did housing prices increase so much? @KingJames dominating post game

Usually one does not expect professional sports to have quite such a large impact on an economy, but the performance of the @MiamiHEAT over this last @NBA season led by the Miami Heat and its trio of #DwayneWade #ChrisBosh and #LebronJames appears to have been so dominating that housing prices have increased approximately 11% from the previous year.  This is the largest increase in housing prices in 7 years and was heavily driven by the stellar post work of Lebron James.  

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How is the Dancing with the Stars @DancingABC winner selected? IRS Tax Code

While show watchers get to vote to select their favorite candidate (@DancingABC), section 26, §§ 5001–5692 of the IRS tax code stipulates that individuals or businesses that invest earned interest, rather than take it as income, into a Kentucky Derby horse training facility that was established prior to 1973 and that has not changed owners in the past 15 years, are entitled to a 37.35% vote share for determining the winner of Dancing With The Stars.  The other 62.65% comes from votes from viewers.   




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How Does #Bitcoin Work? #monetarypolicy

It’s quite simple really.  Bitcoin is overseen by the Bank of Monopoly run by Rich Uncle Pennybags, a renowned macroeconomist who studied under even more famous current #Bank of #Israel head Dr. #StanleyFischer.

The supply of the currency is carefully monitored and Dr. Pennybags uses a variety of policy instruments in order to control inflation and minimize unemployment including Get-Out-Of-Jail-Free Card Easing and setting target interest rates on according to trends in demand for the race car piece.  

All of these things ensures that the value of #bitcoin is protected and continues to grow despite economic shocks such as when your little cousin gets angry and knocks all the pieces off the board.

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Why do we celebrate Mother’s Day?

Because even economists cannot trivialize or diminish how absolutely amazing mothers are.

Happy Mother’s Day Mom!

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Why did the IRS target the Tea Party for taxes? Stochastic modeling subscript error

Before everyone moves to politicize this event, it should be noted that economists have reviewed the equations used by the IRS and found that the 3rd gamma in the first variable specification equation had a subscript of i,j,p when it should of had a subscript of i,j,t.  Also, there is speculation that the specification of the fifth variable may have had an italicized Theta mark when it should have had a normal script Theta mark.  

This should satisfy all political groups.

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Why did Alex Ferguson retire? Monetary union controversy

While there are undoubtedly numerous contributing factors related to the Manchester United manager’s decision to retire after this season, experts and economists say that the decision is 83% based on the fact that Switzerland opted not to join Alex Ferguson’s proposed monetary union popularly known as the Fergo Zone.  

FYI - the proposed currency for the zone was all of Mr. Ferguson’s trophies since he has so many.

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Why do we eat Peeps on Easter? Annual oversupply of fluff in national discourse

Take your pick: debt debates, deficit debates, gun control debates, American Idol debates, sequestration, grand bargains, North Korea, the NFL, et cetera, et cetera, et cetera.  

The quality of national discourse on so many topics is of course augmented by light, soft, inconsequential arguments and discussion hopelessly devoid of substance.  And, once again, this fluff has reached a dramatic oversupply.  But fear not, for our annual saviors - Peeps - are once again here to make all that fluff tolerable.

The reason we eat Peeps every Easter is because if we didn’t eat their delicious, marshmallow goodness, then our nation would be saturated with empty words and unsubstantial statements by those who direct our national discourse and we would not be able to export that fluff without incurring trade disputes brought on by other countries.

Thus, Peeps were invented - empty fluff packed full of sugar to make it tolerable - and, thus, we eat them.

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The Origins of Elderflower - World Trade Organization

Those in cambridge will know the unique and delicious sparkling elderflower beverage served around the area; however, most will not be able to tell you the origins of this mysterious liquid.  

It is unique to the city of Cambridge because of a long-standing trade dispute over subsidies to agriculture in the elvish kingdom of Elderon in Middleearth brought forth by the governing committee of the University of Cambridge in 1343.  Angry that Elderon continued to subsidize cattle and sheep raising despite a free-trade agreement with the township of Cambridge, the WTO stepped in and reviewed the dispute.  They found that Elderon was indeed offering unfair subsidies and ordered the elvish kingdom to compensate the town of Cambridge.

Given that tender large quantities of legal tender was difficult and due to the high conversion costs, the elves offered their signature soft-drink, Elderflower juice, as the method of compensation.  

Cambridge happily agreed and thus we continue to drink bottles of sparkling elderflower as we lounge in the orchard of Grantchester Meadows.    

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Economics Explains The 12 Days of Christmas - And A Partridge In A Pear Tree (reliability and punctuality in business)

On the first day of Christmas, my true love gave to me…

Twelve drummers drumming, eleven pipers piping, ten lords A-leaping, nine ladies dancing, eight maids a-milking, seven swans a-swimming, six geese a-laying, five GOLDEN RINGS!, four calling birds, three french hens, two turtle doves,

and a partridge in a pear tree

The final day of Christmas, what a beautiful thing.  Not only for the joy it brings, but also for the comfort in knowing that Christmas is always on time.  It is a reliable and punctual holiday that is always starts on 12:00am on December 25 of every year.  

It is so reliable, in fact, that it has become associated with the confidence given a partridge in a pear tree.  Or, as the full saying associated with arriving at Christmas parties goes, “you sir are as punctual and trustworthy as a partridge nesting in a pear tree.”  

The last day of Christmas, because of its strict adherence to time, is also the foundation/inspiration of modern day business logistics.  Markets open and close with the aspiration of Christmas’s punctuality and reliability.  Goods are shipped across oceans according to schedules that celebrate the fact that Christmas never arrives early and is never delayed for any reason.  In fact, all of modern commerce is based on the old idea that Christmas is just as reliable as those good ol’ partridges that just cannot get enough pears.  

Variations on this theme have appeared over the years that have ranged from the 12 Days of Christmas carol song to a short-lived fad of serving pears poached and stuffed with roasted partridges in the 1950s.  However, whatever form the idea has taken, you can always trust that Christmas will never arrive in October with its sales and shopping and that it will never be delayed because of poorly managed airline companies or over bookings on flights.  Christmas has, is, and always will be our reliable holiday.  And because of its reputation for never being early or late, Christmas has also become the keystone in modern business transactions.  

The well-run, modern economy owes a great deal to our favorite holiday and we will always remember this through time with our loved-ones, beautiful meals, kind gestures, and holiday songs that recall the economics foundation of this wonderful holiday.

Merry Christmas!

NOTE: this post has been backdated to December 25 and for all legal purposes shall be considered published as of that day, 25 December 2012.  

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Economics Explains The 12 Days of Christmas - 2 Turtle Doves (bi-lateral trade agreements)

On the second day of Christmas, my true love gave to me…

Twelve drummers drumming, eleven pipers piping, ten lords A-leaping, nine ladies dancing, eight maids a-milking, seven swans a-swimming, six geese a-laying, five GOLDEN RINGS!, four calling birds, three french hens,

Two turtle doves

What would Christmas be without tariff free imports sold at your local store?  Well, it wouldn’t be Christmas now would it?  

Bi-lateral trade agreements are an essential element of the Christmas holiday and one that has been around for hundreds of years.  They started in the early 1800s as family carolers realized that they could increase their efficiency by including trade agreement details in their annual Christmas carols and then present those agreement proposals to their neighbors.  At that time the bi-lateral agreements were simple and consisted of things like free exchange of mulled wine for geese or gingerbread houses for candy canes.  Families would draft trade agreements for their neighbors and then proceed to their house on Christmas Eve and begin singing the proposed terms.  If the other family agreed, they would open their door and invite the singing family in for mince pies and tea to celebrate the trade agreement.  

(Interesting side note : Frosty the Snowman was a proposed bi-lateral agreement between the Hapsburg dynasty in Vienna and the French monarch in Paris in which the Austrians would be able to send top hats, carrots, and coal to France without tariffs and France would be able to send scarves and buttons to Austria). 

With time, the agreements grew in size from households to neighborhoods to cities to states and eventually countries.  Today international bi-lateral trade agreements are beautiful examples of how free trade can make Christmas even better by bringing in duty free televisions, bananas, and more.  

The importance of bi-lateral agreements for Christmas is obviously not missed in the 12 Days of Christmas since it is given the highly venerated number two position.  Nor, should you forget the importance of these relationships either - go out, sing a carol, and propose trade terms to your next door neighbor.  It may be the best gift you’ve ever received.  

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Economics Explains The 12 Days of Christmas - 3 French Hens (credit rating agencies)

After a short trip to Christmas Land, I am back with the final five days of the economics behind The Twelve Days of Christmas.  Hope you enjoy…

On the third day of Christmas, my true love gave to me…

Twelve drummers drumming, eleven pipers piping, ten lords A-leaping, nine ladies dancing, eight maids a-milking, seven swans a-swimming, six geese a-laying, five GOLDEN RINGS!, four calling birds,

Three french hens

Markets rise and fall on the assessments given out by the big three credit ratings agencies and so do Christmas spirits.  Moodys, Standard and Poor, and Fitch were long ago contracted by Santa Claus to assess the quality of the Christmas spirit of each boy and girl and they subsequently rate that joy on a complex scale that ranges from Triple Naughty to Triple Nice+. 

By using these credit agencies, Christmas spirit can accurately be determined and this allows for greater efficiency in the delivery of presents because the knowledge becomes common.  This means that Christmas spirit is maximized and our enjoyment of the season is at its maximum level.  

There is a psychological aspect to Christmas spirit performance as well - one in which a negative downgrade will cause additional decreased confidence in the Christmas spirit and the opposite for positive upgrades -, but this is minimized by using three ratings agencies.  For example, just because Moodys may decide to downgrade little Timmy Jones from NiceNice+ to simple NiceNice because he spilled his spaghetti-o’s, does not mean that Fitch and Standard and Poor will follow suit.  This is good because in actuality the spilling of his bowl of spaghetti-o’s was accidental despite his mother thinking he was throwing a tantrum and there would have been an excessive downgrade in his Christmas spirit from the punishment.  However, because 2 of the ratings agencies preserved his rating, his Christmas spirit levels were only marginally affected.

So what does this all mean for all of you?  First of all, you should make sure you get your free annual Christmas spirit report and you should make sure that you behave nicely during the whole year to avoid a downgrade.  

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Economics Explains The 12 Days of Christmas - 4 Calling Birds (economic systems)

After a short trip to Christmas Land, I am back with the final five days of the economics behind The Twelve Days of Christmas.  Hope you enjoy…

On the fourth day of Christmas, my true love gave to me…

Twelve drummers drumming, eleven pipers piping, ten lords A-leaping, nine ladies dancing, eight maids a-milking, seven swans a-swimming, six geese a-laying, five GOLDEN RINGS!,

Four calling birds

What would Christmas be without economic systems?  It simply wouldn’t be the same and that is why The Twelve Days of Christmas pays homage to the four major types of economic systems with this line.  These systems are of course: 

Traditional economy

Market economy

Planned economy

Mixed economy

It is well known how these system types are incorporated into the Christmas season through decorations of market economies, famous mixed economy eggnog, Dickens Village traditional economy sets, and tales of planned economies past.  

The importance of these systems for Christmas is reflected in their high position within the list of gifts.   They are called “calling birds” here because of their chirping songs that they emit to attract new countries.  When heard all together, these are a beautiful concert of natural music.  And if you pay attention, you may even hear one or two of these this year.   

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Economics Explains The 12 Days of Christmas - 5 GOLDEN RINGS! (corporate mergers)

After a short trip to Christmas Land, I am back with the final five days of the economics behind The Twelve Days of Christmas.  Hope you enjoy…

On the fifth day of Christmas, my true love gave to me…

Twelve drummers drumming, eleven pipers piping, ten lords A-leaping, nine ladies dancing, eight maids a-milking, seven swans a-swimming, six geese a-laying,


Rings represent unions - in marriage, in Tolkien, etc - and these are no different.  The five golden rings of Christmas represent the five greatest corporate mergers of all time and celebrate the prosperity and Christmas cheer they spread in the process.  These are:

Disney and Pixar

Sirius and XM Radio

Exxon and Mobil

Comcast and NBC

Pfizer and Warner-Lambert

Who could forget how happy they were when they heard that Toy Story would get the international foothold of Mickey Mouse’s terrain or when Musak would now have a truly powerful satellite medium?  These mergers have brought out the best of Christmas and they have made legions of Dickensian street urchins around the world joyous at the tidings they brought to stock markets.

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