WBEZ | Planet Money http://www.wbez.org/tags/planet-money Latest from WBEZ Chicago Public Radio en Why we sign up for gym memberships but never go to the gym http://www.wbez.org/news/culture/why-we-sign-gym-memberships-never-go-gym-111312 <img typeof="foaf:Image" src="http://llnw.wbez.org//main-images/gym.jpg" alt="" /><p><p><strong>Gyms have built their business model around us not showing up.&nbsp;</strong></p><p>Gyms have way more members than they can actually accommodate. Low-priced gyms are the most extreme example of this. Planet Fitness, which charges between $10 and $20 per month, has, on average, 6,500 members per gym.</p><p>Most of its gyms can hold around 300 people. Planet Fitness can do this because it knows that members won&#39;t show up. After all, if everyone who had a gym membership showed up at the gym, it would be Thunderdome.</p><p>If you are not going to the gym, you are actually the gym&#39;s best customer.</p><p><strong>So gyms try to attract people who won&#39;t come.&nbsp;</strong></p><p>If you haven&#39;t been a &quot;gym person&quot; in the past, chances are good that paying for a gym membership won&#39;t change that. Gyms know this and do what they can to attract people who haven&#39;t traditionally been gym rats.</p><p>Instead of displaying challenging equipment like weight benches and climbing machines in plain view, gyms will often hide weight rooms and other equipment in the back. Many gyms now have lobbies that are designed to look like hotels and fancy restaurants.</p><p>&quot;For the longest time, the design was around the sweat,&quot; says Rudy Fabiano, an architect who designs gyms all over the world. &quot;Twenty-five years ago ... clubs could be very intimidating. Remember there were the baggy pants that everybody had and the bodybuilders would bring their own jug of water?&quot;</p><p>Once gyms started looking more like hotels, coffee shops and restaurants, people who weren&#39;t bodybuilders started feeling comfortable in gyms. The casual gymgoer was born.</p><p><strong>Our brains want to be locked into annual contracts with gyms.</strong></p><p>Normally, we hate being locked into long contracts (cellphones, cable packages), but gym memberships are an exception.</p><p>&quot;Joining a gym is an interesting form of what behavioral economists call pre-commitment,&quot; says Kevin Volpp, director of the Center for Health Incentives and Behavioral Economics at the Wharton School.</p><p>Volpp says we actually like the idea of being locked into a gym contract ... at first, anyway.</p><p>&quot;They&#39;re picturing the &#39;new me&#39; who&#39;s actually going to go to the gym three times a week and become a physical fitness machine.&quot;</p><p>We convince ourselves that since we have committed to putting down money for a year, we will make ourselves go to the gym. And then, of course, we don&#39;t.</p><p><strong>Just when we try to get out, they feed us, massage us and ply us with alcohol. </strong></p><p>Gyms have big issues with retention, and most lose around half their members every year.</p><p>Once we realize that we haven&#39;t been going to the gym, even $20 per month can feel like too much.</p><p>To try to combat this, gyms look for ways to offer value to customers who aren&#39;t necessarily into working out. Planet Fitness has bagel breakfasts once a month and pizza dinners. Those are its busiest times. It also has massage chairs.</p><p>Other gyms have mixers and movie nights and spa treatments.</p><p><strong>Without slackers like us, gyms would be a lot more expensive.&nbsp;</strong></p><p>The reason gyms can charge so little is that most members don&#39;t go.</p><p>People who don&#39;t go are subsidizing the membership of people who do. So, if you don&#39;t work out, you are making gyms affordable for everyone.</p><p>If you are one of the brave few who actually do go to the gym, you are getting an amazing deal.</p><p>&mdash; <em><a href="http://www.npr.org/blogs/money/2014/12/30/373996649/why-we-sign-up-for-gym-memberships-but-don-t-go-to-the-gym">via NPR</a></em></p></p> Tue, 30 Dec 2014 16:28:00 -0600 http://www.wbez.org/news/culture/why-we-sign-gym-memberships-never-go-gym-111312 Germany Approves A Bailout That's Way Too Small To Solve Europe's Problems http://www.wbez.org/story/2011-09-29/germany-approves-bailout-thats-way-too-small-solve-europes-problems-92625 <p><p>By a wide majority, Germany's parliament <a href="http://www.npr.org/2011/09/29/140894987/german-lawmakers-set-to-expand-euro-bailout-fund" target="_blank">just agreed</a> to expand Europe's bailout fund. This sounds like a big deal: Germany's rescuing Europe!</p><p>But Germany isn't rescuing Europe. It's just signing off on a bailout plan that Europe's leaders agreed to months ago — a plan that clearly won't be enough to solve Europe's problems.</p><p>So the implications of today's vote were asymmetric. A rejection from Germany would have meant immediate economic chaos in Europe and beyond. German approval only means that Europe can continue to muddle through for a few more weeks or months, until the next phase of the crisis.</p><p><strong>Specifically, there are three huge problems that the current bailout plan doesn't solve.</strong></p><p></p><p><strong>1. Even after the bailout, Greece still won't be able to pay its debts</strong>. The current plan cuts Greece's debt by 20 percent. This is not nearly enough. It leaves Greece with the biggest deficit in Europe, relative to its overall economy. And that deficit will continue to grow, as Greece's wrecked economy shrinks and the country continues to borrow borrow more money.</p><p><strong>2. No one trusts Europe's big banks.</strong> U.S. money market funds have been <a href="http://www.npr.org/blogs/money/2011/09/16/140464797/a-slow-motion-bank-run-in-europe" target="_blank">pulling money out</a> for months. Long-term lending to the banks is lower than its been in <a href="http://online.wsj.com/article/SB10001424052970204010604576594821352215158.html" target="_blank">more than a decade</a>. And the big European banks are even getting more nervous about <a href="http://www.businessweek.com/news/2011-09-29/three-month-dollar-libor-increases-for-15th-day-reaches-0-372-.html" target="_blank">lending to each other</a>. This is a slow-motion bank run. If it continues, it will at least force the banks to choke off lending. Or it could cause another financial crisis.</p><p><strong>3. Italy is way too big</strong> to be saved by the expanded bailout fund. Italy owes roughly as much money as as Spain, Greece, Portugal and Ireland <a href="http://www.npr.org/blogs/money/2011/08/09/139121242/does-italy-just-need-a-little-breathing-room" target="_blank">combined</a>. Its borrowing costs shot up recently, and only came down when the European Central Bank started buying Italian bonds. This is a temporary measure.</p><p>In one sense, there's a clear solution to each of these problems.</p><p>Force holders of Greek bonds to take a bigger loss; force European banks to raise more money (from the private sector if possible, from the public sector if necessary); and expand the European rescue fund so that it's big enough to save Italy.</p><p>But the details are muddy. There's debate over who is going to be on the hook for losses. There are lots of proposals for all kinds of <a href="http://www.businessinsider.com/eureca-project-greece-solution-2011-9?op=1" target="_blank">crazy financial engineering </a>to make this stuff happen.</p><p>The politics are even muddier. When European leaders agree to a plan, every country in Europe has to sign off on it. The vote in Germany's parliament today was to approve a plan that European leaders agreed to months ago.</p><p>The European Union wasn't designed to handle this kind of massive, fast-moving crisis. There's not enough centralized authority to make big, quick decisions. This is a fundamental, structural problem. And until it's solved — until Europe becomes more integrated, or the euro falls apart — leaders will struggle to make the kind of decisive moves necessary to end the crisis in Europe. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1317329767?&gn=Germany+Approves+A+Bailout+That%27s+Way+Too+Small+To+Solve+Europe%27s+Problems&ev=event2&ch=93559255&h1=Government,Debt,Planet+Money,Europe,World,Home+Page+Top+Stories,News&c3=D%3Dgn&v3=D%3Dgn&c4=140915984&c7=1004&v7=D%3Dc7&c18=1004&v18=D%3Dc18&c19=20110929&v19=D%3Dc19&c20=1&v20=D%3Dc20&c31=127414454,127413573,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Thu, 29 Sep 2011 11:23:00 -0500 http://www.wbez.org/story/2011-09-29/germany-approves-bailout-thats-way-too-small-solve-europes-problems-92625 The Dream Of Europe And The Bailout Of Greece http://www.wbez.org/story/2011-09-27/dream-europe-and-bailout-greece-92562 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-September/2011-09-28/germany_europe_financial_crisis_8705883.jpg" alt="" /><p><p>"We need Greece," Maurice Minot, a Frankfurt taxi driver, told me, swerving in excitement. "We need Spain, we need Italy. It's the dream for Europeans, for more than a hundred years."</p><p>For Minot, as for many Germans on both sides of the debate, the question of bailouts goes beyond narrow self interest. It gets at what it means to be German, and what it means to be European.</p><p>Klaus Frankenberger, an editor at the newspaper Frankfurter Allgemeine Zeitung, points to the painful labor reforms Germany went through a few years ago.</p><p>"Germany's economic revival came with a price," Frankenberger says. "What has Greece done? Deliberately reduced its competitiveness, deliberately inflated the public sector."</p><p>Frankenberger happens to keep at his desk the treaty that set up the European Union. It's all marked up and dog-eared, as if he reads it in the bathtub.</p><p>"Article 125," he says, stabbing the page with his finger, "deliberately rules out the bailout of any member state! That's what it says. And we've decided to ignore this."</p><p>Sixty-six percent of Germans agree with Frankenberger, according to a recent poll. No bailout.</p><p>But what about that other 34 percent? It includes some businesspeople and bankers who would benefit from a bailout. But there's also a sizeable number of people, like my cab driver in Frankfurt, who support a bailout for more idealistic reasons.</p><p>They don't want to tell Greece to go it alone. Not because they'll recoup a financial investment, but because they'll recoup an emotional investment.</p><p>Germans care about Greece because they care about <em>Europe</em>.</p><p></p><p>"We had a wall behind us," says Renate Wilhelm, who used to live in East Berlin. "And now we are friends! And also with France: You don't have to use a passport, and we have the same money. It is like we are sisters and brothers. It's wonderful."</p><p>It's not just older Germans who feel this way about Europe. In Berlin I ran into Simon Banish, 20 years old and shrouded in a hoodie.</p><p>"I feel more like a European than a German," he told me. "The idea to create a United States of Europe sounds interesting-- and to me, it makes sense."</p><p>This might sound a little Kumbaya. But Europe is a messy continent, with a sea of countries that suffered two enormous, brutal wars in the first half of the 20th century.</p><p>Fifty years ago, a little Kumbaya seemed like a really good idea. In fact, that's how this whole project got started in the first place. Helmut Schlesinger, former president of the German Bundesbank, pointed this out to me.</p><p>"One cannot forget that the whole strength of having a European Union is based on the fact that we never want to have war between our countries, which we have had so much, and so terrible," he says.</p><p>In the years immediately following the war, the idea of a common currency was seen, by some, as a way to keep Europe peaceful, Schlesinger says. With everyone using the same currency, Germany's strength would be Europe's strength.</p><p>That's why the bailout question is so agonizing. Because it's not simply about self-interest. It's about who Germany wants to be. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1317226168?&gn=The+Dream+Of+Europe+And+The+Bailout+Of+Greece&ev=event2&ch=93559255&h1=Planet+Money+-+Featured+Posts,Government,Podcast,Business+E-mail+Newsletter+Weekly,Planet+Money,Europe,Economy,World,Home+Page+Top+Stories,News&c3=D%3Dgn&v3=D%3Dgn&c4=140850608&c7=1124&v7=D%3Dc7&c18=1124&v18=D%3Dc18&c19=20110928&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=3&v21=D%3Dc2&c31=135379435,127414454,127413729,127088640,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Tue, 27 Sep 2011 23:58:00 -0500 http://www.wbez.org/story/2011-09-27/dream-europe-and-bailout-greece-92562 A Genius Grant For An Economist Who Studies Race And Inequality http://www.wbez.org/story/2011-09-20/genius-grant-economist-who-studies-race-and-inequality-92324 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-September/2011-09-22/fryer.jpg" alt="" /><p><p>This year's <a href="http://www.macfound.org/site/c.lkLXJ8MQKrH/b.7728991/k.12E8/Meet_the_2011_Fellows.htm" target="_blank">MacArthur fellowships</a> — popularly (and irresistibly) known as "genius grants" — were announced this morning. There was one economist on the list: <a href="http://www.macfound.org/site/c.lkLXJ8MQKrH/b.7730831/k.9839/Roland_Fryer.htm" target="_blank">Roland Fryer</a>, a Harvard prof who studies race and inequality in America.</p><p>A few years back, Fryer published a <a href="http://ideas.repec.org/a/tpr/qjecon/v119y2004i3p767-805.html" target="_blank">study</a> that found that children with "distinctively black" names fared no worse than other children on several socioeconomic measures, after controlling for circumstances at birth. (That study was co-authored with Steven Levitt, of Freakonomics fame.)</p><p>Here's Fryer <a href="http://www.npr.org/templates/story/story.php?storyId=4751829" target="_blank">explaining</a> that finding on News & Notes:</p><p></p><p><blockquote></p><p>...we looked at all of the birth records in California, a little over 16 million names, and compared someone who was born in a very similar hospital in a very similar area of the city with very similar parents. But one kid got the name Lakeisha and the other little baby girl got the name Emily. And what we found is that 20-some-odd years later, Emily and Lakeisha were doing very similar in terms of their economic and social outcomes, in terms of whether or not they were likely to be unmarried mothers, the median income of their ZIP code, education, etc., etc. So our conclusions were that names aren't actually causally affecting blacks but they are certainly associated with lower outcomes.</p><p></blockquote></p><p>We <a href="http://www.npr.org/blogs/money/2011/02/23/133632394/should-we-pay-kids-to-study" target="_blank">wrote</a> earlier this year about another Fryer study. This one looked at whether paying students was an effective way to get them to improve their grades.</p><p><blockquote></p><p>It turns out that the direct approach — just giving them cash for good grades — doesn't work.</p><p>But paying them for other things — doing their homework, going to class — does seem to boost achievement, at least in some cases.</p><p>That's according to a series of studies that paid out $6.3 million to 38,000 students in 261 schools. Here's the <a href="http://www.edlabs.harvard.edu/pdf/studentincentives.pdf" target="_blank">paper</a>, by Harvard's <a href="http://www.economics.harvard.edu/faculty/fryer" target="_blank">Roland Fryer</a>.</p><p>The results are contrary to a basic economic idea: You should pay for output (in this case, grades), and let workers figure out the best inputs (in this case, studying and going to class).</p><p>Of course, that idea falls apart if the workers don't really know the relationship between inputs and outputs — in this case, if they don't really know on their own <em>how</em> to get good grades.</p><p></blockquote></p><p><strong>For More</strong>: Here's a list of <a href="http://www.economics.harvard.edu/faculty/fryer/papers_fryer" target="_blank">Fryer's publications</a>. And here's the <a href="http://www.edlabs.harvard.edu/" target="_blank">Education Innovation Lab</a> that Fryer runs at Harvard. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1316701651?&gn=A+Genius+Grant+For+An+Economist+Who+Studies+Race+And+Inequality&ev=event2&ch=93559255&h1=Planet+Money,Economy,Education,Business&c3=D%3Dgn&v3=D%3Dgn&c4=140625438&c7=1017&v7=D%3Dc7&c18=1017&v18=D%3Dc18&c19=20110920&v19=D%3Dc19&c20=1&v20=D%3Dc20&c31=93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Tue, 20 Sep 2011 08:50:00 -0500 http://www.wbez.org/story/2011-09-20/genius-grant-economist-who-studies-race-and-inequality-92324 The Economic Catastrophe That Germany Can't Forget http://www.wbez.org/story/2011-09-14/economic-catastrophe-germany-cant-forget-91998 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-September/2011-09-14/100k_mark_wide.jpg" alt="" /><p><p>For troubled European countries, the European Central Bank could be like a giant ATM.</p><p>After all, the ECB has the unique ability to print unlimited amounts of euros. It could lend that money to the governments in need.</p><p>The problem with this idea? Europe's biggest economy hates it.</p><p>Cue inflation-fearing, deep-pocketed Germany. The thought of hitting up a central bank's ATM would send many Germans fleeing in panic.</p><p>To understand why Germany is so freaked out about a central bank lending money to troubled governments, you need to go back nearly 100 years — to when the German central bank did just that.</p><p></p><p>After World War I, Germany was deep in debt. Soldiers back from the war needed money for pensions. War widows needed compensation. Reparations to France and Britain were enormous. And no other country would lend it money.</p><p>So Germany's central bank printed a bunch of money and loaned it to the government. The result was possibly the most destructive case of inflation in history.</p><p>During the Weimar inflation, people carted money around in wheelbarrows to do their shopping. At one point, it cost a million marks to mail a letter. The currency was so worthless, it was used as wallpaper in German bathrooms. Money started losing value by the second:</p><p>"There's this famous example that somebody sits in a pub and orders a beer," says historian Carl Ludvig-Holtfrerich. "Immediately, when the waiter carries the beer to his table, he orders the second one. The waiter says, 'Well, you haven't finished!' And he says, 'Yes, but if I don't order now, prices will be double by the time I finish my first beer!' "</p><p>This is Weimar humor. But the result of the hyperinflation was an economic catastrophe.</p><p>Many Germans believe it helped lay the groundwork for the rise of the Nazi party — a belief that has left the nation with a profound fear of inflatoin.</p><p>"This historical experience tells every policy maker: You don't mess around with inflation," says Klaus Frankenberger, an editor in Frankfurt. "Never. You don't do this."</p><p>Fast forward 70 years from Germany's inflation nightmare to 1992. European countries are setting up the euro, and the new currency needs a new central bank.</p><p>In 1992, Germany was the biggest economy in Europe, and it had a lot of influence over the shape of the new European Central Bank.</p><p>So it's no surprise that the ECB wound with its headquarters in Frankfurt, and with a single mission: Keep inflation in check.</p><p>That's it.</p><p>The ECB is not supposed to be bailing out governments, according to many Germans. It's not supposed buy the bonds of troubled countries.</p><p>But for more than a year now — ever since Greece first put up its hand and said, "We need help" — that's exactly what the ECB been doing.</p><p>The ECB says it's not just printing money to buy the bonds of Greece and other troubled countries. When the bank buys the bonds of Germany and other troubled countries, it takes an equivalent of money out of circulation.</p><p>But Germans are not impressed.</p><p>Helmut Schlesingerran Germany's central bank, the Bundesbank, back in the early 90s, when the euro was created.</p><p>"We must have the monetary process under control," he told us last week. "And not saying, well, let us buy 600 billion of government bonds by the Central Banks in half a year, and then we hope that everything is fine! As we can see, it's not so much fine!"</p><p>Schlesinger is not the only former central banker who's worried about this. Just last week, Jurgen Stark, the top ranking German at the ECB, resigned. The official line is that he resigned for personal reasons. But it's no secret that he, too, hated the bond buying program.</p><p>When Stark resigned, the markets freaked out. His resignation — and the market reaction — was a reminder that there's still deep opposition in Germany to the ECB's tactics in fighting the debt crisis. And in the long run, the ECB needs Germany's support. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1316032339?&gn=The+Economic+Catastrophe+That+Germany+Can%27t+Forget&ev=event2&ch=93559255&h1=Radio,Government,Debt,Planet+Money,History,Europe,World&c3=D%3Dgn&v3=D%3Dgn&c4=140419140&c7=1004&v7=D%3Dc7&c18=1004&v18=D%3Dc18&c19=20110914&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=2&v21=D%3Dc2&c31=135511603,127414454,127413573,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Wed, 14 Sep 2011 14:29:00 -0500 http://www.wbez.org/story/2011-09-14/economic-catastrophe-germany-cant-forget-91998 A Slow-Motion Bank Run In Europe http://www.wbez.org/story/2011-09-14/slow-motion-bank-run-europe-92063 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-September/2011-09-16/frenchbanks_custom.jpg" alt="" /><p><p><em><strong>Update:</strong> This post was written on Sept. 14. On Sept. 15, the European Central Bank, along with other central banks from around the world, announced a new lending program to fight the slow-motion run on Europe's banks. Here's <a href="http://www.npr.org/2011/09/15/140497730/central-banks-step-in-to-help-european-banks" target="_blank">more on that program</a>.</em></p><p>Fear can wreck a banking system and cause havoc in an economy. That's why the recent <a href="http://www.google.com/search?q=french+banks&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a#q=french+banks&hl=en&client=firefox-a&hs=hau&rls=org.mozilla:en-US:official&prmd=imvnsu&source=univ&tbm=nws&tbo=u&sa=X&ei=YulwTojrMsfK0AHs5NziCQ&ved=0CDcQqAI&bav=on.2,or.r_gc.r_pw.r_cp.&fp=197151ce8f3efd3a&biw=1024&bih=547" target="_blank">worries about big French banks</a> are so important, and so scary: Even without a Greek default, Europe could slide into a financial crisis.</p><p></p><p></p><p>For the past few months, what The Economist called a <a href="http://www.economist.com/node/21526926" target="_blank">slow-motion run</a> has been underway for big French banks. It looks different than the classic bank run, where ordinary people lose confidence in a bank and rush to pull their money out. That's because big European banks are different from traditional, Main Street banks.</p><p></p><p>At a Main Street bank, regular people put money in savings and checking accounts. This is, in effect, a short-term loan to the bank. The bank then takes that money and makes long-term loans to other regular people in the form of mortgages, small-business loans, and the like.</p><p>Big European banks work sort like that — but on a much, much bigger scale.</p><p>Big institutions like money-market funds lend billions of dollars to big European banks. These are short-term loans of a month or so.</p><p>The European banks take that money and make huge, long-term loans to big companies national governments. That includes loans to Greece (in the form of Greek bonds) and other countries with financial troubles.</p><p>Recently, many of the big institutions that lend money to French banks have grown worried about the banks' loans to Greece and other countries. So they've started pulling their money out of the banks.</p><p>For example, U.S. money market funds reduced their deposits in French banks by about a third between May and August of this year, according to one recent analyst report — that's tens of billions of dollars they've pulled out of French banks.</p><p>So far, French banks have been managing. They've been paying higher interest in order to borrow from other sources. In a pinch, they can also borrow from European Central Bank. This may allow them to muddle through, particularly if European leaders come up with a bigger, bolder bailout plan for Greece that eases investors' worries.</p><p>But if the slow-motion bank run continues, the banks may ultimately be forced to sell off bonds and other assets they hold. If several banks are forced to sell assets at the same time, the price of those assets will fall. It's simple supply and demand.</p><p>As Gary Jenkins of Evolution Securities put it when I talked to him this morning: "If all the banks go, who is buying?"</p><p>In the language of finance, this can push a bank from liquidity to insolvency.</p><p>At the beginning, the bank is fundamentally sound, but can't come up with enough money to meet its short-term needs. It has liquidity problems.</p><p>So it's forced into a fire sale of its assets. This drives down the assets' value. The fall in value means that the bank is no longer fundamentally sound — it's insolvent. In plain terms, the bank is bust.</p><p>The big French banks are too big to fail. So instead of going bust, they would get a bailout from the French government.</p><p>But this would likely be an ugly, scary process. It would cause more fear, and more problems, in financial markets throughout Europe and beyond. It could, in short, be another financial crisis. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1316158060?&gn=A+Slow-Motion+Bank+Run+In+Europe&ev=event2&ch=93559255&h1=Finance,Planet+Money,Europe,Economy,Business,World,Home+Page+Top+Stories,News&c3=D%3Dgn&v3=D%3Dgn&c4=140464797&c7=1006&v7=D%3Dc7&c18=1006&v18=D%3Dc18&c19=20110914&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=3&v21=D%3Dc2&c31=127413671,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Wed, 14 Sep 2011 13:15:00 -0500 http://www.wbez.org/story/2011-09-14/slow-motion-bank-run-europe-92063 Hackers' Low-Tech Tool: A Phone Call http://www.wbez.org/story/2011-08-16/hackers-low-tech-tool-phone-call-90665 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-August/2011-08-16/phone_wide.jpg" alt="" /><p><p>The conference for the best hackers in the free world is held every year in Las Vegas. It's called <a href="http://www.defcon.org/" target="_blank">DefCon</a>. The entrance fee is $150, cash only. (And it's a bad idea to use the ATM at a hacker conference.)<br /> <br />There are lots of hacking competitions at DefCon, most of which are complicated and technical. But one contest is very simple.</p><p>Hackers call up a corporation and try to persuade the person who answers the phone to give them sensitive information. The technique is called social engineering, and it's been a key element of some recent high-profile hacks.</p><p></p><p>At the competition, contestants sit in a glass phone booth and call unsuspecting corporations. Their conversations are played on a P.A. system for dozens of spectators.</p><p>A guy named Mark is up next. He calls Wal-Mart and says he's in the company's I.T. department.</p><p>Each contestant has 25 minutes in the glass booth. There's a checklist of information they're supposed to get: What time the company's packages are delivered, what kind of anti-virus software they use, whether the company uses the most up-to-date operating system.</p><p>Mark is only 18 years old. It's his first time competing here. But he actually gets a few key pieces of information. (Wal-Mart declined to comment for this story.)<br /> <br />The audience at the contest — as at many DefCon competitions — isn't just hackers. Also in attendance: Security companies that corporations hire to defend themselves.</p><p>And a couple seconds after Mark leaves the booth, he gets a job offer from a security company. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1313527329?&gn=Hackers%27+Low-Tech+Tool%3A+A+Phone+Call&ev=event2&ch=93559255&h1=Planet+Money,Technology,U.S.&c3=D%3Dgn&v3=D%3Dgn&c4=139680012&c7=1019&v7=D%3Dc7&c18=1019&v18=D%3Dc18&c19=20110816&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=2&v21=D%3Dc2&c31=93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Tue, 16 Aug 2011 15:11:00 -0500 http://www.wbez.org/story/2011-08-16/hackers-low-tech-tool-phone-call-90665 The Dollar Is Still Central To The Global Economy. That May Not Last. http://www.wbez.org/story/2011-08-11/dollar-still-central-global-economy-may-not-last-90498 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-August/2011-08-12/andrewjackson.jpg" alt="" /><p><p>The U.S. economy is spooking investors. But every day, all around the world, foreign businesses are still eager to use U.S. dollars — even when their business has nothing to do with the U.S.</p><p>When South Koreans buy Chilean wine, they convert their Korean won to U.S. dollars, and send those dollars to the winery in Chile. The winery then converts the dollars into Chilean pesos. This kind of thing is routine in global trade, according to Barry Eichengreen, an economist at U.C. Berkeley.</p><p>Why not just go from won to pesos?</p><p></p><p>"It's easier for them to do two foreign exchange trades, both of which involve the dollar, both of which are standardized, both of which involve a very low fee or transaction cost," Eichengreen says. "Everybody else is doing the same transactions."</p><p>It's like how so many Delta Airlines flights get routed through Atlanta. The dollar is the hub of world trade.<br /> <br />This helps U.S. businesses, which often don't have to go through the hassle or expense of changing currencies. And the central role of the dollar means that foreign governments have to hold massive amounts of U.S. currency — which they tend to park in U.S. Treasury bonds.</p><p>"U.S. interest rates are lower than they would be otherwise because foreign central banks and governments find it convenient to hold our treasury bonds," Eichengreen says. "They lend to us more freely than they would otherwise."</p><p>This ends up being worth hundreds of billions of dollars a year to the US economy. But it probably won't last forever.</p><p>A hundred years ago, the British pound was the center of the financial world. The U.S. dollar's rise started after World War I, and continued after World War II. Today, the dollar is still the world's only viable reserve currency.</p><p>Safe-haven currencies like the Swiss Franc are too small to play that role. The Japanese yen is tied to an economy that's been stagnant for decades.</p><p>The only two contenders — the euro and the Chinese renminbi — have big problems of their own.</p><p>But Eichengreen argues that the euro is likely to survive the current crisis. And he expects China to liberalize its economy and allow the renminbi to become a more widely used international currency.</p><p>"Once upon a time it may have been true that there was only room in the world for one true global currency," Eichengreen says. "But ... everyone now can look at their smart phone and figure out what the price of a euro or a chinese renminbi is in terms of dollars."</p><p>In the long run, Eichengreen sees a world of multiple reserve currencies, where the U.S. dollar plays a diminished role.</p><p>The U.S. would wind up paying higher interest rates, and U.S. businesses would have to use other currencies more often. But as long as the change is gradual, it shouldn't entail too much pain for the U.S.</p><p>But there's another, more worrisome possibility. Eichengreen describes it like this:</p><p><blockquote></p><p>...one can imagine a real crisis of confidence in the dollar that at some point in time down the road, foreign central banks and governments and private investors throw up their hands and say: "This is not a serious country. We better look harder for other places to put our money." And at that point in time, if those other places exist, there could be flight away from the dollar and the dollar crash that people worry about. And that could be in fact be seriously disruptive to the operation of financial markets and to the stability of the economy. That's the thing to worry about.</p><p></blockquote> <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1313134966?&gn=The+Dollar+Is+Still+Central+To+The+Global+Economy.+That+May+Not+Last.&ev=event2&ch=93559255&h1=Currency,Podcast,Planet+Money,Business,World,Home+Page+Top+Stories,News&c3=D%3Dgn&v3=D%3Dgn&c4=139564854&c7=1006&v7=D%3Dc7&c18=1006&v18=D%3Dc18&c19=20110812&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=3&v21=D%3Dc2&c31=127429648,127413729,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Thu, 11 Aug 2011 23:01:00 -0500 http://www.wbez.org/story/2011-08-11/dollar-still-central-global-economy-may-not-last-90498 Drug Dealing, Counterfeiting, Smuggling: How North Korea Makes Money http://www.wbez.org/story/%5Bfield_story_date-yyyy%5D-%5Bfield_story_date-mm%5D-%5Bfield_story_date-dd%5D/drug-dealing-counterfeitin <p></p> Thu, 11 Aug 2011 19:22:40 -0500 http://www.wbez.org/story/%5Bfield_story_date-yyyy%5D-%5Bfield_story_date-mm%5D-%5Bfield_story_date-dd%5D/drug-dealing-counterfeitin Drug Dealing, Counterfeiting, Smuggling: How North Korea Makes Money http://www.wbez.org/story/2011-08-11/drug-dealing-counterfeiting-smuggling-how-north-korea-makes-money-90466 <img typeof="foaf:Image" src="http://llnw.wbez.org//npr_story/photo/2011-August/2011-08-11/northkorea.jpg" alt="" /><p><p>North Korea used to be an industrial powerhouse. Not anymore. Today, the country can't feed its own people. Its cities go dark every night for lack of electricity.</p><p>Yet helplessness wasn't the original plan. The original plan for the country's economy had a name. It was called "juche," or self-reliance. The idea was that all North Korean problems should be solved by North Koreans.</p><p>Every North Korean knows the concept of juche inside and out. The country takes self-reliance very seriously. And if self-reliance requires drug-dealing and the smuggling of counterfeit goods, then so be it.</p><p></p><p>But before we get to that, there are a few other ways the North Korean government can make money.</p><p>It can sell what few assets it has to its neighbors. So China takes coal and magnesium out of North Korea's mountains and harvests fish from North Korean waters. Those sales put millions of dollars into Kim Jong-Il's hands. <br /> <br />In fact, North Korea doesn't just rent its land. It rents out its own people: the government sends its citizens to Russia to chop down trees and to special South Korean factories near the border that need cheap labor. <br /> <br />This works out great for Kim Jong-Il. Those Russian and South Korean companies pay North Korea in dollars and then the North Korean government pockets that money and gives near-worthless local currency to the workers.<br /> <br />And North Korea has one more legal export: monuments. It turns out that giant, ugly statues are one of the few exports of North Korea.</p><p>There's a whole division of the North Korean government that specializes in building those statues for dictators around the world, according to Curtis Melvin, an econ grad student who runs the blog <a href="http://www.nkeconwatch.com/" target="_blank">North Korea Economy Watch</a>.</p><p>"You can go as far back as the 1970s to find monuments the North Koreans have built in Africa and that's sort of continued to this day," he says.</p><p>All these legal exports added up to roughly $2 billion in 2009. In addition to that, North Korea brings in a lot of money through blatantly illegal activity.</p><p>To learn more about the country's illegal exports, we spoke with Ma Young Ae, a defector who used to work as a North Korean spy. Ma now lives in Virginia where she runs a North Korean restaurant. But back in Pyongyang she was one of the country's elites.</p><p>Ma worked for Kim Jong Il's internal police force. Her job was was to track down drug smugglers. That sounds like pretty normal law enforcement, except for one difference. She was supposed to stop small-time Korean drug dealers in order to protect the biggest drug dealer in the country: the North Korean government.</p><p>Ma told us the North Korean government produced opium on a large scale. But it hid its poppy fields from most of the population. Ma only saw the fields because she was an insider.</p><p>After harvesting the fields, the government would put its empty factories to use. The government would turn on its production lines at night and process opium, Ma says. Then they would pack the product in plastic cubes the size of dictionaries and smuggle it out of the country through China.<br /> <br />This was in the mid-eighties, when opium was the big drug. These days the drug of choice for export out of North Korea is ice, also know as methamphetamine.<br /> <br />Ma never smuggled the drugs herself. But she did smuggle something else. When she traveled in China, tracking down those non-government-approved drug dealers, the government didn't give Ma a corporate credit card.</p><p>Instead, she was given a wad of counterfeit dollars. This is another of North Korea's exports: Counterfeit $100 bills known as super-notes.</p><p>Nobody was going to just accept a brand-new $100 dollar bill from a North Korean. Instead, the Chinese would give the North Koreans sixty real U.S. dollars for every fake $100 bill.</p><p>It was during these trips that Ma noticed that the Chinese across the river had a much better standard of living than the North Koreans. So, when she had the chance, she defected.</p><p>Besides the illegal drugs and the counterfeit currency, North Korea is believed to deal in lots of weapons: rifles, missiles, perhaps even nuclear technology. Just a couple of weeks ago in Lybia, the rebels found a bunch of North Korean rocket launchers in a box labeled "bulldozer parts."</p><p>It's impossible to say how much money all this illegal activity brings in. Melvin says the government's primary goal is to maintain control of the country, not to maximize revenue.</p><p>What we do know is that Kim Jong-Il makes enough money to give the country's small elite a pretty good life. Despite international sanctions, he's always getting caught sneaking in iPods, Mercedes, Cognac and big screen TVs.</p><p>Meanwhile, the rest of North Korea gets barely enough to survive. <div class="fullattribution">Copyright 2011 National Public Radio. To see more, visit <a href="http://www.npr.org/">http://www.npr.org/</a>.<img src="http://metrics.npr.org/b/ss/nprapidev/5/1313098031?&gn=Drug+Dealing%2C+Counterfeiting%2C+Smuggling%3A+How+North+Korea+Makes+Money&ev=event2&ch=93559255&h1=Trade,Podcast,Planet+Money,Asia,Economy,Business,World&c3=D%3Dgn&v3=D%3Dgn&c4=139556457&c7=1125&v7=D%3Dc7&c18=1125&v18=D%3Dc18&c19=20110811&v19=D%3Dc19&c20=1&v20=D%3Dc20&c21=2&v21=D%3Dc2&c31=127424471,127413729,93559255&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Thu, 11 Aug 2011 16:06:00 -0500 http://www.wbez.org/story/2011-08-11/drug-dealing-counterfeiting-smuggling-how-north-korea-makes-money-90466