How the Conquistadors Inflated Their Economy

One day I realized I had absolutely no idea how businesses, banks, or the financial world work. That annoys me. So I read an Idiot's guide to economics from the library. The book was pretty dry, but it was a down and dirty quick guide to most of the concepts of economics. Then I started reading a macroeconomics textbook, and now I truly know the meaning of dry. One of the concepts discussed in both books was fiscal and monetary policy. An IS-LM curve (Investment-Savings; Liquidity Preference [money demand]-Money Supply) was introduced which shows how equilibrium exists between the commodity market and the money market with interest rates and income plotted out on the y and x axes respectively. But another idea was introduced which is still an odd concept to me.

And that is the velocity of money.

Simply stated, velocity is equal to the nominal GDP and divided by the money supply, or V=PQ/M. 

And MV=PQ is another way of stating the formula.

So is M=PQ/V.

I remember reading about how the Spanish discovered the Americas and brought back so much silver and gold that it caused rampant inflation for their economy. But being historians, the authors never discussed why that happened. I think the simplest definition of inflation is too much money chasing too few goods which leads to an increase in the price based off of a supply and demand curve. 

But the equation actually shows why inflation happened. Instead of Q increasing, prices increased. Although you would get a higher nominal GDP based off of higher prices, your real GDP would deflate.

So why wouldn't velocity increase with an increased money supply? Velocity is the amount of times money changes hands in the year per unit of currency. So a huge increase in money supply wouldn't necessarily correlate with an increase in velocity.

So, if that's the case, why wouldn't Q increase instead of prices with the GDP being equal to the change of the money supply and velocity of money?

I'm not totally sure, but I think if a large amount of money were flooded into an economy it would take several years of investing in order to actually raise production of goods. If the Spanish explorers were to start buying boats and farms after coming back from the Americas it might take several years before they could start growing wheat or catching a bunch of fish with a fleet. While the money supply exceeds the demand though, prices increase with inflation as a result.

Out of all of this, the takeaway is that by controlling the money supply you can attempt to control prices to prevent a rapid inflation or deflation. 

Now my head hurts.

The Best Christmas Songs You've Probably Never Heard

For all the bad Christmas songs we have clogging up the airwaves, there's lots of great Christmas songs out there. Only thing is you have to know where to look for them because they aren't played on the radio for God knows what reason. Some of them are irreverent, more winter-themed than Christmas-themed, or just too slow to be deemed a playable Christmas song by corporate America.
1. "I Love the Winter Weather" by Squirrel Nut Zippers.
2. "Santa Claus is Smoking Reefer" by Squirrel Nut Zippers. This was actually a secret track hidden on one of their Christmas albums.
3. "This Time of Year (When Christmas is Near)" by Etta James.
4. "The Holly and the Ivy" by George Winston.
5. "In the Bleak Midwinter"
6. "The Wexford Carol"
7. "Walking in the Air" by Nightwish.
8. "Star Carol" by John Rutter.
9. "Bring a Torch, Jeanette Isabella"
10. "Shepherd's Pipe Carol" by John Rutter.
11. "Overture" by Duke Ellington.
12. "Arabesque Cookie" by Duke Ellington.
13. "Dance of the Floreadores" by Duke Ellington.
14. "Toyland" by Perry Como. 

The Worst Christmas Songs

We're in that time of the year where you can't escape Christmas music. Whenever you drive in the car, it comes on the radio. Whenever you turn off the radio, there's music playing in the store. Whenever you leave the store and go back home, there are holiday jingles playing on the television. Whenever you turn off the television, you have the horrible songs still bouncing around your head. I've experienced quite a bit in my life, but there are certain things that make me want to claw at my face whenever I hear them.
And just to clarify, I claw at my face every single time I hear these songs.
1. "I Want a Hippopotamus for Christmas"
    Every little girl's dream is to have a wild, dangerous African animal for Christmas which is notorious for being extremely aggressive and flinging its feces everywhere to mark its territory. Oh? It's not? Well apparently it is for this horribly misinformed little girl. I don't understand how people think this song is cute. What the hell kind of a Christmas would they expect if this actually played out? What the hell kind of sicko parents or Santa would allow this to happen? I have a horrible image of a house with gaping holes in it, people flattened like pancakes, and feces absolutely everywhere. Street hardened policemen would poke their heads in to get a glimpse of the carnage, and immediately turn away to start puking and yell "OH THE HUMANITY!" Plus, what's with the creepy girl's voice? I know it's a child singer, but it still freaks me out. I'm pretty sure I know the reason why. After studio executives spent a day and a half of being told "that's a stupid idea for a song" by 8 year-olds, they clearly went with plan "B" and got an adult female to sing the song with a mask of helium hooked up.
2. "Dominick the Italian Christmas Donkey"
   As if to differentiate that the song is NOT about a reindeer, the singer drove the message home with all the subtlety of a Mel Brooks' comedy. "HEEEEEE-YONK! HEEEE-YONK" is peppered throughout the song along with "JIGGITY JIG!" which isn't preceded by the old standard, "Home again, home again!" And then the singer can't remember the first words to each verse, so he just randomly fills empty air by yelling "LA LA LA LA LA LAAAAAA!" which apparently are sounds that only Italian Christmas donkeys make as opposed to those other jackasses. To be fair, Italy's Santa Claus legend does have him riding a donkey.  But if the Italian Santa had to ride a donkey named Dominick that sounded like an animal version of Ned Flanders ("Hidely ho! HEEYONK JIGGITY LA LA JIG!"), he would've traded him in for a Ferrari. Or a Fiat.
3. "Santa Baby" by Madonna.
   Madonna had a string of hits in the 80's and then 90's, but she's successfully transformed herself from an 80's sex icon to a real-life walking mummy these days. This song was recorded in the 80's by her, and she naturally wanted to try something different than her usual sultry approach. So she sung like a person who's just come out of a wisdom tooth extraction and still fully feeling the effects of the anesthetic. It really is different as a Christmas song, but you only listen to it halfway before you find yourself wishing that you could tell her, "Madonna, look, an 'A' for effort, but maybe you could just try singing it normally?"
4. "The Christmas Shoes"
    There's just something about this song that makes me want to crawl into bed and stay there for a week. I can't quite put my finger on it. It could be the street urchin protagonist in the song attempting to buy some sort of nice shoes, (he doesn't say what kind, but I always picture Air Jordan's or whatever Kobe Bryant's hawking these days) for his terminally ill mother, while his father is so overcome with grief that he's oblivious to everything and allowing his Oliver Twist of-a-son to roam around the city. It could be that the protagonist doesn't have enough money to buy the shoes and has to resort to begging instead of picking up aluminum cans and taking them to a recycling center. It could also be that the song sounds suspiciously like Elton John's "Can You Feel the Love Tonight?"
5. "Happy Xmas (War is Over)"
    I understand what peace is fully. It's the absence of war. And I understand what Yoko Ono is. It's the absence of singing ability. Japanese and Chinese music sound atonal to me but that's because their musical scales are different from the western twelve note scale. And yes, the women singing do sound a tad like cats singing. But it works with their music. What doesn't work in this song is Yoko in the background warbling "WAAAAAR EEEEES OOOOOVAAAAH! EEEEEF YOUUUUUU WAAAAAAN IT! WAAAAR EEEES OOOOOVAH! NAAAAAAAAAAOOOOAAAAA!" I see it in my mind right now. John's hunched over at the console of his recording studio and the sound engineer is listening to the playback and says, "I don't understand, John! We've recorded this fifteen times and every single time once it gets to the chorus, I hear a high pitched whine in the background! It's not the equipment...but what is it?!"
6. "Rockin' Around the Christmas Tree"
    Don't get me wrong. My issue with the song isn't the lyrics but with Brenda Lee's vocal cords which seem to be suffering the same debilitating disease as the little girl who sings "I Want a Hippopotamus for Christmas." I mean, the Hall and Oates cover of this song was fine. Except for the video where John Oates gets all gussied up in a dress for the holidays. And the long, personal gaze that was shared between Darryl and John. That just makes me feel voyeuristic. And then I hear their cover and I start thinking about John in the dress and the stares that they gave each other. Actually, you know what, my beef is with the whole song in general, past to present and future.

I Had a Dog Her Name was Pepper

Usually when I think about where puppies come from, an image of a mother dog licking her little 'uns as they nuss her forms in my mind. But when I think about where my old dog Pepper came from, a black, slimy, oily creature crawling out from a rock or a swamp is the only way I can see how she was spawned.

We first got her back in the late 90's and we fittingly named her Pepper because her coat was flecked with white and black. The first couple of days she adjusted to the new environment but I remember one night vividly because she was lonely and wouldn't stop barking. I let her inside and she slept on my chest with her head tucked under my chin the whole night. "Perhaps this isn't so bad," I thought. And indeed it wasn't.

But later that morning I noticed something was off about her. When my golden retriever came in, happy to greet me, Pepper provided her own salutation by jumping up and biting the golden's tongue. And thus started the beginning of a wonderful friendship that subjugated my golden retriever's legs for Pepper's target practice and Pepper provided...come to think of it, it was just a one way relationship with Pepper getting the most out of it.

"Oh that's so sweet! See how they're playing?" my mother cooed. My sister Hope and I shared a worried glance as Pepper did her damnedest to rip the legs off of our poor golden retriever while growling "RAWR RAWR RAWR RAWR!" and with the golden jumping to try and knock Pepper over to get away. This went on for about a year until Pepper got spayed. Then she just sort of half-heartedly attacked our golden retriever and would occasionally wrestle with her, but you could tell that her heart wasn't into it and that she was just doing it for old time's sake.

But this wasn't the only incident that tipped us off that Pepper was different. After one morning of not seeing Pepper, I asked my dad if he had seen her at all.

"No, I haven't seen her [RAWF!]. I mean I can [RAWF!] hear her pretty clearly but I don't [RAAAAAWF!] see her at all."

"Well, [RAWF RAWF RAWF!] maybe she's just up close to the house [RAWF RAWF!], right up under the windows or something."

"She [RAWF!] could be."

"You know what? [RAWF RAWF RAWF] It [RAWF] sounds [RAWF] like [RAWF] she's [RAWF] under [RAWF] the [RAWF] house! [RAWF RAWF RAWF!]"

My dad and I grabbed some flashlights and pulled off the covers to the crawlspace and saw Pepper coated in dust and dirt and happy to see us. She came running out, leaped into the air, and then ran over and started chasing our golden retriever around the yard. My dad and I didn't see any openings in the crawlspace. Hope suggested that Pepper had attempted to use her magic and teleport, but instead of winding up in a McDonald's greasetrap like she had originally planned, she wound up under the house.

It was around this time that we realized Pepper was slowly trying to communicate with us. Whenever she wanted something, she would slowly extend out her right paw, touch us with it, and continue to do this until we petted her or got her what she wanted.

"What a smart dog!" we'd exclaim, and then look outside to see Pepper running in circles, viciously trying to eat her tail.

Intelligence was completely contradictory with Pepper. If she were outside and begged for food, sometimes we would give her some just so she would stop touching us with her paw. And if she really liked the piece of food, she would rush inside as soon as we would open the door, and then immediately lay down on her back. The first time I attempted to pick her up in this position she clamped down on my hand like a vise. A vise with sharp pointy teeth. After that we just coaxed her out with food, but the end result was the same. She got an extra piece of food and we got to enjoy all of our digits for yet another day.

Her breath started getting worse. A lot worse. "Get away from me dog, you've been eating garlic!" My dad would say. Naturally we gave her rawhides and nylabones to get the plaque off of her teeth, but the chicken liver flavor wasn't agreeable to her, so she would bury these in the yard until they acquired a musty, rancid flavor. "What is she carrying in her mouth?!" "It looks like an evil root!" We could practically see the saliva flowing out of Pepper's mouth as she carried an unraveled jet black rawhide to one of her hidey holes to enjoy in private. It seems we had an answer to her foul breath.

Or so we thought. One day I saw Pepper eating something in the liriope bushes on the outer edge of our yard. "That's weird," I thought, "there's nothing over there; that's just where they use the bathroom." Of course it didn't occur to me that dog refuse is indeed something. My older sister went running out, yelling "PEPPER THAT IS SO GROSS! STOP THAT RIGHT NOW!" and Pepper did indeed stop and ran straight to Katie. Katie picked her up with the intention of putting Pepper inside so that she could get over whatever craving she was having for feces. Pepper was just really excited to see Katie and began licking her all over the face. "EEEEEEWWWWW" Katie cried and deposited Pepper on the floor while she ran to the bathroom to start pouring rubbing alcohol all over her face. Pepper looked around, saw me, and made a straight beeline for me. "AAAAAH! GET AWAY! GET AWAY!"

I took off. No way was that dog going to lick me after what she just ate. I ran from the living room to the dining room. Pepper thought it was a game and met me at the other door. "AHHH! GET AWAY! GET AWAY!" We played ring around the rosy with the piano, the dining table, the coffee table, the kitchen island, and individual chairs. Pepper was having the time of her life chasing me. I was running for my life, convinced that any part of my body that she licked with her tongue would develop some incurable fungus that would begin to rot and require immediate amputation. I finally jumped up on the kitchen table with Pepper staring up at me, convinced that we would remain like this until judgement day.

However my mom heard all the ruckus downstairs and found me biting my nails while hunched over on top of the kitchen table muttering, "humminahumminahumminahummina."

"YOU get off the kitchen table. YOU get outside right now." We both complied. But we explained what happened to our mother who suggested that we take Pepper to the veterinarian. "And make sure to clean Pepper's ears out before we take her, Trey."

I attended to the duty with a pair of Kleenexes. Pepper didn't seem to mind, but it was pretty gross considering the amount of hard, sable bits of ear wax that wound up on the tissues. My sister and mom took Pepper to the vet, and the vet suggested putting meat tenderizer on their dog food to prevent Pepper from eating her used food. Then he got down to brass tacks, muzzled Pepper, and began cleaning her ears out with a q-tip. "Oh gosh, your ears are dirty, girl!" the vet exclaimed. My mother and sister looked on in horror as q-tip after q-tip came out coated with some sort of coal tar. "I don't understand, my son said he cleaned her ears yesterday." "Well, dog ears are kind of s-shaped. The outsides of them look pretty clean."

And with that he turned to throw away all of the dirty q-tips. Pepper began shaking her head and loose ear wax flew everywhere, including on my sister's lip. "Thanks," she said, "by the way, you don't have any rubbing alcohol do you?"

I heard all about it when I got back and retold the story to Hope. Hope got a knowing look on her eyes and silently lead me to the garage where we had Pepper's chair. Pepper originally had a bed, but when my dad moved one of his old orange, green, and yellow striped upholstered chairs into the garage, Pepper claimed that as her little castle and would sleep in it every night. "It all makes sense now," Hope whispered, as if discovering the reason behind a thoughtless crime. I looked at the seat of the chair. A black, tarry substance in a Pepper-shaped ring was on the seat. I got a twig and poked at it. It was very firm but still gummy. "I think we've found an alternative for drilling crude oil," I remember thinking, as we could shear Pepper every summer and squeeze the tar out of her fur and just have that refined into asphalt and diesel fuel.

But alas, this alternative fuel was not to be. Pepper died shortly thereafter and was buried next to the legs of our gold retriever. I would often think about her fondly, remembering all the times I would pet her, and she would gently bite me to show her appreciation. Three years later, I was flipping through Popular Science and read an article about MRI research being conducted with dogs. The dog in the picture was getting a treat from a scientist, but the dog looked exactly like Pepper. Maybe, just maybe, I thought, when we interred her into the earth, she emerged from another swamp in California, looking for something stinky to eat and a pair of legs to bite.

Best Buy's Big Blunder

Have you ever opened up your google email account and delved into your spam folder to try and find an email that may have accidentally wound up there? If you've looked towards the top you can always see a bunch of google ads that feature delicious spam recipes. I've always found it a hoot that google ads will pick up on key words or phrases and not determine the context that they're in. Hence the spam folder advertising spam delicacies.

I got a kick out of it, but I didn't really think much about it in a broader scope. Say for instance if you were running an online website and you also had google ads on the pages. And for instance, if google ads picked up on your products' keywords and then started advertising for similar products on your competitors' websites. Google noticed this early on and allows you to block competitor's websites from google ads so that this doesn't happen.

However, as Best Buy found out on Friday and through the weekend, the filter only works if you turn it on.

Yep, while people were attempting to buy dishwashers, washing machines, dryers, other large household appliances, Best Buy was running ads for its competitors allowing people to determine which one had the best price or the exact product that they wanted.

I can only imagine the CMO must be thinking along the lines of "DADGUMMIT!" right about now.

A Haunting from John Maynard Keynes

The Richmond Times-Dispatch had an editorial today about the dreaded fiscal cliff that's coming up in January unless the dunderheads in Congress and President Obama can get the lead out and agree on something to prevent the tax increases and the slash in Federal spending.
Several writers offer differing views on the best way to tackle this problem, but five of them stood out to me.
One writer says that it's not necessarily the deficit that's the issue; it's far better to have low unemployment and high growth. That certainly echoes Keynes's argument for Great Britain in the 20's and early 30's when labor unions where striking for higher wages and the government was attempting to return the pound sterling to prewar levels. The result was very high unemployment in industrial areas which resulted in the government giving them unemployment pensions. Having a decent growth and low unemployment would allow for more taxes to be raised while reducing expenditures on unemployment insurance and other subsidized benefits.
A second says that increased military spending will create jobs but up to a point. After that point it will lead to decreasing marginal returns due to crowding out of private sector investments. I guess that makes sense; why would you try to compete with the government on research when they've already awarded out contracts to defense contracting companies?
A third writer sort of states the untold truth: the debt ceiling is just a limit. I don't know how it's decided, but apparently it's been moved up and up for years. And the fact that the government can refinance it's debt doesn't necessarily mean that there's a point of no return. However, I suppose that weighs heavily on the amount of our debt compared to other nations with similar GDP.
And the last writers hash out another argument in reference to taxation. One of them states that taxing the rich in order to redistribute it to the poor is really just a government sanctioned form of looting. And as long as the rich remain rich, there won't be a problem. That just smacks of Ayn Rand's "Atlas Shrugged" and it's kind of true from that viewpoint. If you're successful and created your own money because you were the best and the smartest at what you do, does it make sense for the government to continue to draw on your wealth by an income tax once you've paid your taxes like everybody else? Wouldn't that just be penalizing you for your success?
The other writer takes a differing stand point from a practical perspective. He addresses the higher tax rate for the rich as just a simple balance: having tax cuts for the middle class would create more jobs and more growth, but the only way to get to that is to have a higher tax rate for the rich.

So there you have it. Five different ideas on the fiscal cliff and five differing opinions. I think Keynes would take pleasure in trading barbs with the writers.

Deep Thoughts

On Friday night last week, the missus and I went to eat at a pizza joint called Ledo's. And then all of Saturday and Sunday when I went running, I had Boz Scaggs's "Lido Shuffle" running through my head the entire time. I'm still trying to connect the dots on how I got that song in my head.