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After this crisis, what does Greece have to build on?

Tue, 2015-07-07 12:59

New data reported by CNN Money shows that Greece's economic output — known as GDP — has fallen 25 percent since the global financial crisis in 2008. That's a nearly unprecedented decline for a developed country in peace time. Before Greece's high unemployment, budget cuts, and austerity negotiations, Greece was on the upswing. 

“They were a good emerging market with lots of strengths,” Harvard economist Ken Rogoff says.

Among those strengths were a booming tourism industry. Greece has some of the most beautiful coastal resorts in Europe, and there’s that little structure called the Parthenon.  Those assets, notes Rogoff, are still there.

“Tourism surely is eventually going to be a bright spot, because at some point the price of the currency and costs are going to collapse,” he says

Going forward, Rogoff says, Greece could take better advantage of its limited assets if it could devalue its currency, thus becoming more competitive to other countries.

“They could bail themselves out more easily if they weren't on the euro right now, there is no doubt about that,” Rogoff says.

Unfortunately for Greece, tourism is primarily a summer industry. Northwestern University economist George Georgiadis says the country’s biggest asset might be its unemployed doctors, engineers, lawyers and other highly educated workers.

"If Greece were to provide the right conditions for international companies to invest, they would be able to tap into a highly educated population," Georgiadis says.

Georgiadis points out that in addition to devaluing its currency, Greece needs to address a host of other issues that are bad for business — things like corruption and tax evasion.

Otherwise, devaluation is "just going to hurt the economy because the buying power of Greeks would collapse,” he says. 

Georgiadis points out that if Greece does exit the euro, it won’t be able to wait long to implement reforms, or it will risk losing the job skills that are currently languishing in its underemployed work force.

Can the new Colonel Sanders save KFC?

Tue, 2015-07-07 12:58

Kentucky Fried Chicken has undergone a period of decline over the past decade, slashing hundreds of its restaurants in the U.S. and losing ground to rivals.

Despite international expansion, the company has been forced to shut down more than 1,100 stores domestically between 2004 and 2014, and now faces stiff competition from the chicken chain Chik-fil-A. 

"They’ve totally lost out to Chick-fil-A,” says Venessa Wong of Buzzfeed. “Chick-fil-A recently surpassed KFC in terms of sales, even though they have far fewer stores and they’re only open six days of the week."

Wong reports that KFC parent company Yum Brands is not giving up on the chain. However, over the next few years, they will invest $185 million into reinvigorating KFC – starting with the stores and a new advertising campaign.

In the latest KFC commercials, former Saturday Night Live cast member Darrell Hammond stars as the founder of Kentucky Fried Chicken, Colonel Sanders.

“The Colonel was a staple in their advertising for a long time,” Wong says. “Darrell Hammond is charming and he’s got this really enthusiastic character.”

By the looks of it, these efforts may be helping KFC a bit. Last financial quarter, the brand’s same-store sales were up seven percent in the U.S., according to Wong.  

When speed traps keep a city budget afloat

Tue, 2015-07-07 12:42

The small town of Campo sits just eight miles north of the Colorado-Oklahoma border. It’s right on the highway, and the U.S. Census estimates the population is 107.

“We’re losing people all the time,” says Dennis Smith, a Campo resident. “It’s getting smaller and smaller and smaller.”

The few businesses that do exist are a hair salon, a gas station and a small diner. The town collects zero local sales tax, but residents still enjoy a public school and a swimming pool. Most of those things are paid by revenue from tickets.

"Campo thrives on tickets. It does,” says Campo police officer Brad Viner.  In 2013, tickets generated more than $300,000 for Campo, or 93 percent of the town’s total revenue. City officials say that Campo needs that revenue or the town could die. Viner says there’s an even more important reason.

Dennis Smith passes out pamphlets that explain bankruptcy to townsfolk. 

Katie Kuntz

“We have look at the fact that, if a traffic crash does happen, it can be devastating to a family that lives here or a family traveling through here,” Viner says.

Several hours north of Campo sits the town of Mountain View. Mountain View borders Denver, Wheat Ridge and the small town of Lakewood. It’s only six blocks wide and three blocks deep, but it’s home to a couple of major roadways.  In 2013, ticket revenue here accounted for more than half of the city's budget.

"I don't look at it as revenue, to be perfectly honest with you,” says Mountain View Mayor Jeff Kiddie. “Do we slow people down? Yes, we do. And isn't that what traffic enforcement is all about?"

Mountain View police don’t write that many tickets for speeding. They’re for things like failing to wear a seatbelt or tinted windows. About 300 were for “obstructed view” — like having dice in the mirror. Obstructed view tickets made headlines last year when a local TV station reported Mountain View had more obstructed view citations than Denver, Boulder and Aurora combined.

"We haven't done anything illegal, haven't done anything wrong,” Kiddie says. “We’re very careful about what tickets we write and that our officers are doing what they should be doing."  

But Ashlee Lucero, a 23-year-old single mother from nearby Thornton, was stopped in Mountain View, and doesn’t think the police were doing the right thing.

“It’s just money, money, money here,” Lucero says. “I got pulled over; they said that my temp tags were expired, but they weren’t expired, so they wrote me a ticket for a defective tire.”   

Campo police officer Brad Viner 

Katie Kuntz

The police reports states that the officer verified Lucero’s tags were up to date but then noticed a “gash” in her tire — and wrote the $80 ticket. Lucero says she couldn’t pay all at once, so she went to court.

After all the court fees and payment fines, Lucero ended up owing $230 total.

“The problem is that we have police incentivized to basically throw the 4th Amendment out the window and stop people on the basis of profit,” says Ezekiel Edwards, the director of the American Civil Liberties Union's Criminal Law Reform Project. “As people look at this issue more closely, we’re going to find this problem in many more places.”  

At least six states have some laws that cap revenue from fines — or at least require an audit if the town reaches or exceeds the cap. U.S. Rep. Emanuel Cleaver, a Democrat from Missouri, wants a 30 percent ticket cap nationwide.

"If it goes to the floor, it's going to pass, overwhelmingly," Cleaver says. The congressman announced his bill in March — but he says he's been unable to attract a Republican co-sponsor.

"I don't think it's the purview of the state or the federal government to determine those standards,” says Sam Mamet, a spokesman for Colorado cities and towns at the Colorado Municipal League. He believes police enforcement of traffic laws should be left up to individual communities.

“That is in the electorate and the voters in the communities to decide,” Mamet says. “And if it becomes a contentious or a controversial issue, I can assure you that the city council or the town board will hear about it.”

Altogether, Colorado’s cities and towns collected more than $120 million in ticket revenues in 2013. For most towns, average revenues were close to four percent of their total budget.

So many tech conferences, so little time

Tue, 2015-07-07 12:26

If there's one thing the tech industry loves, it's a get-together. 

And call them what you will — meet-ups, geek fests, conferences — there have never been more.

"I'm sure there's at least five or six a day," says Tonia Ries, a PR executive who ran an events and marketing firm for 13 years. 

There are the tech heavyweights — outlets like Re/Code and Tech Crunch — that put on events costing as as much as $6,500 a head. But the real growth is at the lower level, where startups and young companies are staging conferences as a way to make money, market themselves and promote their own innovations.  

For example, the housing-rental company Airbnb recently put on OpenAir 2015, a one-day event in San Francisco. The conference focused on how to use big data to personalize search results, and offered panelists from brand name companies like Pinterest, Lyft and Netflix. Tickets were $50, and proceeds went to charity.  

"Face-to-face continues to be the most powerful and high impact way for people to connect with each other, to build new relationships and to deepen existing relationships," Ries  says. 

Lauren Mozenthal, founder of the women's mentorship group Glassbreakers, attended the Airbnb conference in San Francisco. She says she used to go to as many as 10 conferences a year, but had to cut back to focus on her business. 

"It could be easy for entrepreneurs to get lost to going to conferences and networking instead of focusing on their product and how to make that better. I know that’s my number one priority, and that’s why I’m very selective about which conferences I go to," she says, adding that she prefers short conferences that are tightly focused.  

For the companies throwing all these events, that selective focus means a much more competitive environment. Every new conference or get-together means a scramble for a location, the right speaker lineup, high-profile attendees and media coverage and, of course, the time and attention of the potential audience. 

Ries says putting on a successful event takes research, preparation and a little bit of magic — but it can pay off for companies: "not only in terms of attendee fees and marketing dollars that they can capture from sponsorships and exhibits, but also ultimately in terms of the impact to themselves as a media brand."

The trade deficit has widened to $41.9 billion

Tue, 2015-07-07 08:57

Americans generally buy more from foreigners than they do from us, a pattern that stretches back decades. But changes in the trade deficit can tell a story about what’s happening in the global economy, depending on whether the gap between the value of the goods and services the U.S. imports over the stuff we export is growing or shrinking. Figures released Tuesday from the Commerce Department show the trade deficit widened slightly in May, to $41.9 billion. Why?

“First of all, the U.S. dollar has been stronger against foreign currencies, and that puts a break on U.S. exports,” says Douglas Irwin, an economics professor at Dartmouth College.

In addition, “you have a slowing down in the emerging markets, as well as slow growth in the rest of the advanced world,” says Ted Truman, a senior fellow at the Peterson Institute for International Economics. “That means our exports have been growing less rapidly.”

The value of imports dropped slightly, too, though not as much as exports. In general, strong American demand for imports is actually a sign of a strong economy, counter-intuitive as that may seem, says Dan Ikenson,  director of the Cato Institute’s Center for Trade Policy Studies.

“We tend to import more when our economy is growing, because consumers have more money to spend and businesses expand production,” he explains.

That's in contrast to the recession years.  

“One of the features of the global financial crisis was that growth, especially in emerging economies, remained pretty strong,"  says Robert Lawrence, a professor of international trade and investment at Harvard’s Kennedy School of Government. “So we were able to maintain some of our sales to the rest of the world. In effect, that kept our economy slightly stronger than it would otherwise have been.”

So while exports will always be an important slice of our economic pie, Lawrence says for the U.S. to continue its recovery, more demand will have to come from spending at home rather exporting abroad. 

“We’re back to a pattern where we support them,” says Lawrence. “Our growth stimulates and sort of stabilizes them, rather than the reverse.”

PODCAST: Unlimited vacation

Tue, 2015-07-07 03:00

Driving could remain quite cheap going into this fall, with crude oil prices down 7 percent from before the July 4th weekend. More on that. Plus, Greeks don’t have access to online payment systems like Paypal. We look at why that matters. And what would happen if companies offered employees unlimited vacation?

Fast-changing metrics may spoil FOMC minutes

Tue, 2015-07-07 02:06

On Wednesday, the Federal Reserve releases notes from its last Open Market Committee meeting. Usually that’s a time for Fed watchers to comb through the details to try to divine what the Fed may do regarding its promise to raise interest rates. But this time it should be a little different.

The Fed ended that June meeting with a press conference, which takes the wind out of the sails of this batch of meeting minutes. But that’s not really why this release is anticlimactic.

"From three weeks ago, many things have happened," explains Jeremy Siegel, a professor of finance at the University of Pennsylvania. 

Siegel says flatlining wage growth and the sudden possibility of a Greek exit from the eurozone have thrown fresh instability into the global economy. Some of the Fed’s members may have changed their minds from what they said in mid-June.

"One wonders whether a close reading of those minutes would really give you any valuable tea leaves," Siegel says.

Michael Madowitz, an economist with the Center for American Progress, says he’s curious whether Fed officials are discussing the many possible scenarios of a Greek exit. He says some outcomes might even stimulate the U.S. economy. 

"If you’ve got a lot of money flying out of Europe, it’s got to go somewhere. The safe place to go is the U.S.," he says.

Until the Greek crisis is settled, Fed watchers on the lookout for hints of a rate hike will be stuck gazing into a cloudy crystal ball.

Greeks are locked out of online payments

Tue, 2015-07-07 02:00

 These are dark days for Greek consumers.

Banks remain closed, cash access is limited, and capital controls are in place. The controls — designed to keep Greek money from leaving Greece — prohibit the use of credit cards to make payments outside the country.

"It’s an unfortunate restriction on the ability of Greek consumers to shop online and outside of Greece," says Jason Oxman, CEO of the Electronic Transactions Association. "Generally speaking , it takes Greek customers outside of the global commerce world."

There are reports of blocked iTunes purchases — buying a 99 cent song with a credit card is a foreign transaction — and of cloud storage services being canceled  when the credit card on file doesn't work. 

Paypal, the electronic payment service,  issued a statement saying, "Due to the recent decisions of the Greek authorities on capital controls, funding of PayPal Wallet from Greek bank accounts, as well as cross-border transactions funded by any cards or bank accounts, are currently not available. Payment attempts may also be declined by the card issuer or banking institution."

The restrictions are "definitely affecting consumers who are trying to do any sort of cross-board transacting," says Mary Monahan, an analyst with Javelin Strategy & Research. 

And in today’s global economy, that’s a whole lot of people.

When hackers get hacked

Tue, 2015-07-07 02:00

In over a decade since the war on terror started, the use of digital surveillance has exploded, not only in the U.S., but around the world. As malware has seeped into the foundation of national security, surveillance technology has moved further into the private sector.  

Marketplace Tech host, Ben Johnson, talked with Christopher Soghoian, principal technologist at the American Civil Liberties Union, about the current state of digital surveillance after a major hacking firm was hacked. 

Click the media player above to hear host Ben Johnson in conversation with Christopher Soghoian.

Hacking Team is a boutique Italian surveillance technology firm, serving up made-to-order malware solutions for any supported or "not officially supported" regime.

On Sunday, a hacker infiltrated the company's network and published a huge trove of its documents to the tune of 400 GB. Speaking on the extent of the hack, Christopher Soghoian says, "this Hacking Team breach is really just everything. It’s the source code for the malware, for the surveillance software, it’s all the company’s internal emails, its all their invoices, its even their expense reports for their international travel. Everything is there."

While government agencies like the FBI and the NSA likely use custom surveillance software for high value targets, Soghoian points to low cost software as a market in which private companies like Hacking Team profit: "Surveillance companies are providing lower cost, cheaper surveillance software to governments with lower budgets. So, what we’re seeing is the governments with a few hundred thousand dollars can buy this software." 

While the low costs enable certain countries to bulk up on malware for cheap, Soghoian believes it may hit closer to home: "What [it] means for Americans is that this technology if it has not already will very soon be trickling down to local and state law enforcement agencies. I would not be surprised to learn at all if local and state law enforcement agencies had also purchased this technology from Hacking Team". 

In addition to some of the weaker passwords revealed in the hack, dismantling the hacker's house with the hacker's tools has revealed a disconnect between private interests and governmental regulation. Soghoian says the difficulty of regulating malware is because technology isn't a weapon, as Hacking Team argues. However, he maintains this breach may change the conversation: "I expect that once these documents are made public, I imagine that the U.N. and other governments might take a different view of what hacking team’s software does and what how existing arms control rules might apply to it."

Whether or not Hacking Team can recover from this hack remains to be seen. But if there's one thing to remember, it's don't make your password: Pas$wOrd!

Unlimited vacation anyone?

Tue, 2015-07-07 02:00

An American company offering unlimited vacation sounds like an unthinkable fantasy in a country famed for stingy time-off policies compared with other Western countries. But unlimited time off policies are a reality at a small number of American companies. And the results that they’re getting have other businesses taking a look.

Take ZocDoc, a healthcare technology company. Its New York offices have everything one expects from a young tech company these days: a tastefully industrial workspace, free yoga on Thursdays, a casual dress code, a ping pong table and a whole wall of free snacks (though as a health company, the munchies lean more wholesome than typical tech offices). The benefits package includes a time off policy that goes beyond generous: it’s endless.

“Team members can take time off whenever they need it or whenever they want to,” says Netta Samroengraja, CFO and chief people officer. “We feel like we have a much more motivated work force and they’re absolutely much more productive as well while they’re here.”

Asked how much time the average employee takes under an unlimited policy, she has no answer. The company doesn’t even track it. Staffers need to get permission from managers to schedule vacations, but face no limits on how long they’re gone, as long as they get their work done well. The same unlimited, untracked policy applies to sick days and personal days.

Carol Tyger, who works in marketing and took six weeks off last year, says when she explains the company’s policy to family and friends, she gets a mix of naked envy and total awe.

“I get a whole lot of reactions from: do you even work, why would you go to work and how do you get anything done?” she says. 

Many managers are skeptical about unlimited time off. But some are curious, says Bruce Elliott, Manager of Compensation and Benefits at the Society for Human Resource Management.

“The first question we always get is: how are employees gonna abuse it?” he says. “That’s really the wrong question because what we do find is that employees don’t abuse this policy.”

Elliott’s numbers show just under 1 percent of American businesses have unlimited vacation policies. But there’s great deal of interest in these companies, as many cite gains in productivity, employee engagement and retention.

ZocDoc definitely isn’t going back.

“Overall, we’re really happy with how it’s turned out and it’s actually a great recruiting tool for us right now,” says Samroengraja.

The shoes that make the dancer

Tue, 2015-07-07 02:00

As part of our series called Pro Tool: Tools of the Professional, we're looking for those must-have devices in the possession of anyone in the workforce, be they a hair dresser, welder or writer.

The third item in our series? A pair of shoes.

Professional: Sarah Wroth, Corps de Ballet dancer at the Boston Ballet.

Pro Tool: Freed of London, maker of the L pointe shoes

 

Why it's a Pro Tool: "The evolution of a dancer's career is this process of trying to find the exact [shoe] maker that will enable them to dance their absolute best." - Sarah Wroth.

Starbucks costs more bucks

Tue, 2015-07-07 01:54
5 to 20 cents

You may have noticed if you stopped by Starbucks for coffee this morning that it cost a little more than usual — 5 to 20 cents, to be exact. Starbucks announced that on Tuesday, most of its stores would be raising prices on hot drinks. As CNN Money reports, the company has consistently raised its prices over the last three years, but this is the most comprehensive raising of prices on several items at once.

$6,842

That's how little a professional women's soccer player sometimes makes as an annual salary for her time on the field. Compare that with the U.S. men's soccer team, whose players have a minimum annual salary of $60,000. And as Quartz points out, if any of the returning champions decided to live on her wages from soccer alone, she'd be well below the poverty line.

700 pointe shoes

That's how many pointe shoes are made by Freed of London craftsmen every day. And Sarah Wroth, Corps de Ballet dancer at the Boston Ballet, swears by them. She says a dancer can spend an entire career looking for the perfect pair of shoes. Hear more about Wroth as part of our series on professionals and their must-have tools.

50 percent

Making glass bottles out of recycled material creates 50 percent less pollution than making glass from scratch. It also uses 30 percent less energy. We take a closer look at the economics behind recycling as part of our "I've Always Wondered" series. You asked, so we answered.

Unlimited

We know, it's not a number, but you'll want to hear about it anyway: some U.S. companies have started experimenting with offering employees unlimited vacation days. ZocDoc, a healthcare technology company in New York, has adopted the policy already. Netta Samroengraja, CFO and chief people officer, says ZocDoc has seen increased motivation in its workforce.

23andMe believes genetics are the future of health

Mon, 2015-07-06 14:05

Genetic data has a lot of medical implications for everyone. Genes can explain your current state of health, your ancestry, even what sorts of diseases you may be more susceptible to.

The DNA service company 23andMe wants to collect all of that valuable data and use it to tell customers more about their health.

"I really believe that we’re trying to do things that democratize health care for people," says Anne Wojcicki, 23andMe CEO.

For $100 and a bit of saliva, anyone can put their information on file with 23andMe and potentially be open to any number of medical advances and studies.

"What other health care product of this level of complexity can you say you can get for $100?" Wojcicki says.

Wojcicki believes that the health care system in the U.S. is fundamentally broken.

"If you look at the history of drug discovery, and you look at the pharma lobbying group, every single year for the last couple decades it has become more inefficient and harder and harder to develop new therapies," she says.

"The reason we started this company is because we believe that genetic information will be the foundation for the next way we deliver health care."

Even though 23andMe is rapidly becoming a storehouse for genetic information, Wojcicki is cognizant of the fear potential clients may have in all of their genomes being on file.

"We do do a lot of partnerships with pharma companies because we feel like that’s in the best interest of the consumer in order to make meaningful discoveries from the data."

Even though she and the company take that responsibility seriously, 23andMe still gives patients the option to leave the service at any time and subsequently have all of their information deleted. And although there are some risks in a business based around people's personal bodily information, Wojcicki remains faithful in the benefits of people being made aware of their genetic information.

"If we can actually decrease the failure rate from nine out of 10 drugs failing in clinical trials and instead have seven out of 10 instead failing, that is a major victory for drug discovery and for people having better therapy," she says.

23andMe believes genetics are the future of health

Mon, 2015-07-06 14:05

Genetic data has a lot of medical implications for everyone. Genes can explain your current state of health, your ancestry, even what sorts of diseases you may be more susceptible to.

The DNA service company 23andMe wants to collect all of that valuable data and use it to tell customers more about their health.

"I really believe that we’re trying to do things that democratize health care for people," says Anne Wojcicki, 23andMe CEO.

For $100 and a bit of saliva, anyone can put their information on file with 23andMe and potentially be open to any number of medical advances and studies.

"What other health care product of this level of complexity can you say you can get for $100?" Wojcicki says.

Wojcicki believes that the health care system in the U.S. is fundamentally broken.

"If you look at the history of drug discovery, and you look at the pharma lobbying group, every single year for the last couple decades it has become more inefficient and harder and harder to develop new therapies," she says.

"The reason we started this company is because we believe that genetic information will be the foundation for the next way we deliver health care."

Even though 23andMe is rapidly becoming a storehouse for genetic information, Wojcicki is cognizant of the fear potential clients may have in all of their genomes being on file.

"We do do a lot of partnerships with pharma companies because we feel like that’s in the best interest of the consumer in order to make meaningful discoveries from the data."

Even though she and the company take that responsibility seriously, 23andMe still gives patients the option to leave the service at any time and subsequently have all of their information deleted. And although there are some risks in a business based around people's personal bodily information, Wojcicki remains faithful in the benefits of people being made aware of their genetic information.

"If we can actually decrease the failure rate from nine out of 10 drugs failing in clinical trials and instead have seven out of 10 instead failing, that is a major victory for drug discovery and for people having better therapy," she says.

Greece: currency in unchartered waters

Mon, 2015-07-06 13:25

Behind all the talks and threats and proposals in the Greek crisis is the fear, or perhaps for some the hope, that Greece will disappear from the euro and start its own currency. Such a move would be unprecedented, so there’s little to draw upon to predict what such an exit might actually look like. But there’s some parallel in a historical event that for many people conjures up little more than dim memories from a Western Civilization classroom, if they evoke anything all: the breakup of the Habsburg Empire.

“It had a single market and a single currency from the 1860s until 1914, so this is actually a good model,” says Stephen Gross, an economic historian at New York University who looks at what modern Europe can learn from the empire.

It’s far from a perfect parallel, but Gross thinks it’s an example worth studying. He argues that the Habsburg Empire experience shows that the transition to a reasonably stable new currency could take far longer than policymakers expect.

As for what Greece may do if it comes to exiting the euro, a first step is already happening: strict controls on Greek bank withdrawals. But even with current limits, Greece could be unable to pay its bills, which means state workers and retirees wouldn’t get their regular checks, but rather IOUs.

“This will effectively be a new currency,” Gross explains.

Thinking of a printed IOU as currency may sound like a far-fetched idea, but as euros disappear, holders of the IOUs will be forced to use them to get daily necessities.

“It becomes a currency once you say, ‘OK if I receive an IOU from the government, because I’m a pensioner, then I can take it to the grocery store and exchange it for groceries,’ ” says Martin Baily, senior fellow at the Brookings Institution and a former chair of the White House’s Council of Economic Advisers.

But that still isn’t tangible money, just a quasi-currency. To really bring drachmas back from the dead, Greece must eventually print real notes: drachmas or something else. That could happen in a wealthy Athens suburb, where there’s a stately building with a lovely mountain backdrop. It belongs to the Bank of Greece and prints euros now. But it printed drachmas before and could potentially do so again.

If Greece expects the drachma to work, however, the country will need to make significant changes. 

“The Greeks are going to need internal reforms; they’re going to need political and financial transparency within their state; they’re going to need accounting standards,” says Jacob Soll, a history and accounting professor at the University of Southern California.

Paper money will likely be less of a concern than how the new currency is exchanged for euros, which is what regular Greeks have their bank accounts in. Their money could be frozen until it is converted to the new currency. And that conversion may not happen at a market rate.

“You’re likely to get something less, what would be typically called the official rate,” says Carmen Reinhart, international finance professor at Harvard’s John F. Kennedy School of Government.

That means Greeks could see their savings devalued, and life would become much more difficult, perhaps for a very long time. That’s why the prospect of a Greek exit, still hypothetical, is taken lightly by no one.

Everything you ever wanted to know about recycling

Mon, 2015-07-06 13:12

“I’ve Always Wondered” has been inundated with questions about recycling. Recycling apparently both fascinates and haunts many of you, with its suspicious and menacing claim that it’s both “good for the environment” and “makes sense.”  Well, fear not, gentle listener.  Marketplace is here with answers. 

What if you are a bad recycler and don't wash out your plastic chocolate cheesecake container?

I’m not gonna lie. It’s not pretty. 

Every few days, the vast recycling machinery at the Sims Municipal Recycling plant in Brooklyn is shut down and cleaned. In part, this is because of all the vile, putrid sludge that accumulates from flakes of dried yogurt and banana peels and whatever else we put into our recycling bins because we are either lazy or overly optimistic about the power of recycling. 

Perhaps more an issue is all the nonrecyclable stuff that gets put into a recycling bin (see below for a list of things recyclers have found). Worse than any chocolate cheesecake are things like plastic bags or shredded paper — they wreak havoc on recycling separation machines (normal paper is OK if the plant is designed to handle paper; and not all are). 

The dirtier or more contaminated recyclable material is with nonrecyclables, the more likely the recycling plant will just throw all of it into a landfill. Nonrecyclable stuff also reduces the efficiency of the separation, which makes recycling less profitable.

In single-stream recycling, where all the recyclables are placed in the same bin, are the bags of mixed stuff sorted by people or machine?

Mostly by machine, with some human help.

At the ReCommunity Recycling plant in Beacon, New York, actual human beings scan conveyor belts loaded with recyclables before they go through various sorting machines.  The humans are on the lookout for things that can damage the recycling machines or things that they would prefer to not recycle. The gems they find include:

  • Guns
  • A 6-foot section of telephone pole
  • A bowling ball
  • A bale of marijuana
  • A grenade
  • Syringes with needles
  • Shredded paper
  • Sneakers
  • A wedding ring
  • Wedding gifts

There are also a number of ingenious machines used at most recycling plants to separate items from one another. The Sims Municipal Reycling plant has 2 miles of conveyor belt moving 1,000 tons of recyclables every day from machine to machine.

A disc screen — rotating metal discs move recyclables along and smash glass bottles as it goes. The shards fall down through the machine into a waiting conveyor belt. 

A ballistic separator — recyclables of different densities and shapes fall in different ways.  Kind of like if you were to play with a beach ball in the rain.  The rain falls to the ground, but you’re able to keep the ball in the air because it’s light and puffy. This machine plays beach ball with everything, jumbling it around. Flat things like paper and film go one way, and bulky things like containers go another. 

Giant magnets – pick up magnetic metal things.

Optical sorter — As plastic moves along a conveyor belt, it moves through a strong light.  A computer is photographing the moving bits and pieces, and identifies them based on the spectrum of light they absorb or reflect. Within fractions of a second, the computer tells air jets to puff certain plastics off the conveyor belt and into their own bin. Humans do some basic separation by hand as well. 

Eddy current separator — A lot of people don’t realize this, but metals like aluminum and copper can interact with magnets. An incredibly powerful rare earth magnet spun at 2,900 revolutions per minute will repel them. Here’s an explanation and a video on how copper and aluminum interact with strong magnets when moving.

Does recycling make economic and environmental sense when you add everything up? Has recycling reduced the number of landfills?

It usually makes economic sense, and just about always makes environmental sense. 

Environmentally it’s a no-brainer. Why dig aluminum ore out of the ground, transport it around the globe, chemically digest it and electrolyze it in furnaces, when you could just melt down some old cans? Energy savings for aluminum recycling over producing aluminum from scratch are around 95 percent. According to the EPA, recycling reduces solid waste by 49 percent, reduces net greenhouse gas emissions by 70 percent and reduces air pollutant emissions by 90 percent. 

Economically, it usually makes  sense. But  not in every case. 

Recyclables are valuable.  That’s why, for example, people steal them.  A lot. Aluminum, in the past, has gone for $2,000 per ton.  Copper has gone for $9,000 a ton.  Even paper can go for hundreds of dollars per ton. The fact that recyclables can be sold to manufacturers of bottles, clothing, carpet and cans is why recycling makes economic sense. 

Recycling doesn’t cover the cost of collection for a city like New York, but it is certainly less expensive than not recycling. It costs money to send trash to a landfill or incinerator.   New York pays 20 percent less for recycling than for dealing with its trash. The difference is not as large in certain areas of the Midwest, however, where landfill fees can be cheap.  In those instances, the savings to a city may only come from revenue sharing from the sale of the raw materials (like compacted aluminum cans, etc).

Recycling doesn’t always make economic sense, however. Or, at least, sometimes it doesn’t make enough economic sense.

There is a reason, for example, why we don’t often recycle plastic foam. It’s perfectly recyclable, and there are manufacturers who will buy condensed, melted down plastic foam to make lawn chairs. In fact, industrial recycling does happen, but in the consumer world, the cost of collecting, cleaning and consolidating plastic foam doesn’t make it worth it. So it’s rarely done.

Glass is increasingly falling into the same category as plastic foam. The money recycling plants get from selling their crushed glass (known as cullet) is significantly lower than what they can get for aluminum or plastic. The city of Harrisburg, Pennsylvania, recently decided it wasn’t worth it to recycle glass, and  to focus on more valuable recyclables like aluminum or plastics. 

Commodity prices have been falling steeply in the past year, which affects the prices recyclers can sell their metals and plastics for.  In many cases they’ve come down by half, putting many recyclers in a difficult situation, and in some cases, contributing to bankruptcies and plant closures. 

How much does it cost to recycle glass? How much energy and water does it take to turn a glass bottle back into a glass bottle? Is it worth it?

It takes 30 percent less energy and creates 50 percent less pollution to use recycled glass to make new glass than does making new glass from scratch.

Owens-Illinois, for example, is a massive glass producer. It melted 12.3 million tons of glass last year and created 40 billion containers (you can see how here).  Thirty-eight percent of that was from recycled glass, and the company is trying to increase that number to 60 percent. The reason is that recycled glass melts at a lower temperature than the mixture of sand, lime and other ingredients often used to create new glass, so it takes significantly less energy.

How some health insurers ended up as nonprofits

Mon, 2015-07-06 12:59

Blue Shield of California was stripped of its nonprofit tax-exempt status by the California Franchise Tax Board in 2014. Now, the Los Angeles Times has reported on an audit of the huge California health insurer that was used in part as the basis for denying nonprofit status. Blue Shield is contesting the decision; having to pay state taxes back to 2009 could cost the company more than $100 million.

In a June 2014 letter to the company, tax board officials wrote that “Blue Shield is not operating exclusively for the promotion of civic betterment or social welfare,” according to the Times. And part of the reason was Blue Shield’s massive cash reserves, which had swollen to more than $4 billion by last year. Consumer advocates have criticized the company, saying it should use those amassed profits to provide more free or reduced-cost health care to needy Californians. The company says it already caps profits and provides abundant charity to Californians, and that some of the accumulated cash is earmarked for a major acquisition to expand its business into the Medicaid area.

Michael Sparer, chair of health policy and management at Columbia University’s Mailman School of Public Health, explains the characterizes nonprofit health insurers: “They’re mission-driven, they’re going to be reinvesting any surplus they have. They’re not going to be sharing surpluses with shareholders or looking to make a large profit.”

Back in the Depression, when these statewide nonprofit health insurance plans were starting up, they achieved their social welfare mission in part by the practice of "community rating," that is, setting the same health insurance premiums for everyone in a given geographical area, regardless of health status or other demographic characteristics, like age or gender.

But Tom Baker, of the University of Pennsylvania Law School, says being nonprofit didn’t mean being a charity and operating solely for the benefit of insured policyholders.

“They’ve never been that kind of warm and friendly, small mutual-type health insurance,” Baker says. “They were set up as nonprofits as a way of justifying their monopoly power, making doctors more comfortable with the idea that they might be deciding whether to pay for things or not.”

In the current health insurance environment, nonprofits, for-profits and mutual insurers (owned by the policyholders) face financial volatility, public policy uncertainty and rapid change in business conditions. A wave of corporate consolidation is afoot, says Steve Zaharuk, senior vice president at Moody’s Investors Service, as insurers try to increase profits while reducing administrative and provider costs. He says nonprofits like Blue Shield of California may have to merge and acquire as well to increase and broaden their footprint, compete for more contracts with doctors and hospitals, and streamline operations.

“It could become more difficult for the local Blue Cross Blue Shield plans and the local regional companies to compete with these national companies,” Zaharuk says .

Jill Horwitz at UCLA School of Law says nonprofits like Blue Shield of California seem to be hoarding cash for business reasons that don’t necessarily violate their nonprofit mission.

“I would have been more concerned if we saw a lot of spending on atriums and big bonuses and offices and things like that,” she says. “But what we’re seeing is cash in the bank being held, and that doesn’t strike me, on its face, as such a bad thing.”

Those cash surpluses might be used to buy other health care companies, keep premiums on an even keel and have reserves for a rainy day.

What the China stock market roller coaster means

Mon, 2015-07-06 12:59

The roller coaster that is the Shanghai stock market bounced back up a bit today, after a 25 percent plunge over the last two weeks. The government suspended initial public offerings to cap the supply of stocks for investors. And it persuaded 21 brokerage firms to pledge to buy stocks.

“All the large brokerages are directly controlled by the Communist Party,” says Andy Rothman, Matthews Asia investment strategist. “So when the party says ‘We’d like you to take the following steps to try and put a floor under the market,’ the brokers say, ‘Yes sir.’ ”

Which suggests China’s market reflects Beijing helicopter-parenting much more than the actual economy. One is not the other.

“Over the last six years,” Rothman says, “China’s had the best-performing economy in the world and one of the weakest stock markets in the world.”

A market that might make investors nervous about contagion. But mainland stocks are like a hospital room with plastic curtains to contain germs.

“There’s certainly not enough foreigners that have investments in the equity market there,” says Tim Mulholland of the advisory firm China-American Capital. “It’s a closed-type market. A Chinese stock market selloff isn’t going to really mean anything in the global scheme.”

Still, one long-term concern is that the state will continue to manipulate the stock market up and down, which could have negative consequences for broader economic growth.

“Volatility in the financial markets creates uncertainty,” says Yukon Huang, former China country director for the World Bank, now of the Carnegie Endowment for International Peace. “Uncertainty has a very negative impact upon investment. And investment is essentially the longer-term determinant of how rapidly a country or economy like China can grow.”

Germany's reactions to Greek referendum

Mon, 2015-07-06 12:59

Greece's voters returned a shocking 61 percent no in a historic referendum, rejecting a bailout proposal from the country's international lenders on Sunday. European leaders are now waiting to see if Greece will leave the eurozone.

The BBC’s Theo Leggett is on the field in Frankfurt, Germany, where reactions have varied.

Leggett says people in Frankfurt express a fair amount of sympathy for the people of Greece, but not for the Greek politicians.

"They know it cannot be pleasant to be limited to withdrawing about thirty bucks a day, not being able to buy important items," Leggett says. "But nevertheless most of the people I’ve been speaking to are pretty firm that 'enough is enough,' that German taxpayers should not be having to pay for the mistakes Greek governments have made in the past."

Click on the media player above to hear more.

 

Greek Finance Minister resigns amid fallout from vote

Mon, 2015-07-06 12:55

The fallout from Greece's vote on Sunday has continued into Monday morning, with Greek Finance Minister Yanis Varoufakis stepping down from his position. Here's an update on the situation in Greece:

  • On Sunday, Greeks took to the polls to vote on a bailout deal, deciding against European austerity. As the New York Times reports, although the results may mean an even tougher road ahead for negotiations, it certainly solidifies Greeks' confidence in Prime Minister Alexis Tsipras.
  • Monday morning, Greek Finance Minister Yanis Varoufakis announced his resignation, citing reports that the Eurogroup had expressed they would prefer not to negotiate with him any longer. As the Wall Street Journal reports, Varoufakis became known for a confrontational style that did not win him many allies in negotiations.
  • Banks in Greece remain closed Monday. "The banks are the first fire that has to be put out. They're absolutely depleted of cash. They do not have a source of liquidity," says reporter John Psaropoulos of The New Athenian.
  • The BBC reports that eurozone leaders have called an emergency meeting for Tuesday.
  • TL;DR: Is Greece solvent yet? Nope.

Click the media player above to hear reporter John Psaropoulos' update on the situation in Greece from Athens.

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