How FRASER Enhances Economic Research and Analysis

Most of us know about FRED, the Federal Reserve Economic Data hosted by the Federal Reserve of St. Louis. It provides data and graphs at your fingertips. You can quickly grab a graph for a report or for a online argument. Of course, you can learn from it too. I’ve talked in the past about the Excel and Stata plugins.

But you may not know about the FRED FRASER. From their about page, “FRASER is a digital library of U.S. economic, financial, and banking history—particularly the history of the Federal Reserve System”. It’s a treasure trove of documents. Just as with any library, you’re not meant to read it all. But you can read some of it.

I can’t tell you how many times I’ve read a news story and lamented the lack of citations –  linked or unlinked.  Some journalists seem to do a google search or reddit dive and then summarize their journey. That’s sometimes helpful, but it often provides only surface level content and includes errors – much like AI. The better journalists at least talk to an expert. That is better, but authorities often repeat 2nd hand false claims too. Or, because no one has read the source material, they couch their language in unfalsifiable imprecision that merely implies a false claim.

A topical example would be the oft repeated blanket Trump-tariffs. That part is not up for dispute. Trump has been very clear about his desire for more and broader tariffs. Rather, economic news often refers back to the Smoot-Hawley tariffs of 1930 as an example of tariffs running amuck. While it is true that the 1930 tariffs applied to many items, they weren’t exactly a historical version of what Trump is currently proposing (though those details tend to change).

How do I know? Well, I looked. If you visit FRASER and search for “Smoot-Hawley”, then the tariff of 1930 is the first search result. It’s a congressional document, so it’s not an exciting read. But, you can see with your own eyes the diversity of duties that were placed on various imported goods. Since we often use the example of imported steel and since the foreign acquisition of US Steel was denied, let’s look at metals on page 20 of the 1930 act. But before we do, notice that we can link to particular pages of legislation and reports – nice! Reading the Smoot-Hawley Tariff Act’s original language, we can see the diverse duties on various metals. Here are a few:

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Keeping Receipts

Online shopping is convenient and even the norm for many items. Going to the store sounds like a time-consuming labor or an exceptional outing. My family, for example, lives in a suburban location that doesn’t have well-priced grocery home delivery. Shipping only works for some non-perishables. So, for many items we order online and do ‘drive-up pick-up’. We don’t even need to go into the store for many items. And reordering the same items repeatedly is a breeze.

We are also accustomed to the ability to return things. If your blender breaks on your first smoothie, then no worries – you can return it. If the chocolate cookies don’t taste like chocolate? Return it – satisfaction guaranteed. You can buy three pairs of shoes in different sizes and then keep the ones you want at the original sale price. Return the others.

For me, besides the time saved and convenience, a major factor in my decision to make purchases online is the documentation. I don’t need to save the receipt in a shoe box, Ziploc, or file drawer – the online retailer keeps an archive of all my purchases. Often this includes the date, amount, and shipping details including delivery date. There’s a super convenient digital paper trail.

If I need to contact a seller in order to exercise a warranty, then I have their contact information. I don’t need to retain the product packaging or investigate the brand at a future inopportune time. For example, I recently bought a Little Tykes water table for my kids. As I was assembling it on Christmas Eve I realized that I was missing a small part. I was able to work around it. But I was also able to immediately contact the manufacturer with a copy of my invoice. I emailed the date of purchase, the product model number, and the instruction manual had conveniently included part numbers. They were able to ship me the parts after a single email. Online shopping, and the resulting trail of evidence, makes the process much more practical than keeping paper records in a likely unorganized fashion.

There are other benefits to the paper trail. Back before widespread online shopping, retailers would often offer rebates as a sales strategy. In the year 2004, I bought a computer hard drive for $120 before a $40 mail-in rebate. The retailer (or manufacturer, I can’t remember) was hoping that people saw the post-rebate price and then failed to redeem it. And that often happened.  You needed to fill out a rebate form on an index card, cut the UPC bar code of the product packaging, and then mail them with your receipt to the company rebate department in a stamped envelope. If you dragged your feet, then you’d probably lose an important piece of the crucial combination and lose out on your $40 rebate. If the items were lost in the mail, then you were shucks-out-of-luck. Now, rebates have gone the way of the dodo since receipts are automatically retained and retrievable.

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What is vision insurance good for?

The answer sure seems to be “nothing”. I just went for an eye exam for the first time since Covid and realized that I’ve been wasting my money by paying for vision insurance.

The problem isn’t the eye exam- that went fine, and was covered fine with a $35 copay. But it was covered by my health insurance, not my vision insurance. So what is the vision insurance good for, if it doesn’t cover eye exams?

The answer is supposed to be “glasses”. It is supposed to cover frames up to $150 with a $0 copay, and basic lenses with a $25 copay, from in-network providers. That sounds ok- but there are two problems.

One is that almost none of the in-network providers (like Glasses dot com or Target optical) appear to actually offer lenses where the $25 copay applies; instead the minimum lens price is at least $85.

The second problem is that the premiums are high enough that even if I use them to get $25 glasses (which I eventually found I could through LensCrafters), it wouldn’t be worth it. They don’t sound high at first, which is how I got suckered into signing up for this scam in the first place. It’s just $5/month for single coverage; that sounds like nothing, especially for an employer benefit. It is a rounding error compared to health insurance premiums, and it comes out of pre-tax money. A small waste, but still a waste. Why?

Glasses are just so cheap if you can avoid the monopoly retailers and get them somewhere like Zenni. Zenni will sell you perfectly functional (and IMHO good-looking) prescription eyeglasses for $16. Their frames start at $6.95, lenses at $3.95, and shipping at $4.95. Catch a sale, or order enough to get free shipping, and you could actually get glasses for well under $16.

Or you can do what I did- order glasses from Zenni with premium options that pushed them up to $50- and find it is still cheaper than using the insurance I already paid for to get the cheapest pair available at most of their in-network retailers. The cheapest possible deal with insurance would be to pay $60/year in premiums, get glasses as often as the insurance allows so as not to waste the benefit (every 12 months- much more often than I find necessary), find frames listed under $150 to get for $0 copay, and find an in-network provider that actually offers lenses for the $25 copay. In this best-case scenario you are still paying $85 per pair of glasses. Given that the $60 in premiums came from pre-tax money, perhaps you can argue that it was really more like $40 in real money; but you can also buy glasses from a competitive retailer like Zenni using pre-tax money from an HSA or FSA.

So as far as I can tell, vision insurance really is useless. I certainly decided not to use it for my latest pair of glasses even though I had already paid years of premiums; Zenni was still much cheaper for a comparable product. I’m dropping vision insurance now that open enrollment is here. My take-home pay will be going up, and EyeMed will stop getting my money for nothing.

Is there anyone vision insurance makes sense for? I think it could makes sense for someone who really wants brand name glasses, or for someone who really wants to get their glasses in-person at the optometrist, and wants new glasses every year. For everyone else, run the numbers for your own plan, but I suspect you would also be better off just buying glasses directly.

Disclaimer: This post is not sponsored & doesn’t use affiliate links; Zenni is the best option I currently know of, but I’d be happy to hear of other competitive retailers you think are better, or an argument for when vision insurance is actually useful.

Robinhood’s Casino Comps

I just got the new Robinhood Gold credit card after 4 months on their waitlist. It offers 3% cash back on everything- except travel, which is an even better 5%. This seems to be a much better deal than the typical credit card (which offers ~0-1% back in cash or equivalents), and even better than the previous best alternative I know of (the Citi Double Cash, which pays 2% back). So, is there a catch?

As far as I can tell, there are two, but one is minor and the other is avoidable.

The minor catch is that while they advertise the Gold Card as having no annual fee, you need to be a Robinhood Gold member to get it. Robinhood Gold has a $50/year fee, though it comes with other benefits, and getting the extra 1%+ back on the credit card will itself pay for the fee assuming you spend at least $5k/yr on the card.

The potentially major catch, and the reason I assume Robinhood is offering such a good deal, is that they want to entice you to open a brokerage account and to make bad decisions with that account that make them money. Much like a casino that offers you free drinks and cheap hotel rooms in the hope that you will choose to gamble and end up losing way more than the cost of the “complimentary” things they gave you. This is a major risk, but if you know what to avoid you can still come out ahead. The last time my friends dragged me to a casino I got handed plenty of free drinks despite the fact that I never gambled. Similarly, Robinhood might nudge its users to lose money in ways large (options) and small (overtrading with market orders).

But while Robinhood’s interface might suggest these bad choices, it absolutely does not require them. You can simply choose not to enable options trading, not to over-trade (and to turn off price alerts that nudge you to do so), and to use limit orders instead of the default market orders when buying stocks. In fact, you could avoid using Robinhood to buy stocks altogether, and simply use their brokerage account as a way to earn 5% interest while using it to pay off your credit card (though on the other hand, Robinhood could benefit people if it nudges them to do stock investing at all instead of keeping everything in a checking account).

The fact that Robinhood Gold brokerage accounts pay 5% interest on uninvested cash is its other big advantage. You can find savings accounts elsewhere paying 5% or a bit more, but many won’t maintain that rate, and they have transaction limits. Robinhood also pays a 1% bonus on cash transferred in if you keep it there.

Someone moving to the Robinhood ecosystem from a bad setup (paying with cash, or debit cards, or credit cards with no rewards that are paid off from a checking account that earns 0%) could in theory increase their real spending power by 8%+. Even someone in a more common situation (has a 1% rewards card but most of their spending is on things like mortgages that aren’t credit-card-eligible, pays the credit card from a 0% interest checking account but sweeps excess cash to a high-yield savings account paying 4%) could still increase their total spending power 1-3%. Not huge, but a big deal for something that can be set up for less than a days work.

This is now the best single-account setup I know of- assuming you can stay out of their casino. Churning through different accounts can get you a better return, but it is also a lot more work and has its own risks. If you want to up your returns some without the fees or risk of the Robinhood ecosystem, then something like the Citi Double Cash paid from a high-yield (4%+) savings account is probably the way to go.

Disclaimer: I might be wrong about this but if so I am honestly wrong; this post is not sponsored and I’m not even using referral links when I easily could. Still, do your own research and let me know if I’ve missed anything

Update: Robinhood CEO Vlad Tenev did an interview on Invest Like the Best this week where, reading between the lines, he confirms both the positive and negative things I say here. They make most of their money overall on options and active traders; 3% cash back exceeds the interchange fees they get from merchants, but they expect the card to be profitable because some users will carry a balance (and pay interest) and because it will push people to sign up for Gold (so pay fees and perhaps trade more). He notes that there is another card that offers 3% cash back, but it is only available to those with at least $2 million managed by Fidelity.

Publish or Perish: A Hilarious Card Game Based on Academia

I had the opportunity to play an advanced copy of “Publish or Perish,” a new card game that satirizes the world of academia. Created by Max Bai, this game offers a funny take on the often cutthroat world of academic publishing.

Official website for the game: here

My group of eight friends divided into teams to accommodate the game’s six-player limit, which I’d recommend not exceeding. From the moment we started reading the instructions aloud, we were laughing.

The gameplay is engaging. One unexpectedly hilarious rule involves clapping for each other’s achievements. The game’s core revolves around publishing manuscripts, accumulating citations, and navigating the waters of peer review and academic politics.

I was impressed by the calibration of the trivia questions. They struck a great balance – challenging enough that we often couldn’t answer them, yet not so obscure that they felt unreasonable. This aspect added an educational twist to the fun, sparking interesting discussions.

The humor in “Publish or Perish” is spot-on, especially in the details. The manuscript cards had us in stitches, with journal names like “Chronicle of Higher Walls” (a clever play on the real “Chronicle of Higher Education”) and absurd paper titles.

My favorite paper title was “The Great Avocado Toast Crisis: Socioeconomic Impacts of Millennial Breakfast Choices”
Esteemed friend and economist Vincent Geloso liked “The Economics of Building a Death Star”

The two other full-time academics in our group were so impressed that they pre-ordered copies on the spot. While the game is probably most enjoyable with at least one academic in the group, our mixed party – including a government statistician and several non-academics – found it entertaining.  One of my non-academic friends summed it up as follows: “This game brought several people from different backgrounds and areas of expertise together for a thoroughly enjoyable evening.”

“Publish or Perish” manages to be both easy to learn and refreshingly original. I predict it will carve out its own niche with its unique theme and mechanics. Players can engage in academic shenanigans like plagiarism, P-value hacking, and even sabotaging opponents’ work – all in good fun.

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You, Parent, Should have a Robot Vacuum

Do you have a robot vacuum? The first model was introduced in 2002 for $199. I don’t know how good that first model was, but I remember seeing plenty of ads for them by 2010 or so. My family was the cost-cutting kind of family that didn’t buy such things. I wondered how well they actually performed ‘in real life’. Given that they were on the shelves for $400-$1,200 dollars, I had the impression that there was a lot of quality difference among them. I didn’t need one, given that I rented or had a small floor area to clean, and I sure didn’t want to spend money on one that didn’t actually clean the floors. I lacked domain-specific knowledge. So I didn’t bother with them.

Fast forward to 2024: I’ve got four kids, a larger floor area, and less time. My wife and I agreed early in our marriage that we would be a ‘no shoes in the house’ kind of family.  That said, we have different views when it comes to floor cleanliness. Mine is: if the floors are dirty, then let’s wait until the source of crumbs is gone, and then clean them when they will remain clean. In practice, this means sweeping or vacuuming after the kids go to bed, and then steam mopping (we have tile) after parties (not before). My wife, in contrast, feels the crumbs on her feet now and wants it to stop ASAP. Not to mention that it makes her stressed about non-floor clutter or chaos too.

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Borrowing, Beef, and Break-even

Interest rates communicate the value of resources over time. For example, if you take out a loan, then the interest rate tells you how much you must to pay in order to keep that money over the life of the loan. The interest rate also reflects how much the lender will be compensated in exchange for parting with their funds. On the consumer side, the interest rate reflects the price that the borrower is willing to pay in order to avoid delaying a purchase.

When a business borrows, the interest rate reflects the minimal amount of value that they would need to create in order to make an accounting profit. For example, if a business borrows $100 for one year at an interest rate of 5%, then they need to earn $105 by the time that they repay the loan in order to break even with zero profit. The business would need to earn more than 5% in order to earn a profit on their borrowing and investment venture.

The longer the business takes to repay their loan, the more interest that accrues. And, the higher the interest rate, the more they need to earn in order to repay their loan.

This logic applies to all production because all production takes time. If production takes very little time, then the impact of the interest cost is miniscule. But, if production takes longer, then interest rates become increasingly relevant. These kinds of products include trees, cheese, wine, livestock, etc. Anything that ages, ferments, or has a lengthy production process will be more sensitive to the cost of borrowing.

How?

The growth pattern for most (all?) goods looks similar. Below-left is a growth chart for dairy cows . Notice that calves grow quickly at first, and their growth slows over time. For the sake of argument, let’s say that the change in value of a cow mimics the change in weight (Yes, I know that dairy and beef cows are different, but the principle is the same).  Below-right is the monthly percent change. Even at an age of 25 months a cow is still growing in value at 2.4% per month or 33% per year.

Of course, there is a risk that some cows don’t survive to slaughter, lowering the expected growth rate. Since most cattle are slaughtered between 18 and 24 months of age, their growth rate at the time of slaughter is 4.4%-2.7% per month. As the interest rate at which farmers borrow rises, the optimal age at slaughter falls. Otherwise, the spread between the growth rate and the interest rate could go negative. Even so, what an investment! If you can borrow at, say, 8% per year, then you’ll make money hand-over-fist on the spread.

Except… Cows cost money to raise, and most of that cost is feed. According to the production indicators and estimated returns published by the USDA, the cost of feed in February of 2023 was $158.11 per hundred pounds of beef. The selling price of beef was $161.07. That leaves $2.96 or a profit of 1.87% earned over the course of 1.5-1.75 years. That investment is starting to look a lot less good, especially since it doesn’t include the cost of maintaining facilities, insurance, etc. It’s no wonder that farmers and ranchers are serious about their subsidies. Clearly, with such tight margins, farmers and ranchers are going to look good and hard at the interest rates that they pay on their debt. And, they do have debt.

However, the recent increase in beef prices is not caused by higher interest rates.

That 1.87% profit margin is at prices and costs from February 2023. Since 2020, the price of cattle feed ingredients (grain, bean, and oil) peaked in the summer of 2022 and are still substantially more expensive than pre-Covid (see below). That means that cows getting slaughtered right now were raised on more expensive feed. This February 2024, the cost of feed per 100lb. of cattle was $191.80. But the cattle selling price was only $180.75. That’s a $11.05 loss for cattle raising. Wholesale prices of cattle might be up recently, but the cost of feed is up by more. It’s not the cattle farmers who are benefiting from the high beef prices. In fact, they’re getting squeezed hard.

There is good news. The cost of feed ingredients has been falling recently, which means that beef farmers should begin to see some relief if the recent trend continues. For Consumers, the price of beef is already down from its 2023 peak.

Hazards of the Internet of Things 1. Hacking of Devices (Baby Monitors, Freezers, Hospital Ventilators) in Homes and Institutions

For my birthday this year, someone gave me a “smart” plug-in power socket. You plug it into the wall, and then can plug in something, say a lamp, into the smart socket, which you can then control via the internet. Yay, I am now a part of the Internet of Things (IoT). What could possibly go wrong?

However, my Spidey-sense started to tingle, and I chose to give this device away.  At that point, I was thinking mainly of the potential for such devices to get hacked and then recruited to be part of a vast bot-net which can then (under the control of bad actors) conduct massive attacks on crucial internet components. For instance,

Mirai [way back in 2016] infected IoT devices from routers to video cameras and video recorders by successfully attempting to log in using a table of 61 common hard-coded default usernames and passwords.

The malware created a vast botnet. It “enslaved” a string of 400,000 connected devices. In September 2016, Mirai-infected devices (who became “zombies”) were used to launch the world’s first 1Tbps Distributed Denial-of-Service (DDoS) attack on servers at the heart of internet services.  It took down parts of Amazon Web Services and its clients, including GitHub, Netflix, Twitter, and Airbnb.

But it turns out the hazards with smart devices are widespread indeed. IoT devices are so useful for bad guys that that they are attacked more than either mobile devices or computers. One layer of hazard is the hacking of specific, poorly-secured devices in a home or institution, with subsequent control of devices and infiltration of broader computing systems. This will be the focus of today’s blog post. Another layer of hazard is the use to which masses of (sometimes private and personal) data snooped from “unhacked” smart devices are put by large corporations and state actors; that will be considered in a part 2 post.

Here are results from one study from nearly three years ago:

https://www.thalesgroup.com/en/markets/digital-identity-and-security/iot/magazine/internet-threats

A study published in July 2020 analyzed over 5 million IoT, IoMT (Internet of Medical Things), and unmanaged connected devices in healthcare, retail, manufacturing, and life sciences. It reveals an astonishing number of vulnerabilities and risks across a stunningly diverse set of connected objects….

The report brings to light disturbing facts and trends:

  • Up to 15% of devices were unknown or unauthorized.
  • 5 to 19% were using unsupported legacy operating systems.
  • 49% of IT teams were guessing or had tinkered with their existing IT solutions to get visibility.
  • 51% of them were unaware of what types of smart objects were active in their network.
  • 75% of deployments had VLAN violations
  • 86% of healthcare deployments included more than ten FDA-recalled devices.
  • 95% of healthcare networks integrated Amazon Alexa and Echo devices alongside hospital surveillance equipment.

…Ransomware gangs specifically target healthcare more than any other domain in the United States. It’s now, by far, the #1 healthcare breach root cause in the country. …The mix of old legacy systems and connected devices like patient monitors, ventilators, infusion pumps, lights, and thermostats with very poor security features are sometimes especially prone to attacks.

So, these criminals understand that stopping critical applications and holding patient data can put lives at risk and that these organizations are more likely to pay a ransom.

I know people in organizations which have been brought to their knees by ransomware attacks. And I have read of the dilemma of the guy who was on vacation in the Caribbean or whatever, and got a text from a hacker instructing him to deposit several hundred dollars in a Bitcoin account, or else his “smart” refrigerator/freezer would be turned off and he would come home to a spoiled, moldy mess.

What brought all this IoT stuff to my attention this week was a talk I ran across from retired MIT researcher Timothy Wallace, titled “Effects, Side Effects and Risks of the Internet of Things”, presented at the 2023 American Scientific Affiliation meeting. The slides for his talk are here. I will paste in a few snipped excerpts from his talk, that are fairly self-explanatory:

(My comment: 10 billion is a really, really big number…)

(My comment: this type of catastrophic compromise of computer systems being enabled by hacking some piddling little IoT device that happens to be in the home or institution local network is not uncommon. Which is why I am reluctant to put IoT devices, especially from no-name foreign manufacturers, on my home wireless network).

Many of these vulnerabilities could in theory be addressed by better practices like always resetting factory passwords on your smart devices, but it is easy for forget to do that.

And just to end on a light note (this cartoon also lifted from Wallace’s slides):

Supply & Demand, With gifs

I’ve discussed the ways to teach supply and demand in the past. Regardless, almost all principles of economics classes require a book. But even digital books are often just intangible versions of the hard copy. Supply and demand are illustrated as static pictures, using arrows and labels to do the leg-work of introducing exogenous changes. There’s often a text block with further explanation, but it lacks the kind of multi-sensory explanation that one gets while in a class.

In a class, the instructor can gesticulate and vary their speech explain the model, all while drawing a graph. That’s fundamentally different from reading a book. Studying a book requires the student to repeatedly glance between the words and the graph and to identify the appropriate part of the graph that is relevant to the explanation. For new or confused students, connected the words to one of many parts of a graph is the point of failure.

This is part of why the Marginal Revolution University videos do well. They’re well produced, with context and audio-overlaid video of graphs. It’s pretty close to the in-person experience sans the ability to ask questions, but includes the additional ability to rewind, repeat, adjust the speed, display captions, and share.

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