General Economic News Dec. 20 - 23

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News
THURSDAY
December consumer sentiment rises to 74.5: reports
Despite the gain in December, the gauge is below pre-recession levels of more than 80. While there have been some signs of improvement in the economy, consumers remain concerned about jobs.
Demand for U.S. Capital Goods Rebounds as Spending Holds Up
Orders for U.S. capital equipment rebounded in November, signaling a slowdown in business investment may be less pronounced than some economists projected.
Ireland to inject $4.9 billion into AIB
The Irish government on Thursday effectively nationalized Allied Irish Banks PLC after the nation’s High Court approved the finance ministry’s request to allow it to inject an additional 3.7 billion euros ($4.9 billion) of capital into the troubled lender.
Consumer Spending in U.S. Climbs for Fifth Straight Month as Incomes Grow
Household purchases rose 0.4 percent after a 0.7 percent increase in October that was almost twice as large as previously estimated.
Mortgage Rates in U.S. Fall for First Time in Six Weeks, Freddie Mac Says
The average rates for a 30-year fixed loan fell to 4.81 percent in the week ended today from 4.83 percent, Freddie Mac said in a statement. The average 15-year rate decreased to 4.15 percent from 4.17 percent, the mortgage-finance company said.
New home sales climb - but recovery is sluggish
Sales of new homes rose 5.5% to an annual rate of 290,000 in November, the Commerce Department reported Friday. And while that shows improvement, sales are still off 21.2% from a year ago.

WEDNESDAY
U.S. third-quarter growth revised up to 2.6%
The U.S. economy expanded at a 2.6% pace in the third quarter, slightly faster than previously reported, mainly because of a higher inventory buildup, according to the latest government data.
Nov. existing-home sales up 5.6% to 4.68 million
Even so, sales were still 27.9% below prior-year levels and below the 5.26 million in June when a homebuyer tax credit existed.
U.K. Economy Slows More Than Estimated as BOE Splits
Gross domestic product rose 0.7 percent from the previous three months, the Office for National Statistics said today in London. That compares with an initial estimate of 0.8 percent.
Congress freezes federal pay
It's official: Federal workers won't be getting a pay increase for the next two years, despite the best efforts of the unions that represent them.
A Nation in Motion
The Census reveals a people who are moving to pro-market red states.
Airlines post fattest profits in 10 years
This year is shaping up to be the most profitable year for the airline industry in at least a decade. The bad news is that it costs a lot more to visit Mom.
$305 on gas this month - Bah! Humbug!
Holiday shoppers will need to bump up their budget for one purchase this year. The price of fuel is up 13.6% from last December and 76% higher from December 2008, according to a new study from the Oil Price Information Service.

TUESDAY
Prisons get education funds
The biggest recipient of Alabama’s federal stimulus dollars for education isn’t a school system or college. It’s the state prison system.
'Net Neutrality' Rules Set to Pass

MONDAY
In tough economy, Santas are also suffering
For freelance Santas, this holiday season has been more "no, no, no," than "ho, ho, ho."
Senate Passes Food Safety Bill for Second Time, Sends to House
The Senate on Sunday passed a sweeping bill to make food safer, sending it to the House in the waning days of Congress. 
Congressional Salaries on the Rise Even as Obama Freezes Federal Wages
For a guy who insists that federal bureaucrats make too much money, incoming House Majority Leader Eric Cantor sure doesn't mind handing out handsome government raises of his own.
New Census May Complicate Obama 2012 Bid
The 2010 census report coming out Tuesday will include lots of good political news for Republicans and grim data for Democrats hoping to re-elect President Barack Obama and rebound from last month's devastating elections.
Economic Reports for This Week
Data will include the final gross domestic product for the third quarter and existing home sales for November (Wednesday); and weekly jobless claims, personal income and spending for November, durable goods for November, the Thomson Reuters/University of Michigan consumer confidence index for December, and new home sales for November (Thursday).

Economist Comments
THURSDAY
Who'll Really Benefit from Net Neutrality Regulation?
Will consumers really benefit from expanded FCC regulation of the Net and digital networks?
The Need for a National Mortgage Modification Program
This plan will stabilize the housing market and put money in the pockets of homeowners.

WEDNESDAY
Empowering the Free Energy Markets
For America to thrive, we need energy policy that favors the development of abundant and affordable energy .
The Net Neutrality Coup
The campaign to regulate the Internet was funded by a who's who of left-liberal foundations.
The Decentralization of America
As changes are made to the number of Congressional seats allotted to each state and the Tea Party movement attempts to "take back the government," how the country operates is going to change.
Government Gobbles the Web
The FCC makes a naked lunge to collect political power unto itself.
Taking On Public Unions Isn't Just a Jersey Thing
Some of the reforms on the table in the Midwest would produce big savings in the first year -- for example, increasing employee shares of pension and health care costs.

TUESDAY
No trust for Social Security
The trust fund is nothing more than a trap and a fantasy for those who think it's a solid foundation for Social Security.
How Spain Can Avoid the Irish Error
Now is the time for Spain to take its destiny into its own hands, and in doing so, restore the viability of at least a large part of the euro zone economy.
A Defense of the Market Speculators
Amid ongoing economic and financial uncertainty, including an oil price that is inching back up, the role of speculators in the economy has and will continue to be called into question. If their detractors are to be believed, they're a destabilizing force in the economy.
The great bank heist of 2010
Wall Street wins, Main Street pays — again
A hand up, not a handout
Human compassion can heal hearts in ways government checks can't

MONDAY
Could You Retire Without Social Security?
This week's landmark tax deal sharply changes the financial outlook for Social Security. That has huge implications for your retirement. And most people don't have a clue what's coming.
They Just Hate Rich People
If the debate over the tax deal between President Obama and congressional Republicans has shown anything, it is that the American Left really hates the rich. But, why?
The Seven-Year Switch
The year 2004 has served as a useful, if imperfect, touchstone for investors. Some parallels are eerie, some mere coincidence. What it means for 2011.
Signs of Strength in the Economy
In case you needed something to brighten your Friday even a little bit, there's been a smattering of good economic news this month (courtesy of the invaluable CalculatedRisk).
Insolvency Stalks China's Banks
Are China's banks threatened with insolvency? Yes, warns a seasoned global-market watcher.
The FCC's Threat to Internet Freedom
Net neutrality' sounds nice, but the Web is working fine now. The new rules will inhibit investment, deter innovation and create a billable-hours bonanza for lawyers.
Opposing View on Energy: Subsidies? Just Say No
The problem with electric vehicles can be summed up with one word: subsidies. Subsidies are prima facie evidence that consumers would not buy the product at its market price.
EPA's Costly Rules Will Cost Jobs and Set Back Nation's Economic Recovery
Our nation is in a high stakes race with China to develop clean energy technologies but we are falling behind. It may be hard to remember now, but we surprised the world years ago by overtaking Russia in the space race, and we can surpass China now if we make some small but important changes in government energy policy.

Blogs
THURSDAY
CBO on GSE Reform
I am currently drafting something on the same general topic, so I will add comments based on my current thinking. The folks at CBO discuss three options--purely public, purely private, and a hybrid. They find drawbacks to every option. They explain the hybrid option:
Protective Tariffs, Revenue Tariffs, and American Economic Growth
Did protectionist tariffs contribute to, or obstruct, America’s economic growth during the 19th century?
What Are Ratings Agencies For?
There's no question that the credibility of the ratings agencies has been called into question by the performance of the enormous amount of toxic sludge that they rated AAA during the housing bubble.  So I do understand the complaints that they're still around, influencing markets by what they say, without having ever really explained very well how they got it so monstrously wrong in the first place.
How effective will Basel be?
The Basel committee adopted a 3 percent leverage rule in July, meaning that for every $3 of capital, a bank can borrow no more than $97. While the percentage is tentative and subject to review before it goes into effect, it has since come under attack by banks in Europe and Asia, which say it will restrict their borrowing capacity and inhibit lending.
Growth is good
When we're talking about slower population growth, we're talking about slower growth in aggregate demand. That's not the sort of thing that places upward pressure on incomes. Meanwhile, we could see rising real incomes as slower population growth leads to slower growth in consumer prices, but that's obviously not inflationary.
New Home Sales weak in November
The 290 thousand annual sales rate for November is just above the all time record low in August (274 thousand). This was the weakest November on record and below the consensus forecast of 300 thousand.

WEDNESDAY
How Government Failure Caused the Great Recession
The interaction of six government policies explains the timing, severity, and global impact of the financial crisis.
Freedom is What Keeps Cities Alive
Cities can’t be managed, and that’s what keeps them so vibrant. They’re just these insane masses of people, bumping into each other and maybe sharing an idea or two. It’s the freedom of the city that keeps it alive.
Incentives Matter: Bank Regulatory Edition
One reason that bailouts are so politically popular is that they make financial crises less common but, when they come, more severe because more leverage has built up. That change in the structure of returns is usually a political winner, call it "Ticking Time Bomb."
Why Something Good May Come of the FCC’s Net Neutrality Move
There is good reason to think bipartisan regulatory reform is possible in the next Congress. Thanks to the FCC’s action, the odds just increased that Congress will act.
Brad Delong’s analysis of the housing crisis
When the housing bubble took off–and when mortgage loans and MBSs became really risky–that’s when Fannie Mae and Freddie Mac pulled back. The GSEs were dominant players in the market up through the end of 2002: most of the loans made through the end of 2002 are still good. The GSEs were small players by the start of 2004–which is when the mortgages that have turned out to be toxic assets started to come through.

TUESDAY
Cigarette Taxes and Smuggling
The Mackinac Center’s Michael LaFaive and Todd Nesbit have released a new study on the ill-effects of raising cigarette taxes at the state and local level. Cigarette tax hikes have become a popular choice for spend-happy state policymakers looking for money in these tough economic times.
Moody's Warns it may downgrade Portugal's Credit Rating
Moody’s ... put Portugal on review for a possible downgrade, almost a week after doing the same to Spain, and having cut Ireland by five notches last week.
Can vigilant creditors limit excess bank risk-taking?
Ideally, enforceable bond covenants should limit bank risk-taking, and ensure major bank solvency, but is that feasible?  I see a few problems with the idea:
One-in-Three Working Families Considered ‘Low Income’
Nearly one in three working families earned less than 200% of poverty line last year, as a bad economy pushed 250,000 families below that threshold, according to a new analysis of Census Bureau data.
Will The Housing Market Continue To Decline?
It is clear that housing prices will continue their slide for at least another year in the softer markets. Bottom fishers should be ready.
Number of the Week: Cash for Shares
$92 billion: How much companies spent on their own shares in the third quarter of 2010.
Small Business Confidence Index Jumps
It could be a temporary phenomenon related to the seasonality of the holidays. But the data matches other positives as well. I would bet that we are seeing a trend, but I’m not going to call it that yet. It is still my belief is that a recovery will be characterized by stagnant growth and price inflation.
Bankruptcies Falling Again
Now that they're filing again, it may be time to revisit.  of course, it's not a big fall--but as I say, the economy is considerably worse now.  If it falls further, I think we'll eventually have to say that the bankruptcy reform did produce a measurable, if not enormous, reduction in bankruptcies.
The Baby Bummer Generation
Pew Research came out with a study on the Baby Boomer generation That is kind of fascinating. It is something that we need to follow because they represent 26% of the population (79 milli0n) and they are set to retire.

MONDAY
Unofficial Problem Bank list increases to 920 Institutions
Here is the unofficial problem bank list for Dec 17, 2010.
Small businesses still hunkering down
Some business owners retain a glimmer of hope that the worst of the recession has passed, but most are braced against another downturn, with little debt and minimal investment.
Ten Economic Questions for 2011
Just some questions looking forward to next year:
Schedule for Week of December 19th: Happy Holidays!
This is a holiday week (Merry Christmas!), but there will still be plenty of economic releases. There are two key housing reports: November existing home sales on Wednesday, and New home sales on Thursday.

Reports
THURSDAY
Fannie Mae, Freddie Mac, and the Federal Role in the Secondary Mortgage Market
This study looks at how Fannie Mae and Freddie Mac evolved into the institutions they are today. As context for discussing future options, the study also examines both the rationales that are often cited for federal involvement in the secondary mortgage market and the problems with Fannie Mae and Freddie Mac that existed before the recent financial crisis.
The Effects of Government-Sponsored Venture Capital: International Evidence
This paper examines the impact of government-sponsored venture capitalists (GVCs) on the success of enterprises. Using international enterprise-level data, we identify a surprising non-monotonicity in the effect of GVC on the likelihood of exit via initial public offerings (IPOs) or third party acquisitions.


WEDNESDAY
WORKER ABSENCE AND PRODUCTIVITY: EVIDENCE FROM TEACHING
Our analysis indicates that worker
absences have large negative impacts: the expected loss in daily productivity from employing a temporary substitute is on par with replacing a regular worker of Average productivity with one at the 10th–20th percentile of productivity.

MONDAY
Economics Group
Weekly Economic & Financial Commentary