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Why it makes economic sense to send a letter for $0.49

Mon, 2014-04-21 13:52
Monday, April 21, 2014 - 16:30 David Weinberg/Marketplace

Postal worker Dalyncia Stevenson at the sorting facility in Los Angeles, where she took our letter and sent it on its way to a small island in the South Pacific.

Every other week we try to answer some of the questions that you've submitted for our series, I’ve Always Wondered. This week, we are going to answer a question from listener Mark Robbins: "How is it possible that for less than the price of a cup of coffee, you can send a letter halfway across the globe to a remote island in the South Pacific?" 

Marketplace reporter David Weinberg wanted to know, too. And thus his week-long experiment began: 

Robbins sent us his question via email. He chose, for his example, the island of Tanna, about a thousand miles West of Australia. I found an address for a bar on the island, and before I sent the letter, I called Mark to ask he had anything he'd like to say to the people of Tanna.

“Hello from chilly northeastern Pennsylvania. Wish I were there.”

I dropped the letter in the mailbox with a $1.15 global forever stamp. From there, it was taken to the main Los Angeles sorting facility, a 1 million square foot building  where I met Ken Starks, the acting manager of plant support operations.

And herein lies the answer to Mark’s question: The reason you can send a letter across the ocean for less than the price of a cup of coffee is because of the staggering economy of scale of the USPS.

Take, for example this one machine:

This delivery bar code sorting machine processes 30,000-40,000 pieces of mail per hour. The minimum amount of postage required to send a letter is $0.49. So nearly every day, this one machine processes at least $20,000 in postage revenue per hour. And this is just one of several machines in a single sorting facility.

The USPS handles half of all the mail in the world. In 2013 the postal service generated $65.2 billion in revenue. It has more retail locations in the U.S. than McDonald's, Starbucks, and Wal-Mart combined. It's the second largest employer in the U.S. behind Wal-Mart, and the median salary of a U.S. postal worker is about $53,000.

So for every letter that travels across the globe, there are millions that travel much shorter distances. They subsidize the cost of international letters.

The story of this letter's journey will continue throughout the week.

Marketplace for Monday April 21, 2014

Answers to the big questions behind small, simple, ubiquitous things in the world of business.

by David WeinbergPodcast Title Why it makes economic sense to send a letter for $0.49Story Type FeatureSyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Fertilizer for farmers competes with oil for rail cars

Mon, 2014-04-21 13:37

It’s just about time for spring planting season in the Upper Midwest. But to plant, farmers need fertilizer, and the trains that ship fertilizer are busy. Shipments of crude oil have squeezed out other freight and now the federal government has stepped in, ordering two railroads to make room. 

To farmers waiting for their fertilizer, the problem seems obvious. Roger Johnson, president of the National Farmer’s Union, says agricultural shipments are way behind: "What I’m hearing from farmers back home is that these oil cars are moving just like clockwork. And there is very much the sentiment: They have been given some sort of priority treatment by the railroads.”

The government has ordered two railroads, BNSF and Canadian Pacific, to ensure the delivery of fertilizer for spring planting. A BNSF spokesperson said in an interview that the railroad is not favoring oil over fertilizer. Traffic is up, but consumer products are the growth leader, not crude oil. BNSF does say it sets rates individually, according to the market.  Canadian Pacific says it also sets rates individually, depending on the type of freight. 

“It’s called differential pricing,"  says Steve Sharp,  president of Consumers United for Rail Equity. "The railroads charge different prices per car or per pound or whatever, depending on the commodity and what they think the market will bear.”

Sharp notes that  power companies trying to get shipments of coal are having problems, too. He says, because a lot of the shipping contracts are private, it’s hard to compare prices for shipping oil via train with other commodities.

“That’s one of the issues as shippers we have," he says, "we don’t have access to a lot of good current data to really tell where we are.”

The National Surface Transportation Board, which issued the order, says it’s tracking the railroads’ fertilizer shipments. Their first reports are due this Friday.

Why it makes economic sense to send a letter for $0.49

Mon, 2014-04-21 13:30

Every other week we try to answer some of the questions that you've submitted for our series, I’ve Always Wondered. This week, we are going to answer a question from listener Mark Robbins: "How is it possible that for less than the price of a cup of coffee, you can send a letter halfway across the globe to a remote island in the South Pacific?" 

Marketplace reporter David Weinberg wanted to know, too. And thus his week-long experiment began: 

Monday

Tuesday

 

Monday

Robbins sent us his question via email. He chose, for his example, the island of Tanna, about a thousand miles West of Australia. I found an address for a bar on the island, and before I sent the letter, I called Mark to ask he had anything he'd like to say to the people of Tanna.

“Hello from chilly northeastern Pennsylvania. Wish I were there.”

I dropped the letter in the mailbox with a $1.15 global forever stamp. From there, it was taken to the main Los Angeles sorting facility, a 1 million square foot building  where I met Ken Starks, the acting manager of plant support operations.

And herein lies the answer to Mark’s question: The reason you can send a letter across the ocean for less than the price of a cup of coffee is because of the staggering economy of scale of the USPS.

Take, for example this one machine:

This delivery bar code sorting machine processes 30,000-40,000 pieces of mail per hour. The minimum amount of postage required to send a letter is $0.49. So nearly every day, this one machine processes at least $20,000 in postage revenue per hour. And this is just one of several machines in a single sorting facility.

The USPS handles half of all the mail in the world. In 2013 the postal service generated $65.2 billion in revenue. It has more retail locations in the U.S. than McDonald's, Starbucks, and Wal-Mart combined. It's the second largest employer in the U.S. behind Wal-Mart, and the median salary of a U.S. postal worker is about $53,000.

So for every letter that travels across the globe, there are millions that travel much shorter distances. They subsidize the cost of international letters.

Tuesday

To send our letter to the island of Tanna, I purchased a global forever stamp for $1.15. By the time it arrives it will have traveled on multiple on-the-ground vehicles and airplanes in multiple countries.

This is what the inside of a postal truck looks like.

David Weinberg/Marketplace

So how does that $1.15 get divided among all nations?

Step 1: Receive Payment for Postage

The origin country of the letter gets to keep 100 percent of the postage revenue. For now…

Step 2: Weight it

The island of Tanna is in the country of Vanuatu, which is one of the 192 member countries of the Universal Postal Union. At the end of the year, every member of the UPU adds up the weight of all the mail it delivered for other countries.

Step 3: Pay Your Dues

The UPU has established a complicated system of terminal dues that countries pay each other for mail delivered outside its borders. So if the USPS delivered 2,000 kilograms of mail from Vanautu in 2013, and Vanautu only delivered 1,000 kilograms U.S. mail from the U.S., then Vanautu will have to pay terminal dues to the U.S. How does that money get divided up among the multiple countries that handle the letter? 

Google Maps

Short answer: It doesn’t get divided for each individual piece of mail. Instead, countries pay terminal dues based on the overall weight of mail shipped between them.

These rates are decided by The Universal Postal Union.

The story of this letter's journey will continue throughout the week.

Prefab apartment buildings on the rise

Mon, 2014-04-21 13:13

A new apartment building called The Stack is about to open in the Inwood section of Manhattan. By design, it looks like a collection of staggered Lego blocks. On the inside, it’s like any other modern rental building in New York. It has a sleek, simple design. 

What’s different is that these apartments were not built here in Manhattan, but almost entirely somewhere else. 

“The paint, the lighting, the kitchen cabinets, the appliances, the bathroom tile, fixtures, mirror, all of that is done in the factory,” says The Stack’s architect, Tom Gluck, with the firm GLUCK+.

Gluck has been an architect for years, but this is the first time his firm has built what’s called a modular building. 

Each apartment comes out of a factory from a company, like Capsys in the Brooklyn Navy Yard. It looks like an auto plant, complete with assembly line run on a track in the ground. 

“Where we’re building pieces of building like you’d build a car in a factory. You get that repetition, that precision," says Tom O’Hara, director of business development at Capsys.

On one end of the plant, a team is joining steel beams to make the skeleton of a new apartment. On the other end, a crew is putting the finishing touches on a unit. One guy is tiling the bathroom. You could cook in this kitchen. There’s even a thermostat on the wall already. The apartments are so close to finished that they look like you could move in immediately, if they weren’t sitting on a factory floor.

An apartment module nearing completion at Capsys. It will soon be trucked to the building site and hoisted into place. (Photo: Dan Bobkoff)

But soon, this entire apartment will be put on a flatbed, trucked to the Bronx, then hoisted on top of all the other modular apartments. When the building’s done, you won’t even know it was built this way. 

There are many reasons proponents like O’Hara think modular construction is better: it’s built inside, away from weather and dirt. It’s faster because you can build the foundation and the building at the same time. There’s much less wasted material. And yet, while it’s popular in Europe, modular construction in the U.S. remains a rounding error, accounting for just a tiny percentage of new home and multifamily construction. 

“I think a lot of people really have misconceptions about the modular business,” O’Hara says.  “I think they feel somehow that there’s substandard construction in the factory.” 

He says most people think modular means mobile homes or boring, blocky buildings. To him, it just means it’s built better. 

“Why would I want my toaster built by a guy sitting on a bench with a ten snip banging things together. I want it out of a factory! Why shouldn’t the building come out of a factory?” O’Hara says. 

Modular has been seen as the future before, and yet never caught on beyond certain sectors like college dorms and hotels. 

But nearly everyone I talked to thinks this is the moment that changes.

“A lot of it truthfully has to do with this building that we’re standing in front of,” says Jim Garrison, an architect and professor at the Pratt Institute. We’re behind the new Barclays Center arena in Brooklyn, looking at what’ll soon be the tallest modular building: 32 stories of apartments. 

It’s funded by a big name developer. Garrison says it’s the biggest example that modular is possible, practical, and not necessarily cookie cutter. 

“We now have opportunities to build very interesting buildings using these systems. And, people are listening to the benefits that come with it,” Garrison says. 

That’s not to say modular doesn’t have downsides. Because it’s made of boxes, you end up with walls against walls, taking up valuable square footage in the building. Designers have to decide everything on the front end. But more developers are attracted to modular’s faster, and sometimes cheaper construction. And, with new projects in the works, maybe this time is different.

President Obama travels east, still pledging a 'pivot'

Mon, 2014-04-21 13:11

President Barack Obama leaves on a diplomatic trip to Asia on Wednesday. First stop, Japan. Then, on to other allies in the region—South Korea, the Phillippines and Malaysia. He’ll be talking economics, and trade, and cooperation—to try to signal to these Pacific Rim allies that the U.S. is serious about its stated aim to ‘pivot’ toward them. Analysts say the President needs to convince them that the U.S. will back them up in their regional competition with rivals like China, as tensions have heated up over conflicts in the East China Sea.

For decades, America focused primarily on allies and enemies across the Atlantic. But, more and more U.S. trade and investment are happening across the Pacific. Stephen Biddle teaches international affairs at George Washington University, and is a fellow at the Council on Foreign Relations. He says so far, the shift of military capability toward the Western Pacific has been minimal.

“2,500 U.S. Marines, for example, were sent to bases in Australia,” he says. There are more ships going to Japan and Singapore, and ultimately the U.S. plans to put 60 percent of naval and air forces into the Pacific—up from 50 percent today. Key Pacific allies—Japan, South Korea, and Australia—plan to purchase American-made F-35 fighter jets, which will allow more cooperation and joint operations in the area.

“There’s going to be a different future budgetary fate for the parts of the U.S. military that are relatively better suited to the Pacific,” Biddle explains. He says Navy and Air Force units will be needed to cross the long distances, and to cover the large expanses of ocean in the Pacific Rim. Army and Marine Corps units, which have been deployed heavily in Europe and the Middle East, will be less useful there, and will likely be cut more as a result.

Right now, defense spending is not going up—due to the drawdown from Middle East wars, and Congress’s sequester budget cuts.

“In terms of dollars, frankly, we have not seen much of a shift in the way the Department of Defense has allocated its resources toward the kind of capabilities that I think might be needed in the future in the Pacific region,” says former Air Force official Mark Gunzinger, now a senior fellow at the Center for Strategic and Budgetary Assessments.

Gunzinger lists potential threats, starting with China, which has been boosting defense spending by double-digits: “Precision-guided anti-ship cruise missiles, advanced air defenses, undersea warfare systems, attack submarines . . .” Gunzinger says crucial shipping lanes, and strategic access to the area for the U.S. and its allies, could be blocked by these and other weapons that China is developing.

But defense analyst Mark Jacobson at the Truman National Security Project points out that the U.S. does not need to meet the security challenges in the region alone; nor are U.S. allies fatigued and depleted, as America’s European allies were at the end of World War II, when the current projection of U.S. power into the Atlantic sphere of influence was implemented.

“You’re talking about some of the world’s strongest economies,” says Jacobson. “With their power comes some responsibility for their own defense. And I don’t think this is lost on the South Koreans, the Australians, or the Japanese, at all.”

If life gives you eggs, make egg salad

Mon, 2014-04-21 12:59
Monday, April 21, 2014 - 13:33 David Silverman/Getty Images

Freshly-laid eggs being collected for delivery to the local packing plant.

From the Marketplace Datebook, here's a look at what's coming up April 22, 2014 :

  • President Obama is scheduled to visit the community of Oso in Washington State where last month's devastating mudslide occurred.
  • The National Association of Realtors reports on sales of existing homes for March.
  • It's director John Waters' birthday. He'll be 68.
  • A toast to the planet we live on. Tomorrow is Earth Day.
  • And speaking of toast, do you have a lot of eggs to eat? Maybe you dyed dozens of them for Easter. Then you may be among those observing Egg Salad Week.
Marketplace for Monday April 21, 2014by Michelle PhilippePodcast Title If life gives you eggs, make egg saladSyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Don't drink coffee as soon as you wake up

Mon, 2014-04-21 12:38
Monday, April 21, 2014 - 15:35 FRANCOIS GUILLOT/AFP/Getty Images

Don't drink coffee first thing in the morning for maximum caffeination.

You’re probably going about your workday all wrong – if you’re trying to reach peak productivity, that is. Quartz’s Rachel Feltman gives some suggestions about how to optimize your workday:

1.    Don’t drink coffee when you first wake up in the morning.

“For the first couple of hours after waking up, your cortisol levels are going to start to peak anyway and that’s what really perks you up in the morning,” says Feltman. It’s a waste of the caffeine – better to wait until that initial morning buzz wears off, between 9:30 and 11 a.m.

2.    Send emails that don’t need to be answered right away at 6 a.m.

“6 a.m. emails tend to have higher opening rates than other times of the day,” says Feltman. However, she says, it may be a good time for reading the email, but not necessarily replying. She suggests sending emails that require more thought at 6 a.m., giving the receiver time to respond later in the morning.

3.    Brush your teeth at 2:30 p.m.

Feltman admits she hasn’t started doing this one yet, but the benefits are two-fold. You’re less likely to snack if you’ve just brushed your teeth, and it’s good to have breaks in the middle of the afternoon slog. “It’s a nice little interlude,” she says.

Read the complete guide to an optimized workday at Quartz.

Marketplace for Monday April 21, 2014Interview by Kai RyssdalPodcast Title Scheduling the ideal workdayStory Type InterviewSyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Don't drink coffee as soon as you wake up

Mon, 2014-04-21 12:35

You’re probably going about your workday all wrong – if you’re trying to reach peak productivity, that is. Quartz’s Rachel Feltman gives some suggestions about how to optimize your workday:

1.    Don’t drink coffee when you first wake up in the morning.

“For the first couple of hours after waking up, your cortisol levels are going to start to peak anyway and that’s what really perks you up in the morning,” says Feltman. It’s a waste of the caffeine – better to wait until that initial morning buzz wears off, between 9:30 and 11 a.m.

2.    Send emails that don’t need to be answered right away at 6 a.m.

“6 a.m. emails tend to have higher opening rates than other times of the day,” says Feltman. However, she says, it may be a good time for reading the email, but not necessarily replying. She suggests sending emails that require more thought at 6 a.m., giving the receiver time to respond later in the morning.

3.    Brush your teeth at 2:30 p.m.

Feltman admits she hasn’t started doing this one yet, but the benefits are two-fold. You’re less likely to snack if you’ve just brushed your teeth, and it’s good to have breaks in the middle of the afternoon slog. “It’s a nice little interlude,” she says.

Read the complete guide to an optimized workday at Quartz.

The poetry of 'bankrupt' and 'nest egg'

Mon, 2014-04-21 11:05

As much as we talk about the financial markets, how often do we really stop to think about the words we’re using? Or how poetic they can be?

Mark Forsyth, author of “The Etymologicon: A Circular Stroll Through the Hidden Connections of the English Language” pondered the words we use to talk about the financial markets recently for The New York Times. Here’s one excerpt from his piece, which he read for us today:

"Sometimes, of course, bankers would run out of money, and when they did — in an age before the invention of TARP, bailouts and Ben Bernanke — their bench would be ceremonially smashed in front of them. It was then a 'broken bench' or 'banca rotta' or 'bankrupt.' Though trading terminals may be sturdy things, this is the sort of personalized and decisive action that I’m sure we all hope to see from Janet Yellen and her ax."

Read more of Mark Forsyth’s essay here, and listen to his voice above.

If life gives you eggs, make egg salad

Mon, 2014-04-21 10:33

From the Marketplace Datebook, here's a look at what's coming up April 22, 2014 :

  • President Obama is scheduled to visit the community of Oso in Washington State where last month's devastating mudslide occurred.
  • The National Association of Realtors reports on sales of existing homes for March.
  • It's director John Waters' birthday. He'll be 68.
  • A toast to the planet we live on. Tomorrow is Earth Day.
  • And speaking of toast, do you have a lot of eggs to eat? Maybe you dyed dozens of them for Easter. Then you may be among those observing Egg Salad Week.

The costs of climbing Mount Everest

Mon, 2014-04-21 10:09
Monday, April 21, 2014 - 18:00 Buddhabir RAI/AFP/Getty Images

Nepalese rescue team members rescue a survivor of an avalanche on Mount Everest on April 18, 2014

The deadliest avalanche in Mount Everest history is leading Sherpas in Nepal to consider a labor strike. The boycott would protest the amount of money provided by the Nepalese government to families of the deceased. Thirteen Sherpas were killed and more are presumed dead after last Friday's fatal avalanche. The government currently provides about $400 per family and the strike would aim to increase that amount to $10,000. 

Sherpa guides have one of the most dangerous jobs in the world, but many Sherpas are attracted by the relatively high pay of assisting climbers up Mount Everest. Sherpas make at least $2,000 per climbing season, considerably more than the median income of Nepal, which comes in at around $540 per year. Elite Sherpas can make as much as $4,000 - $5,000 in just two months. By comparison, Western guides make as much as $50,000, plus tips.

Alpine Ascents is a company the leads Everest climbs for $65,000 per person. Five of the Sherpas who died in last week's avalanche were employed by that company. Director of Programs Gordon Janow understands the importance of the Sherpa role in the business. "They're setting up the camps, carrying oxygen, walking side-by-side one-on-one," Janow says. Without Sherpas, he continues, "it'd be an entirely different style of expedition."

Perhaps even more difficult than the task of accompanying climbers to the summit, Sherpas also carry supplies and equipment on the climb. Legally, they are only supposed to carry 8 to 10 kilograms (17 to 22 pounds), but willingness to carry double that can also lead to double the earnings

 Right now, it's the start of climbing seasson and business is booming.

"You know there's a lot of money in the hundreds of thousands, if not millions of dollars that changes hands on Everest every year," says Nick Heil, editorial director of OutsideOnline.com and author of "Dark Summit," a book about the commercialization of climbing the Earth's highest mountain. "Only a small percentage of that goes into the hands and pockets and accounts of the work force that basically enables all of this to take place."

Sherpa's wages are not a part of the proposed boycott, but Janow says they're also worth discussing. However, he acknowledges it's a balancing act. If compensation rises too much, it could damage Nepal's climbing industry altogether. 

"Like anything else, does it push the cost of it up so people aren't going?" Janow asks.

Sherpas face more than just the fear of death. Being a Sherpa means frequent exposure to injuries, yet there is little support for those who become disabled on the job. The Sherpas are also asking the government to provide $10,000 in compensation for guides who can no longer work in mountaineering due to their injuries.

Marketplace for Monday April 21, 2014by Tobin Low and Krissy ClarkPodcast Title The human cost of climbing Mount EverestStory Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

The poetry of 'bankrupt' and 'nest egg'

Mon, 2014-04-21 10:07
Monday, April 21, 2014 - 14:05 Wikimedia Commons

As much as we talk about the financial markets, how often do we really stop to think about the words we’re using? Or how poetic they can be?

Mark Forsyth, author of “The Etymologicon: A Circular Stroll Through the Hidden Connections of the English Language” pondered the words we use to talk about the financial markets recently for The New York Times. Here’s one excerpt from his piece, which he read for us today:

"Sometimes, of course, bankers would run out of money, and when they did — in an age before the invention of TARP, bailouts and Ben Bernanke — their bench would be ceremonially smashed in front of them. It was then a 'broken bench' or 'banca rotta' or 'bankrupt.' Though trading terminals may be sturdy things, this is the sort of personalized and decisive action that I’m sure we all hope to see from Janet Yellen and her ax."

Read more of Mark Forsyth’s essay here, and listen to his voice above.

Marketplace for Monday April 21, 2014 The Etymologicon: A Circular Stroll Through the Hidden Connections of the English Language Author: Mark Forsyth Publisher: Berkley Trade (2012) Binding: Paperback, 304 pages by Mark ForsythPodcast Title The poetry of 'bankrupt' and 'nest egg'Story Type CommentarySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Fertilizer for farmers competes with oil for rail cars

Mon, 2014-04-21 09:46
Monday, April 21, 2014 - 16:37 Tom Pennington/Getty Images

A locomotive sits idle on the tracks near the Burlington Northern Santa Fe Railway Intermodal Facility.

It’s just about time for spring planting season in the Upper Midwest. But to plant, farmers need fertilizer, and the trains that ship fertilizer are busy. Shipments of crude oil have squeezed out other freight and now the federal government has stepped in, ordering two railroads to make room. 

To farmers waiting for their fertilizer, the problem seems obvious. Roger Johnson, president of the National Farmer’s Union, says agricultural shipments are way behind: "What I’m hearing from farmers back home is that these oil cars are moving just like clockwork. And there is very much the sentiment: They have been given some sort of priority treatment by the railroads.”

The government has ordered two railroads, BNSF and Canadian Pacific, to ensure the delivery of fertilizer for spring planting. A BNSF spokesperson said in an interview that the railroad is not favoring oil over fertilizer. Traffic is up, but consumer products are the growth leader, not crude oil. BNSF does say it sets rates individually, according to the market.  Canadian Pacific says it also sets rates individually, depending on the type of freight. 

“It’s called differential pricing,"  says Steve Sharp,  president of Consumers United for Rail Equity. "The railroads charge different prices per car or per pound or whatever, depending on the commodity and what they think the market will bear.”

Sharp notes that  power companies trying to get shipments of coal are having problems, too. He says, because a lot of the shipping contracts are private, it’s hard to compare prices for shipping oil via train with other commodities.

“That’s one of the issues as shippers we have," he says, "we don’t have access to a lot of good current data to really tell where we are.”

The National Surface Transportation Board, which issued the order, says it’s tracking the railroads’ fertilizer shipments. Their first reports are due this Friday.

Marketplace for Monday April 21, 2014by Sally HershipsPodcast Title Fertilizer for farmers competes with oil for rail carsStory Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

President Obama travels east, still pledging a 'pivot'

Mon, 2014-04-21 09:29
Monday, April 21, 2014 - 16:11 Mandy Cheng/AFP/GettyImages

Dozens of Taiwanese fishing boats.

President Barack Obama leaves on a diplomatic trip to Asia on Wednesday. First stop, Japan. Then, on to other allies in the region—South Korea, the Phillippines and Malaysia. He’ll be talking economics, and trade, and cooperation—to try to signal to these Pacific Rim allies that the U.S. is serious about its stated aim to ‘pivot’ toward them. Analysts say the President needs to convince them that the U.S. will back them up in their regional competition with rivals like China, as tensions have heated up over conflicts in the East China Sea.

For decades, America focused primarily on allies and enemies across the Atlantic. But, more and more U.S. trade and investment are happening across the Pacific. Stephen Biddle teaches international affairs at George Washington University, and is a fellow at the Council on Foreign Relations. He says so far, the shift of military capability toward the Western Pacific has been minimal.

“2,500 U.S. Marines, for example, were sent to bases in Australia,” he says. There are more ships going to Japan and Singapore, and ultimately the U.S. plans to put 60 percent of naval and air forces into the Pacific—up from 50 percent today. Key Pacific allies—Japan, South Korea, and Australia—plan to purchase American-made F-35 fighter jets, which will allow more cooperation and joint operations in the area.

“There’s going to be a different future budgetary fate for the parts of the U.S. military that are relatively better suited to the Pacific,” Biddle explains. He says Navy and Air Force units will be needed to cross the long distances, and to cover the large expanses of ocean in the Pacific Rim. Army and Marine Corps units, which have been deployed heavily in Europe and the Middle East, will be less useful there, and will likely be cut more as a result.

Right now, defense spending is not going up—due to the drawdown from Middle East wars, and Congress’s sequester budget cuts.

“In terms of dollars, frankly, we have not seen much of a shift in the way the Department of Defense has allocated its resources toward the kind of capabilities that I think might be needed in the future in the Pacific region,” says former Air Force official Mark Gunzinger, now a senior fellow at the Center for Strategic and Budgetary Assessments.

Gunzinger lists potential threats, starting with China, which has been boosting defense spending by double-digits: “Precision-guided anti-ship cruise missiles, advanced air defenses, undersea warfare systems, attack submarines . . .” Gunzinger says crucial shipping lanes, and strategic access to the area for the U.S. and its allies, could be blocked by these and other weapons that China is developing.

But defense analyst Mark Jacobson at the Truman National Security Project points out that the U.S. does not need to meet the security challenges in the region alone; nor are U.S. allies fatigued and depleted, as America’s European allies were at the end of World War II, when the current projection of U.S. power into the Atlantic sphere of influence was implemented.

“You’re talking about some of the world’s strongest economies,” says Jacobson. “With their power comes some responsibility for their own defense. And I don’t think this is lost on the South Koreans, the Australians, or the Japanese, at all.”

Marketplace for Monday April 21, 2014by Mitchell HartmanPodcast Title Following The Money – A Real Pivot Or Not?Story Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

PODCAST: Is Netflix the new cable?

Mon, 2014-04-21 08:52
Monday, April 21, 2014 - 09:23 Justin Sullivan/Getty Images

The Netflix headquarters in Los Gatos, California.

Two things Netflix-related happened last week. One, Netflix released a trailer for the new season of Orange is the New Black. Two, we got more evidence that Netflix is the new cable.
Data in a new report show nearly 1 in 5 homes with a Netflix or Hulu subscription has no cable.

Once upon a time, we saw Japan as a massive exporter of things like cars, televisions and electronics. That was then. Today there's word Japan's trade deficit surged 70 percent over the last year. The BBC's economics correspondent Andrew Walker's been following this and joined us to discuss.

Meanwhile, a movie you may have never heard of has quietly made a fortune at the box office. The budget of the Christian indie film "God's Not Dead" was dirt cheap relative to other films atop the box office charts. The production budget was less than $3 million, but faith-based movies have a way of making good money using unconventional marketing, all while flying far below the mainstream radar.

 

Marketplace Morning Report for Monday, April 21, 2014by David BrancaccioPodcast Title PODCAST: Is Netflix the new cable?Syndication All in onePMPApp Respond No

PODCAST: Is Netflix the new cable?

Mon, 2014-04-21 06:23

Two things Netflix-related happened last week. One, Netflix released a trailer for the new season of Orange is the New Black. Two, we got more evidence that Netflix is the new cable.
Data in a new report show nearly 1 in 5 homes with a Netflix or Hulu subscription has no cable.

Once upon a time, we saw Japan as a massive exporter of things like cars, televisions and electronics. That was then. Today there's word Japan's trade deficit surged 70 percent over the last year. The BBC's economics correspondent Andrew Walker's been following this and joined us to discuss.

Meanwhile, a movie you may have never heard of has quietly made a fortune at the box office. The budget of the Christian indie film "God's Not Dead" was dirt cheap relative to other films atop the box office charts. The production budget was less than $3 million, but faith-based movies have a way of making good money using unconventional marketing, all while flying far below the mainstream radar.

 

God quietly rules the box office

Mon, 2014-04-21 02:35

A movie you may have never heard of has quietly made a fortune at the box office. The budget of the Christian indie film "God's Not Dead" was dirt cheap relative to other films atop the box office charts.

The production budget was less than $3 million, but faith-based movies have a way of making good money using unconventional marketing, all while flying far below the mainstream radar. The film itself is fairly conventional, structured a bit like a boxing movie, except the hero and villain are a Christian student and his skeptical philosophy professor. Rather than a ring, their climactic battle is a classroom debate over whether God exists.

Most critics, including some Christians, have been dismissive of the film. But that’s had little impact on its appeal. In part, that’s because the Christian filmmakers knew their audience and how to craft a story they would respond to. As if for good measure, they also threw in cameos from a popular Christian band and even members of the “Duck Dynasty” family.

The way films like this become hits is more about what happens off screen: the film’s low-key, but highly targeted marketing got pastors around the country to endorse the film. A thumbs up from the clergy meant their congregations bought advance tickets and filled buses to go see it, some traveling long distances.

“A lot of the success has been solely because of churches that have gotten behind this movie,” says David A. R. White, who produced and starred in the film. “In fact, we had almost a million dollars in presales before we even opened.”

That set up an opening weekend shocker. The tiny film grossed $9.2 million, showing up on box office charts just behind the lavishly promoted “Divergent” and “Muppets Most Wanted.”

One number in particular caught Hollywood’s eye. The movie was in a small amount of theaters. But it was raking in nearly $11,000 per screen, well ahead of expensive blockbusters. It also performed well in small markets. Theater owners took notice and the film has expanded to more theaters ever since stunning the movie industry on its opening weekend.

“’God’s Not Dead’ is one of the films that we will point to to say that this is a great genre, faith-based films are here to stay,” says Paul Dergarabedian, senior media analyst at box office tracking firm Rentrak.

Drawing more Christians is one way Hollywood aims to get closer to its object of worship: money. The big-budget “Noah” got a mixed response. But “God’s Not Dead” has movie producers faithful and godless alike, taking notice and taking notes.

Military commissaries consider going generic

Mon, 2014-04-21 02:20

Military commissaries, grocery stores that sell name-brand products to military families basically at cost, are facing a billion-dollar budget cut over the next three years. And defense officials are considering a sea change for commissaries: allowing them to stock generic.

That’s something Patt Donaldson would like, and steering two kids and two loaded carts, he and his wife Jessica Donaldson wrap up a big shopping trip.

She’s in the Navy and they live near the Fort Belvoir Commissary in Virginia. But they do these big runs off base – at ALDI, Costco, and Wegmans. They like the produce better, and all the store brands. Generic yogurt, canned fruit and pasta run down the belt to checkout.

“The generics we can get outside of the commissary is certainly far cheaper for us than what we can get buying name brands in the commissary,” says Patt Donaldson.

This is something military spouses often debate – where to get the best deals. Commissaries offer 30 percent savings on a typical basket of brand name goods, though some products see steeper discounts than others.

Currently, commissaries can’t sell generics. But now that the Pentagon has proposed a billion dollar commissary cut over three years, commissary prices are expected to rise. That has some officials wondering if stocking generics is a solution.

It’s an option Sgt. Maj. Of the Army Raymond Chandler described at a recent Senate Armed Services Committee hearing.

“If I’m a young soldier and I choose to go to the commissary... the only thing I can buy is Green Giant or Hunt’s brands," he said. "But I can go to Walmart and get great value and that’s 30 cents less for a can of corn than it is in the commissary.”

So stock generics and everyone saves, right? Upsetting the commissary ecology has risks, says Tom Gordy, President of the Armed Forces Marketing Council, which represents military brokers who work with the name brands.

Say for example the Defense Commissary Agency went out and contracted for a store brand. Let’s call it Five Star Food. “That means the name brand products that are on the shelves will lose their shelf space, and they will also lose volume of sales,” he says.

Five Star Food would have costs, of course. To make it look as cheap as a generics in civilian groceries, Gordy says commissaries might have to mark up their remaining name brands even more.

“The manufacturers right now, most of them give best pricing to the Defense Commissary Agency,” he says.

They also provide marketing dollars. They even stock shelves. All, Gordy says, to support a military benefit. They might be less inclined to subsidize a military business.

About half of America has zero net wealth

Mon, 2014-04-21 02:17

Wealth is the value of everything you own: stocks, bonds, your home, your car -- minus your debts. And while income inequality has taken center stage in debates about the growing gap between rich and poor, what's happening with wealth paints an even more staggering picture.

The wealth share of the 0.01 percent, or the top 16,000 families in America, has skyrocketed. That tiny group now owns 12 percent of the wealth in America.

The wealth of the larger one percent  -- and even the .5 percent -- isn't rising.

These days, if you want to be among the biggest winners, says UC Berkeley researcher Gabriel Zucman, who co-wrote a new report on wealth, it helps to be in the 0.1 percent or better.

Around 50 percent of the US population, Zucman said, has zero net wealth. Their debts, effectively, equal their assets. 

Will Netflix numbers confirm cable cutting?

Mon, 2014-04-21 01:44

 Two things Netflix-related happened last week. One, Netflix released a trailer for the new season of Orange is the New Black. Two, we got more evidence that Netflix is the new cable. 

“People who use Netflix or Hulu are actually almost three times more likely to be in that cord cutter segment,” says John Fetto, senior analyst at Experian Marketing Services. Its data in a new report show nearly 1 in 5 homes with a Netflix or Hulu subscription has no cable. 

Until now, he says, those cord cutters were more hype than reality. “We had never actually seen a real uptick in our data. It was always within the margin of error,” Fetto says. 

But now, he says about six and a half percent of households have only internet service—that’s two and a half million more than in 2010. Not everyone is swayed, though. Live TV still has its perks. 

“Consumers want local news. They want live sports,” says Brett Sappington, director of research at Parks Associates. He says some TV viewers are downgrading instead of cutting their cable when they sign up for Netflix.

And, of course, Netflix wins either way.

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