General Economic News Nov. 8-12

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News
FRIDAY
Super-sized Pension and a Doomsday Scenario
While the federal debt of $13.7 trillion raises issues of devalued currency, higher borrowing costs for Washington, D.C., and loss of international bargaining power, state debt – much of it driven by exploding pension costs – poses a more immediate risk to the U.S. economy, according to many experts.
Consumer sentiment edges up in November
Better-than-expected reading of 69.3 for the month, report shows
New deepwater drilling permits: Zilch
President Obama lifted his moratorium on deepwater oil drilling nearly a month ago, but the government still hasn't issued any new permits in the Gulf of Mexico.
Cashing in on Corporate America's $1 trillion
Corporate America's wallet is bulging with $1 trillion and the rumor mill is heating up. What will companies do with all that cash?
US homes lost to foreclosure drops 9 pct in Oct.
The number of U.S. homes repossessed by lenders last month fell by the sharpest margin this year, as several major lenders temporarily halted most or all of their foreclosures amid allegations thousands of foreclosures were handled improperly.
Still crazy after all these yields
Ireland’s plan for a brutal fiscal adjustment has done nothing to appease panicky bond markets. Portugal is also in their sights.
Home Prices Decline in Nearly Half of Metropolitan Areas
Home prices fell in nearly half of U.S. metropolitan areas in the third quarter, indicating that the market is losing steam without government tax credits, according to an industry report.

WEDNESDAY
China trade surplus heightens G-20 tensions
As global leaders prepare to debate international trade imbalances this week, both the U.S. and China announced data that points to a continued trade disparity between the world's two largest economies.
Ireland's Crisis Flares as Investors Dump Bonds
Ireland's financial troubles loomed large Wednesday as investors — betting that the country soon could join Greece in seeking a bailout from the European Union — drove the interest rate on the country's 10-year borrowing to a new high.
Bipartisan vow: We'll fix AMT
More than 20 million taxpayers are at risk of having to pay the so-called wealth tax when they file their 2010 taxes next year, if lawmakers fail to act. But that's not likely to happen.
Commodity Prices Surge
Gold, Cotton Touch New Highs as Fed Stimulus, Chinese Growth Drive Demand
GM: Best quarter in 11 years
General Motors reported its best quarter since 1999 Wednesday, setting the stage the automaker to begin selling shares to the public once again.

TUESDAY
Recession's casualty: Charity
As the recession whacked the economy, charitable giving by even the wealthiest Americans took a substantial hit, according to a study released Tuesday.
Bankruptcy filings jump 14% in 2010
As the U.S. economy struggles to recover from a deep recession, the number of Americans filing for bankruptcy continues to rise dramatically.
Ireland's Next Blow Could Be Home Loans
Ireland's commercial-property bust has knocked the country's banks to their knees. Now the lenders are bracing for another blow: losses on home loans.
Wholesale Inventories Surge 1.5%
Inventories surged 1.5%, matching a July gain that was the biggest increase in more than two years, the Commerce Department said. Analysts polled by Reuters were expecting a 0.7% increase.
Banks Ease Loan Standards, but Crunch Isn't Over
The credit crunch is easing in the U.S. but it's far from over.
Economic Stress Dips to 16-Month Low
The nation's economic stress fell in September to a 16-month low, thanks to more hiring in New England, fewer foreclosures in the mid-Atlantic and declining bankruptcy filings in the Southeast, according to The Associated Press' monthly analysis of conditions around the country.
Debt Worries Punish Euro Against Rivals
The euro declined against the dollar and yen amid concerns about debt problems of some euro-zone nations, especially Ireland.

MONDAY
Irish markets flounder as EU eyes survival plan
Shares in Ireland's banks fell to record lows and national borrowing costs reached new euro-era highs Monday as the government prepared to discuss its fiscal survival plans with the European Union's economic commissioner.
Banks fail in Md., Calif., Wash.; 143 total in 2010
Regulators shut down four banks Friday, bringing the total of 2010 failures to 143. That tops the 140 shuttered last year and is the most in a year since the savings-and-loan crisis two decades ago.
Leading economies set to diverge in recovery: OECD
The world's leading economies are set to diverge as they recover from the global economic crisis, with the United States, Germany, Japan and Russia gaining pace while China, Britain, France and India slowing down, the OECD said on Monday.
Greek prime minister wins voter mandate for cuts: analysts
Greek Prime Minister George Papandreou has beaten the odds in local elections to win a grudging mandate for radical austerity measures to overcome a debt crisis, analysts said on Monday.
Americans' debt slashing nears $1 trillion
Americans have paid off nearly $1 trillion in debt over the past two years, although the pace of repayment has slowed, according to a regional Federal Reserve report released Monday.
Economy recovering, but recession's shadow is long
Now the recession is over, at least technically, and the economy is growing again, at least a little. But many changes in spending habits that most Americans first saw as temporary have taken hold, perhaps for good, some economists say.
Fed's Hoenig hammers housing subsidies
Hoenig, the Fed banker who has said at seven straight Federal Open Market Committee meetings that he believes the Fed's current policy is a mistake, repeated Friday that he believes the Fed should raise interest rates to put the economy on a path to balanced growth.
Looking Ahead to Economic Reports This Week
Reports this week will include wholesale trade inventories for September (Tuesday); trade deficit for September, import prices for October and weekly jobless claims (Wednesday); and Thomson Reuters/University of Michigan consumer confidence index for November (Friday).

Economist Comments
FRIDAY
Periphery Proposal Ignores Greece's Recent Experience
Greece's present interest rate spreads suggest that the market is now assigning a high probability that Greece will default on its sovereign debt within the next five years.
The other recovery to watch: world trade
World trade suffered its worst slump since the Great Depression in 2008 and 2009.

WEDNESDAY
The Man Who Called the Financial Crisis—70 Years Early
Decades before anybody had ever heard of a mortgage derivative, an economist named Melchior Palyi predicted key causes of the 2008-2009 financial crisis with precision that makes a modern reader's hair stand on end.
Worry Over Trade Deficits
Acting on behalf of various interest groups, politicians fret over trade deficits but is it something that ordinary Americans ought to worry about?
US Needs to Become a Free Market Economy
Free market economists don't believe it's possible to predict human behavior by studying aggregates because aggregates don't make choices, only people do.
Progressives don't really get progress, but the American people do
Progressives claim to have a monopoly on progress – designed by intellectuals who 'know better' and brought about by a big, beneficent government. But Americans voted in last week's elections that this brand of progress actually impoverishes, and that a free market is much smarter.
Despite Warnings From States, Federal Regulators Failed to Act on Foreclosure Problems
Despite multiple warnings, Federal regulators appeared to rely on laissez faire idealogy and banks' own reporting rather than actually investigating.
Stealth Protectionism
We have heard every major world leader reject the notion that protectionism would be an appropriate response to the financial and economic debacle of 2007-08. And yet the signs are unmistakable: We are entering a protectionist era that does not speak its name.
It's Time to Discontinue the Basel Regimes
Before the G20 approves the Basel III capital regime this week, it should take a moment to examine the logic of Basel, what has happened under Basel II, and the potential future under these regimes.

TUESDAY
A checklist for Congress
Revamped House, Senate have much work to do.
The Age of the Entrepreneur
The way startups raise money is changing, fast. Angels, super angels and VCs have to figure out the new rules, but that's good -- really good -- for founders themselves.
10 Market Bubbles that could soon Burst
What other bubbles are out there lurking in the global economy? Here is a long list by experts:

MONDAY
Is Economics a Science?
It would be, if it weren’t for the people.
GM's Ultimate Sales Incentive
GM's IPO seems underpriced in the high 20s. That could be a boon for initial buyers, a fiasco for the Treasury. Is the stock really worth $35?

Blogs
FRIDAY
Federal Workers Need Reality, Not Raises
Yesterday the USA Today reported that not only has the number of federal workers making more than $150,000 a year doubled since President Barack Obama took office, but that President Obama wants to give federal workers a 1.4% across-the-board pay raise.
Chinese Economic Data: More Tall Tales
The Conference Board, a global research association, made a splash with their 2011 global outlook. The group’s most interesting claims are that emerging markets will drive “global growth” and that China could pass the U.S. on one measure of economic size as early as 2012. The Conference Board is making two mistakes many observers make, and which the media gladly eats up.
5 Most Important Issues at G20 Meeting
It seems like yesterday that the most recent G20 was gathering in Toronto to discuss a more coordinated response by governments and central banks to deal with potential crises. That was five months ago. We're about to start a new G20 meeting, this time in Seoul, today.
Secondary Sources: Capital Failure, Commodity Inflation, Productivity
A roundup of economic news from around the Web.
My New Favorite Christie Line
“Let me help you pack.” That’s what Gov. Chris Christie told one of the state’s top administrators when that administrator commented publicly that he could leave New Jersey and go to another state if his $242,000 total compensation were to be capped under the governor’s proposed rule.

WEDNESDAY
Get to Work Getting Control of Government
Conservatives must pay close attention to what this Congress does and be prepared to hold leaders accountable. The progressives that controlled the 111th Congress simply had no respect for the limitations on federal government power that the Founders placed in the U.S. Constitution.
How the Irish may save civilisation (again)
Despite the valiant efforts of government to cut spending since the crisis, the markets do not seem to believe they can solve the problem on their own. Government bond yields are now 8%, an unsustainable level. It looks inevitable that the Irish will have to seek help from the European Financial Stability Fund.
Humor: China Rating Agency downgrades U.S.
Dagong Global Credit Rating Co. — the Chinese rating agency which hit headlines earlier this year for its AA-view on the United States — is back. With a US downgrade.
Hazlett vs. Biden
Reacting to this short video of me discussing Joe Biden’s phantasmical delusion that government is the source of all good ideas of the past 300 years, my GMU colleague (and former Chief Economist for the F.C.C.) Tom Hazlett sent to me the following e-mail – posted here with Tom’s permission:
Uncertainty
Is uncertainty one of the reasons banks aren't lending and the economy remains lethargic? I'd say the answer is a clear yes.
Secondary Sources: Venezuelan Inflation, Sarah Palin, Fannie & Freddie
A roundup of economic news from around the Web.

TUESDAY
Upgrading Trade Transparency
AFP reported late last week that Sprint Nextel will not consider bids from two Chinese companies for large telecom contracts due to national security concerns expressed to Sprint Nextel by the American government. This is probably the right outcome, but it is the wrong way to achieve that outcome.
More Ireland
The WSJ has some interesting facts on the Ireland residential housing market.
Not Worrying About “Unequal” Wealth ‘Distribution’
Michael Norton and Dan Ariely surveyed us Americans and found that we “drastically underestimated the current gap between the very rich and the poor” (“Spreading the wealth,” Nov. 8).  They found also that Americans’ “ideal” distribution of wealth is one that is more even than is the wealth-distribution in reality.
Fighting Social Security Reform Is the Worst Thing Lawmakers Can Do for Seniors
When the next Congress arrives in Washington, Members will need to get to work to reduce runaway government spending. One area that has been identified as a good place to start—especially as the National Commission on Fiscal Responsibility and Reform prepares to give its recommendations on deficit reduction next month—is Social Security.
CR Index: Less money stress, but less interest in some holiday buys
Our financial difficulties and stress levels have declined, and employment numbers have climbed back into positive territory, according to the Consumer Reports Index for November.
Joe Biden’s Weak Case for Government Meddling
Vice President Joe Biden believes that human progress depends almost entirely on government vision and government incentive.
Small-Businesses Sentiment Improves
Small-business activity in the U.S. picked up in October, and job creation turned positive, according to a report released Tuesday that also took government economic policy to task for failing to turn the economy around.
CardHub Study on the Effects of the Durbin Amendment Debit Price Controls
CardHub has a new study that assesses the effects of the Durbin Amendment and its likely unintended consequences

MONDAY
Is the current banking system the worst possible?
We do have the worst possible banking system because it is built on two pillars of straw—proprietary information and leverage.
Reject All-of-the-Above Energy Approaches
With Congress divided, will anything actually get done in the next two years? President Obama recently suggested energy policy as an area in which bipartisan support could exist. Rather than trying to pass  a large climate change bill, Obama stressed the importance of increasing technologies and energy sources to reduce greenhouse gas emissions  – including nuclear, clean coal, electric vehicles, wind, solar, and renewable fuels.
Early Retirement Accounts Won’t Fix Social Security
The twist with early retirement accounts is that the account would pay your full benefit for the first few years of retirement—say, from 67 through 72—and then you’d receive your full benefit from the current program. This is an option I have not considered in a while. Heres why...
Ireland Facing House Price Collapse?
It's terrifying to contemplate that the federal government is now, for all intents and purposes, the source of nearly all the mortgage origination in the United States.  Doubly so for a libertarian, of course--but it's also terrifying to contemplate what the market would look like without those interventions.  Would other sources of mortgage finance exist? And if not, what's the value of a house in a market that has suddenly gone to all-cash deals?
California’s Multiplayer Version of Chicken
Sure enough, it looks like everyone in California is playing a multiplayer version of chicken, sometimes characterized as “someone around here better be reasonable, and it is certainly not going to be me.”
Multiplicative Growth: A Just-So Story that Deserves a Hearing
Policy is not enough to ensure economic growth.
Government Misstatements About Billionaires and Other Gold-Friendly Actions
We are nowhere near a bubble in gold prices. We are however looking at a U. S. government that may have invented tax numbers for political reasons. But it can’t invent physical gold.
Schedule for Week of Nov 7th
A light week for economic releases. The trade report on Wednesday is probably the key release and could lead to a revision in Q3 GDP.
Beware Policies that are Pro-Business
The fact that more than 200 American business executives are in India with the President is cause to fear that any pro-business policies he might adopt will be of the second, impoverishing sort
Consumer Credit Increases
Americans boosted borrowing for the first time in eight months in September, the Federal Reserve said Friday, but credit-card debt continues to decline.

Reports
WEDNESDAY
Wholesale Inventories Increase in September
Wholesale inventories rose 1.5 percent in September, led by gains in nondurable goods. Growth in August inventories was revised upwards to 1.2 percent from the originally reported 0.8 percent.
Fixing Transit: The Case for Privatization
America's experiment with government ownership of urban transit systems has proven to be a disaster. Largely because of government ownership, the transit industry today is beset by a series of interminable crises. Transit advocates propose to solve these problems with even more subsidies. A better solution is to privatize transit. Private transit providers will provide efficient transit services that go where people want to go. In order for privatization to take place, Congress and the states must stop giving transit agencies incentives to waste money on high-cost transit technologies.
U.S. International Trade in Goods and Services
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total September exports of $154.1 billion and imports of $198.1 billion resulted in a goods and services deficit of $44.0 billion, down from $46.5 billion in August, revised. September exports were $0.5 billion more than August exports of $153.6 billion. September imports
were $2.0 billion less than August imports of $200.1 billion.

TUESDAY
Does Haste Make Waste in Regulatory Analysis?
Most federal agencies must conduct economic analysis when proposing major regulations. Thispaper uses a new dataset scoring the quality of analysis that accompanied proposed regulations in2008 to assess whether some types of regulations receive more thorough analysis than others
The Truth About Entitlements
Does the United States really have to restructure the entitlement programs that affect seniors? Some would argue that Social Security is sound. Some would suggest that greater taxes on the highest earners would be a solution. Some would say that Medicare’s problems can be solved with painless reforms to control costs. Some would suggest that we have room to raise overall taxes to levels seen in European countries. Some would say that high economic growth is likely to eliminate the problem. This paper looks at the feasibility of these alternatives to scaling back spending promised for seniors.

MONDAY
Obama Should Approve Korea Trade Agreement
A greater potential success during the Seoul gathering would be the Obama Administration’s affirmation of the Korea–U.S. free trade agreement (KORUS FTA), finally allowing submission for legislative approval. Yet President Obama continues to genuflect to special interest groups, which has delayed the FTA’s progress. South Korean officials complained that, as late as last month, the U.S. had not even articulated its specific demands on altering the automobile section of the agreement.
Slaughter of the Innocents
What caused the financial crisis? Even though the Dodd-Frank Act (DFA) has been signed into law, this is still an important question. If we do not attribute the crisis to the right cause, we could well stumble into another crisis in the future; and if the DFA was directed at the wrong cause, we should consider its repeal.
Wells Fargo Economic Group
Weekly Economic & Financial Commentary