Wednesday, June 16, 2010

6/16/10 Post

Stimulus Bond Program Has Unforeseen Costs
Build America Bonds, part of President Obama’s economic stimulus plan, are also building something else: controversy.
A Face-Off over Sale of Spectrum by FCC The federal government has raised billions of dollars from previous wireless auctions. If the new wireless spectrum is set aside for public emergency use without an auction, the government might have difficulty paying for it.
House Passes Tax-Cut for Small-Business Investment
Offsetting tax increases include one raising $5.3 billion over the next decade by limiting taxpayers' ability to avoid gift taxes by setting up grantor retained annuity trusts.
Employers Race for Retiree Funds …some companies worry that the early-retiree fund will be exhausted quickly.
Weak Euro Casts Uneven Benefits Across Bloc The euro zone's trade balance swung to a surplus in April, indicating that a weak euro and strong demand in overseas markets such as the U.S. and China are offsetting strains in trouble spots along Europe's southern fringe.
High Default Rate Seen for Modified Mortgages Fitch Ratings Ltd. forecasts that most borrowers who get lower mortgage payments under a federal government program will default within 12 months.
Louisiana leaders say drilling ban could be worse than oil spill
As the president attempts to curb the nation’s spewing anger over the oil spill in his national address, leaders and experts in Louisiana say the administration is continuing to strike out.
Euro-Zone Inflation Rises
CPI rose to highest level in 18 months in May
Fannie Mae, Freddie Mac to delist from NYSE
Mortgage finance giants Fannie Mae and Freddie Mac posted combined losses of $93.6 billion in 2009 and another $18.2 billion in the first quarter. They were ordered by their federal regulator to no longer trade their shares on the NYSE.
Wholesale prices drop in May for second straight month as cost of energy and food both decline…prices dropped 0.3% in May following a 0.1% decline in April. Core inflation, excluding energy and food, rose 0.2%.
More families are homeless and on the streets
The economic downturn has likely spurred the surge in homeless families... In 2009 some 170,000 families of 535,000 people needed shelter last year.

The Symmetry of the Interchange Debate
The argument over interchange fees has largely focused on the merchants' side of the equation. But this ignores the banks' side of the market, which is just as important for overall consumer welfare.
It's Official: You Won't Be Able to Keep Your Health Insurance Remember when Obama promised that if you like your health insurance, you can keep it? Well, Obama to America: Tough noogies.
Required Repeating: Fiscal Responsibility Is Not a Bad Thing Bottom-line: cut the budget, limit taxes, tie the ruler's hands with respect to monetary policy, and open up the economy for trade from afar as well as near. In short, economic freedom works if only political leaders would give it a chance.
Industrial Production, Capacity Utilization increase in May
Industrial production advanced 1.2% in May after having risen 0.7% in April. Manufacturing output climbed 0.9% last month, its third consecutive monthly gain of about 1%, and was 7.9% above its year-earlier level.
Game Over for Illinois Teachers’ Pensions
Illinois’ Day of Reckoning is imminent and they aren’t alone.
Morning Recommendations
A well-written review and a new metaphor for the economy.
Can We Expect Real Reform from BASEL III?
You can be for or against these interventions, but I find it amazing (though not surprising) that the biggest financial crash in recent history hasn't so much changed the political equilibrium.
Employment and Real GDP, Real GDI
Expect a 2nd half slowdown in GDP growth this year - and the unemployment rate will stay near the current level for some time.
What’s the Fuss about Financial Seismology?
What seems to be missing from the idea of financial seismology is that bad institutions and/or bad policy disconnect the financial system from the feedback mechanisms vital to its survival.
Keeping Up with the Jones Act
The President's continued refusal to request an emergency waiver of one piece of legislation is slowing down the oil spill response.

Research, Reports & Studies
The Roaring Twenties and the Austrian Business Cycle Theory [CH 3]
Could the downturn have been avoided, or was there something about the boom years that destined them to come to an end?
Married Fathers: America’s Greatest Weapon against Child Poverty
The poverty rate in 2008 for single parents with children was 35.6 % Compared to 6.4 % for married couples with children. Being raised in a married family reduces a child’s probability of living in poverty by about 80%.

Economists' Comments & Opinions
Panic and populism will not fix the US deficit…the question is not whether the dollar will retain its haven status, because it will, but how much damage will be done as global investors offer US policymakers the rope with which to hang themselves.
Failing Successfully
I asked Dr. Jones about the fallout from the bailouts of 2008, how to prevent bailouts in future financial crises, and the possibility of speed bankruptcies as an alternative to the current regulatory reform legislation's "resolution authority" that would give federal regulators the ability to take over and wind down financial institutions in crises.
One reason to support fiscal tightening: It lowers relative political price of looser, innovative monetary policy. –Garrett Jones, Twitter

"Did You Know"
Congress will soon consider a $23 billion spending measure for public education. The Obama Administration estimates that another $23 billion in taxpayer money would save between 100,000 and 300,000 public education jobs. If that is the case, then 300,000 education jobs would cost taxpayers $76,000 each; exceeding the average teacher salary by nearly $30,000. If 100,000 jobs were saved, each one would cost taxpayers $230,000.

Book Excepts
“Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. And whoever has sole control of the means must also determine which ends are to be served, which values are to be rates higher and which lower, in short, what men should believe and strive for.” –F. A. Hayek, The Road to Serfdom

Graphic of the Day

Deficits and debt will rise to unprecedented levels in coming decades without major changes in federal budget policies

See also: Financial Habits of the American Youth

Economic Indicators