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Friday, November 26, 2010

Budget News Nov.22-24



News
TUESDAY
Portugal New Focus of Europe Debt Fears .
Hopes that the rescue plan being worked out for Ireland would stop pressure building on other European governments were set back Monday as retreating financial markets turned the spotlight to Portugal as the next potential domino to fall.
Pork Really Stinks: $1.8 Million to Study Pig Odor
Rep. Jeff Flake of Arizona waged a lonely battle against congressional spending earmarks for years, but now he’s got plenty of company as President Obama and House and Senate Republican leaders all support a moratorium.
Euro-Zone Private Sector Grows Despite Debt Woes
Growth in the euro-zone's private sector expanded sharply in November, boosted by a strong expansion in France and Germany, despite heightened concern about the rising debts of some euro-zone member states, particularly Ireland.
In European Debt Crisis, Some Call Default Better Option
Ireland has finally taken its medicine, accepting the financial rescue package European officials have been pushing for several weeks.
IMF: Greece Needs More Reforms
A delegation of European and International Monetary Fund officials said Tuesday that Greece was "broadly on track" with its efforts to cut its budget deficit, but warned the country would need to take tough structural reforms in the months ahead.
Irish Debt Crisis Forces Collapse of Government
Confronted with high-level defections from his governing coalition, Prime Minister Brian Cowen said he would dissolve the government after passage of the country’s crucial 2011 budget early in December.

MONDAY
Some States Weigh Unthinkable Option: Ending Medicaid
Elected and appointed officials in nearly a half-dozen states, including Washington, Texas and South Carolina, have publicly thrown out the idea.
GOP Ranks Fray on Vote to Raise Debt Limit
The government is authorized to borrow $14.3 trillion and is expected to hit that amount within a few months. If the limit is not raised, it could signal to the markets that the U.S. isn't prepared to meet its obligations and send tremors through the financial system.
State Tests Limits of Spending Cuts
Many within the state are now worrying about 2012, which is expected to be the toughest budget year yet as federal stimulus dollars dry up.

Economist Comments
WEDNESDAY
Why We Should Be Thankful for the Fiscal Commission
In my own opinion, the probability that 14 commission members would sign onto a consensus report was zero all along; so was the probability that we would get a comprehensive deficit reduction deal out of the 112th Congress, absent a sovereign debt crisis or other economic crisis that forces the hands of elected officials.

TUESDAY
Deficit reduction pleas fall on deaf ears
Their leadership has learned well the lesson of that earlier episode: deficit reduction requires painful tradeoffs and bipartisan compromise, and while the long-term economic benefit may be significant, the short-term political dividend is negligible at best.
US Budget Cutting Options Are Plentiful:Concrete Action Needed
Bowles and Simpson released a discussion draft about two weeks ago that they are now reworking in an attempt to come to an agreement next week.

MONDAY
CORRAO: It's the spending, stupid
Raising taxes just enables spendthrift government.
The 'Build America' Debt Bomb
The state and city fiscal mess is getting worse, yet the Obama administration wants Congress to make new taxpayer-subsidized bonds permanent.

Blogs
WEDNESDAY
Five Ways to Cut Military Spending Today
The U.S. military has an important purpose, protecting Americans, but that purpose has been distorted over the years. Here are five military spending cuts Congress and the President can make today while they undertake the harder task of rethinking the true purpose of the military and then restraining its use.
Defending Defense: A Response to Recent Deficit Reduction Proposals
The Center for Defense Studies issued a statement in response to the deficit commission co-chair's recent proposals.
Desperately Seeking Revenues in Michigan
Michigan’s municipal governments are on the hunt for revenues. Mayor Demsey sent out a letter asking tax-exempt organizations to make a voluntary contribution to the general fund.

TUESDAY
Which States are Earmark Magnets?
Cato’s Tad DeHaven has a great piece in The New York Post on what the earmark ban means for New York. Not much, it turns out. New York taxpayers contribute 8.2% on average to the overall federal tax burden and receive only 2.1% of all earmarked funds, making them the last state in the earmarks line.
Bad Arguments for Earmarks, Good Arguments against Them
One of the things I find most disturbing about earmarks is how they contribute to vote-trading between members, which probably increases spending significantly, too. My guess is that fewer bills would go through if lawmakers had to get their colleagues to vote yes based purely on bills’ merits.
Will Republicans Get Serious on Spending?
It is tempting to think the Tea Partiers will force the party to finally live up to their promises of frugality. But the evidence suggests they are engaged in a task akin to plowing the sea.

MONDAY
Political Morality and the SS Trust Fund
The U.S. budget is not "tight." It is unsustainable. It is a lie. Politicians have made a set of future promises that under the most commonly-believed economic scenarios cannot be kept.
Earmarks
The knowledge that they were going to have a chance to start shoveling pork a little bit later in the process affected how much they appropriated at the beginning.
What is wrong in this picture?
"State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans."
When Do City Pension Plans Run Dry?
Actuary John Bury has an analysis of when city pension plans are scheduled to run out of assets. Philadelphia, Chicago, and Detroit have about seven or eight years left.
Earmarks Are the Gateway Drug to Big Government Addiction
Members who otherwise might want to defend taxpayers are lured into becoming part of the problem.

Reports
MONDAY
Fiscal Commission Factsheet
...even if 14 of the 18 commissioners agree on policy recommendations, Congress is not required to act.

Employment News Nov. 22-24



News
WEDNESDAY
Initial unemployment claims: Lowest since July 2008
The government's weekly jobs report brought a bit of good news Wednesday, as the number of Americans filing for their first week of unemployment benefits sunk to its lowest level in more than two years.
Consumers spend and earn more, layoffs slow
Americans earned more and spent more last month, and the number of people applying for unemployment benefits dropped last week to the lowest level in more than two years. At the same time, demand for long-lasting manufactured goods fell off.

TUESDAY
State unemployment rates hold steady
The state unemployment picture was little changed in October, with rates holding relatively steady across the country, the government said Tuesday.

MONDAY
Another hit to states: Interest payments to Uncle Sam
The Great Recession has forced states to borrow $41 billion from a federal fund to cover unemployment checks for their jobless residents. Now their bill is coming due.

Economists Comments
WEDNESDAY
FOMC members sour on growth, unemployment
The Federal Reserve’s governors and regional presidents have grown more sour on growth and unemployment, with some saying it could take more than six years for the jobless rate to return to normal levels, according to a summary of projections released Tuesday.
Bernanke Goal of Optimal Employment Elusive With Profits Bringing No Jobs
Not far from where Federal Reserve Chairman Ben S. Bernanke grew up, a revolution inside a Campbell Soup Co. plant explains why U.S. corporations are piling up profits -- with little need to hire more people.
Obama’s War on Gulf Drilling Sends American Jobs Overseas
You’d think that an unemployment rate hovering near 10% would focus the White House’s mind on job creation, not destruction, but the Obama administration stayed true to form yesterday when Interior Secretary Ken Salazar visited the Gulf and told offshore drillers that the permits they need to put Americans back to work are not coming anytime soon.

Blogs
WEDNESDAY
State Unemployment Rates in October: "Little changed" from September
Eight states now have double digit unemployment rates. A number of other states are close.

TUESDAY
Unemployment Benefits Lead to Higher Taxes, Loans
A National Employment Law Project analysis found 41 states increased unemployment-insurance payroll taxes this year by an average of nearly 33.9%. The largest was a 168.5% boost from 2009 in Hawaii. As a weekend Journal article noted, states also are borrowing more from the federal government to help pay the high costs of unemployment insurance.

Reports
None.

Monetary News Nov. 22-24



News
WEDNESDAY
Fed Trims Outlook on Growth and Jobs
Federal Reserve officials downgraded their outlook for the U.S. economy at their early November meeting, projecting that the jobless rate could exceed 8% for two more years and that it won't return to its former vitality for five years or more.
Fed Considered long-term target in secret
The US Federal Reserve considered a radical change to its monetary policy at an unannounced metting in mid October which could have committed it to buying an unlimited amount of securities.
Federal Reserve minutes show split on QE2
When Federal Reserve policymakers met behind closed doors earlier this month to discuss the controversial policy of quantitative easing, the debate was a contentious one.
Corporate Issuers Freeze Up
Worries about Europe's debt troubles and growing tensions in Korea froze corporate credit markets.

MONDAY
Geithner Says Obama Opposes Depriving Fed of Employment Mandate
U.S. Treasury Secretary Timothy F. Geithner said the Obama administration would oppose any effort to strip the Federal Reserve of its mandate to pursue full employment and warned Republicans against politicizing the central bank.
Backlash could tie Fed's hands, Goldman says
Are hopes for a QE2-driven recovery already drifting off course?

Economists Comments
WEDNESDAY
Ben Bernanke: The Central Banker, the Diplomat?
The chairman's vision, where the emerging world should just do what the developed world wants it to do, isn't going to happen. And lecturing people on a specific world view isn't going to make you any friends.
Here's Why the Fed Plan is Failing: We're All Austrians Now
It's no accident that Austrian economic is newly popular. It provides the best explanation for the business cycles we just lived through.

TUESDAY
BACON: Bernanke's raid on the middle class
Fed action will reward the profligate and punish the prudent.
Fed Can’t Serve Two Masters
Last week Congressman Pence and Senator Corker announced a bill to end the Federal Reserve’s dual mandate of price stability and maximum employment.

MONDAY
Seventies Revival
How close are we to a 1970s scenario? There are similarities as well as differences.
I'd Sign Any Letter to Avert Inflation Crisis: Kevin Hassett
The biggest potential benefit of QE2 is that it will reduce the risk of deflation. If prices start dropping, the economy could conceivably enter a death spiral, especially if wages don’t adjust downward as prices fall. In that case, employers might cut even more workers.
O Deflation, Where Is Thy Sting?
Whether or not we are in danger of deflation all depends on what your definition of deflation is.
A Critical Analysis of Current Federal Reserve Actions and Their Consequences
An exploration of recent QE actions by the Fed, the repercussions, and what implications similar policies may have on financial markets, the global economy going forward.
Bernanke Under Fire: Why an Early Tuesday Turkey Could Shake Up Markets
On November 23, the Fed will release the minutes of the FOMC meeting held earlier this month as Bernanke steps up defense of QE2 in the face of growing criticism.

Blogs
WEDNESDAY
Thoughts on QE2
A LOT has been written recently, pro and con, about the Fed’s new round of quantitative easing, dubbed QE2. But, frankly, much of the discussion on both sides lacks a coherent analytical framework for thinking about the key issues. I try here to provide such a framework.
Secondary Sources: QE2 Exit, Fed and Inflation, Bank Scrutiny
A roundup of economic news from around the Web.
Economists React: Fed Failing on Both Sides of Mandate
The bottom line from the forecasts is that the FOMC thinks that it will be failing on both sides of its dual mandate three years from now. It is easy to understand their dovishness given that outlook.
The case for doing less or nothing
John Taylor lays out the case for rules vs. discretion and in the process, does a superb job of summarizing his case for why doing less or even nothing would have been better than the activist government response over the last two and a half years.
The Fed’s Clouded Vision Of The Future
If you are looking for guidance and clarity from the Federal Reserve, your trust will be misplaced. The recently released minutes of the Federal Reserve Open Market Committee’s (FOMC) November meeting reveal a deeply divided Fed with no clear consensus on the effectiveness of their policies.

TUESDAY
Weaker Dollar Not Likely to Spur Job Creation
The effects of monetary easing are starting to hit the market, including an increase in US exports.

MONDAY
Geithner Politicizes the Fed, Warns Congress Not to Do the Same
To top it off, the Fed itself is politicizing the Fed by interfering and commenting on fiscal policy while whining about Congress commenting on monetary policy.
Bernanke Translated
Here are excerpts from Mr. Bernanke’s remarks, with translation by David Wessel, economics editor of The Wall Street Journal and author of “In Fed We Trust: Ben Bernanke’s War on the Great Panic.”
Bank Failures Reach 149 in 2010, Totaling 314 Since End of 2007
The FDIC closed three more community banks last Friday. There are now 22 failures so far in the fourth quarter.

Reports
None

Tax News Nov. 22-24



News
WEDNESDAY
More Than 80 Percent of Americans Say Keeping Bush Tax Cuts a Priority
More than 80 percent of Americans say it is at least "somewhat important" that Congress extend the Bush tax cuts before they expire at the end of this year.
Liberal Millionaires Urge Democrats to Compromise on Bush Tax Cuts
Group would keep Bush tax cuts for families earning up to, oh say, $1 million.
Your paycheck is about to shrink
Are you ready to give up $30 a month? That's what may come out of your paycheck if -- as expected -- the Making Work Pay tax credit expires at the end of the year.

TUESDAY
Tax cuts, federal budget await Congress' return from holiday
Coming off an election in which voters unleashed their fury over Washington's perceived inability to grapple with tough issues, lawmakers spent much of the first week of the lame-duck session going after low-hanging fruit while leaving a number of big-ticket items on the table.
If tax breaks for the wealthy expire, would small business suffer?
Republicans say an extension would encourage spending and job creation. Most Democrats say the majority of small firms wouldn't be affected anyway.
Bush tax cuts: What happens if Congress punts
Congress' dithering over the Bush tax cuts could mean smaller paychecks for everyone come Jan. 1 -- no matter what lawmakers decide to do.

MONDAY
States Raise Payroll Taxes to Repay Loans
Demands on Depleted Unemployment-Insurance Funds Led to Borrowing of Nearly $41 Billion From Federal Government.

Economist Comments
WEDNESDAY
Year-end tax strategies for small-business owners
Tax tips to keep more of your profit in your pocket.
Tax hikes aimed at the rich hit everyone
It is time to set the record straight. Small-business employers and their employees face a looming crisis come Jan. 1. That is when hefty tax increases will take effect if Congress does not act to reinstate the 2001 and 2003 tax rates. Worse, there is a misperception among policymakers and the general public that increases to the top-tier rates will only be a tax on the rich.

TUESDAY
FEULNER: The trouble with tax hikes
When we raise taxes on the rich, they react as any of us would: by doing what they can to shrink their taxable income. That means not investing as much in the kinds of projects that create jobs. This sets up a chain reaction: Lower-income workers wind up with fewer opportunities and smaller salaries - those fortunate enough to remain employed, that is.
Estate Tax
The estate tax has gotten a lot of press this year because, well, it doesn’t exist this year and Congress is set to discuss what they want to do with it, along with tax rates, in subsequent years.
RAHN: Thoughtless taxation
We're past the point of diminishing returns.
Buffett's Wealth of Dollars, Lack of Insight
Billionaire investor Warren Buffett says the rich should have a higher tax bill. He's free to hold this opinion. But he's not free to turn his ideas into law. For this, the nation should be grateful.

MONDAY
The Blur Between Spending and Taxes
The Bowles-Simpson proposal is not perfect, but it is far better than the status quo. The question ahead is whether we can get Senator Porkbelly and Congressman Blowhard to agree.
Higher Taxes Won't Reduce the Deficit
History shows that when Congress gets more revenue, the pols spend it.

Blogs
TUESDAY
Deficit Hawks, Tax Chickens
In other words, both plans to cut the deficit are hawkish, and the response to them largely represents hawks revealing their inner chickens.
Tax Loopholes Are Corrupt and Inefficient, but They Should only Be Eliminated if Every Penny of New Revenue Is Used to Lower Tax Rates
The problem is on the spending side of the fiscal ledger. The Simpson-Bowles Commission and the Domenici-Rivlin Task Force were charged with figuring out how to reduce red ink. We already know from Congressional Budget Office data, however, that we can balance the budget fairly quickly by limiting the growth of government spending.

Reports
None.

Health Care News Nov. 22-24



News
WEDNESDAY
High Deductibles Prompt Many Families to Forgo Treatment
Lower-income families with high-deductible insurance plans are opting to forgo treatment more often than other groups, a new study finds.
HHS Sells Overhaul Law With Data
HHS found that average deductibles in employer-sponsored insurance had nearly doubled, increasing from $446 to $917 for single coverage from 2002 to 2009, and $958 to $1,761 in family coverage during the same time period.
Poll: Voters want foes to reject health care
Most voters say members of Congress who campaigned against the health care reform bill should turn down the medical insurance offered them as federal employees.

TUESDAY
Rules Eased for Some Health Plans
Amid pressure from employers, the Obama administration on Monday loosened rules for bare-bones health-insurance policies. It marks one of the administration's biggest steps to peel back regulations that big business found onerous under the health- care overhaul.
Insurance Regulations Follow State Recommendations
The HHS rules lay out a process for states to request an adjustment over the next three years if they believe that the rules' medical-loss ratio will destabilize their insurance market.
Johanns Hopes to Repeal Health Care Provision in Lame Duck
The Senate is scheduled to vote after Thanksgiving on legislation to repeal a small but increasingly maligned provision of President Barack Obama’s health care overhaul, and the Republican author of the repeal is optimistic that it will pass this time.

MONDAY
Health insurers: Pay more for medical care or give refunds
Beginning in 2011, insurance companies have to spend 80% to 85% of premiums on medical care instead of toward their own profits and overhead costs, according to the Department of Health and Human Services.
States Battle with Federal Government on Health Care
Medicaid Becomes First Victim of Blame Game in Some States
Rivlin Throws Grenade Into Medicare Debate
Former Clinton budget director teams up with GOP budget cutter.

Economist Comments
WEDNESDAY
Health Reform's Competition Crushers
Liberal consumer groups are aghast to learn that the Obama health team are really monopolists at heart, bent on handing hospitals a cartel in their local markets.
More Good News for Thanksgiving
In the Wall Street Journal just before Thanksgiving last year, Melinda Beck detailed some of the health care advances that we should continue to give thanks for this Thanksgiving Day:

MONDAY
Business on Obamacare: Resist, Don't Repeal
Congressional Republicans are touting plans to repeal the Obama Administration's health care reform law, but they face wariness for a full rollback from a key constituency: the business lobby.

Blogs
WEDNESDAY
Does the UK have the best health care institutions in the world?
Not in the present day time slice sense, but think of it over time.  There is a big lock-in effect.  The United States, for instance, cannot easily switch into another way of organizing its health care system.  Obamacare is built upon current institutions and, for better or worse, does more to lock them in than to modify them.

TUESDAY
Will Health Reform Save Lives?
Ideal health insurance actually would not include Medicaid at all. It would involve people enrolling in private plans that are portable, and travel with them from job to job. And this result is consistent with other research. For although there is some argument about how much difference health insurance makes, almost every study finds that private insurance is better than Medicaid.
One More Step toward the Right Medicare and Medicaid Reforms
The President’s National Commission on Fiscal Responsibility and Reform is not set to release its final recommendations on how best to tackle deficit spending and entitlement reform until December 1. However, several of its members have already gone public with proposals to reduce runaway spending and put Medicare and Medicaid, two of the fastest-growing entitlement programs, on the road to solvency.

MONDAY
Welfare Reform: British Style
According to British Chancellor of the Exchequer George Osborne, the United Kingdom will put into place “a radical new welfare state where it always pays to work.”

Reports
None

General Economic News Nov. 22-24



News
WEDNESDAY
How to Improve the Financial-Reform Law
A brief proposal to protect the system—without stifling innovation.
Battered Ireland Clings to Its Low Taxes
Though the country needs $115 billion, it says its 12.5 percent corporate tax rate is "non-negotiable"
Home Sales Fell 2.2% in October
Sales of previously owned homes fell in October amid weak demand and concerns about the foreclosure process, putting sales for 2010 on pace to close at their lowest level in 13 years.
Remake of Obama Economic Team Broadens Scope
The departure of a number of administration officials is giving President Obama broader scope to remake his economic team even as the White House prepares to carry out a long-planned shuffle involving two of his closest political advisers.
Orders for U.S. Durable Goods Unexpectedly Dropped in October
Demand for so-called durable goods dropped 3.3 percent, the biggest plunge since January 2009, after a revised 5 percent jump in September that was larger than previously estimated.
New home sales: Down 80% from the boom
New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000.

TUESDAY
Study: Emissions Still Near Record Levels
Despite the global financial crisis, which was expected to significantly bring down carbon emissions last year, emissions were only 1.3 percent below the record levels of 2008, according to the annual carbon budget update by the Global Carbon Project.
Existing Home Sales Fall More Than Expected
Sales of previously owned homes fell by more than expected in October, possibly due to delayed foreclosures and as banks imposed "overly strict" lending standards, the National Association of Realtors said on Tuesday.
Whitney sees 5,000 bank branches closing
The bank shakeout is about to pick up steam.

MONDAY
Ireland Is Second Euro Nation to Seek Aid as Banks Wobble
Ireland became the second euro country to seek a rescue as the cost of saving its banks threatened a rerun of the Greek debt crisis that destabilized the currency.
What does the Irish bailout mean?
Europe and the International Monetary Fund are discussing the final details of a rescue package worth up to 100 billion euros to bail out Ireland's banking sector. What are the implications of the bailout for Irish people and the rest of the world?
French Fear ‘Brain Drain’ to the U.S.
Academics are increasingly leaving France for the United States, which carries the risk of a “brain drain” in France, according to a report this month by an independent study group.
Add 2.1 million houses to the glut
There's a large number of homes, either already repossessed by lenders or very seriously delinquent, that are poised to be added to the already glutted regular supply of homes on the market.
Weak world economy cuts carbon pollution last year
Weak world economy cuts carbon pollution last year
Holiday Drivers Face Highest Gas Prices in More Than 6 Months
Americans preparing for Thanksgiving travel face the highest gasoline prices in more than six months, with prices at the pump topping $3 per gallon in New York and on the West Coast.

Economist Comments
WEDNESDAY
The Laws of Economics Do Not Stop at Borders and Do Not Face an Expiration Date
Time and place matter in questions of the manifestation of the laws of economics, and the magnitude of the effect.  But the pure logic of human action is neither time specific nor country specific.

TUESDAY
There’s Nothing ‘Rapacious’ About America’s Income Differences
Here is a summary of some of the key differences between low-income and high-income households in America:
Would Higher 30 Year Fixed-Rate Mortgages Hurt Homeownership
At the center of the debate over Fannie Mae and Freddie Mac reform is the question of 30-year fixed-rate mortgages. The industry and progressive left argue that without some kind of government guarantee for housing finance, rates on 30-year mortgages will sky rocket to unaffordable levels and hurt homeownership.

MONDAY
Banks Face Another Mortgage Crisis
The government may have bailed out the nation's biggest banks, but now the courts will sort out who gets stuck with mortgage losses. Banks could lose more than $100 billion.
Taking von Mises to pieces
Why is the Austrian explanation for the crisis so little discussed?
Seeing the U.S. through Asia's eyes
Many leaders from Asia's growing economies believe the U.S. is in a state of denial. It's time to stop bickering and put our house in order.
Irish Bailout May Highlight New Problems in Portugal and Spain
While it appears that Ireland may be able to move forward from its financial crisis soon, the other two countries -- attempting to expand their economies while dealing with heavy debt burdens -- may not be so fortunate.

Blogs
WEDNESDAY
Fair Trade Is Less Fair (and Less Free) than Free Trade
Is there any doubt that replacing “free” with “fair” in this context would remove all teeth from the First Amendment?  In the same way, a policy of fair trade rather than free trade would, in practice, be a policy of unfree – and, by the way, unfair – monopoly privileges for politically influential domestic producers.
More on the Trade Deficit
Here’s a letter to Chris Isidore, Senior Writer at CNNMoney.com, on the trade deficit.
Production vs. Predation
One thing’s for certain: the proportion of personal wealth that is today the result of unjustified government-granted privileges is a great deal higher than it was before the 1930s – and even before 2008.

TUESDAY
General Motors. Never Again?
“Government bought 914 million shares at 43.71. Sold half at 33, own 500 million or so at 35. Taxpayers down about 9 billion. Why is there such celebration today about this 'great government success?'”
Confidence Affects the Business Cycle, Study Finds
Economists have long recognized that feelings influence economic decisions. When optimism rules, businesses hire in anticipation of better sales ahead, and consumers take on debt in expectation of bigger paychecks. John Maynard Keynes called it “animal spirits.”
Second thoughts on Ireland
Irish political economy seems to be falling apart in front of our eyes and the bond market isn't so happy, even after Ireland accepted the EU/IMF bailout.  That would appear to be political risk.  Maybe there won't be a happy ending even in the short run.
7 Thoughts About Ireland
Tyler Cowen ponders what went wrong.  As someone who wrote a bit about the Euro, and the Celtic Tiger, before this mess started, my thoughts:
Secondary Sources: The Euro, Students, Wall Street
A roundup of economic news from around the Web.

MONDAY
Forecasters See U.S. Economy Still Sluggish in 2011
Economic forecasters expect the U.S. economy to remain sluggish next year, weighed down by high public debt, unemployment and business regulation.
Schedule for Week of November 21st
This is a holiday week (Happy Thanksgiving!), but there will be plenty of data released early in the week. The key releases are existing home sales (on Tuesday) and New home sales (on Wednesday).
CoreLogic: Shadow Housing Inventory pushes total unsold inventory to 6.3 million units
Shadow Inventory Jumps More Than 10 Percent in One Year, Pushing Total Unsold Inventory to 6.3 Million Units
Microfinance as Subprime
Having done a fair amount of work in microfinance and closely related areas (development finance involving business clients with larger-than-microfinance loans) in the developing world, I am overall a big fan.  As many people are.  The question that has long loomed, however, is whether it can or should scale upwards to become a full-fledged part of the global capital markets, or whether it should remain a highly subsidized development activity for very poor people or, most plausibly, some of both.
New Fannie Mae Lending Guidelines
Good news. These are not seller-funded Down payment Assistance Programs (DAPs).
The Politics of the Mortgage Interest Deduction
For the real estate industry, the problem with giving in to Wyden-Gregg is that it would show weakness. Once we have been defeated once, the thinking goes, we can be defeated again. If our goal is to maintain the mortgage interest deduction, we must show that any attempt to trim the deduction, no matter how sensible and narrow, will result in devastating electoral punishment from the housing lobby.
Climate Talks or Wealth Redistribution Talks?
Typically the largest wealth distribution program that occurs in Cancun, Mexico, is college students spending their parents’ money. That could change at the upcoming United Nations climate summit if developing countries clamoring for money to cope with global warming get their wish. With each passing year, it’s clear that international climate change talks are less about climate and more about wealth redistribution.

Reports
WEDNESDAY
An International Comparison of Capital Structure and Debt Maturity Choices
This study examines the influence of institutional environment on capital structure and debt maturity choices by examining a cross-section of firms in 39 developed and developing countries. We find that a country’s legal and tax system, the level of corruption and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios.

TUESDAY
Time to Raise Social Security’s Retirement Age
Americans are living longer, which means they are spending a higher proportion of their lives in retirement, receiving Social Security payments. Yet the government program is a mere five years away from being unable to pay out all of the claims it has promised. Because today’s retirees enjoy longer lives and better health, both Social Security retirement ages (“normal” and “early eligibility”) must be increased.

MONDAY
Economics Group
Weekly Economic & Financial Commentary

Friday, November 19, 2010

Budget News Nov. 15-19



News
FRIDAY
McConnell Shoots Down Spending Bill
Senate Minority Leader Mitch McConnell (R., Ky.) said Thursday that Republicans won't support a large spending bill to fund the federal government through fiscal 2011.
Senate confirms new White House budget chief
The U.S. Senate confirmed Jacob J. Lew as director of the White House's Office of Management and Budget by a voice vote Thursday night.
Greek Hopes for Loan Extension Fade
Greece's government is losing hope of getting additional time to pay back a €110 billion ($149.91 billion) loan after its European partners pressured Athens for tough new measures to meet its deficit targets, two senior government officials said Friday.
Is bipartisan debt-reduction for real?
The Republicans' midterm surge has given the federal debt-reduction commission -- whose recommendations are due Dec. 1 -- a chance to stand up and be counted.
Irish Grasp at EU, IMF Lifeline
Dublin Admits It Needs a Rescue; Moment of Truth for 16-Nation Euro Zone.
Budget fight sets up 2011 showdown
Republicans moved Thursday to kill a year-end spending compromise, hoping to gain leverage in what could be a quick strike against President Barack Obama in the next Congress over budget priorities — and quite possibly funding for health care reform.
California Bond Woe Bodes Ill for States
America's strapped states and cities took another hit Wednesday, with California seeing tepid demand for its latest bond sale and other governments pulling about $700 million worth of borrowing deals this week as investors continued stepping away from the municipal bond market.
Spain and Portugal rule out rescue packages
Spain and Portugal have hurried to disassociate themselves from Ireland’s debt crisis...
Raise the national debt limit?
Congress is months from a vote on whether to raise the national debt limit. But House Republicans are already bracing for what could be the toughest vote tea party freshmen face.
GOP Governors Plan Budget Cuts
Newly elected Republican governors are preparing to wrestle with huge budget gaps in states already struggling with foreclosures and high joblessness.
Ireland faces corporation tax showdown
French and German officials are pressing Ireland to increase its low corporate tax rate in return for an aid package...
Debt Panel Convenes, Still Lacks Consensus
The bipartisan commission examining how to cut the federal debt ended three days of closed-door meetings Thursday without a firm agreement among its 18 members, with several saying the panel was still at odds over how to contain the ballooning costs of health care.
Additional $1.2B hole in state revenue projected — expect more budget cuts
Officials were stunned to learn Thursday that the state is expected to take in $1.2 billion less in tax revenue than previously thought between now and June 2013, the latest grim result of an economy creeping toward recovery.

THURSDAY
Key Question For Duck: Pass Omnibus or CR?
Democratic leaders are attempting to get on the same page on how to fund the government, but the mixed signals among Senate and House Democrats and the White House is casting some doubt on the only must do business in the lame duck: funding the government.
Deficit Proposal Draws Mixed Review
A new Wall Street Journal/NBC News poll shows Americans skeptical of deficit-cutting proposals laid out by the chairmen of a commission appointed by the White House.
A User's Guide to the Deficit-Reduction Plans
It seems everyone in Washington these days has a plan to balance the federal budget and wipe out the nation’s long-term structural deficit, and frankly, it’s getting tough to keep them all straight.
Greece Sticks to Deficit Target in 2011 Budget
The Greek socialist government Thursday unveiled its final 2011 budget reaffirming its fiscal commitment to international lenders by vowing to cut is budget deficit to 7.4%.
US fiscal panel at odds over deficit cut plans
The US fiscal commission’s ability to forge a consensus on measures to shrink the budget deficit has been complicated this week...
Questions on Muni Ratings Are Raised by Stale Data
States, cities and other municipalities are notorious laggards when it comes to financial disclosure; ratings firms and investors are accustomed to the wait.

WEDNESDAY
US fiscal panel members seek deficit vote
Several members of the US fiscal commission are asking for a commitment from Harry Reid, the Democratic Senate majority leader...
Prospect of Ireland bailout drives dollar up, Dow down
Worries about the European debt crisis boiled over in world markets Tuesday, this time triggered by the prospect of debt-strapped Ireland becoming the second country to need a bailout.
Jobless benefits cost so far: $319 billion
Unemployed Americans have collected $319 billion in jobless benefits over the past three years due to the federal government's unprecedented response to the Great Recession, according to a CNNMoney analysis of federal records.
Britain Signals Intention to Help Ireland in Debt Crisis
The British offer came after finance ministers from the 16 countries using the euro decided to “intensify” talks with Ireland on possible aid to shore up the country’s troubled economy and banking sector.

TUESDAY
Greece, Germany Grapple Over Debt
...the deficit is likely to be 9.4% this year, and that government debt would total 144% of GDP at the end of 2010.
Estimated state budget deficit reaches $25.4 billion
The economy, new restrictions approved by voters, phantom savings in the budget and the end of temporary taxes add to gloomy forecast by Legislative Analyst's Office for the next 18 months.
New York State's Budget Gap May Reach $1 Billion, Deputy Comptroller Says
This year’s projected gap will be followed by a $9 billion deficit in the year beginning April 1, according to budget documents. Next year’s imbalance may reach $9.3 billion if lawmakers don’t close the current deficit with spending cuts, according to Robert Megna, the state budget director.
Texas leaders to ask for more spending cuts
Straus and Dewhurst said they'll send agencies a letter by the end of the month asking for additional cuts of 2-3 percent in their current year spending.

MONDAY
Irish Officials: We Don't Need a Bailout
Debt-burdened Ireland is talking with other European Union governments about how to handle its troubled finances, but denied they needed a bailout from an EU rescue fund as the continent's debt crisis continued to challenge policymakers for a response that would calm market turmoil.
Deficit Panel Co-Chair 'Hopeful' of Plan Approval
The recommendations would seek $4 trillion in deficit reduction over the next decade by cutting discretionary spending and eliminating tax breaks, while also raising the Social Security retirement age and imposing other changes on entitlement benefits.
Peter Orszag defends deficit commission
Orszag, former director of the Office of Management and Budget for President Barack Obama, writes in a New York Times column Monday that the commission's leaders have “bravely” proposed putting Social Security “on sounder financial footing.
Debt Commissioners: Baby Boomers Will Crush Social Security, Medicare
The U.S. government currently borrows 40 cents of every dollar it spends and is expected this fiscal year to draw a deficit more than $1.3 trillion. At the rate of current spending, interest on the debt alone will cost the U.S. $1 trillion by 2020.
Greek Budget Deficit Tops 15% of GDP
Under the terms of the loan, Greece must cut its budget deficit to 8.1% of GDP this year—from a previously estimated 13.8% gap in 2009—and to 7.6% of GDP in 2011.

Economist Comments
FRIDAY
Fixing The US Budget – Straightforward Or The Hardest Problem On Earth?
The conventional wisdom is that we face a serious budget problem, ballooning debt and political deadlock that prevents any semblance of progress either in the short term or over the next 20 years.
Fixing the Deficit: Our Biggest Test
Yet while the problem seems insurmountable, it really is not — at least not at this point. The greatest service the co-chairs of the deficit-reduction commission have done in their draft proposal is to make that plain.
Saving the euro
Ireland’s woes are largely of its own making but German bungling has made matters worse.

THURSDAY
Cutting the Deficit by Cultivating Growth
It is the reduction in the capital-gains tax that should get some of the credit for the economic boom and the surplus that followed.
Deficit Commission Runs Up against Unreality
...it changes the dialogue at least a bit away from the unreality that otherwise has dominated the campaign and Congress on fiscal issues for months, indeed years, and that threatens to get even worse.
The Rivlin-Domenici Alternative to the Deficit Commission Report
The Rivlin-Domenici plan wouldn’t cut spending; it freezes some small portion of the budget at 2011 levels but that’s pretty much it.

WEDNESDAY
This Is The Horrifying Budget Report That Caused Everyone To Freak Out About California
Well, there are a few reasons, but one culprit is the state's Legislative Analysis Office, which on November 10 came out with some very ugly revenue projections for the coming year, and the years after that... The nut is that the state has a $25 billion imminent budget problem.
Cities Face a Deepening Fiscal Crisis
A recent study of the 77 largest municipal pension systems by finance professors Joshua Rauh of Northwestern University's Kellogg School and Robert Novy-Marx of the University of Rochester estimates that total unfunded liabilities of America's municipal pension systems is well north of half a trillion dollars.
Payroll tax holiday and other measures to reduce the debt
This morning, a bipartisan task force that we co-chair unveils a bold, comprehensive plan to dramatically reduce America's deficits and debt and strengthen our economy, enabling the nation to reclaim its future.
States Offer Washington Lesson in Belt Tightening
The U.S. government is now borrowing $5 billion every business day and has done nothing more than talk about a plan to reduce its debt. State governments don't have that luxury.
BACON: Serious proposal for restoring fiscal sanity
Bowles-Simpson plan puts everything on the chopping block
Debt crisis gets human face
As Ireland’s debt crisis occupied centre stage in Brussels on Tuesday, back in Dublin hundreds of cash-strapped small businesses struggled...
BLANKLEY: Race against time to balance the budget
Failure to act quickly could trigger a double-dip recession.

TUESDAY
Irish woes should speed Europe’s default plan
...it has finally dawned on the EU that a rolling process that places private bank losses on to public balance sheets could leave its governments insolvent too.
Earmark ban: No effect on spending
For the earmark ban to reduce spending, "you have to lower the spending authorizations by the same amount," said Maya MacGuineas, fiscal policy director at the New America Foundation.
Reach for the Low-Hanging Fruit
According to the Congressional Budget Office's alternative scenario (the one that makes realistic assumptions about future policies), by 2050 the national debt will reach 344 percent of the economy with entitlements consuming two-thirds of non-interest spending.
Premature Rejection: Pelosi, Unions Nix Deficit Plan
The Bowles-Simpson deficit reduction plan could save Social Security. But Nancy Pelosi and some of the largest unions in the country have dismissed it out of hand. Have the Democrats become the “party of no?”
Cal Thomas: Debt Commission needs a history lesson
Every government agency and program should be periodically re-authorized. All spending should be justified before congressional committees responsible for oversight, and reduced -- or ended -- if the spending fails to fulfill its purpose.
California's Destructive Green Jobs Lobby
Silicon Valley, once synonymous with productivity-enhancing innovation, is now looking to make money on feel-good government handouts.
LEWIS: Key steps to balanced budgets
The Appropriations Committee - which will be ground zero for spending cuts - must begin strengthening the budget process with common-sense reforms to better control spending and make it more transparent and accountable to taxpayers who are footing the bill.

MONDAY
The Accidental Statist
Obama says the crisis made him do it.
FRASER: Good ideas, bad ideas
The report tackles all elements of the budget - cutting discretionary spending, cutting entitlement and other mandatory spending and tax policy. The results would bring spending down to 20.5 percent of gross domestic product (GDP) by 2040. This is good. However, taxes would increase to 21 percent of GDP. This massive tax increase is one of the key flaws of the co-chairmen's plan. The notion that you must raise taxes to solve a spending problem is simply wrong.
The GOP's Spending Tests
Republicans can demonstrate their fiscal sincerity by banning earmarks and appointing reformers to the House and Senate Appropriations Committees.

Blogs
FRIDAY
Soaking the Rich Would Not Solve the Long-Term Deficit Crisis
...selecting all of the options to increase taxes—including the crippling carbon and national sales taxes, which would hit all Americans—would still leave a deficit in 2030.

THURSDAY
How I Balanced the Budget
Overall: After 2015 my budget cuts will yield a $14 billion surplus; after 2030 there will be a $473 billion surplus. Spending cuts account for 85% of these gains, and tax increases account for 15% of additional gains.
For California, a New Month, a New Deficit
Five weeks after the Legislature passed a budget that promised to close a $19 billion budget shortfall, California has sunk back into yet another fiscal crisis, this time facing a $26 billion gap that is posing a major new challenge for the incoming governor, Jerry Brown, and seems almost certain to force deep cuts in a state already reeling from three years of financial turmoil.
The Deficit Dilemma and Obama's Budget
Much of the projected doubling of the national debt between now and 2020 reflects the spending and tax proposals in the president's fiscal plan this year.
Stimulus: Still Not Working!
Stimulus spending is like morphine. It might feel good in the short term for the beneficiaries of the money, but it doesn’t help repair the economy. And it causes more damage if it gets in the way of a proper recovery.
GAO: Public Debt Will Surpass WWII Highs Within 10 Years
The Government Accountability Office (GAO) has released yet another dire warning about the nation’s long-term fiscal condition.

WEDNESDAY
Mean Street: Not Enough Shock in America’s Deficit Shock Therapy
These ideas have been circulating for years. The only shocking thing is that we have done so little with them.
Obamacare, Save Money? Not Likely.
Orszag claims that Obamacare will reduce the federal deficit and Medicare spending. What isn’t mentioned is that, though it’s true that spending on Medicare will be reduced by $575 billion over the next decade, savings are used to offset spending on new programs. So really, there are no savings at all.

TUESDAY
Caulk the Leaks in Weatherization Spending
Money for nothing and overspending combined to 8.8 percent of total spending. Even more disturbing is that $69,000 (11.2 percent) of the audited spending couldn’t even be verified.
GAO: Unchecked Debt Could Prove ‘Disruptive and Destabilizing’
As if Washington hasn’t had enough reminders, the U.S. Governmental Accountability Office became the latest group in recent weeks to issue a stark warning that the levels of federal debt – if left unchecked – could prove disastrous.
How Would You Reduce the Deficit?
...reducing long-term deficits should focus on spending in Medicare, Medicaid, and Social Security. The co-chairs’ recommendations take a step in the right direction, but do not go far enough.
Fiscal Commission Compared to Clinton
...let’s remember that spending was just 18.2% in President Clinton’s last two fiscal years, 2000 and 2001.
Why Ireland fears a bailout
Note that casting your financial lot with the EU is especially problematic if you don't expect the EU to be so influential five or ten years down the road. Obviously the Irish are betting against the idea of a major step toward EU fiscal union and correctly so.
Four budget calculators, one story
In the Times' calculator, the single biggest thing you can do is add a "magic asterisk" to the health-care system. We don't know how exactly we're going to hold Medicare's spending growth to GDP+1%, but if we manage it, we'll save $560 billion by 2030.

MONDAY
Can a reduction in government spending stimulate the economy?
Critically, the IMF agrees that “tax increases are much worse for the economy than spending cuts.” Moreover, the IMF agrees that “after a few years, even large (but spending based) fiscal adjustments create growth for the economy.”
I Agree: Budget Cutting is Easy
Here's a prediction: if the New York Times keeps this game up on its site, a whole lot of people are going to be more sympathetic to cutting government and more optimistic that it can be done.
It’s Not About Ireland Anymore
Like it or not, it’s time for the Europeans to decide: Who gets unlimited liquidity support because they are essentially solvent, and who has to restructure their debt – with bridge financing and help from the outside?

Reports
WEDNESDAY
Restoring America's Future
...developed by a bipartisan task force that is chaired by former Senate Budget Committee Chairman Pete Domenici and former White House Budget Director and Federal Reserve Vice Chair Alice Rivlin, and includes 19 former White House and Cabinet officials, former Senate and House members, former governors and mayors, and business, labor, and other leaders.

Employment News Nov.15-19



News
FRIDAY
House fails to extend unemployment benefits
The House failed Thursday to pass a bill that would have given the unemployed three more months to file for extended jobless benefits.
WH report: Stimulus law boosted economy, jobs
President Barack Obama's Council of Economic Advisers issued a report Thursday concluding that the contentious law that targeted the recession has been a significant factor in the recovery.
Few Businesses Sprout, With Even Fewer Jobs
Fewer new businesses are getting off the ground in the U.S., available data suggest, a development that could cloud the prospects for job growth and innovation.
Wanted: More Than 2,000, in Google Hiring Spree
The world's largest Internet search engine, whose finance chief told investors in September that the Internet industry was waging a "war for talent," has job openings listed for 2,076 positions on its website, according to a Reuters tally Thursday.
Jobless Claims Tick up; But Near Two Year Low
The number of people applying for unemployment benefits rose slightly last week, offering some hope that the job market may be improving. But claims need to fall further to bring down the 9.6 percent unemployment rate.

THURSDAY
Jobless claims climb 2,000 to 439,000
The number of workers who filed new claims for unemployment benefits rose 2,000 last week to 439,000, reflecting little change in nationwide hiring, according to the latest government data.
Oregon gets 7,600 more jobs, biggest one-month gain in years
The numbers released today show strong hiring by universities, to handle increased enrollment, and by schools, retailers, hospitals and providers of nursing and residential care.
Unemployment benefits extension introduced in House
The unemployed would have three more months to file for extended jobless benefits under a bill introduced in the House Wednesday. The legislation would extend the deadline to file for federal unemployment benefits to Feb. 28, sparing 4 million people from falling off the rolls. The deadline is now Nov. 30.

TUESDAY
What it really takes to get unemployment down
The harsh reality is that it will take tremendous growth in the GDP even to make a small dent in the unemployment rate.
Spending Worries Put Jobless Benefits at Risk
Congress is unlikely to agree to extend jobless benefits for two million unemployed workers by the time the program begins to lapse in two weeks, as lawmakers struggle with a packed lame-duck session and voter antipathy toward government spending.

Economists Comments
FRIDAY
Biden: Unemployment Benefits Vote Was a 'Gigantic Mistake'
In a live interview on MSNBC’s Morning Joe today, Vice President Joe Biden called Congress’ failure to extend unemployment insurance a “gigantic mistake,” reviewed the administration’s plans for Afghanistan, and expressed confidence that the stalled New START treaty would win Senate approval.
Strangling innovation and job creation with red tape
The next two years will be a critical time to see whether all the promises of a more transparent America are realized. If not, maybe it is time to create an entrepreneurs party, where wealth and value creation are prized above rule manipulation and influence peddling.

THURSDAY
'Fair Pay,' Fewer Jobs
Democrats in Congress seem to have misconstrued the lame-duck session as one last chance to do tangible economic harm, so we should thank Senate Republicans for their public service yesterday in killing the White House priority of the "paycheck fairness" bill.

WEDNESDAY
Industrialization and Its Discontents
After a couple of decades of urging the Americans to overlook their anti-trade biases, the Chinese are going to have to adjust to the same discomforts.

Blogs
FRIDAY
Will it ever get better?
The downside of a poorly designed stimulus is that it creates more distortions in the market, does nothing to address structural unemployment and delays a market adjustment. Policymakers must pick their poison.
When Labor Is Capital, Why Push Labor Away?
In an era when, as Arnold Kling puts it, labor is capital, government policies are pushing capital away from our shores. Here’s an area ripe for reform. If either political party is serious about economic growth, it will take the lead on high-skill immigration reform.
Q3: Quarterly Housing Starts and Unemployment
This week the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q3 2010. Although this data is Not Seasonally Adjusted (NSA), it shows the trends for several key housing categories.

WEDNESDAY
Despite Stimulus, 6 Million Benefit-Paying Jobs Vanish in One Year
Based on population growth, and even factoring in the number of retirees, the US should have gained about 1 million jobs.

TUESDAY
Obamacare Accelerates Hospital Job Losses
Repeatedly, reports have shown that Obamacare will increase job loss.  But what happens when those who are laid off are the workers meant to enable the health care law’s expanded access of care: namely, hospital employees?
Philly Fed Survey of Economists Sees Unemployment Rate Still Near 8% in 2013
Economists in a long-running survey from the Federal Reserve Bank of Philadelphia have cut their estimates of growth and see high rates of unemployment enduring for years to come.

MONDAY
Drilling Permitorium Continues
Although Congress lifted the ban on deepwater drilling in October and drillers are eager to return to work, the government still has not issued any permits. And the news is unlikely to improve much next year.
Number of the Week: More Entrepreneurs, Fewer Jobs
More Americans are going into business for themselves, but that doesn’t necessarily mean they’ll be creating jobs for others.
The Skyrocketing Compensation of Federal Employees
USA Today reports on the growing disconnect between the compensation of federal government employees and everyone else:
Labor Force Participation Trends, Over 55 Age Groups
On Thursday I asked: What will happen to the Labor Force Participation Rate? The graphs tell all.

Reports
None

Monetary News Nov. 15-19



News
FRIDAY
Bernanke: Fed's right on stimulus, China
Federal Reserve Chairman Ben Bernanke on Friday defended the central bank's plans to spur U.S. economic growth, saying they could help reduce unemployment, and -- in a message aimed at China -- urged developing nations to let their currencies gain in value.
WRAPUP 2-China raises RRR again as inflation fight intensifies
China ordered lenders on Friday to lock up more of their money with the central bank for the second time in two weeks, stepping up its battle to pull excess cash out of the economy before inflation has a chance to take off.
WTO chief warns against currency wars
Pascal Lamy, WTO director general, said the fight over currency values -- in a reference to the United States and China -- could upset global financial stability.
What's Really Behind Bernanke's Easing?
My guess is that the Fed chairman knows that we still have too many banks overstuffed with toxic real estate loans and derivatives.
European Bank Revolt Over Regulation Grows
European bankers are growing increasingly vocal in their opposition to what they view as regulatory overkill in response to the fiscal crisis. Banks in Europe say too much red tape will prevent them from providing much-needed financing to companies, thereby killing off a nascent economic recovery.

THURSDAY
Bernanke Defends Fed Policy as Republicans Step Up Criticism
Federal Reserve Chairman Ben S. Bernanke defended his expansion of record monetary stimulus in a meeting with Senators as top Republican lawmakers stepped up their criticism of the central bank chief’s policies.
QE2: 3 signs to watch for progress
Many economists and market commentators are convinced that the Fed's move to pump $600 billion into the economy by buying up long-term bonds will do more harm than good for America's economic recovery.
China imposes price controls to stave off inflation
China moved Wednesday to put price controls in place to deal with rising inflation pressures. The government announced price control guidelines and said it would put state reserves of grains, edible oils and sugar on the market when necessary in order to guarantee supplies.

WEDNESDAY
Fed's Lockhart: Fed Will Likely Complete Entire QE2 Program
The Federal Reserve will likely need to complete its $600 billion bond-buying program, Atlanta Federal Reserve Bank President Dennis Lockhart said Tuesday. "The working assumption should be we will in all probability complete the program in the eight months it was designed for," the central banker said.
Stung by Criticism, Fed Officials Reply
Federal Reserve officials, taken aback by sharp criticism of their decision to print money and buy $600 billion in Treasury bonds, are counterpunching to defend themselves and, in some cases, to reinforce their commitment to the policy.
U.S. Inflation Remains Muted
U.S. consumer prices continued to rise modestly in October as gasoline prices surged, but underlying inflation hit its lowest level in more than 50 years, supporting the Federal Reserve's recent move to try to boost the economy.
Bond Market Defies Fed
Interest Rates Rise Despite Launch of Treasury Buying as Investors Take Profits.
China manipulates currency, U.S. panel says
China continues to manipulate its currency and the nation's "exclusionary" trade policies have contributed to a massive deficit with the United States, a special commission said Wednesday.
Senate panel OKs Diamond as Fed member
A Senate panel on Tuesday approved the nomination of Nobel pricze winner Peter Diamon to be a member of the Federal Reserve, marking the second attempt to push through Republican roadblocks.

TUESDAY
Ben Bernanke, politician?
The Federal Reserve was already making a high-stakes economic bet with QE2. Now it's also a political bet, and that doesn't bode well for Bernanke or the Fed.
Bond Market Defies Fed
Interest Rates Rise Despite Launch of Treasury Buying as Investors Take Profits.

MONDAY
Fresh Attack on Fed Move
GOP Economists, Lawmakers Call for Abandoning $600 Billion Bond Purchase.
The Fed vs. Brazil's Reformers
Brazil's President-elect Dilma Rousseff may be pressured to respond to U.S. monetary easing with more protectionism and higher taxes.

Economists Comments
FRIDAY
Lowest Inflation Since 1957 – Are You Kidding Me?
The Fed thinks prices are too low. The Fed wants more inflation — maybe $12-$13 for a chicken dinner at KFC. Fifty bucks for a family of four.
The Euro Debt Crisis Rolls On: "There Is No Way This Thing Ends Well"
The EU was supposed to be about stability. Countries weren't supposed to have deficits more than 3 percent of GDP. Greece's budget deficit is 15 percent in 2009. So the budget isn't healthy, and they're having to tighten more. That'll lead to political instability. There's no way this thing ends well.
Shughart: Fed takes wrong course
Quantitative easing leads away from the path to economic recovery.
Brazil Watch: Will Brazil Raise Interest Rates?
Despite the pressures of an inflating economy, finance minister Mantega believes he can reduce rates.
Bernanke: stop calling it QE!
There's something about quantitative easing that bothers just about everyone - including, believe it or not, Fed chief Ben Bernanke.

THURSDAY
The trap of the Federal Reserve's dual mandate
Fed Chairman Ben Bernanke has wistfully imagined a day when economists might get "themselves thought of as humble, competent people on a level with dentists." But that day will not dawn as long as the dual mandate makes it almost mandatory for him to vow that the Fed "can assist keeping employment close to its maximum level through adroit policies."
Failed Models and the Real Costs of QE2
It has been three years since the crisis began, and Washington, from White House to Congress, has done everything possible to prevent recognition of losses from troubled assets being held at inflated values on bank balance sheets. The Fed, whose independence is necessary to its authority, has increasingly become a policy tool in bidding for many of these bad assets.
The Coming End of the Global Monetary System as We Know It
The White House and Congress must function better together to help save the economy.

WEDNESDAY
Bernanke's Easter Island moment
Even a mere 10 days after its passage, and before significant implementation, it's clear that Bernanke's move, in terms of adverse effect compared to the size of the policy move, is well up there. The Fed's buying program will be concentrated on medium-term Treasury bonds, for two reasons.
Ron Paul's Golden Opportunity
Who better to host the debate over sound money in Congress than the Fed's most persistent critic?
Facts Prove Federal Reserve Has Accomplished Its Mission
The Fed has managed to boost inflation expectations and asset prices, and ensure that economic growth will be spurred higher.
US Economy Heading for Stagflation
A combination of stagnation and inflation is considered to be the worst of all of the potential outcomes for an economy.

TUESDAY
What Caused the Financial Crisis
Was the great financial crisis caused by greedy and reckless bankers and Wall Street players or by a broad range of individuals, financial institutions and governments who became less risk-averse and prudent or by government housing policies that brought on the housing bubble and mismanaged the risks?
Is the Mexican Peso Too Strong?
Mexico is forming its own immigration policy, only dollars moving south -- and not people moving north -- are the objects of concern.
A Double Hex
Inflation in China and a slowdown in Germany may be twin omens of hard times. Plus, a chilly G-20 greeting for President Obama.

MONDAY
New Congress should rein in the Fed
The first order of business for the new Congress is two-fold: move on deficit and debt reduction and rein in the Federal Reserve.
Obamanomics Leaving World Nervous
The president's failed stimulus didn't keep the unemployment rate below 8 percent, as the White House promised: It's stuck above 9 percent, and far higher if we include those too discouraged to seek work. But the stimulus added several more big straws of debt to the camel's back.
Gold Mocks World Spooked By Fed's $600 Billion: William Pesek
There’s plenty of blame to go around for this, and the U.S., Europe and Japan must own their share of it before expecting big gestures from poorer nations. Countries like China are wondering why they are being asked for greater reforms than counterparts such as the U.S., and rightfully so.
What Amount of QE2 Separates a Healthy Economy From Hyperinflation?
Somewhere between $10 and $10 trillion of quantitative easing, the Fed becomes a board of ill repute.
Why the Fed Cannot Regulate ‘Systemic Risk’
A systemic risk advisor might help ameliorate bubbles and busts, though not avoid financial cycles.

Blogs
FRIDAY
Going Broke by Fractions of a Percent
Ben Bernanke should stop paying interest on reserves.
Fed's Priority Must Be Fixing Securitization Process
It's critical to economic recovery and yet the Dodd Frank Act has put it on the back burner.
Fed’s Plosser: QE2 Benefits May Not Outweigh Costs
The benefits of the Federal Reserve’s plan to buy $600 billion in government bonds in an effort to lift the economy may not be enough to outweigh the costs.

THURSDAY
Taylor, Krugman and Quantitative Easing
The main problem with this explanation is that there is actually no evidence for a global saving glut. On the contrary, … there seems to be a saving shortage. … the global saving rate – world saving as a fraction of world GDP – was very low in the 2002-2004 period especially when compared with the 1970s and 1980s.”
QE2
 By lowering long-term real interest rates below where they otherwise would be, QE2 should help expand aggregate demand.  I include the modifier "modestly" because I don't expect these actions to have a very large effect.
Inflated Reputation
George Will doubts the Fed’s ability to carry out its “dual mandate”, This mandate, as described in 2007 by Federal Reserve governor Frederic Mishkin, is for the Fed “to promote the two coequal objectives of maximum employment and price stability.”
What is the case for the Fed?
I view 1929-1932 as a better illustration of the workings of "a world without a Fed" than "a world with a Fed," even though of course we had a Fed then.  If you take the relevant division to be "before and after WWII," the Fed looks pretty good.
Where Quantitative Easing Meets Sustainability (or Bennie and Clyde)
The federal government can perpetually spend more than it takes in from tax and other “revenues.” It can perpetually issue bonds to cover the difference and in case you are worried that no one in their right mind would ever buy them after a long period of this, the Fed can simply buy them up.

WEDNESDAY
The Uncertainty Certainty
Whether the Fed is right or wrong, the fact remains the future of inflation and interest rates, and the Fed’s impact, are extremely uncertain, making it especially difficult for businesses to make decisions.
Corker Calls for Dropping Fed Mandate on Jobs
Sen. Bob Corker (R., Tenn.) called Tuesday for a narrowing of the Federal Reserve’s focus to price stability, the latest attempt by a Republican to alter the central bank’s mandate.
Open Letter To The Fed
This letter to the Fed Chairman Ben Bernanke, signed by prominent conservative economists and writers, asks the Fed to discontinue quantitative easing (QE2). The significance of the letter are the signers.
Has the Fed Been a Failure?
2013 will mark the 100th anniversary of the Fed.  What have we got for our money? Surprisingly little.  Inflation is clearly higher in the post-Fed era as is price variability.
Quantitative Easing, Here and There
I've been surprised to find that there's a considerable amount of outrage among the people I talk to about our quantitative easing program.  I knew China was upset, but I had not appreciated how much this would filter down to ordinary people who do not, say, work for the trade ministry or the central bank.

TUESDAY
Fall of the Mighty Dollar: Looking Back at the Credit Crunch
At the very start of the financial crisis, it was already clear to many that the dollar's hegemony would be questioned.
Yes, gold is at a record high...against the dollar. Just what does that mean?
On Tuesday, a NYT column pointed out that gold is only at a record high if you don't adjust for inflation. Just what are gold – and the dollar – worth?
Fed's QE2 draws the ire of Virginia Tea Party Patriots
The Virginia Tea Party Patriots have sent a letter to the members of the state’s congressional delegation that castigates the Federal Reserve’s second round of quantitative easing (QE) and calls for Congress to audit the Fed.
What will printing money and creating debt lead to?
Ben Bernanke believes that making people feel richer is the key to generating actual wealth. Is he right? We're about to find out.

MONDAY
Conservatives vs. the Fed
The monetary stimulus will do no more good--and could do more harm--than the fiscal stimulus.
The Saga of QE and The Ben Bernank
Since it is difficult to know what prices really are, I believe the trend is more important than the actual level for purposes of assessing the impact of money supply.
Diamond Not Qualified for Fed Board
Tuesday the Senate Banking Committee meets for the second time to consider the nomination of Peter Diamond to a seat on the Federal Reserve’s Board of Governors. Since Professor Diamond was first nominated, he has been awarded the Nobel prize in economics.
Of inhuman bond spreads
Sovereign bond spreads for Portugal, Ireland and Greece point towards trouble.
What if we reform the whole monetary system?
We could try to solve problems within the current monetary framework, or could discuss alternative monetary regimes.
Reform the Monetary System?
Most economists agree that the latest crisis was caused by risk-taking incentives along with financial innovations that allowed banks to lend excessively. While monetary policy prevented, a collapse of the financial system, an increasing number of economists also agree that it is not possible to safeguard the financial system over and over again. There are limits to intervention. Therefore we have to find a way to deal with the very causes of the crisis.
Taleb Shreds Bernanke
Nassim Taleb is out promoting his new book, The Bed of Procrustes, a collection of aphorisms about economics. He is as close to Austrian theory as you can get and he spouts the party line on boom-bust and the role of government in the economy, as well as Austrian theory epistemology.
Open Letter to Ben Bernanke
We believe the Federal Reserve’s large-scale asset purchase plan should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

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