Q: Regarding the $600 trillion derivatives market, can you tell us what the peak of that market was? I've heard $1.14 quadrillion and $1.2 quadrillion, but the only figures I could find, from the BIS showed a something like $672 trillion in June of 2008, the farthest back I could find, and a drop of $89.9 trillion since then. What was the peak "value," post peak trough, and latest "value"?

Submitted by Jim Young from Bloomington, CA

A: I dont have that info at my finger tips, part of the question has to do with the notional value, which is complicated. There are no reliable estimates in part because derivatives have been largely unregulated to date and the industry is fighting to keep it that was for as long as possible, pushing for a new delay on implementing the Dodd Frank legislation.

Answered 05/31/11 12:48:29 by Kevin Hall and Tony Pugh

Q: Thanks for the interesting forum. Real interest rates have been very low in recent years, even making quite the news splash a couple years ago for declining below zero. Are you aware of any high-quality analyses by economists/financial economists as to what prevailing economic conditions or motivations lead investors to accept such a low real return on lending?

Submitted by maryjo from columbus

A: i think the simplest answer is the low real rate of return is what investors are taking in exchange for a safe haven. those who want to take more risk, in the bond market, have taken German, Canadian and Brazilian debt. This has been PIMCO's play, but we are, as you noted, in an unprecedented period of low rates designed to keep the economy on life support and not get sicker.

Answered 05/31/11 12:47:17 by Kevin Hall and Tony Pugh

Q: why don't all govt's at the same time reset debt at 0 and start all this over again? Stop the suffering around the world and make it a better place for all.

Submitted by clay from Portland,or

A: This would violate contracts, it's why the governemnt didnt nationalize mortgages, which would have been a better solution in my mind to deal with the housing crisis.

Answered 05/31/11 12:46:00 by Kevin Hall and Tony Pugh

Q: When speculators sell oil contracts at the closing date, who buys them? There always seems to be saviors for the speculators. The saviors are at fault for high prices. If there were no saviors the speculators would be struck with a shitload of oil or would they?

Submitted by Jon Carlson from Chicago, IL

A: other speculators, people are betting on the price going up or going down and together they each assume they are correct, both can't be

Answered 05/31/11 12:45:23 by Kevin Hall and Tony Pugh

Q: I read "More Woes for Medicare & for Social Security" this weekend. Great article. Can we really be sure the government has repaid the borrowed monies from the SSA since 1979? How much would we save if illegals, regardless of their county of origin, were no longer given "free money, food stamps & health coverage"?

Submitted by Addie from Apache Junction, AZ

A: There are IOUs for the borrowed money, this is the difference between debt held by the public, in the $9 trillion range and gross federal debt that is now $14.3 trillion... the gap is what government owes itself. As for illegals they are a small, small part of the problem ... it's nice political rhetoric but they are a wash according a growing body of economic research, they add some, take some from the broader economy

Answered 05/31/11 12:44:47 by Kevin Hall and Tony Pugh

Q: As an expatriate who has lived abroad for 5 years now without returning to the States, I wonder WHY the cuts that are being suggested affect the poorer people while two wars that were supposed to be OVER are still being waged, why the Pentagon gets all the monies it does (how many new toys do the Generals need????) and WHY the Bankers, the Wall Street Brokers, health insurance company CEOs and the rich are still getting away with large bonuses. Why have companies like GE not paid a cent of taxes this year and WHY politicians who have been proven to be tax-evaders (somebody like Mr. Geithner or the New York Senator must have the income to employ good accountants, gosh I never would forget I had properties in areas or that I owed the government $75,000, get away with it when a regular person would end-up in jail? While the middle class is falling into poverty, homelessness and crime are up, the housing crises far from over is there any question or hope that with that type of national debt it is possible to maintain a democracy - it just boggles the mind how many items need addressing. Where is the investment in infrastructure that was promised, where are the jobs in renewable clean energy development, why are we wasting money on building a ridiculous wall on the Mexican border - I have more questions than you probably have answers. A very confused American living abroad on an island in the middle of nowhere that is peaceful and objects to the MONSANTO assault on Europe.

Submitted by Inge Perreault from Lagoa, Azores

A: Interesting points, trying to stay out of the political debate and focus on the economics, but will post this for all to see. Ate logo

Answered 05/31/11 12:43:10 by Kevin Hall and Tony Pugh

Q: what are the factors which used to distinguish factor of production

Submitted by rafaelrasmo from tanzania

A: check the textbooks

Answered 05/31/11 12:42:16 by Kevin Hall and Tony Pugh

Q: When will you investigate the "Short selling" re airlines at time of 9-11?

Submitted by sharon from Camp Sherman Oregon

A: Interesting question, the data from that period would not be anywhere near as comprehensive as it is today. The question also is are you talking about someone in the equity markets i.e. stocks, shorting airline stocks, or are you referring to people shorting jet fuel used by airlines_ in the futures market?

Answered 05/31/11 12:42:06 by Kevin Hall and Tony Pugh

Q: Why is it that in 2008 oil was $147.00 a barrel and gas prices were 4.00 a gal. In 2011 oil got to $113.00 to $115.00 a barrel and gas is 4.00 a gal.

Submitted by Orin Johnson from Rochester MN

A: Good question. It has to do with factors such as refinery capacity_ which is at historic lows, that's to say amounts of spare production ability not seen since the 1970s. Some would suggest this creates an artificial scarcity that drives up price, but the industry insists this reflects productivity and the ability to get more gasoline out of a barrel of oil. Refineries dont pass on the oil-price rise (or fall) on a one-to-one basis, so gas prices even in 2008 rose by a smaller percentage than crude prices did. What's even more striking today is that the high prices were accompanied by very healthy inventories in storage and all sorts of indicators of an impaired consumer. Clearly the high prices dampened demand as consumers chose to stay closer to home, telling that prices have fallen so quickly as schools are about to let out and summer driving is about to start. A cynical person might think what we've seen of late is akin to profit taking in the stock market, lock in your gains and get ready for another cycle.

Answered 05/31/11 12:37:54 by Kevin Hall and Tony Pugh

Q: Speculators who drive up the price of crude oil should be hurt severely when the price inevitably falls, maybe even wiped out. But I never see evidence of that. Am I missing something? (By the way, I have learned that McClatchy is one of the best news organizations in the U.S. if not the planet. Thanks for your continuing terrific investigative work.)

Submitted by Art Amolsch from Basye, VA

A: Indeed speculators do get hurt, some pretty big name hedge funds were recently on the losing end of the price drop over the past few weeks. Wall Street is correct when they say that for everyone betting long, there has got to be someone betting short_ that's to say, in favor of falling prices. The question really is whether all this massive speculative activity drives up prices. The correlation suggests it does, to prove it you would have to limit the activity and measure the difference, but regulators to data have been unable or unwilling to take away the punch bowl when so much money is being made.

Answered 05/31/11 12:33:19 by Kevin Hall and Tony Pugh

Q: Is it possible that big oil co's are investing in oil hedge funds and in big banks for oil swaps to drive speculation in oil prices?-(Double dipping)-How can we check?

Submitted by Jim Akers from Tacoma WA

A: It is possible, and we are investigating that right now, but it is very difficult to prove because so much of hte trading is done in the over-the-counter markets, where there is little public disclosure. Some companies like BP have trading arms, and it is not just oil companies. Ag giants like Cargill also play these markets and serve as swap dealers, meaning they are hypothetically involved in almost every possible part of a trade. Wall Street firms are increasingly involved in taking physical delivery, either through storage companies or similar businesses. And there is just so little public data available, the Commodity Futures Trading Commission provides aggregate numbers but no information on who the traders actually are. History shows bad things happen when there are information vacuums.

Answered 05/31/11 12:31:16 by Kevin Hall and Tony Pugh

Q: No question here (unless maybe y'all can answer why the chicken crossed the road...?)! Actually, just a note to say I really appreciate the terrific job that McClatchy continues to do... thanks folks, so much!! Cheers, -Mat P.S.- BARACK OBAMA: The chicken crossed the road because it was time for a change! The chicken wanted change! PAT BUCHANAN: To steal the job of a decent, hardworking American. SARAH PALIN: Because gosh-darn it, he's a maverick (wink-wink)! And I can see that road from my house!

Submitted by Mat D. from NorCal

A: Thanks, as to why the chicken crossed the road, my sources tell me the road was in Pakistan and it was dying (literally) to know who was in that big three story compund....

Answered 05/05/11 10:30:23 by Kevin Hall and Tony Pugh

Q: Gentlemen, I just read your excellent story of March 7 on the status of private defined benefit plans and the PBCG. My wife and I are McClatchy pensioners and are well aware of the financial difficulties the company has been having. I'm having trouble finding out how the McClatchy pension plan is doing these days. I am aware that the company gave a lot of real estate to the plan last year, but I do not know how healthy the plan is overall. I suppose you may have some interest in the long-term viability of the pension plan as well. Is there anything you can tell me about how the McClatchy plan is doing? Thanks. Steve Landers Charlotte

Submitted by Steve Landers from Charlotte, NC

A: The company just put out its annual statement to pensioners, assume it is now available online but the McClatchy plan is about 77 percent funded, down from 88 percet a few years ago. The company has also, if I read it correctly, made use of a government rule that allows it up to 15 years to return the pension plan to full funding. If the McClatchy plan is like most other private plans, it has bounced back with the rise in stock values but there were a lot of layoffs chainwide last year and that I presume resulted in a lot of draw against the pension plan. that's a seat of the pants guess, however.

Answered 05/05/11 10:29:35 by Kevin Hall and Tony Pugh

Q: What's going on with the $600 TRILLION global derivatives market? About $300 trillion of these contracts are owned by five large U.S. banks(see google for articles on this). this is ahuge amount of money to be hanging over the U.S. taxpayers,as these companies values are no where near this amount. What's the chances the U.S. taxpayer will end up bailing out the banks on this one? Can't there be a law that you can't risk more than your company is worth?

Submitted by del cain from orlando,fl

A: Great question and the answer is regulators are trying to put in place new rules for the derivatives market and Wall Street is throwing everything it has at them. GOP leaders in the House of Representatives are moving through a bill that would delay implementation of these rules until there was an assessment of the impact on end users of derivatives. Unfortunately there is a lot of gray area in this ... many big ag companies, for instance, hedge movements of commodity prices in the derivatives markets, but they also act as broker dealers, which means they are, in gambling terms, the house. When there is a big stink you can bet your bottom dollar it's because it is hitting close to home on monied interests.

Answered 05/05/11 10:26:14 by Kevin Hall and Tony Pugh

Q: Why is there a need to incorporate, as in: forming an "anonymous society" to conduct business ?? Why are Corporations or LLC's- as of late, are needed to conduct transactions in a market....????? Is this a standard created to bypass & profit, at a strictly corporate level what common ordinary mortals would not escape based on what I guess are common sense laws....?? I hope this is a question that can be answered by U..!!!

Submitted by Tony Best from NYC

A: The short answer is there is no short answer. There are advantages and disadvantages to incorporation, ranging from tax benefits to securities issuance etc. Over the past several decades the trend has been away from incorporation and toward formation of S Corporations (Incorporated companies are C corps) which allow the profits and dividends to flow through individual income rather than corporate taxes. There have also been a series of stories of late that explore how little US corporations actually pay in taxes despite the hated 35 percent tax rate. Their effective tax, what they actually pay, is far lower. Corporate tax revenues make up a smaller and smaller portion of all revenue collected, down to about 9 percent of all revenue in the latest data.

Answered 05/05/11 10:23:28 by Kevin Hall and Tony Pugh

Q: Since U.S. banks are only paying 1% interest and I have a friend in Panama who says that Panamanian banks are paying 6% interest for CD's and/or current accounts, does it make sense to transfer some money (that I don't need for a while) to a Panamanian bank so I don't suffer major losses by keeping it in a U.S. bank?

Submitted by Rachel B. from Brooklyn, NY

A: On the face it makes sense but we live in a world fraught with risk. You wouldnt want too many eggs in one basket, you'd have to consider the tax implications of foreign earnings and you would need to explore what sort of guarantees there are if the bank offering you the CD goes bust. Here the FDIC makes you whole, I don't know what the rules are in Panama but I'd sure make sure I knew before I plunked down any significant amount of money.

Answered 05/05/11 10:20:05 by Kevin Hall and Tony Pugh

Q: I understand that the price of oil is directly related to the value of the dollar, which is at an all-time low. (1) What is the reason for the decline in the value of the dollar? (2) What are the implications for the U.S. economy, beyond high prices at the gas pump?

Submitted by Fred Como from Burnt Hills, NY

A: I think it's more accurate to say that the rising price of oil has been correlated to the slump in the dollar, but it is surely not a cause. remember back in 2009 when oil was in the dumps around $40-50 a barrel. The dollar was also sliding in deep crisis, and if there was a causal link oil should have shot up and didn't. The rise and fall of the dollar is a speculative game by currency traders. Do you think the euro zone is stronger than the U.S. economy right now? They never addressed their banks (smaller in number, heavy concentration) they are barely registering life in terms of economic growth and their debt problems are far worse than ours. Japan has quite a mess on its hands, so my take is the financial markets have largely become detached from real supply and demand issues. As to the implications for the U.S. economy, huge. And that's why it is disappointing that policymakers just sit back and take this. There is no shortage of oil, there is ample excess productive capacity and demand is weak. Even if China and India demand more oil they consume far less than we do, for now. The impact of higher prices erodes consumer purchasing power, is killing the airline and trucking industries and makes it hard for businesses and citizens alike to plan ahead_ all of which dampens consumer sentiment and gives companies pause when considering additional hires.

Answered 05/05/11 10:18:23 by Kevin Hall and Tony Pugh

Q: Trace the history of business in the United States through six distinct eras ?

Submitted by sor sokreth from sihanoukville Cambodia

A: Good question from your professor, your job not mine to answer however. rgds

Answered 05/05/11 10:13:08 by Kevin Hall and Tony Pugh

Q: Representative Jane Harmon was caught by HS involved in espionage with lobbyist associated with the Israeli Lobby,can you tell me why she was not charged and arrested?

Submitted by Livingston from Coarsegold, Ca

A: This is not an economic question, but our Justice reporter says that the allegation that she promised to get charges dropped against Israeli defendants came out two years ago and reportedly involved a decision by the Bush administration. It was the National Security Administration, not Homeland Security, that recorder her. Sorry I couldnt be of more help

Answered 04/13/11 13:36:34 by Kevin Hall and Tony Pugh

Q: Why do our legislators allow corporations to send our jobs overseas? Doesn't the fact that all our business personal and financial records reside in a foreign country represent a national threat to our security?

Submitted by JL from Coarsegold, Ca

A: I think overseas operations of U.S. companies operate independently of their U.S. parents in most cases. Most companies establish abroad in ways that they are not subject to taxation in the US. There is still a good amount of earnings that could be repatriated in the U.S., and there is a constant lobbying push to allow it. As to allowing corporations to send jobs overseas, it's awfully hard to stop given the freedom to incorporate elsewhere. Laws could be designed to indirectly punish those that do, or reward those that don't, but there has been little appetite for either in Congress or state legislatures.

Answered 04/13/11 13:33:29 by Kevin Hall and Tony Pugh