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Marketplace MegaFail Inflation Edition

Frankly, these statements are incredibly stupid. Inflation means prices and incomes are rising at about the same rate. Any increase in salaries will just keep pace with inflation, leaving the consumer with unchanged purchasing power. The only way people who borrow can pay back with cheaper dollars is if the inflation is a complete surprise. If the inflation is expected, it will be part of the interest rate on the loan. Finally, higher housing prices? Give me a break. Even if housing prices rose, the real net wealth in your house wouldn’t change much because the higher price level would eat up the price increase. Continue Reading →

Lazy NPR Reporter Can’t Be Bothered to Check Facts

“Under this theory, Social Security recipients, veterans, government employees, contractors and all the rest would get lower priority; though Tiberi says seniors and veterans should get paid first with whatever is left after interest payments.”

“Under this theory?” Oh, yeah, wait, let’s Google the word “default.” The very first result is from Wikipedia:

“In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant (condition) of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either unwilling or unable to pay his or her debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory notes.”

If Ms. Keith had spent two minutes doing research instead of coming up with creative language to snipe at Republicans, she would not have embarrassed herself, her show, and NPR this way. Ms. Keith hereby wins the award for lazy NPR reporter can[‘t be bothered to check facts. Continue Reading →

The Economics of Champagne

let me instead relate a story I heard several years ago during a tour of the Korbel Champagne Cellars in Guerneville (Sonoma County), California. The guide explained that U.S. sparkling wine producers were now prohibited from using “Champagne” on their labels, with one exception. Because Korbel was so old and used the méthode champenoise technique, they alone were allowed to keep Champagne on their labels. This was formalized in a bilateral treaty between the U.S. and the European Union in 2008. The NPR reporter completely misunderstood the legal ramifications of calling something “Champagne” when it was not made in Champagne, France. Continue Reading →

National Income Accounting and the Most Recent NPR Fail

The more subtle issue is a complete misunderstanding of what GDP measures. Most principles of economics texts get this pretty much: gross domestic product is the market value of all goods and services produced in a country during a calendar year. Read that again and see if you can find the words “spending” or “transactions.” You can’t because GDP measures neither of those. GDP measures production, not spending. Continue Reading →

Meta-Analysis, the Election, and 538

It’s made even worse this year by the non-response rate to polls, hovering near 90 percent. That means for every ten calls a pollster makes, they get one response. So much for the “random sample” assumption. Continue Reading →

Venture Capitalism for Dummies

Got that? You ain’t getting any money back. Venture capitalists understand that they are in a high-risk business. They make profits by carefully analyzing proposals and funding those that they believe have a reasonable probability of success. People who don’t understand this (including, apparently, the entire staff of KQED radio) should stay away.

As an added note, KQED is San Francisco’s public radio station. For a city that hosts companies like Twitter and Foursquare, reporting like this is a disgrace. Continue Reading →