Monday, November 12, 2007

Got omega-3? Not so much

Love this quote: There's no need to buy "manufactured kibble" spiked with omega-3 fats…

A lot of the omega-3 adverts is misleading. Most of these packaged foods have plant-based omega-3s, which draw on inefficient conversion process by body, yielding a small fraction the benefit of fish.

Got omega-3? Not so much

Kim Painter, USA TODAY
Getting plenty of heart-healthy omega-3 fats used to mean eating fish or taking supplements.

But grocery aisles these days are packed with food labels boasting of omega-3 content. You can buy milk, eggs, yogurt, cereal, orange juice, butter substitutes, mayonnaise and other products that carry the claim.

Behind the boom: studies that show certain omega-3 fats can help prevent fatal heart attacks and offer other heart benefits; less conclusive research hints at brain and eye benefits and possible anti-cancer effects.

But don't cross fish off your shopping list yet, nutrition watchdogs say. That's because many of the new products contain little or none of the omega-3 fats backed by the most scientific evidence: DHA (docosahexaenoic acid) and EPA (eicosapentaenoic acid).

"The numbers are tiny, but the claims they are making are huge," says Katherine Tallmadge, a Washington, D.C., registered dietitian and spokeswoman for the American Dietetic Association.

"It's all very confusing," says Bonnie Liebman, a nutritionist with the Center for Science in the Public Interest. She reviewed omega-3 food claims for a recent newsletter article (at

Her conclusion: Consumers are in real danger of being misled. Even a careful label reader won't learn, for instance, that a carton of Breyers Smart DHA Omega-3 yogurt has less DHA than a teaspoon of salmon.

And that bottle of Hellmann's mayo proclaiming the product is "naturally rich in Omega-3 ALA"? True enough, Liebman says: Most mayonnaise is made with soybean oil, which is a source of ALA (alpha-linolenic acid). But that kind of omega-3 fat, found most abundantly in flaxseed, has not been proven to convey the same health benefits as DHA plus EPA, she says.

One study even suggested high intakes of ALA might increase the risk of prostate cancer. But that finding "doesn't make any sense to anyone at this point" and needs more rigorous study, says William Harris, a heart researcher at the University of South Dakota.

Harris, who has advised companies making omega-3 products, says he sees little downside to the grocery-store glut as long as consumers know what they are getting. "But if the label just says omega-3 and makes no mention of DHA and EPA, there's a good chance it's ALA. So it can be a little deceptive."

Tallmadge's advice: "Eat fish." Those concerned about mercury, including pregnant women, can choose low-mercury varieties such as salmon and sardines, she says. Walnuts, ground flaxseeds, tofu and other whole foods containing ALA also are great additions to any diet, she adds, even if the evidence for that fat is not as compelling. There's no need to buy "manufactured kibble" spiked with omega-3 fats, she says.

Vegetarians can take algae oil supplements to get DHA, she says. Others who just don't eat enough fish can take fish oil supplements. But read the labels carefully, she warns, looking for levels of DHA plus EPA.

Studies suggest an average of 500 milligrams a day is beneficial, Liebman says. You can get that much by following the American Heart Association's advice to eat fish, particularly fatty fish, at least twice weekly. The association says patients with coronary heart disease should get 1,000 milligrams of DHA plus EPA daily.
HOW MUCH OMEGA-3 FAT? All food sources of omega-3 fats are not created equal. Here are the amounts of DHA and EPA, the omega-3 fats backed by the most promising studies, in some foods:

Food DHA+EPA (mg)
Atlantic salmon, farmed (6 oz. cooked) 3,650
Coho salmon, farmed (6 oz. cooked) 2,180
Swordfish (6 oz. cooked) 1,390
Bumblebee salmon (Red, Pink or Blueback, 3 oz.)1,200
Sardines in vegetable oil, drained (3 oz.)840
Fish sticks (6) 680
Shrimp (3 oz.) 270
Smart Balance Omega Plus Buttery Spread (1 tbsp.) 160
Land O Lakes Omega-3 Eggs (1) 150
Breyers Smart DHA Omega-3 yogurt (6 oz.) 30
Horizon Organic DHA Omega-3 milk (1 cup) 30
Silk Plus Omega-3 DHA Soy Milk (1 cup) 30

Source: Center for Science in the Public interest (

There's fish oil then there's fish oil

Another missive on fish oil, a pretty impactful one (in addition to just exercising). You may take fish oil already.

It’s certainly changed my life.

However, you may not “feel the difference” even though it’s suppose to be a naturally powerful brain booster.

Here’s some reasons why fish oil are less effective today than ever before:

- Times have changed; we now get “stripped-down” fish oil. Not the fish’s fault but our own obviously. Nowadays, we have to use molecular distillation to remove PCBs, mercury, and other heavy metals from all the fish we need but have polluted. Since the impurities’ molecular weights approximate that of the matrix of natural omega-3 fats (e.g. phospholipids, like our brain’s) that houses fish oil’s active DHA and EPA ingredients, distillation removes this natural fatty housing. This leaves a stripped down “triglyceride” form of fish oil.

- And we don’t eat fish oils with fatty meals to compensate. Low absorption of DHA and EPA result because both require binding to the right profile of fats for transport through the blood-brain barrier and for integration with our brain’s matrix of phospholipids (the 60% of brain matter that is omega-3 fats)…Phospholipids are the most natural and absorbable for our brain.

Only 30% absorption
So there’s roughly a 30% absorption rate for distilled fish oil capsules and liquids, which is boosted roughly by 5-10% by taking it with a fatty meal. Thus, if you’re taking 2 capsules a day, your body is likely, at best, using half that. Long story short, you usually have to take a lot more to feel the difference, as I do. And fish burps and digestion problems often get in the way.

Then there's Krill
Krill are small shrimp-like fish (blue whales eat 8,000lbs a day) found in great abundance, more easily replenished at the Antarctic, is low on food chain and thus are naturally pure (free of heavy metals, mercury etc.). Most importantly, they are naturally housed in a matrix of omega-3 phospholipids which our brain’s also based. Take with breakfast for better digestion; within 15 minutes you’ll feel the difference. You may be surprised how you lived without “real” fish oil for so long. It improves brain function, mental/emotional balance, memory recall, awareness / alertness. And so forth:

- For Men and Women Lipid Management - supports healthy blood lipids.
- Brain Nutrition - contains ultra-potent marine lipids which enhance brain function.Additional Benefits For Women
- Menstrual Discomforts - relieves emotional and physical menstrual discomforts.

Link below is replete with the science. Bottom line, krill’s the most natural, ultra-potent omega 3 to-date. Even though one capsule has the industry-average total DHA+EPA (240mg), it is an order magnitude more effective. And even though the small capsules do smell like, well, krill, there’s actually no fish burps as your body absorbs it entirely. Just don’t sniff the bottle and you should be fine J

Very highly recommended folks give Neptune krill oil a try; this is particularly safe and suitable if you’re pregnant or nursing.

Neptune Krill Oil
You can get Jarrow’s Neptune Krill Oil at a good price, with the usual hard core quality standards that Jarrows brings to the table. Some people have asked, so just to be clear, I’ve no affiliation with Jarrow.

Matter fact, FWIW, he was a Democrat who switched to be a right-wing Republican in order to support a less regulated supplements industry. More on point, he runs a tight ship, and his products are just one of the best, bar none. Neptune is the Canadian company that brought clean, abundant krill to the masses. Canadians have nurtured an entire industry and technology base for this, rivaling even Europe and Japan. Because of the pharmaceutical industry’s heavy influence, the US is a laggard here.

Jarrows and others redistribute Neptune’s krill product. Jarrow’s Neptune Krill Oil is about 33 cents a capsule online. It’s also at most health / supplement stores (except GNC) though the one near our house was sold out…krill oil seems popular these days.

You can check out a colorful end-to-end piece on Neptune Krill that is fairly accurate (you can also see a YouTube version here). For the science-minded, here's an ORAC measure:

Wednesday, October 24, 2007

Save the Earth in Six Hard Questions: What Al Gore doesn't understand about climate change.

Gosh, I felt "Save the Earth in Six Hard Questions: What Al Gore doesn't understand about climate change." (reposted below) was a rather simplistic article, particularly by the author’s and Slate's usually high standards.

It makes leaps of assumptions itself that would like to lump things into nice round numbers, a point off growth here, another there, to size up the effects of climate change neatly.

And that's the problem.

Eminent pro-market Nobel economists like Kenneth Arrow say
(Economist Explains Forests' Costs and Benefits") that today we don't cost pollution correctly by many order of magnitude.

And as Arrow explains:

It’s very typical all over the world for fisherman to limit their catch, because they know that if they catch too much there won’t be any next year. Or the nets have big meshes so that the young will escape. It has been very well documented that, for fishing, people tend to create a market, not like we ordinarily have, but a market that understands what costs that you’re imposing.

It’s the idea that, at least for the resources you use, you should at least pay the cost to society. What you do today may not be so serious today, but it affects tomorrow. Of course, the typical situation is using up fossil resources, for example oil and coal. Or the degradation of farmland.

Those things are profitable today, but don’t take the future into account. Or consider dumping carbon dioxide into the atmosphere, which for many years, didn’t create any significant problems. Now the dumping, which has been going on since the 1800s, since the Industrial Revolution began, is beginning to show up. The point being, once stuff goes in, you can’t take it out.

So, the result is that there is a permanent effect, and – from the perspective of an economist – you don’t pay for it. You don’t pay a tax, a price for putting carbon dioxide into the atmosphere. This is what you call a dynamic effect, an effect over time.

So just because we don't doesn't mean we shouldn't. Without an eye-blink people seek insurance for cars, earthquakes, dismemberment, and floods, some of which are fairly unlikely to ever take place for most people, but just in case....

Most people, bubbly (pun intended) as folks seem to be these days, naively assume we can treat Mother Nature as a free garbage dump and don't support efforts to hedge, assess and mitigate one of the most potentially catastrophic large-scale risks and costs ever. Schizophrenic. Not what the conservative Teddy Roosevelt would have done.

It also demonstrates plenty of naive and wishful thinking. Just because we don't know everything doesn't mean we don't take time, effort, and resources to learn and mitigate. We do it for a bunch of lot less likely risks of life. Yet we apply a double-standard for the environment, which today amounts to a molecule of water in a bucket.

The environment should trump most issues for our collective attention and resources.

And to even imagine summing up the environment and assuming we can arrive at a well-informed present-value dollar cost misses a key point. Obviously, conserving and engendering green technologies is a cost. But conversely it is also an intrinsically very valuable exercise and work product in of itself (as with most things worth doing).

Society spends money to learn how to make a widget with less parts, less costs, and less resources yet with more functionality and features - standard fare for most technological advances. They typically feature upfront R&D costs with huge gains amortized well into the future.

Take CFL's for instance. Compact Fluorescent Light bulbs are the size of a regular light bulb. Costco now sell a 6-pack 120-watt equivalent compact fluorescent bulbs for $5:

- It only consumes 20 watts of energy, basically cutting out about 100 watts worth
of heat. Yet it’s whole lot brighter and has a purer white light than regular
incandescent and emits a lot less heat.

- That 6-pack also cuts out over 7,230 lbs of CO2 over its lifetime. It saves 4,700 kWh of electricity, enough to light up an avg. home for 2 yrs.

- And greenhouse gases forgone equal to planting 80 trees.

- Average 10,000 hr lifetime (1-3 yrs) is lot longer than a regular bulb.

- Now, there’s a bunch of wattage options available – all a lot greener, fantastic ROI
and better all around.

- Not to mention the $564 you save over the lifetime of use.

Less (and smarter) is (a lot) more. Now more business are taking part of green as they should. It’s a strategic investment.

Conservatives typically are comfortable with the status quo and thus seek to keep it intact.
What I dislike about this type of nit-picking is it gives [neo]conservatives ammunition and excuse to continue doing as little as possible. In uncertain times like these, we need progressives and liberals who see the world colored as it really is, not black and white lumps of numbers and choice facts that fit into nice, easy to sound-bite bullets on paper. And write-off the big chunk of reality that is altogether nuanced and inconvenient [or difficult] to grok at the moment.

At least without hard rigorous thought, effort and science applied over prolonged, sustained periods of time. Quite liberal and open-minded, a pre-requisite for the innovations necessary.

And just to be clear: we're not the ones doing Mother Nature any favors. Rather, she’s doling us a big one, putting up with our crap, so to speak, while not asking for payment upfront though the IOUs will need to be paid, no free lunches and all. Else she’ll stop picking up the trash and just let us die off. As we rightly deserve if we can't come to our common senses.

Which I'm sure Mother Nature will be fine with, as she’s been for the last 4 billion years.

Slate - everyday economics: How the dismal science applies to your life.
Save the Earth in Six Hard Questions What Al Gore doesn't understand about climate change.
By Steven E. Landsburg
Posted Monday, Oct. 22, 2007, at 7:44 AM ET

Barring a last-minute intervention by the Supreme Court, the 2007 Nobel Peace Prize will be shared by Albert Gore Jr. Admittedly, Gore has been less of a menace to world peace than some previous laureates (think Henry Kissinger). But there is nothing particularly peaceable about Gore's rhetorical approach to climate policy.

At his most pugnacious, Gore has depicted the fundamental trade-off as one between
environmental responsibility and personal greed. Of course, as everyone over the age of 12 is perfectly aware, the real trade-off is between the quality of our own lives and the quality of our descendants'.

In other words, climate policy is almost entirely about you and me making sacrifices for the benefit of future generations. To contribute usefully to the debate, you've got to think hard about the appropriate level of sacrifice. That in turn requires you to
think hard about roughly half a dozen underlying issues.

1. How much does human activity affect the climate? This is actually a whole menu of questions: What can we expect given the current level of carbon emissions? What if we cut those emissions by half? By two-thirds? And so on. These are questions for
physical scientists, not economists or politicians.

2. How much harm (or good!) is likely to come from that climate change? This is partly a matter of physical science and partly a matter of economics. If the world temperature rises 3 degrees, agronomists try to predict the wheat yield in Oklahoma; economists try to predict when Oklahomans will turn to alternate ventures—and when it will become profitable to grow wheat in Alaska. Climatologists estimate what it takes to put New York underwater; economists estimate the cost of moving New York inland.

3. How much do we—or should we—care about future generations? Edmund
Phelps, the 2006 Nobel laureate for economics, argued long ago that you (and I)
should care exactly as much about a stranger born 1,000 years hence as we do
about a stranger who's alive today. Phelps' view has been highly influential
among economists, who now take it as more or less the default position. But even
economists are sometimes wrong, and there are powerful arguments for
"discounting" the welfare of future generations.

First, many people (myself excluded, however) believe we should care more about our countrymen than about a bunch of foreigners—hence the sentiment for a border fence. If we are allowed to care less about people who happen to be born in the wrong country, why can't we care less about people who happen to be born in the wrong century?

And second: Few of us feel morally bound to churn out as many children as we possibly can, which means we think nothing of denying future generations the gift of life. If it's OK to deny them their very lives, shouldn't it be OK to deny them a temperate climate?

There is a ton more to be said in response and counter-response, but in the end, you've got to take a stand. Does the next generation count 100 percent as much as our own, as Edmund Phelps demands? Or 99 percent? 95 percent? 90 percent? I'll show you later how much the answer matters.

4. How likely are those future generations to be around, anyway? If you think life on Earth will be destroyed by an asteroid in 200 years, it makes little sense to worry about the climate 300 years from now. (Of course, the issue is complicated by the fact that our climate policies change the survival odds.)

5. Just how rich are those future generations likely to be? If you expect economic growth to continue at the average annual rate of 2.3 percent, to which we've grown accustomed, then in 400 years, the average American will have an income of more than $1 million per day—and that's in the equivalent of today's dollars (i.e., after correcting for inflation). Does it really make sense for you and me to sacrifice for the
benefit of those future gazillionaires?

6. How risk-averse are we? This matters not just because of uncertainty about the effects of climate change but because it affects the way future generations want us to behave. Imagine yourself as a disembodied soul, waiting in line to be born—possibly next year, possibly 100 years hence. If you have little tolerance for risk, you'll want us to pursue policies that make life about equally good at all times; if you're
willing to roll the dice, you might prefer a policy that allows some generations
to live riotously at the expense of others.

Only after you've addressed each question in turn can you say something sensible about climate policy. To carry out that program in detail would indeed be a Nobel-worthy achievement. I don't propose to earn my Nobel Prize in this column space, but I can at least offer a quick back-of-the-envelope calculation to show you how this stuff works.

First, I'll make the extreme assumption that our environmental recklessness
threatens to shave 1 percentage point off economic growth forever. Because of
compounding, our disposable incomes will be reduced by 9.5 percent a decade from
now and by 63 percent a century from now—perhaps because we'll spend 63 percent of our incomes relocating coastal cities. Now toss in some standard (but arguable) assumptions about risk aversion and discounting. (Note to econogeeks: I assumed a risk-aversion coefficient of 1, and I discounted future generations' welfare at an annual rate of 5 percent, partly because we might care less about them and partly because we're not sure they'll exist.) Run this through your calculator, and you'll find we should spend up to about 17 percent of our incomes on climate control—provided that our investment is effective. That's an expenditure level that I expect would satisfy Al Gore.

Change the numerical assumptions, and you'll change the numerical conclusion. Make the discount rate 1 percent instead of 5 percent, and you can justify spending up to a whopping 62 percent of our incomes on climate control; lower the discount rate to 10 percent, and you can't justify spending more than 8 percent of our

The moral of that story is not that economists can justify anything;
it's that assumptions really matter. Therefore you need to be clear about your
assumptions, and you need to be prepared to justify them. If you're not talking
about discount rates and levels of risk aversion, you're blathering.

The most thoughtful assessment of climate change is the Stern Review, prepared in October 2006 at the behest of the British government. The Stern Review reaches
conclusions generally compatible with Al Gore's worldview, but only after laying
out the underlying assumptions so clearly that skeptics like me can tinker
around with them and see how the conclusions change. In other words, they've
taken a hot-button issue and reduced it to its constituent pieces so that
opposing parties can stop yelling at each other and say, "Let us calculate."
That's what I call a contribution to world peace. I wish the Nobel Committee had

Wednesday, October 10, 2007

What the falling dollar means for you

There’s a number of really big macroeconomic issues with such a lop-sided exchange rate.

It’s not coincident that the forex curve fell precipitously just a year and half after W takes office. It continued throughout his much vaunted “tax cuts for the top 5% [trickling down] to help stimulate the economy” and by using interest heavy debt financing.

Ironically, the good advice now is to buttress your wealth/retirement, if you’re rich enough and haven’t already done so, by saving your tax cut windfalls. Then reinvest it into emerging markets like Asia and Latin America, which defeats the purpose of the cuts to begin with. Ugh. Reality bites again.

And the CNBC talking heads who chatter about how that works out for America today because today’s US companies are multinationals, and thus profit from this miss the point. Profits go to shareholders, mostly the top 5%. Labor wages go overseas.

Few Americans benefit. The top 5% want the best returns, so they reinvest their shareholder profits overseas. And since it’s the 95% of US households running now on credit fumes fueling 2/3 of US economic activity, it’s ultimately corrosive to the US economy.

That’s why supply side tax cuts don’t work. They target the wrong people, are debt financed from overseas, and seep the life blood (steadily rising wages) from the economy. That’s why GOP supply-siders are Wild West Doctors trying to heal the American economy.

And the oft-cited exports go up because of a weaker dollar plays to our weakness. Our exports aren’t in more demand because of its rising intrinsic worth. It’s because there’s a yard sale going on and things are cheap. Not to mention that exports play a small part of our economy - a quarter of our GNP.

And end of day, the debt we borrow still need to be paid back, ultimately, in foreign currency.

Sometimes I wish we taught economics in school by starting with personal finance, not orthodox theories that are hard to relate and apply. At the core, economics really isn’t rocket science. It’s just laden with jargon.

Ultimately, it’s about learning to diligently follow where you dollar goes after you spend it and go from there, developing a simple economic model that you fill in with more meat over time.

Having solid savings strategy now is key. To really have your money work harder for you, invest overseas for superior returns. Great vehicles are emerging market index funds, like VWO. Not the best feeling when doing this but necessary for financial well-being.

The mighty U.S. dollar has tumbled over the past five years and is likely to keep falling. Here's how it could change your life.

By Charley Blaine

Thinking about a trip to Europe? Start saving. Because of the weakening U.S. dollar, travel overseas is becoming more expensive.

Even if you don't plan a globe-trotting vacation, the falling dollar may cost you. If the slump gets out of control, it could mean inflation and much higher interest rates for Americans.

The dollar has steadily lost value compared with other major currencies since the end of 2002. Result: The euro has risen more than 70% against the dollar. The Canadian dollar, affectionately known as the loonie, is up more than 60% -- to parity for the first time in more than 30 years. The yen is up about 16%.

The dollar is falling partly because Americans import way more goods than they sell abroad -- especially oil -- and must borrow to close the gap. Another factor: Higher interest rates in Europe and elsewhere make those countries' currencies more valuable.

Consider how this affects your life:

The downsides

Pain at the gas pump will get worse. While growing global oil demand is pushing prices higher, here's the dollar angle: Crude oil is priced in dollars, and oil producers, especially members of the Organization of Petroleum Exporting Countries, want to be compensated for the dollar's decline.

In most years, the price of crude oil and gasoline declines in the fall. But this year, AAA's daily price survey shows regular unleaded gasoline at about $2.79 a gallon nationally, up 21% from a year ago.

You may need to stay home. Let's say you went to Paris in early 2002 and paid 100 euros a night for a room in a moderately priced hotel. That was the equivalent of about $86 a night.

Today, that room would cost $142 a night, a 65% increase.

Ditto for neighboring Canada. Keep that in mind if you want to attend the 2010 Winter Olympics in Vancouver.

Your dream BMW costs more. The base price of a BMW 3 Series sport sedan has risen about 20% over the past five years, The Wall Street Journal reported this week. It's likely to go up more.

Though BMW and other automakers may accept lower profits to stay in the U.S. market, the lower dollar boosts prices for imported food, shoes, chemicals and the like. European governments worry that a dollar in free fall could be a disaster even for Germany, Europe's strongest economy.

And if price competition eases, U.S. companies could gradually charge more for products they sell at home.

Interest rates will rise. Somehow, the U.S. has to finance its trade and government deficits, and, at some point, the investors who provide the cash will want to get paid.

The lenders are banks, pension funds and governments in Europe, China, Japan and oil-producing nations. These investors showed their potential muscle over the summer, when many balked at the terms for purchases of mortgage securities and junk bonds that Wall Street banks wanted to sell.

But there are upsides

U.S. exports will get a boost. The weaker dollar is a boon for U.S. manufacturers because it makes their products more competitive abroad.

One company that sells bakeware made at a factory in Minnesota expects its exports will grow 50% this year because of the weaker dollar, according to The Wall Street Journal.Lay out the welcome mat for foreign tourists. Visitors to the U.S. will find their cash goes further than before, potentially helping the travel business.

The Greater Fort Lauderdale Beachmobile -- a sandbox on wheels that promotes warm beaches and suntans -- usually goes to New York in winter to drum up business for south Florida. This year, it's going to London.

''It's almost un-American, but every time the dollar drops a little lower, it looks a little better for tourism in the U.S.,'' Nicki Grossman, the president of the Fort Lauderdale tourism bureau, told The Miami Herald.

Of course, foreign investors want to buy what they see, pushing property prices higher in key markets like New York.

The falling dollar should help U.S. stocks. All of the companies in the Dow Jones Industrial Average ($INDU, news, msgs) are big multinationals. Each time one of them translates a profit from, say, Europe, the weaker dollar adds to the bottom line. For example, IBM Corp. (IBM, news, msgs) reported that quarterly revenue rose 9% from a year earlier. Without currency changes, the gain was about 6%.

The weaker dollar is one reason the Dow gained 684 points, or 5.1%, in the 10 trading sessions from Sept. 18 through Monday, when it smashed through 14,000 for the second time in 2007.

This rosy scenario is good at least until the dollar drops so low that U.S. interest rates start to rise. When that happens, things could get nasty -- which is another story.

Wednesday, September 05, 2007

Update on New Data Published on Benefits of DHA (Omega-3's, e.g. Fish Oil)

The benefits of DHA supplementation were recently discussed in several publications:
  • A study published in the American Journal of Clinical Nutrition (August 2007) found that DHA is effective in reducing the level of triglycerides in male hypertriglyceridemic patients. In this study, DHA alone was effective without EPA, the other omega-3 commonly found in fish oil, in reducing triglycerides. Hypertriglyceridemia (high triglyceride levels) in men is associated with an increased risk of cardiovascular disease and metabolic syndrome.
  • An independent study published in the Society of Biological Psychiatry (July 2007) found a deficit in the total fatty acid composition of the orbitofrontal cortex and found a selective deficit in the level of DHA compared with controls in brain examinations of postmortem patients who had been diagnosed with major depression compared with controls. These findings add to the growing body of evidence showing a correlation between low tissue levels of DHA in neuropsychiatric diseases such as depression.
  • A study published in Nature Medicine (July 2007) reported that increasing consumption of long-chain omega-3 fatty acids, including DHA, reduces destructive vascularization in the retina. In this animal study of retinopathy associated with prematurity, the authors summarize a series of experiments demonstrating that long-chain omega-3 fatty acids, and selected metabolites, are effective in reducing retinal vascular disease, a leading cause of blindness.

Friday, August 10, 2007

The Big Elephantine Squeeze

The obvious is sometimes so much so that nobody [wants to] pay attention. The media finally sounds the big bugle about the elephant that's been smelling up the room all this time. None of it is rocket science, just [personal] finance 101 that the "punditry" routinely chose to glaze over on the tube and [less so] in print: flat wages + high debt + high market/GDP growth = ?

And it doesn’t help that “pundits” - chatterboxes or slick-talking snake oil salespeople are just as descriptive - play musical chairs knowing that growth can grind to a halt when credit’s overstretched to breakpoint. Yet they fear crying wolf given how vested they are in folks buying into the dogma of everlasting stock market growth - while they divest - business cycles be damned.

Newsweek's "A Widening Credit Squeeze" (August 9th, 2007) aptly frames the issue:
…A credit-card squeeze carries real risks for the U.S. economy overall. “The shift from home-equity borrowing to credit cards is quite costly,” says Smith. Not only are mortgage interest rates about half that of credit-card interest rates, but the interest paid on credit cards isn’t tax-deductible. Smith believes that already-strapped households with little or no savings to rely on will be faced with increased financial obligations that will eventually lead to slower growth in consumer spending. And with consumer spending accounting for about 72 percent of gross domestic product, any slowdown could have a big impact.

Americans are so tapped out financially that they may not be able to stop using plastic no matter how high rates get, says Christian Weller, an economist and senior fellow at the Center for American Progess. “I think credit-card usage could still go up even if rates go up,” says Weller. “The credit market right now is like a balloon that’s being squeezed on the mortgage side and expanding on the credit cards side,” he says. Weller says he’s concerned that credit-card debt has risen dramatically over the past few months, even as growth in consumer spending has slowed. This, he says, is a sign that credit-card borrowing is being used to close a widening household budget gap—that cards are being used to fund housing, transportation and medical care. “I believe what we’re seeing is that consumers are borrowing out of necessity—we’re not talking about a flat-screen TV or iPods here.”

This chart shows how consumer spending has slowed even though credit card use has risen. According to some economists, this may indicate that consumers are increasingly using cards for basic living expenses, rather than luxury items.

Source: Moody's, Inc.

For customers who need access to credit but get knocked out of the prime credit-card market due to tightening standards, the only alternative to meet their expenses may be the subprime credit- card market, says Ellen Cannon, assistant managing editor at the financial research group And that could put them even deeper into trouble, she says. “What happens with the subprimes is that they’ll give you a $200 credit limit and then they charge you $59 initiation fee and an annual fee of $45. So by signing up, you can be $150 in the hole and your interest rate is 32 percent. It’s highway robbery.”

How long will it take Americans to dig themselves out of their credit hole? Years. “Debt will increase and consumption will weaken in the next year,” says Smith. “But there will come a point when people will either have maxed out their credit or they’ll see their credit rating starting to suffer, and that’s when many of them will decide to get their household balance sheets back in order—probably by sometime in early 2009.” Smith warns, however, that reversing a borrowing trend is “a slow process.” And that’s something anyone who’s ever tried to pay down a big credit-card bill knows firsthand.
I’ve blogged for a while about the overextended American, including a month ago, It’s the Balance of the Paycheck, Stupid. That was a response to a posting about the “irrelevance of trade deficit figures”, a oft-popular sentiment during peaks of a financial bubble.

In fact, our growth has run too long on the inferior grade economic fuel that is debt financing, mirroring the Japanese bubble. That bubble was followed by more than a decade of spiraling deflation and economic stagnation that the Japanese are just beginning to recover from.

Now China’s finance ministry’s bold threat recently to withdraw their $1.33 trillion dollar reserves from US treasuries and debt markets if forced to devalue their yuan is doubly potent. (UK's Telegraph - August 10, 2007 - "China threatens 'nuclear option' of dollar sales")

As history tends repeating, a lame-duck administration is acting its part as a modern day Hoover, waiting for the economic fallout to widen before being forced to resort to a last-ditch effort to do something. Even then, it’d be mostly cosmetic laced with rosy sound-bite oratory – doubly impotent & intellectually hallow as is the low expectations of these past 7 years.

And the non-stop touting of tax cuts as panacea for much of this country's financial maladies, big and small, is a rather sorry linchpin for American economic policy. It also sets a shoddy example and excuse for Americans to heed, akin to deciding to cash the always-plentiful "free-for-now" check-as-cash offers that credit card companies shovel out.

While attractive politically, tax cuts are botched economics when they dig an even bigger financial hole using 100% debt-financing as is the case when a country is in a deep red trillion-dollars+ deficit and chooses to starve itself of tax revenue by refusing to maintain tax rates as is or raise them as needed (like "no voodoo economics" Bush 41 did) and goes about writing a giant nationalized IOU check that in the fine print inevitably also echoes "free-for-now, ballooning-interest-later". All the while, benefits of this tax cut accrue mostly to the wealthy who often reinvest most of that unneeded upside overseas in emerging markets, in order to maximize returns.

And this sums up at root the flaw of the Laffer-inspired "supply-side" economics, in a nutshell*.

Which also means that, bottom line, some serious green and gravy is due Asia and the rest of the world, which they will cash in the not-too-distant future at a time of their choosing, not ours.

* Not-so-nutshell, from Wikipedia:

Estimates of the effectiveness of the Laffer curve

In 2005, the Congressional Budget Office released a paper called "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates" [2] that casts doubt on the idea that tax cuts ultimately improve the government's fiscal situation.

Unlike earlier research, the CBO paper estimates the budgetary impact of possible macroeconomic effects of tax policies, i.e., it attempts to account for how reductions in individual income tax rates might affect the overall future growth of the economy, and therefore influence future government tax revenues; and ultimately, impact deficits or surpluses. The paper's author forecasts the effects using various assumptions (e.g., people's foresight, the mobility of capital, and the ways in which the federal government might make up for a lower percentage revenue).

Even in the paper's most generous estimated growth scenario, only 28% of the projected lower tax revenue would be recouped over a 10-year period after a 10% across-the-board reduction in all individual income tax rates.

The paper points out that these projected shortfalls in revenue would have to be made up by federal borrowing: the paper estimates that the federal government would pay an extra $200 billion in interest over the decade covered by his analysis.

To support these calculations, the paper assumes that the 10% reduction in individual tax rates would only result in a 1% increase in gross national product, a figure some economists consider too low for current marginal tax rates in the United States. [3][4]

The paper appears to focus on Federal government revenue only and does not look at the total public sector revenue (i.e., it does not include increases in local and state government revenue).

Wednesday, July 25, 2007

The Government's Big Fish Story

Omega-3's (fish oil) are pretty important to one's health. And luckily, there's lots of good choices - from great-quality ones, to super-quality ones. Some rules of thumb that may be helpful:
1 - molecularly distilled: both have no PCBs, mercury, heavy metals
2 - well-absorbed: enteric coated is best absorbed by intestines, latter is emulsified and goes quickly to bloodstream

> taking omega-3's with food, including fats, also significantly increase absorption
3 - high levels of active ingredients DHA+EPA: 200+240mg vs. 230mg+350mg per dose/capsule, respectively

> effective dose varies, usually 1-3 grams a day of DHA+EPA (assumes ~500mg DHA+EPA total per dose = 2-6 dose a day)
4 - naturally preserved: protected with vitamin E
Thanks to, below is a well-written, succinct article about Omega 3's:

The Government's Big Fish Story
By Sabrina Rubin Erdely and Denny Watkins, Men's Health

When Randal McCloy was rushed to West Virginia University Ruby Memorial Hospital's intensive-care unit, he was practically dead. The 27-year-old coal miner had spent 41 hours buried 2 ½ miles underground after an explosion in the Sago, West Virginia, mine where he'd been working. His 12 oxygen-starved colleagues had all perished.

"As far as we know, he survived the longest exposure to carbon monoxide poisoning," says Julian Bailes, M.D., the neurosurgeon assigned to the case. McCloy was in a coma and in deep shock, his heart barely beating, one of his lungs collapsed, his liver and both kidneys shut down. Even if he somehow managed to pull through, doctors predicted McCloy would be severely brain damaged, since the carbon monoxide had stripped the protective myelin sheath from most of his brain's neurons. "It's very difficult to come back from a brain injury," says Dr. Bailes. "There's no drug that can help that."

While McCloy was being given oxygen infusions in a hyperbaric chamber, Dr. Bailes was struck by inspiration: He ordered a daily dose of 15,000 milligrams (mg) docosahexaenoic acid (DHA) and eicosapentaenoic acid (EPA) for the miner. In layman's terms?

"Fish oil," says Dr. Bailes.

Several weeks passed. Then, unexpectedly, McCloy emerged from his coma. This in itself was amazing, but he wasn't done. In the weeks that followed, he stunned even the most optimistic experts by recovering his memory and gradually regaining his ability to walk, talk, and see, a turnaround that many in the medical field called miraculous.

Although Dr. Bailes believes the hyperbaric chamber may have worked some magic on the myelin, he thinks much of the credit belongs elsewhere. "The omega-3s helped rebuild the damaged gray and white matter of his brain," says Dr. Bailes, who now takes his own medicine, swallowing a fish-oil supplement each morning. On his orders, McCloy, still recuperating at home, continues to take fish oil daily. "I would say he should be on it for a lifetime," says Dr. Bailes. "But then, I think everybody should."

70's to Now...Omega 3 fatty acids = the building blocks of your Brain and Heart: DHA + EPA
Maybe what fish oil needed all along was a better publicist. After all, this isn't the medical community's first infatuation with omega-3s. Back in 1970, a pair of Danish researchers, Hans Olaf Bang and Jørn Dyerberg, traveled to Greenland to uncover why the Eskimo population there had a low incidence of heart disease despite subsisting on a high-fat diet. Their finding: The Eskimos' blood contained high levels of omega-3s, establishing the first link to heart health. But even though this discovery spurred additional omega-3 research throughout the '70s and '80s, the public remained more interested in other nutrients—none of which had the unfortunate words "fish" or "fatty" in their names.

There are three types of omega-3s: DHA and EPA, found in fish and marine algae (which is where the fish get them), and alpha-linolenic acid (ALA), which is found in plants, seeds, and nuts. All three have health benefits, but those attributed to DHA and EPA have sparked renewed interest in recent years. Studies show that this tag team may not only reduce a person's risk of heart disease and stroke but also possibly help prevent ailments as diverse as arthritis, Alzheimer's disease, asthma, autoimmune disorders, and attention-deficit/hyperactivity disorder—and those are just the A's. Researchers are now exploring if these multifunctional fats can, among other things, ward off cancer and even make prison inmates less violent.

It's enough to make omega-3 geeks downright giddy.

"Omega-3s are fantastic!" says Jing X. Kang, M.D., Ph.D., a Harvard University researcher who made the news by genetically engineering pigs to produce omega-3s in their meat. "Not just for your heart but also for brain function, immunity function, women's health, children's health — I'm amazed at how important they are."

In fact, some experts argue that omega-3s should be labeled essential nutrients as necessary to health as, say, vitamins A and D. "They're involved in the metabolism of each individual cell," says Artemis P. Simopoulos, M.D., a physician and the president of the Center for Genetics, Nutrition and Health in Washington, D.C. "They're part of your body's basic nutrition."


Early Man: From 1-lb brain to 3-lb supercomputers
"Not very glamorous, is he?" says Jane Crowther, senior director of Omega Protein's Health and Science Center. It's hard to disagree: I've come to the nation's largest fish-oil refinery, in Reedville, Virginia, and now that I'm face to fin with what a poster on the wall calls "MENHADEN...THE WONDERFISH!" I'm not exactly awestruck. Bony, oily, and without much meat, the menhaden isn't even considered edible by most people. And yet, hidden inside is a substance that some anthropologists claim was critical to our very evolution; without it, they say, we'd still have brains like chimps'.

Ask most scientists and they'll tell you that Stone Age man evolved on the African savannas, developing his big, complex brain as a result of all the animals he'd hunt and eat. But most scientists would be wrong, according to Michael Crawford, Ph.D., who, along with researchers from the USDA, conducted a 2002 study challenging the prevailing theory, which he calls "a load of rubbish."

Crawford, the director of London's Institute of Brain Chemistry and Human Nutrition, argues that many other savanna mammals also subsisted on meat, but none developed our megabrains. "And with their strong jaws and sharp teeth, they were far better equipped to eat flesh than we were," he says. Yet relative to their growing bodies, those animals' brains actually shrank, while man's brain expanded from a 1-pound processor to a 3-pound supercomputer.

What were we dining on that the rest of the Paleolithic crowd wasn't? Crawford has a three-letter answer: DHA. "The human brain is soaking in DHA," he says. "It is the only substance that supports that level of neural development and cognitive function."

And lo and behold, paleontologists have found evidence that early man lived along the coasts of southern Africa, leaving behind mounds of fossilized shells and other table scraps. Crawford points out that catching fish would have been a heck of a lot easier than snaring four-legged prey. Children and pregnant women could wade in and collect mollusks themselves, feeding young brains in the process. Studies show that DHA helps secure the connections between brain cells, especially in utero, when pregnant women can increase their babies' IQs by as many as six points.

While the savanna-versus-seashore debate will continue (Emory University researchers recently fired their own scientific salvo at Crawford's theory), no one can dispute that we're veritable meat-eating machines today. The average American ate only 16.2 pounds of fish in 2005, but consumed 195 pounds of meat. And although our livers can manufacture tiny amounts of DHA and EPA when we eat lots of ALA-rich nuts and seeds, these aren't exactly our favorite foods, either.

"6 and 3 got out of whack"
Changing agricultural techniques have worsened the situation. The natural omega-3 contents of meat, milk, and eggs have plummeted now that our livestock no longer graze on ALA-rich grass, instead consuming corn, wheat, and other grains that are loaded with another group of fatty acids, called omega-6s. In fact, the disappearance of omega-3s from our diets has coincided with an upsurge in omega-6s, mainly in the form of cereals, grains, and processed foods made with hydrogenated oils. Dr. Simopoulos estimates that in caveman days, we ate an equal amount of the two types, but that the average American now eats 16 times more omega-6s than omega-3s.

"That's what's really killing us," says Lands. "The balance of 6 and 3 got out of whack." These two types of fatty acids have a biochemical yin-and-yang relationship: While omega-3s reduce our body's inflammation response, omega-6s encourage it. Each fatty acid is crucial: For example, if your inflammatory response is too weak, you won't be able to fight infection properly. And in theory, the push and pull should create perfect balance. Instead, the excess of omega-6s in our diets may have left us in a perpetual state of inflammation.

"The reason you take ibuprofen and Celebrex and all those nonsteroidals is to prevent the manufacture of these inflammation molecules in the first place," says Joseph Hibbeln, M.D., a neuroscientist with the NIH. "The mental picture I have is of the Dutch boy with his finger in the dike, where the finger is expensive pharmacology, and the flood is omega-6s."

"Put us out of business with fish oil"
Andrew McGeehin had limped for the past half century. "Stupid football," mutters the 83-year-old resident of Allentown, Pennsylvania. He tore up his right knee in his 30s, and despite surgery and drugs, the pain gradually became enough to wake him at night. Finally, McGeehin's orthopedist, Thomas Meade, M.D., suggested that he take an omega-3 supplement. "I wasn't expecting much. But I figured I'd tried everything else," says McGeehin, who began swallowing fish oil along with his usual dose of the anti-inflammatory drug Voltaren. One week later, McGeehin was startled to realize that the stiffness in his knee was gone. He was able to walk with the easy, fluid stride of a younger man.

"Dr. Meade must be a genius!" McGeehin says today, though Dr. Meade himself explains it more modestly: "I read the literature. There's a plethora of evidence supporting the benefit of omega-3s for joint pain." He cites a 2006 University of Pittsburgh study of 125 people with neck and back pain, in which 60 percent of participants reported having less pain after taking omega-3s. And clinical studies on rheumatoid arthritis suggest that patients who take a daily dose may be able to cut back on their meds.

Indeed, in the 2 years in which Dr. Meade has been recommending omega-3s to his patients, he's seen a major shift in his orthopedic practice. "I almost never prescribe anti-inflammatories now," he says. "My staff kids me that I'll put us out of business with fish oil."

"Internal ice pack"
Omega-3s act as a sort of internal ice pack, in part because they spur our bodies to produce several inflammation-lowering substances. "Omega-3s work along the same biochemical pathway as a COX-2 inhibitor, such as Vioxx, but farther upstream," says Dr. Meade, meaning that omega-3s treat the underlying problem rather than the symptoms. And emerging research indicates that this powerful ability to ease inflammation is one of the ways omega-3s may help prevent a number of ailments, including...

Heart attack and stroke
Cardiologists now believe that chronic inflammation triggers the release of artery-blocking plaque. In the most definitive study to date, published in the Lancet, heart-attack survivors who took 900 mg fish oil daily were 30 percent less likely to die of a second heart attack, and 20 percent less likely to suffer a stroke, than those who skipped the supplement.

Omega-3s can guard your arteries in other ways, too, since they also lower triglycerides and make blood vessels more elastic. Add in their ability to improve electrical communication between cardiac cells, thereby preventing arrhythmia, and you can see why omega-3s are a standard part of cardiac care in Europe. If you have a heart attack in Italy, France, Britain, or Spain, the hospital will even send you home with a prescription for Omacor, a "medication" that's superpurified DHA and EPA.

Alzheimer's disease
Though not yet conclusive, research suggests that runaway brain inflammation may cause Alzheimer's disease. In a 2007 study published in the American Journal of Clinical Nutrition, elderly men who consumed 350 mg DHA and EPA daily experienced less cognitive decline than those who swallowed only 15 mg a day. And researchers at the Rush Institute for Healthy Aging, in Chicago, found that people who ate fish at least once a week were significantly less likely to develop Alzheimer's disease than those who ate more turf than surf.

Prostate cancer
It's estimated that chronic inflammation is the culprit in 20 percent of all cancers, and that may include many cases of prostate cancer. In a 2003 Harvard study that tracked nearly 48,000 men over 12 years, researchers discovered that the men who ate fish three times a week were 25 percent less likely to develop metastatic prostate cancer than those who dined on less. However, a recent (and hotly debated) study review in the Journal of the American Medical Association says clear proof of cancer protection is still lacking.

Could fish be the ultimate mood food? Ohio State University researchers recently analyzed blood samples from 43 older adults and found that a high omega-6 to low omega-3 ratio corresponded to elevated inflammation and more symptoms of depression. This and previous research suggest that eating more fatty fish or supplementing with omega-3s could help us beat the blues.


Columbia's Akabas agrees, which is why her Institute of Nutrition has come out with a bold endorsement. "We think the whole U.S. population would benefit from an upward shift in omega-3 intake, and we don't see any downside," she says. "So our recommendation is to not wait until the research becomes definitive. It's time to examine the development of a DRI."


Pick the Perfect Fish-Oil Supplement

When tested 41 fish-oil supplements, none was found to contain unsafe levels of mercury, PCBs, or dioxins. One explanation is that many brands are now molecularly distilled to remove any possible contaminants.

Ignore the total milligrams (mg) of fish oil, and focus instead on the combined eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA). You want a supplement that contains at least 500 mg per dose or serving. If you're on blood tinners, talk to your doctor about the best dosage.

Your choice is basically capsules or a liquid. They're equally effective at delivering omega-3s to your bloodstream, so go with the form you think you'll take on a daily

Fish Burp
Some people experience this as their stomachs dissolve the fish-oil capsule. Beat the burp by buying enteric-coated capsules or freezing regular capsules. Either strategy will cause the fish oil to be released in your intestine instead, says William Harris, Ph.D., a professor of medicine and biomedical sciences at the University of South

The ratio of EPA to DHA used in research varies, but most supplements are made with a 3:2 split. This translates to 300 mg EPA and 200 mg DHA in a 500 mg supplement.

Any fish oil will do, be it from mackerel or menhaden, salmon or sardines. Supplements made from algae oil contain only DHA, and those made from flaxseed oil have alpha-linolenic acid (ALA), only a little of which can be converted into EPA and DHA by your body.

Once inside your body, omega-3s can quickly lose their power due to oxidation. Look for vitamin E, a.k.a. tocopherol, an antioxidant that can neutralize free radicals.

More on Omega-3 Fatty Acids on MSN Health & Fitness:
· Reality Check: Omega-3 Fatty Acids

The Cholesterol Connection
Check Your Oil
Share Your Thoughts on Omega-3s
Provided by Men's Health>1=102 a 12

Wednesday, July 18, 2007

The Tale of Two Silent Economies

Coincident to my last post, there is a story in today's NYT about Taiwan being the Silent Hands Behind the iPhone.

It's stunning that Americans are mostly silent, in this case satisfied with ourselves sans any competitiveness policy, other than promoting free-trade (important, but not sufficient in of itself) and outsourcing to the bottom of the value chain, neglecting the bread-and-butter policy work that is the formulation of a top-level national policy to consistently engender next-generation R&D sectors and the basis for the next round of new markets and technologies (and better jobs).

There's no good reason why we shouldn't be accruing the high-end value of this economic supply chain. Consider what happens when Apple eventually outsources the iPhone + iPod's design overseas - perhaps Cupertino can continue to be the bastion of avant garde sales and marketing.

...Taiwan’s evolution from computer-making giant to telecommunications Goliath has gone largely unnoticed in the United States because companies here make most of their money as made-to-order manufacturers, not sellers of their own brand products.

But Taiwan’s industrial makeover has helped its companies remain competitive in a world increasingly dominated by low-cost Chinese assemblers and by Japanese and South Korean companies with strong footholds in high-end components like flash memory chips. The strategy of repackaging — finding new uses for computer components — has paid dividends.

Companies on the island have captured 87 percent of the global market for wireless modems, 84 percent of the D.S.L. modem market and 70 percent of the market for personal digital assistants. In the competitive cellphone business, Taiwan companies made 12.4 percent of the world’s handsets last year, up from 9.8 percent in 2005, according to the Institute for Information Industry, a government-affiliated research center. That share is expected to grow as brand-name companies like Sony Ericsson outsource more of their production to companies here. In all, Taiwan companies produced $31.5 billion in communications equipment and services last year, more than 50 percent above the total the year before, according to the institute, which expects production to reach a value of $46 billion by 2010.

Less than a quarter of that was manufactured on Taiwan, with the bulk made on the Chinese mainland. “It’s been a fairly natural progression because handsets are really a mini-version of the PC, and Taiwanese are adept at adjusting,” said Gary Chia, president of the Yuanta Research Center.

The transformation did not happen by accident. As in much of Asia, the government played an active role in steering businesses into new markets by showering them with tax incentives, cheap property to build factories and research money. Companies on Taiwan have also been able to shift gears smoothly because the concentration of component producers on the island has made it easier to gather the technology and engineers to design and assemble new products....

...The iPhone is a great example of where Taiwan is still strong: reliable sourcing, leading technology and complex integration,” said Allen J. Delattre, chief of the electronics and high-technology practice at the consulting firm Accenture. “Does the average person who buys an iPhone know it’s from Taiwan? Maybe. Do they care? Probably not. But if you look at the companies in Taiwan, they are behind the scenes, and that’s a good place to be because that’s where the value is.”

...The key for Taiwan companies, Mr. Delattre and other analysts said, is to invest in next-generation products early. For example, companies here are fast becoming important players in the development of WiMax wireless and fiber optic broadband equipment. They are again getting a healthy push from the government, which is spending more than $200 million over five years to help create the world’s largest high-speed WiMax network. By next year, with 2,000 base stations spread across the island, companies will be able to start testing new applications, like the sending of video from ambulances on their way to hospitals. “We are trying to make the infrastructure more complete,” said Tsung-Tsong Wu, deputy minister of the National Science Council, which has a $1 billion annual budget. “If the highways are built, companies can go as fast as they like.”

It's the Balance of Paycheck, Stupid

This is homage to a thought-provoking post by Charles Fitzgerald's Platformnomics titled "It's the Balance of Profits, Stupid". Commenting on renowned economists Hal Varian (information) and Gregory Mankiw's (macroeconomics) exchange that bilateral trade balances (aka balance of trade, the source of our big national bogeyman, the trade deficit), both economists suggest the such deficits matter less than you think, when you consider that we Americans are soaking up a lot of the profits.

On the other hand, I suppose what would concern a *labor* (Mincer) vs. an information-(Varian) or macro-(Mankiw) economist is that more than two-thirds of our economy is driven by consumer spending, spurred on by net job gains, concomitant with wages + credit-use growth.

And while we steadily export hourly jobs to China, the same can't be said that domestic jobs are being replaced fast enough by "new economy" markets that stimulate and provide for net new jobs (be it measured by headcount or aggregate wages), as orthodox economic theory prescribes: Think new Boeing Dreamliner as a pertinent business model, which invests in R&D locally, sources internationally for its composite inputs and garners 80,000+ net new high-wage *manufacturing* jobs, or think of Toyota's hybrid investments in Japan while sourcing lower-end car manufacturing to rest of world.

As Mankiw indicated, the economic and trade balance numbers aren't "fake"; rather international trade can be very nuanced and certain views of [bilateral] trade have very little concrete economic meaning. What is troubling for me is that for a while now, many think of new information-based markets as the economic panacea, asserting that as long as corporate profits grow, little else matter.

This faction also imply that a significant portion of corporate profits accrue to workers' [wages]. Others, like myself, assert that growing profits accrue to investors and the owners of capital like Apple's Jobs, but collectively, American workers haven't benefited much, which,
according to the Economic Policy Institute (below chart), seems to be disproportionately so.

Source: Economic Policy Institute, “When do workers get their share?” Economic Snapshot, May 27, 2004.
Data from the National Income and Product Accounts, Bureau of Economic Analysis, U.S. Dept. of Commerce.

And thus, unsurprisingly, most Americans have resorted to "house-of-credit-cards" financing that continues to encourage end-to-end economic exuberance, now greatly over-leveraged, to the point that currently the U.S. has a net negative 0.5-1% *dis-savings* rate.

One fundamental indicator of "dis" trend is the stagnant wage growth of the past 6+ years, and, according to the progressive Center for American Progress, the Bureau of Labor Statistics report that the biggest employment gains were:
"...largely concentrated in three industries: government employment, with 40,000 new jobs—all of them occurring at the state and local government level. In addition, health care and restaurants, two sectors that have shown remarkable job strength throughout the past few years, added 42,300 and 34,600 new jobs, respectively.

In comparison, the construction sector, which had provided a lot of labor market momentum before the residential housing boom came to an end in late 2005, added only 12,000 new jobs, almost all of which happened in nonresidential construction. Residential construction employment was essentially flat, reflecting the continued weakness in the housing sector..."

This comparatively weak job growth has also contributed to slowing wage growth:

"...Hourly wages for production, ...workers who make up about 80 percent of the workforce rose by 0.3 percent in June 2007. Hourly wages in June were 3.9 percent higher than a year earlier. This is down from a monthly growth rate of 0.4 percent in May and a year-over-year change of 4.0 percent in May.

This slower wage growth comes after inflation-adjusted hourly earnings already declined in March, April, and May. In fact, after accounting for inflation [~2.5-3% average], hourly and weekly earnings in May 2007, the last month for which data are available, were the lowest since September 2006. That is, because of weak job growth, workers do not have the bargaining power to keep wage growth at least in line with price changes.

Just because job growth is better than expected doesn’t mean that it is strong. It is certainly welcome news that the economy is seeing some unexpected employment gains, but these are happening in a labor market that has been struggling for years to find a foothold. Workers who are burdened by high prices and near-record amounts of household debt need faster job and wage growth, not lowered expectations."
Deficits in the end will matter when the ratio of wages-to-credit reach a critical mass and profit growth collapse as credit-driven expansion slow drastically,
unless wages rise and we pay down our debt by saving a larger portion of our income.

Which ironically means that, meanwhile, the Chinese with their 1.33 trillion dollar reserves and other Asian net savers who have chosen to buy fewer iPods and such, at least to-date, have been fulfilling our money needs via global credit markets, yet are just financing their own demand and having Americans ultimately own the IOUs in the end.

That is, unless wage growth re-align to be more proportional to our consumer spending rate, and that is doubtful at this point. We may now be at the cusp of such a slowdown, with housing and mortgage markets steadily deflating; only time will tell.

And like nobody definitively knows many decades later what exactly the tipping point was for the Great Depression, nobody can say now what that "breaking point" wage-to-credit ratio is. But smart folks like Warren Buffet to the economic arbiters @ NBER assert that at some point, net (not bilateral) trade balances indeed have to balance, e.g. be paid back within a bounded future time horizon.

And for more then a decade, the vaunted consumer economic workhorse has largely been using inferior-grade credit-subsidized monies to drive this spectacular market boom (and help to top DJIA's 14,000+ in a record time).

Many seasoned economists and market pros see few economic fundamentals to justify this torrid rise, other than US companies vested in rapidly-growing, savings-rich developing markets whose populations and incomes are booming thus demanding basic infrastructure and commodities, which do benefit US trade and engender spectacular returns for emerging market ETF-holders.

Still, it's important to understand that trade only account for a quarter of US economic activity/GDP, and as such, there's a real need here-and-now to reform American economic policy to be more balanced and to hone in on improving the economic health of its citizenry and government.

A concrete start would be something along lines of bread-and-butter Consumer Economics 101 kicking it off at elementary education onward, significantly more savings incentives and education, greatly expanding R&D credits and loans, to pay-as-you-go gov't spending.

But it seems Americans tend to thrive under duress, and until one exerts itself, many will probably continue to assume that Tulips=Profits.

Monday, July 16, 2007

FDR - Another Smith Tour De Force

Until Jean Edward Smith's biography of FDR came along (his other being the immaculate work on Chief Justice John Marshall), there was nothing interesting that I wanted to post about or read in a long time (last good presidential work I read was Doris Goodwin's Lincoln bio, A Team of Rivals). Then a week ago, I picked up a copy at my trusty Costco book section, after which there was nary a waking moment when I didn't find myself turning each page to see how the story would "unfold"; I just finished it. Another brilliant, insightful work, balanced introspective about the man, and the same time deftly crafts a story of the times that makes FDR so larger than life, not of decades ago, but someone who is immediate, intimate, and continues to impact contemporary events and times.