Use Pricing to Get the Traffic Moving in Manhattan!

Ken Livingstone argues in "Clear Up the Congestion-Pricing Gridlock" (New York Times , July 2, 2007) that New York City could learn from London. Pricing entry into the city would reduce congestion sufficiently to more than make up for the burden of the tax.

He tells us that four years ago, "London’s business district was undergoing rapid growth, but it was at capacity in terms of traffic. Efforts to channel more cars into the city center simply led to ever lower traffic speeds, which in turn led to business losses and a decrease in quality of life. Simultaneously, carbon emissions were mounting because of the inefficiency of engine use.

In 2003, London put in place a £5 (about $9) a day congestion charge for all cars that entered the center city (the charge is now £8). This led to an immediate drop of 70,000 cars a day in the affected zone. Traffic congestion fell by almost 20 percent. Emissions of the greenhouse gas carbon dioxide were cut by more than 15 percent.

The negative side effects predicted by opponents never materialized. The retail sector in the zone has seen increases in sales that have significantly exceeded the national average. London’s theater district, which largely falls within the zone, has been enjoying record audiences. People are still flocking to London — they’re simply doing so in more efficient and less polluting ways."

Attack of the worms

In the developing world simple things have enormous impact. Worms (the kind you get inside you) reduce productivitiy whether we are talking about manufacturing or learning in school. Nicholas D. Kristof writes in the International Herald Tribune that "Here in Congo, one study found that 82 percent of children have worms, and partly as a consequence 70 percent are anemic."

The whole editorial is well worth reading.

Bloomberg: Dollar Falls on Reduced Concern Housing Will Slow Global Growth by Bo Nielsen

Dollar Falls on Reduced Concern Housing Will Slow Global Growth
By Bo Nielsen

Aug. 25 (Bloomberg) -- The dollar fell the most against the euro since March on diminished concern that U.S. housing weakness will slow global growth.

The yen posted its biggest weekly decline versus the euro since 2003 as investors returned to carry trades in which they borrow in Japan to invest in higher-yielding assets elsewhere. Global stocks rose and volatility fell as traders increased bets the Federal Reserve will cut rates in September.

``Things are calming down sufficiently enough for the market to go back to the trades that dominated prior to the shake-out: buying other currencies against the yen and selling the dollar,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, with about $250 million in funds under management.

The dollar dropped 1.5 percent this week to $1.3675 per euro, for the biggest weekly decline since mid-March. The dollar rose 1.8 percent to 116.44 yen. The yen plummeted 3.4 percent to 159.26 per euro, for the biggest loss since September 2003.

The Fed Uses a Less Used Weapon in its Arsenol

Friday, the Federal Reserve cut the discount rate and the stock market soared. The Dow was up 233 points. Today (Monday) it appears that Asian stock markets are following suit. The market in Sydney is up 2.33%. Tokyo closed 3% higher and Hong Kong almost 6%.

The Fed reduce the rate it charges its member banks to borrow from it. Its more usual tool is open market operations: buying and selling government securities.

Shiller comments on the Housing Bubble

Is this the August Before anoter Black Monday Tuesday?

In August, 1987, the Economist magazine ran a cover that looked like the poster of a horror movie entitled "The Return of Inflation." The U.S. stock market started falling culminating in the crash of October 20th ("Black Monday".) From August to Black Monday the Dow Jones fell a thousand points (when a thousand points was a lot.) Five hundred of those points were lost on October 20th.

Are we on the same path?

The U.S. housing bubble has ended with a large amount of mortgage backed securities backed by subprime mortgages that are turning sour. Hedge funds and other investment funds are holding large amounts of these. As they try and sell these securities, they are finding there is no market. This global run from risk is causing treasury securities to rise in price and the world's central bankers rush in shoring up the liquidity of their banking systems.


Listen to Phil Resler, Chief Economist of Nomura Securities, discusses the current liquidity scare with the Wall Street Journal's Phil Izzo and David Wessel.

The S&P 500 may seem cheap at 17 times earnings, but it spent most of my life below 15x.