Moneymanagement’s Weblog

Save money by cutting down your electric bills

Posted in economics, Energy by moneymanagement on July 18, 2009

Ever gasped at the huge electric bills that seem to climb up constantly. Your electricity bill is a recurring expense which could bring a substantial saving in your monthly budgeting.

Make a good choice in lighting

Lighting contributes to nearly 30% of the consumption of electricity and if we work at improving the lighting in our homes we can achieve a fair bit of energy efficiency.

Florescent light consumes much lower electricity than the bulb.  The newer innovation is Compact fluorescent lamps (CFL) which looks like a white bulb. They are long lasting and about 5-6 times more energy efficient than the regular light bulbs. Thus, using them in place of bulbs can result in substantial energy savings.

According to Bureau of Energy Efficiency (BEE) a 15-watt CFL produces the same amount of light as a 60-watt bulb.
BEE also rates CFLs with stars to show their energy efficiency. A 5 star rates CFL will gives out the best light per watt of electricity consumed.

Although a single CFL costs more initially, over the life of the bulb you actually save money. Here’s a comparison on the energy consumption to make you sit up and think before you buy a bulb again.

CFL Incandescent or Bulbs
Energy Input (watts) 13 60
Light Output (lumens) 810 830
Useful life (hours) 10,000 1,500
Electricity Used (kilowatt hours) 130 600

To make the most of the natural light available in your home, you need to know how to use it.

There are several ways to maximise your natural light. You can hang mirrors opposite windows. Take down unnecessary window dressings and replace with filmy materials, such as voile and muslin, to diffuse light. Trim trees or bushes that overshadow windows.

Cooling the bills

Cooling accounts for 11% of home energy usage, an Energy Star-rated cooling system can help reduce electric costs by hundreds of rupees. Don’t constantly move the thermostat up or down throughout the day because this wastes energy and money.

Consider setting the thermostat as high as comfortable in the summer.

Make sure your central air conditioning unit outside your home stays clean and free of debris.

Use ceiling fans to assist in cooling.  In the summer, blades should rotate counter-clockwise when viewed from below.

Make sure furniture and draperies are not blocking cooling outlets. Blocked outlets restrict air circulation, overwork the cooling equipment and increase operating costs.

The refrigerator

The refrigerator alone accounts for 7% of an average home’s total energy usage. What’s more, refrigeration efficiencies have come so far in recent years that anyone with a unit more than five years old should consider investing in a new refrigerator.

Defrost food in your refrigerator, this helps cool the refrigerator, easing energy requirements, and it is better for the food than defrosting in room temperature.  Keep refrigerator full so that it is cooling less open space (water jugs make good fillers).

This article has been written by me for MoneyLife magazine


Why did the government change its mind about the bail out?

Posted in economics by moneymanagement on October 7, 2008

Incase you have been wondering about the yoyo stand of the Americian Governement …I found an excellent post on Dani Rodrik’s weblog

Here it is


At first, pundits and analysts were left wondering why 228 representatives chose to “Just Say Nay”. After the eventual approval of the “bailout” (or “rescue”?) package, many have pointed to the tax provisions added by the Senate, or to the renewed persuasion efforts from political leaders, as explanations for the turnaround. But a closer look at the data helps us understand why some of the initially unconvinced were more persuadable than others: extreme ideological positions and the scope of the financial sector in home districts were the key factors.

Much was made of the political pressures faced by different representatives. Those who were most sensitive to their constituents’ antagonistic sentiments towards the bill because of electoral concerns were indeed more likely to reject it. We found that a member facing a competitive race was 30% more likely to say “Nay” than her colleague with a “safe” seat. Also, a member who was stepping down was almost 50% more likely to vote for the bill than a colleague with a seat to defend. But the reelection incentives did not seem to matter in explaining the change of heart: a representative in a “safe” seat who voted against the bill initially was not more likely to switch his vote than his threatened colleague.

A more crucial factor was ideology. While Republicans were indeed more likely to reject the bill, what mattered the most was how extreme the ideological positionof each representative was. This turned out to be the single best predictor of the “Nay” vote, and particularly so for Republicans: an extremely conservative representative – say, an ideological kin of Sen. Tom Coburn (R-OK), the most conservative of all senators – was about 60% more likely to cast a “Nay” vote than a fellow GOP representative, otherwise identical, who just happened to be as centrist as Sen. Olympia Snowe (R-ME).

What is more, ideology was also very important in understanding which representatives had a change of heart. Among those who initially voted against the bill, the more ideologically extreme were significantly less likely to change their votes in the second go-around. Only the less extreme among the extremists proved within the reach of persuasion.

The other crucial factor was the role of the financial sector. Congresspersons representing districts where the financial sector is a more prominent employerwere far more likely to vote for the package in the first round and, if at first voting against it, also to eventually change their minds. This suggests that those constituents who were particularly vulnerable to the rejection of the bill, and to the market reaction after the first vote, were indeed able to make their concerns heard. On the other hand, we could find no evidence that economic conditions such as the prevalence of subprime loans or the unemployment rate influenced voting patterns, indicating how much the current crisis has expanded far beyond local concerns about toxic mortgages in housing markets.

(Incidentally, members of the Black Caucus also played a role. They were indeed more likely to say “Nay” in the first vote, and those who did vote “Nay” were about 30% more likely to reverse their vote in the second round than other representatives – we leave it to the political junkies out there to explain this change.)

In sum, a closer look at the data suggests that the voting patterns were fairly predictable after all – the stunning rejection and the subsequent approval of the bailout package were two sides of a familiar political coin.

A historic week in September

Posted in banking, economics by moneymanagement on September 24, 2008

Timeline of the week’s events in the face of the worst financial crisis since the Great Depression:


Sunday September 14, 2008

·    Frantic talks during the weekend fail as Paulson states that there will be no bailout for Lehman. The bank is dumped by potential suitors such as Barclays   and effectively allowed to go bankrupt.

·    Stocks expected to tumble Monday, threatening the start of the next leg of the bear market.

Monday September 15th

·    Lehman declares bankruptcy; serious risk of default on counterparty derivatives results in central banks pumping in $100 billion into the money markets, which follows the announcement of $70 billion on Sunday as they attempt to contain the impact of Lehman’s bankruptcy.

·    Bank of America  takeover of Merrill Lynch  for $50 billion, the world’s third-largest investment bank, to prevent a Lehman-style bankruptcy.

·    HBOS  Britain’s biggest mortgage bank, crashes 30% after being targeted by short-selling hedge funds that sought a similar fate for the bank as Northern Rock. I was probably one of the first to break the news of a hedge fund assault on the bank, as a similar attack of March this year was still fresh in my mind, and therefore had a head start on the scrambling mainstream media that only started to connect the pieces together some 24 hours later.

·    The world’s largest insurer, AIG , seeks bailout cash, with speculation that the insurer seeks a loan of between $30 billion and $75 billions from the Fed.

·    Stock markets crash; Dow Jones ends down 504 points.

Tuesday September 16

·    Money markets freeze with the interbank rate (LIBOR) jumping to 6.75% due to the extreme risk of counterparty default.

·    No U.S. interest rate cut, despite calls and speculation that the Fed could cut by as much as 50 basis points.

·    AIG, the world’s biggest insurer, is bailed by the Fed for an initial $85 billion for an 80% stake in the insurer.

·    Stocks bounce on AIG bailout; Dow Jones rallies 142 points.

Wednesday September 17

·    HBOS is taken over by Lloyds TSB   for £12 billion amidst a stock price crash of 66% in three days. The shotgun wedding was to prevent another Northern Rock-style collapse and nationalization, precisely the possibility warned of on Monday. My analysis called for restrictions on short-selling to give distressed financial institutions room to breathe.

·    Gold as a safe haven soars by an historic one-day move of $85 following the news of the AIG nationalization and Lehman’s continuing impact on counterparties, with no end in sight to the crisis.

·    Russians shut down their exchanges, fearful of a similar collapse to that which followed the LTCM crisis a decade earlier.

·    Stock market slide resumes as the market lines up the next financial dominos to fall; investors fearful of capital losses dump financials, and the Dow Jones ends down 450 points.

Thursday September 18

·    Lloyds TSB takeover of HBOS confirmed for £12 billion ($21 billion) or £2.32 per share in an all-stock deal.

·    Central banks around the world flood the markets with over $250 billion more cash as the interbank market’s freeze sees the money market rate surge to above 6.75%.

·    Morgan Stanley the big investment bank to be targeted, with expectations of a merger with Wachovia 

·    U.K. FSA announces a ban on short-selling of financial stocks. I suggested this as a necessary move some 24 hours earlier. This and the central bank extra liquidity is seen as extremely bullish on a short-term basis at least, as short covering will lead to a strong rally as well as speculators jumping on the band wagon.

·    U.S. stocks soar in late trading following speculation of further restrictions on short-selling and a huge bailout. The Dow Jones ends up 410 points.

Friday September 19th

·    U.S. Treasury announces the mother of all bailouts – Stocks soar across the board on the intention to allocate an initial $700 billion and probably countless trillions more to buy up much of the financial sectors’ bad illiquid debt. The U.K. FTSE rockets higher by 8%.

·    The SEC also expands short-selling restrictions to 799 financial stocks, which contributes to the short-covering rally that leaves the Dow Jones up 369 points.

·    Washington expands the “mother of all bailouts” by guaranteeing money market funds that invest in high-risk instruments like commercial paper

Is your bank safe?

The Fed’s and other central banks’ action does not mean that all the banks have now been saved, as last week’s example of the world’s fourth-largest investment bank, Lehman, going bankrupt illustrates that literally many hundreds if not a thousand plus banks will go bust during the course of the worsening credit crisis, with all of the consequences for depositors. The following report by EWI presents a list of the 100 safest banks.

After all the money put in by the US government, the bailout plan is under scrutiny by FBI. The markets are still on a free fall and democracy as we know it had died. A new form of controlled democracy is on the rise.

Economics of Terrorism

Posted in economics by moneymanagement on September 13, 2008

The terrorist attacks on New Delhi in crowed market areas on a saturaday evening have chilled most Indian to the soul….we are all wondering – are our loved ones safe? Will we be next?

Here are some thoughts on how the econmics of terorism works


Terrorism specifically affects…

• Tourism

• Stock markets

• Trade:bilateral trade 4% 

• Insurancec costs rise, loss to insurers

• Oil markets: reduce Supply (Iraq); reduce Demand (London)

• Foreign direct investment

• Portfolio investment (size and composition)

• Saving and consumption 

• Investment 

• Utility: personal impact costs (life and property;disruption to production; fear and grief; injury; response costs, e.g. medical; etc.)



Terrorism beliefs

Terrorists are not desperately poor uneducated people from the Middle East. A surprisingly large share of them have college and even graduate degrees. Increasingly, they seem to be from Britain, like the shoe bomber Richard C. Reid and most of the suspects in the London Underground bombings and the liquid explosives plot.

This has left the public wondering, Why are some educated people from Western countries so prone to fanaticism? Before trying to answer that question, though, some economists argue that we need to think about what makes a successful terrorist and they warn against extrapolating from the terrorists we catch. It is a problem economists typically refer to as “selection bias.”

Most terrorists really are committed true believers, willing to die for their cause. Within the Muslim world, the researcher found a positive relationship between level of education and support for terrorism — the higher your level of education, the more likely you are to support terrorism against Western (including Israeli) targets. Suicide bombers also tended to be better educated than the average population. 


The economic impact of terrorism

The “impact” part of the attack is trivial from an economist’s point of view (sad, to be sure, and it involves such dicey moral and technical issues as how to value the loss of lives, but nonetheless trivial). 

To understand terrorism we need to analyze its elements:

There are four elements in this definition:

(a)   the inducement of intimidation or fear;

(b)  the use, or threat of use, of extra-normal violence;

(c)   the premeditated character of such violence; and

(d)   the political objective.

 The last element – the political objective – is of particular interest because it requires that terrorists must reveal their identity and that they must communicate their demands.


Bombings are by far the preferred method of terror. The reason, once more, has to do with the cost of the action. Hostage taking is logistically more complex and operationally more risky than is bombing. Bombing is not only cheap for the terrorist but more costly to detect for government (far fewer communications available for interception for instance, making it harder to track down potential bombers). Once more, as theory predicts, a lower cost will attract more activity.

Terrorism is not a “crime of passion.” Contrary to public opinion, terrorists do not take lives indiscriminately. Instead, terrorists are rational: they take lives

deliberately, or else they use the threat of taking lives as a tool of negotiation to achieve their objectives at least-cost

Ike hits Texas’ Economy

Posted in economics, interesting by moneymanagement on September 13, 2008


North Texas may see a spike in the price of gasoline and supply shortages next week, depending on how hard Hurricane Ike hits Texas Gulf Coast refineries.

Ike has also halted imports and exports at the Port of Houston, air travel to Gulf Coast cities and rail service out of the region. – all critical to the Texas economy.

At an evening news conference, state officials estimated that the economic impact would reach $81 billion – and could creep up to $100 billion over the next 24 hours.

As the storm approached this week, at least nine Houston-area refineries evacuated workers and shut down. The nine, including refineries owned by Irving-based Exxon Mobil, BP and Shell, are responsible for refining 2.3 million barrels of oil per day.Flooding is a major concern with Ike as most of the refineries are on the water. Ike is expected to have a very large storm surge because of its size.

Even if flooding is not severe, it will take time to move employees back into the area.

Most important, experts said, the extent of damage to the power grid could determine how long refineries stay out of commission.



Meanwhile, other aspects of Texas infrastructure are facing shutdowns and slowdowns. The Port of Houston plans to shut down its cargo operations during the weekend, and air and rail travel out of the area are on hold.

Wal-Mart Stores Inc., the largest U.S. retailer, and Home Depot Inc., the second-largest, have major import facilities in Baytown.

Wal-Mart’s emergency management team senior operations manager, Bryan Koon, said Ike has been on the company’s radar for at least two weeks. Wal-Mart has diverted shipments to Los Angeles and Savannah, Ga., and some boats are holding at sea until the storm passes. This week, containers in port were moved to safer ground, he said.




Air travel 

Dallas-based Southwest Airlines Co., American Airlines and other airlines canceled flights to Houston and Corpus Christi.

Fort Worth-based Burlington Northern Santa Fe Railroad closed its Houston and Galveston operations Thursday, and it removed equipment from the areas expected to be hit by Ike.

Union Pacific Railroad removed 4,000 rail cars and 200 locomotives from areas expected to be affected by the hurricane.


Some Comments from

Many citizens evacuated, some freely, some forced to leave the area. It cost $600 to $1,000 dollars to evacuate, lodged a couple days and return home. It is hard for some to imagine many of these people will be returning home not only to destruction, insurance issues and higher premiums but loss jobs and incomes as well. That adds to unemployment, benefit needs and financial problems like foreclosures and credit issues. They and my fellow residents are in my prayers. We have all struggled with destructive storms for the past couple months.

  Another one says
I’ve been working in the Houston refinery and chemical complex for most of my working life, and my dad did the same before me. If we get a 15+ foot storm surge up the Houston Ship Channel, it’s going to flood refineries, and that’s going to be an economic disaster. Those refineries are miles and miles of pipes, thousands of valves, tens of thousands of instruments and control system devices, and if that stuff goes under water, those places are out of business for months. Knock 25% of America’s refining capacity down for a month or so, and you’re going to be paying $7.00 a gallon for gas – if you can find it at all.