Monday, June 14, 2010

6/14/10 Post

Wall St Rallies in spite of retail sales dip
US stocks closed higher on the day and on the week on Friday in spite of weaker-than-expected retail sales figures.
Economic News in the Week Ahead
Reports this week will include import prices, producer price index, housing starts, and industrial production and capacity utilization, weekly jobless claims, consumer price index, and leading economic indicators for May; Philadelphia Fed manufacturing index for June.
Treasury Auctions Set for This Week
…on Friday, the rate on the outstanding three-month bill was 0.07%. The rate on the six-month issue was 0.15%, and the rate on the four-week issue was 0.03%.
New Rules on Changes to Benefits
The White House on Monday will issue new rules that strongly discourage employers from cutting health insurance benefits or increasing the costs of coverage to employees…
Democrats Target Corporate Tax Rules
Democrats attacking corporate tax rules they say encourage U.S. multinationals to send jobs overseas.
Number of the Week: Default, Not Thrift, Pares U.S. Debt
122%: U.S. household debt as a share of disposable income
Obama’s State Aid Proposal in Doubt Concern over the nation's mounting debt could snarl the passage of Obama's proposal to provide more aid to state and local governments hit by the economic downturn.
Euro-Zone Industrial Output Surges
The stronger-than-expected outcome goes some way to disguise the weaker performance of those member states struggling with too-large deficits and credit downgrades.
State Plan Makes Fund Both Borrower and Lender…in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.
Obama Presses for Aid to Cities and States
Mr. Obama did not propose to offset the cost of any state aid with savings from other spending cuts or tax increases...
Moody’s Downgrades Greece Ratings to Junk Status
Moody's slashes Greece to 'Ba1' from 'A3'.
Obama calls on Republicans to stop blocking Medicare bill…forestalling a 21% cut doctors receive under Medicare.
Manufacturing surging, but housing will falter
Slack in economy remains huge, keeping inflation at bay.

Q1 2010: Mortgage Equity Withdrawal strongly Negative
The following data is calculated from the Fed's Flow of Funds data and the BEA supplement data on single family structure investment.
AUDIO: Clay Shirky on Cognitive Surplus
Shirky talks about social and economic effects of Internet technologies and interrelated effects of social and technological networks.
Peltzman on the Financial Crisis
Peltzman emphasized… that safety and soundness regulation actually got tougher over the past twenty years.
Tax Credit Extension Could Help Tax Cheaters
The danger is that this extension would also give more time to people who are merely pretending they were under contract in April and intend to backdate their documents.
Weekly Summary and a Look Ahead
Two housing related reports will be released this week…
AUDIO: Blakely on Fashion and Intellectual Property Johanna Blakely of the University of Southern California talks with EconTalk host Russ Roberts about the fashion industry and the role of intellectual property.

Research, Reports & Studies
Economics Group: Weekly Financial & Economic Commentary The moderate recovery continues, but is it sustainable? The Hudson Institute Economic Report: June 11, 2010Americans are not confident enough in the recovery to spend. Instead, they are saving in case of further deterioration in their employment or assets.
The Economic Clashes of the Last Hundred Years [CH 1] …following the course of events over the last hundred years, we will examine the connections between major economic policy experiments and the economic ideas on which they were founded.
Discretionary Defense Spending CBO’s Presentation to the National Commission on Fiscal Responsibility and Reform
The Great Trade Collapse of 2008-09: An Inventory Adjustment? With more severe frictions on international transactions, in a downturn, the calibrated model shows a larger decline in output and an even larger decline in international trade, relative to a more standard model without inventories.

Book Excerpts
“…more than 50% of individuals can be wealthier than average. Consider that you have a very small number of very poor people and the rest clustering around the middle class. The mean will be lower than the median. Take a population of 10 people, 9 having a net worth of $30,000 and 1 having a net worth of $1,000. The average net worth is $27,100 and 9 out of 10 people will have above average wealth.” –Nassim Nicholas Taleb, “Almost Everybody Is Above Average,” Fooled by Randomness, 106

“Did You Know?”
The average [New York] state employee earns a whopping $92,332 total compensation for an average workweek of 37.5 hours, according to the Empire Center for New York State Policy (based on figures from the state comptroller’s office).

Economists’ Comments & Opinions
Only confidence can save banks from the dark side “Fear leads to anger, anger leads to hate, hate leads to suffering.” Exactly this process is now under way in the economy, as fear and hatred combine to threaten Europe’s banks, hurting the economy.
Ship of fools
We learned a simple thing this week: that the BP clean-up effort in the Gulf of Mexico is hampered by the Jones Act.
Money Managers May Face New Tax Increase At best, this is a retroactive tax that will discourage investment in an important industry. At worst, it is a job- creation program for global competitors in an industry historically dominated by U.S. firms.
The all-too-real phantom balance sheet
…for countries, at least, there are three balance sheets with which we need to deal in order to assess financial risks accurately. This third might be called the “phantom balance sheet”.
America's Municipal Debt Racket State and local borrowing as a percentage of U.S. GDP has risen to an all-time high of 22% in 2010.
“When most money is bank-created, household and firm net worth drive NGDP growth.” –Garrett Jones, Twitter

Graphic of the Day
A Decade of Growth in the Regulators’ Budget
See also: The Economics of the World Cup
INTERACTIVE: Average Tax Rates on Salaries Up to $1,000,000 [2009]