What's really behind the deficit hawkishness?
MY WORKING theory of the Obama administration's recent deficit tough talk has been that the powers that be believe any new, deficit-funded stimulative measure would be impossible to get through Congress without some nod toward reining in the growing debt. Paul Krugman seems [...]
Please stop patting Ben Bernanke on the back
ALAN BLINDER opens a new Washington Post column with what I believe is the conventional wisdom:The Federal Reserve's performance in this long-running financial and economic crisis deserves separate grades. For the early crisis period, from the summer of 2007 until a [...]
Would you take investment advice from this man?
WHEN last we checked in on Bill Gross, he was writing about, um, death, before telling us all that assets have way over-performed over the past 50 years. In his latest missive, by contrast, Mr Gross is merely rewriting history:My point [...]
China's trade surplus is about more than exchange rates
IN JUST about any analysis of the persistent trade imbalance between China and America, China's currency policy is sure to feature as the principle villain. By pegging its currency to the dollar, China prevents dollar depreciation from playing its natural [...]
An unlikely explanation for high auto prices
EARLIER this week, I pointed to a surprising increase in vehicle prices in the Consumer Price Index and noted that the rise seemed to be due to Cash for Clunkers, which depleted vehicle inventories. Prices were up because there were fewer cars [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• Metropolitan budgets are on the brink of catastrophe. (New Republic) • Income and poverty in American counties, nicely mapped. (Economix)• Basic background deficit math. (Brad DeLong) • Google invents a city, puts it on Google maps. [...]
It will have to be done eventually; here's where to start
AMERICA has gotten itself into a funny place. Despite the large increase in its debt load associated with the Bush tax cuts, two significant wars, a deep recession, and large fiscal stimulus, the country has managed to avoid [...]
Of young health reform supporters and old empires
I PRESENT two outstanding graphical presentations of data, for your enjoyment. First, from the New York Times, a look at support for health care reform across two critical variables:And second, via Paul Kedrosky, a videographic on the (recent) history of empire:Bonus [...]
A warming globe is a hungrier one
THE amusing-yet-slightly-disturbing news of the day is that America is suffering a nationwide shortage of Eggo frozen waffles—a critical part of the diets of lazy breakfasters everywhere. The reason for the shortage? Production problems at key Kellogg facilities in Atlanta, Georgia, which [...]
Far from where we want to be
THE good news is, the OECD's latest economic forecast revises up sharply projected economic growth for member nations. The bad news is, that still leaves OECD economies in pretty dismal shape. The organisation is now projecting that OECD members will grow by [...]
Free exchange is trying to help find a better macro policy
I THINK Brad DeLong misread this post of mine from yesterday as a shot at him. It wasn't. I agree with him that the constraints which seem to be draping themselves across American policy options are worrisome. I [...]
A half million seeking unemployment benefits each week
IT SEEMS a little silly to report on weekly jobless claims figures for a week in which there was no change in the number, but I've been following this statistic for so long now that I feel obliged to update you. [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• Say's Law in China—is it really so crazy to build a big empty city? (Scott Sumner) • Economists on some key principles for health care legislation (but why'd they send the letter to the president?). (Economix) [...]
People forgetting how bad things were last fall
BRAD DELONG got himself a lot of links yesterday by writing that efforts to save the banking industry last fall, by eroding public trust in government, increased the odds of a replay of the Great Depression from virtually nothing to 5%. [...]
Pundits desperately want some ineffectual tough talk
TODAY, it's Martin Wolf's turn to write this column:This, then, was an opportunity for Mr Obama to tell some brutal truths. I hope he did, after careful briefing from his staff, on the following lines...The policy China apparently recommends to us would [...]
More cash now needed to buy clunkers
THIS morning we learn that consumer prices in America ticked upward by 0.3%, month-over-month, in October, with core prices rising 0.2%. That's a bit more than expected, and it stands in contrast to the producer price data released yesterday, which showed continued [...]
Americans have started to save again, hope it will last
WHAT will the global economy look like without the consumption-mad American? In response to the recession Americans are saving more and spending less. In 2009 the American personal saving rate spiked to about 6%. That's small compared to historical [...]
How to say "keep out" in futurese
MEGAN MCARDLE directs us to an interesting Slate piece on the trouble with trying to deter future excavation of dangerous nuclear waste facilities:Even if future trespassers could understand what keep and out mean when placed side by side, there's no reason to [...]
A salute to papers with boring conclusions
CRITICS of academic journals often focus on the issue of publication bias; everyone is anxious to publish a paper with a dramatic finding or unexpected result while few people care much about drawing attention to researchers who went looking for titillating findings [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• Treat sudden financial arrest with a financial defibrillator, says Ricardo Caballero. Includes a nice discussion of incentive effects. (Vox)• Steven Pinker reviews Malcolm Gladwell. Mr Gladwell responds. (New York Times, Gladwell.com)• The economics of pinball. (Cheap [...]
The rich world should show emerging markets how it's done
ED GLAESER is basically right when he says:[I]f China’s per capita carbon dioxide emissions increase by 14.4 tons and reach United States levels, then world carbon dioxide emissions will increase by about 19 billion tons or 67 percent. If [...]
Which country will have the best 2010?
THE ECONOMIST has cranked up its World in 2010 blog (which, shockingly, is not about the distant future but next year), and today there is an entry asking for nominations for "Best Country in the World, 2010". (Somalia has already won the [...]
Immigrants don't crowd out native workers
SO LONG as we're obsessing about labour markets, here's an interesting new research result from Giovanni Peri: Using the large variation in the inflow of immigrants across US states we analyze the impact of immigration on state employment, average hours worked, physical capital' [...]
The central bank is failing at its primary task
BEN BERNANKE gave a talk yesterday to the Economic Club of New York. He discussed the American labour market:Since December 2007, the U.S. economy has lost, on net, about 8 million private-sector jobs, and the unemployment rate has risen from [...]
Officials blind to the scope of the unemployment problem
IN THE last week, the internet has filled with examinations of the problem of a jobless recovery and what can be done to address it. In particular, there has been an ongoing debate over how effective monetary policy has been [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• This makes sense, but it's interesting to imagine what the economic impact might be of undoing the 2001 and 2003 tax cuts during the 2011 to 2013 time frame. (Economist Mom, via Brad DeLong) • It [...]
It's about deals to be struck, not sabres rattled
PAUL KRUGMAN'S column today makes a point I brought up not long ago—that there's a real danger to the global trade system of having high American unemployment figures juxtaposed against headlines on China's trade surplus for months on end. That [...]
Bullishness on commodities, most likely
JAMES HAMILTON notes that commodity prices have been moving in lockstep for most of this year, and they've been rising—the average commodity rose in price by about 37% from the beginning of the year. What to make of this?I wouldn't really think that this [...]
Selling items for more and less than they're worth, at the same time
TYLER COWEN links to a New York Times column by Richard Staler, on the diabolical auction site Swoopo. The idea behind Swoopo is pretty straightforward: items for auction are posted on the site, and every time' [...]
Don't look now, but big trade deficits are back
IMBALANCES in global trade and capital flows seemed to play a key role in generating the financial and economic crisis that the world has faced over the past few years. This has led to considerable handwringing over what should be' [...]
Growth is returning, mostly
FOR the most part, today's economic data releases are pretty encouraging. American retail sales were up in October, though the growth from September looks less impressive when gains from automobile sales are removed (ex-autos, retail sales were up 0.2%). The chart below, from Calculated Risk, [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:Commercial real estate problems might cause banks to limit loans to small businesses, slowing job creation. (macroblog)"[M]ost food price spikes are driven by major policy shifts, such as tariffs and subsidies, which result in harmful tit-for tat [...]
It looks like money for nothing
EARLIER this week, CBO head Doug Elmendorf made a statement that got everyone in the blogosphere nodding along:The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and [...]
Europe limps into expansion
THE big economic news today is that the euro zone managed economic expansion in the third quarter, but barely. The Economist notes:It is not quite the recovery that was hoped for. Figures released on Friday November 13th showed that the euro-area economy crawled out of [...]
American firms can build efficient cars, but choose not to
SPEAKING of America's oil problem, here's a look at one reason the country is so petrol-hungry:New car fleet fuel economy, weight and engine power have changed drastically since 1980. These changes represent both movements along and shifts in the [...]
But for oil and China, pretty well
WITH American recovery comes renewed growth in the trade deficit:You can see in the chart above that America's trade balance collapsed, along with world trade generally and oil prices, through January of this year, at which point a slow recovery began. Since [...]
If only coastal metros grew like Houston
I RECENTLY commented on a new Brookings' analysis of the likely cost of a climate bill across metropolitan areas. As part of that post, I noted:The tricky part about that dynamic is this: the cleanest metropolitan areas in the country also tend [...]
Straight talk on the dollar is hard to find
AH, THE painful contortions American leaders find themselves attempting whenever the dollar's relative strength or weakness is at issue. Earlier this week, Tim Geithner could be heard saying:I believe deeply that it's very important to the United States, to the [...]
Australia drowning in a sea of surplus Sauvignon
AUSTRALIA has a lot of wine sitting around:Australia has an accumulated surplus of 100 million cases of wine that will double in the next two years if current trends continue, according to the report. The annual surplus is huge – equal [...]
The Berlin Wall's impact on trade patterns persists
TO FOLLOW up a bit on the discussion earlier this week on German economic integration, post reunification, here's a new research result from Volker Nitsch and Nikolaus Wolf:Why do borders still matter for economic activity? The reunification of Germany in 1990 [...]
The Chinese government stimulates weather, as well
HERE'S your bizarre news story of the day:Beijing’s airport canceled more than 60 flights and delayed more than 120 others today as the heaviest snowfall in the Chinese capital in at least 54 years blanketed the city for the third day this [...]
The labour market bleeding is slightly less profuse
BY THIS, I mean the fact that only half a million people filed for unemployment benefits last week. Still, the 502,000 initial jobless claims reported this morning were fewer than economist forecasts and the lowest total since the beginning of the [...]
Wouldn't workers keep trying to earn more?
GREG MANKIW is worried about the effect of rising implicit marginal tax rates (thanks to the phasing out of benefits for lower income workers) on earning incentives. He produces this chart to illustrate the "poverty trap".And he writes:It shows income after taxes' [...]
When will high petroleum prices send output diving?
BACK in the spring, James Hamilton provided the economics world with one of the more interesting results of the crisis and recession—that if you took a macroeconomic model and plugged in observed oil prices through the middle of 2008, you got [...]
Congress quizzes the Fed on baseball, for some reason
EDMUND ANDREWS has an interesting New York Times story up, concerning the developing political savvy of Fed chairman Ben Bernanke. There are some disconcerting elements to the piece; Mr Bernanke is doing his best to secure certain Fed prerogatives by [...]
Educated workers aren't anxious to call it quits
THROUGHOUT the recession, economists have been speculating about the potential effect of high unemployment and reduced household wealth on retirement decisions. Would the drop in 401(k) values lead workers to put off retirement and work longer, or would dismal labour market' [...]
The bizarre theatrics of America's dollar policy
CHINA'S recovery continues to power forward:Production rose 16.1 percent from a year before, the most since March 2008, the statistics bureau said in Beijing today. Retail sales gained an annual 16.2 percent in October, it said. The trade surplus almost doubled from [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• Joe Gagnon says that both monetary and fiscal policy can be effective in a liquidity trap. (Econbrowser) • Why has distance (rumoured for some time to have died) been having an increasing effect on trade patterns? [...]
The future's so frightening it might not be that bad
FELIX SALMON comments on a book on financial reform by Bob Pozen and concludes:What’s pretty obvious though is that most of Pozen’s recommendations will not be enacted. Which raises the obvious question: if we don’t do this, what’s going [...]
Is China building itself into excess capacity purgatory?
TYLER COWEN is worried about excess capacity in China. He quotes the Wall Street Journal: Most of China's growth this year has been unsustainable, driven by stimulus. China's money supply has risen 29% in the past year. At the government's behest, [...]
Markets shine on American exporters
PAUL KEDROSKY titles the post containing this chart, "Dying Dollar Dings Exporters? Not So Much." But of course, that American exporters would benefit froma falling dollar is exactly what we'd expect to happen.Note that this is based on share performance. Presumably, anticipation of better [...]
An irrationally exuberant pathology
ONE of the reasons St. Louis Fed president Jim Bullard is more anxious than others to rein in Federal Reserve activity is a concern that leaving policy too loose for very long will lead to inflation of new asset bubbles. Should we be worried about [...]
Markets are well aware of how little oil is out there
The Guardian had a blockbuster scoop on the state of global oil production yesterday:The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims [...]
Fed official surprisingly bullish on employment
THE Financial Times' Krishna Guha writes up some additional takeaways from his interview with St. Louis Fed president Jim Bullard, who recently said he believed that inflation uncertainty was as high as it has been since 1980.Bullard has an above-consensus forecast for growth [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• On the placebo effect and decaffeinated coffee. (Neuroskeptic, via Marginal Revolution) • Scott Sumner clarifies his thoughts on expected inflation and nominal GDP. (Scott Sumner) • "Though climate change is a grave problem, Levitt and Dubner [...]
Falling wages mean more empty calories
SPEAKING of unintended consequences from above market wage rates, have a look at this (via Greg Mankiw):Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States [...]
Sovereignty has strange effects on economic development
GAVIN WRIGHT tells the interesting story of the belated economic revolution in the American south in one of my favourite economic history papers. In the years between the end of the Civil War and the Great Depression, the south was essentially a [...]
Nothing highlights social chasms like recession
THE New York Times has an excellent interactive graphic displaying unemployment rates and trends in America by age, race, and education level. Here's a question for you: what is the current unemployment rate among black men, aged 15 to 24, without a high [...]
At the end of the month, when the money runs out
FROM the New York Times:“There are families not eating at the end of the month,” said Stephen Quinn, executive vice president and chief marketing officer at Wal-Mart Stores, and “literally lining up at midnight” at Wal-Mart stores waiting [...]
A continuing series
ONE month ago, after Federal Reserve officials issued a series of contradictory statements, I asked: "What are these Fed presidents up to?" We may have a continuing series on our hands. According to the Financial Times, St. Louis Fed president James Bullard is saying that uncertainty [...]
Forget whether it works, how much does it cost?
VIA Felix Salmon, here's an interesting look at the TSA (the folks who make you take your shoes off at airports) from the Government Accountability Office:TSA lacks assurance that its investments in screening technologies address the highest priority security needs [...]
Meet the new truck, same as the old truck
SOMETIMES when you try to kill two birds with one stone, you miss both birds and break your neighbour's window. Here's a look at how Cash for Clunkers fared at getting greener vehicles on the road: The most common deals [...]
Can you make a dirty state embrace green legislation?
LAST week, Brookings scholars published the results of an effort to calculate the average expected cost of a climate change bill by metropolitan area. The authors noted that lower emission reduction costs tended to be found in the districts of [...]
Pretty please, can we have some inflation?
YESTERDAY, I linked to a Paul Krugman post in which he links to an old piece of analysis he wrote on the Japanese economy in 1998, in which he says:To preview the conclusions briefly: in a country with poor long-run growth prospects [...]
Something in the China-America relationship has to give
THESE stories are increasingly troubling:China denounced new U.S. anti-dumping duties on steel pipes as protectionist on Friday and opened an investigation into imports of U.S.-made automobiles, about a week before President Barack Obama is scheduled to arrive for a visit. Beijing [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• On the price elasticity of American citizenship. (Felix Salmon) • Price comparison shopping online probably won't lead to "frictionless commerce". (NBER, via Mark Thoma) • Tyler Cowen tells stories about storytelling, at TED. (TED) • Manufacturing [...]
A new WPA might not be the best unemployment fix
HERE is Paul Krugman:As it is, job-creation efforts are generally indirect. Tax cuts and transfers in the hope that people will spend them; aid to state governments in the hope of averting layoffs. Even infrastructure spending is routed through [...]
Can we handle rapid technological change?
OVER at Angry Bear, Rdan posts something by Martin Ford, in which he ponders the issue of technology-induced long-term structural unemployment:I'm not talking about far fetched science fiction-level technology here: this is really a simple extrapolation of the expert systems and specialized algorithms [...]
Is the Fed really helpless?
PAUL KRUGMAN responds to discussion on the David Beckworth chart—tracking nominal spending—that I posted yesterday. He discusses a liquidity trap model he drew up in 1998, while thinking about the Japanese economy, and writes:In that model, prices are assumed sticky in the short run, [...]
To reduce joblessness, target joblessness
SEVERAL (though by no means all) of Europe's larger economies have come through the current recession without experiencing quite the large jump in unemployment that has plagued America, turning on its head the usual perception of European labour markets as persistently beset by high [...]
America continues to bleed jobs
THE American labour market has opted not to keep us all in suspense, wondering whether and when the unemployment rate might crest the 10% level. As of the month of October, the unemployment rate stood at 10.2%—only the second time in America's postwar history [...]
The best of the rest of the economics web
TODAY'S recommended economic writing:• North America the most popular destination for would-be migrants. (Gallup) • How to model big international strategic diplomacy questions. (Cheap Talk) • The government should probably stop adopting policies that encourage carbon-intensive living arangements. (Boston Globe) [...]
But is that the real threat?
FELIX SALMON, back from a long blog vacation, is keeping his eyes open for the next big crash, and he thinks his old boss Nouriel Roubini has spotted a good candidate:Nouriel’s analysis is quite compelling, given the way the carry trade works. In [...]
And why some inflation sure would be helpful
ALEX TABARROK says that this chart, from David Beckworth, "sums up a lot of recent economic history".Mr Beckworth is suggesting that nominal spending be considered an indicator of the tightness, or looseness, of monetary policy. So for instance, the poor state [...]
When regulation looms
I LIKE this point from Al Gore, via Elizabeth Kolbert, via Brad Plumer: Once the world makes it clear that we are going to follow a roadmap to a low-carbon economy, the best-managed businesses will seek to race out in front of that emerging trend. Indeed, [...]
How "days on market" influences home shopping behaviour
HOMES are idiosyncratic purchases. When home shopping you can look at comparable sales or ask experts for their opinion on value, but it's difficult to know what any specific home is worth and whether a seller is pricing above market. Of [...]
Firms getting very good at doing more with less
THURSDAY is new jobless claims day. Umpteenth verse, same as the first—jobless claims fell to 512,000 for the week, the lowest number since the first week of 2009. But for the 18th consecutive week, weekly claims were between 500,000 and [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• Economists are overwhelmingly in agreement on the science and appropriate policy reponses to global warming, says New York Times blog Green Inc., which may or may not be read by the authors of New York Times [...]
What's really behind a book price war?
JAMES SUROWIECKI'S latest column is on the bestselling book price war developing between Amazon and Wal-Mart, involving a handful of the most popular titles (he adds additional thoughts on the subject in a blog post here). Mr Surowiecki walks readers through a [...]
High unemployment? No problem, says Bernanke.
THE Federal Reserve just released the Federal Open Market Committee's November statement, which reads:Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over [...]
A Wednesday quiz
THAT is the name of an online quiz, located here, which tests whether you can name the correct famous economist corresponding to a brief clue. The quiz is timed. Alex Tabarrok got all of the answers in 49 seconds. It took me much longer because I [...]
Are we too worried, or just worried about the wrong things?
COMES from David Leonhardt:[I]t’s a good time to remember that when an economy is just coming out of recession, its weaknesses are always more obvious than its potential strengths.Mr Leonhardt joins the emerging contrarian trend of writers suggesting [...]
Recovery continues, slow and uncertain
THERE are several pieces of economic news out today. Tell me what you see:- The ADP employment report showed an employment decline of 203,000 in October, down from 227,000 in September, but a bit more than the 198,000 that was expected.- But in the [...]
Lousy job prospects keep kids in school
TO MANY American workers, the above headline would seem like a terrible joke. Long-term unemployment, combined with the prospect of near-permanent contraction in labour forces in key sectors like manufacturing and construction, means that a large cohort of workers will emerge from [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• "Should central banks be quasi-fiscal actors?" No, says Willem Buiter. (Maverecon)• Obviously, White House strategists are much better at strategy than me. Still, it seems to me that Peter Orszag, and others, are hurting themselves by [...]
A climate bill will drive small changes across America
DEPENDING on where, and how, you live, the effect of emission regulations on your budget may vary quite a bit. The Congressional Budget Office, in its analysis of the House of Representative's climate change bill, noted that the effect of [...]
Berkshire bets on growing hunger for coal
ONE of today's bigger stories is the news that Warren Buffett's Berkshire Hathaway will buy up the 77% it doesn't yet own of rail company Burlington Northern Santa Fe, in a deal that values the company at about $44 billion. Mr Buffett [...]
But is it clear-cutting or merely pruning?
PERHAPS you've heard that the British government is taking steps to chop up its banking industry. What's that all about? The Economist explains:At the height of the banking crisis, restoring financial stability was paramount for the British government. Worries about limiting the [...]
Goldman tried to cut housing losses. So what?
I HATE to put myself in the position of defending Goldman Sachs, but I'm having a little trouble getting worked up about the latest allegations of nefarious activity. Here's McClatchy:In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion [...]
Disaster averted, for now at least
THIS is courtesy of Paul Krugman:There are a number of indicators suggesting that the initial shocks to output were every bit as serious this time around as in the early years of the Depression, so what explains the difference in outcome? First off, [...]
Does the sobriety of depression lead to crashes?
TYLER COWEN links to a very interesting study, which depressives should enjoy (or not): Bad moods can actually be good for you, with an Australian study finding that being sad makes people less gullible, improves their ability to judge others and [...]
The best of the rest of the economics web
TODAY'S recommended economics writing:• "[T]he positive productivity effect of offshoring dominates possible downsizing effects, raising domestic employment at...establishment[s]." (Vox)• Hey, Ford posted a third-quarter profit. (New York Times) • How to sell a dollar for more than a dollar. (Marginal [...]
Bubbles are part of a healthy economy, but how do we keep them from swallowing us whole?
ASSET bubbles regularly decimate our portfolios, but must we live with them? The Obama economic team often uses the expression "balanced growth". It suggests our economy can still grow, albeit at a [...]
Can we learn anything from Florida's public disaster insurance?
ALEX TABARROK sees a parallel between a public option in health care markets and Florida's publicly-provided homeowner's insurance option. He links to this story, which reads: After Hurricane Andrew hit Florida in 1992 some Floridians were having difficulty purchasing homeowners’ [...]
A look at the demographic transition across countries
FOLLOWING up on this week's Leader, The Economist has put together a videographic on recent changes in fertility rates and per capita output:Recent increases in fertility in some of the richest nations are an interesting phenomenon. It seems that as production [...]
But will jobs follow?
MARKETS took a beating last week, as news from a disappointing September (and third quarter) sank in. So far, October seems to be looking a little brighter. For starters, manufacturing activity across the country continues to increase. According to the Institute for Supply Management, the [...]
This time, the Fed isn't in control
OTHER bloggers have been elaborating on the discussion of strength of recovery and unemployment levels that I mentioned last week. Paul Krugman continues to carry the torch, and he posts this chart:Which illustrates just how far short of previous recoveries the current' [...]
What is "languishing in obscurity"?
VIA Tyler Cowen, here's a look at "Economists" as Jeopardy category:Economists: somewhat less obscure to Americans than "hockey quotes".
[...]No jobs, no confidence
A FEW more pieces of data have come in this morning, which offer a pretty clear look at the kind of recovery America can expect. First, the good news: the Institute for Supply Management Chicago index—a measure of business activity—unexpectedly increased and moved into expansion [...]
Falling fertility a route to prosperity
REMEMBER when Casey Mulligan said that it was perhaps not a good thing, economically speaking, to give women in developing nations the ability to control family size, because larger populations increased the incidence of innovators, thereby boosting economic growth? That was kind of [...]
