Monday, June 21, 2010

6/21/10 Post


News
US manufacturing crown slips
The US remained the world’s biggest manufacturing nation by output last year, but is poised to relinquish this slot in 2011 to China – thus ending a 110-year run as the number one country in factory production.
Bank failure is 83rd in '10; pace more than double last year's
The 83 closures so far this year is more than double the pace set in all of 2009, which was itself a brisk year for shutdowns.
In Budget Crisis, States Take Aim at Pension Costs
But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired.
Fannie and Freddie tab is $146B and rising
The Congressional Budget Office has predicted that the final bill could reach $389 billion.
Bureaucracy frustrates U.S. Gulf oil spill efforts
Those on the front lines of the U.S. Gulf Coast oil spill say they are forced to fight two battles -- one against the crude washing into lush wetlands and another against needless bureaucracy.
States See Growth in Jobs
The sluggish U.S. jobs recovery is inching beyond the industrial South and Midwest, and is spreading toward the service-heavy economies of the two coasts, in a sign of hope for a labor force hit by the worst recession in generations.
Wall Street reform comes down to the wire
With one week down and one week to go on negotiations melding the two Wall Street reform bills, lawmakers have a lot of tough decisions ahead.
Big Sis: Internet Monitoring Needed to Fight Homegrown Terrorism
Napolitano said it is wrong to believe that if security is embraced, liberty is sacrificed.
Is the Fed out of bullets?
Economists are more nervous about the chances of another recession. And one of biggest fears is that the Federal Reserve may have run out of bullets to fight another downturn.
Doc's win on Medicare too late to stop 21% cut
The Senate passed a bill Friday rescinding a 21% cut and adding a 2.2% increase for Medicare payments. The bill was passed by unanimous consent after lawmakers found a way to pay for the boost without raising the budget deficit.

Blogs
Economists React to Yuan News
Here are some initial reactions from China economists to the Chinese central bank’s statement vowing to make the yuan’s exchange rate more flexible.
Weekly Summary and a Look Ahead
Two key housing reports will be released this week: existing home sales on Tuesday, and new home sales on Wednesday.
Dead On Arrival: Financial Reform Fails
Welcome to the next global credit cycle – with too big to fail banks at center stage.
From the AER
It seems as though empirical work without the "con" of econometrics is in. Theorem-proving and low-credibility multiple regression is out.
Adam Levitin on Interchange Price Controls
...the problem with this argument is that it only looks at half of the market.
Response from Brad DeLong on fiscal policy
I believe the "zero bound" is perhaps the single largest "red herring" in the economics profession today.
Housing Starts and the Unemployment Rate
Usually housing starts and residential construction employment lead the economy out of a recession, but not this time because of the huge overhang of existing housing units.
Markets For Everything: North Korean Edition
It turns out that the people in red who were cheering for North Korea in their soccer game against Brazil weren't North Koreans at all, but Chinese actors.
CoreLogic: House Prices increase 0.8% in April
National home prices increased in April, the second consecutive monthly increase.

Research, Reports & Studies
The Case for Auditing the Fed Is Obvious
The profit or loss of the Fed’s investments would provide a very helpful indicator of whether the Fed’s actions served the economy as a whole or merely transferred wealth from ordinary taxpayers to bank shareholders.
Corporate Tax Incidence: Review of General Equilibrium Estimates and Analysis
The analysis identifies the major drivers of the results from open-economy models and compares estimates from four major studies that have examined corporate tax incidence in an open economy.
Crisis Economics
As Milton Friedman once put it: "The role of the economist in discussions of public policy seems to me to be to prescribe what should be done in light of what can be done, politics aside, and not to predict what is ‘politically feasible' and then to recommend it."
The Hudson Institute Weekly Economic Report
Housing starts are down, initial unemployment insurance claims are up, and some price indices show deflation.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Production seems to be running ahead of demand...
Looking Ahead to Economic Reports This Week
Data will include existing home sales for May (Tuesday); new-home sales for May (Wednesday); durable goods orders for May and weekly jobless claims (Thursday); and the Reuters/University of Michigan consumer confidence index for June and the revised first-quarter gross domestic product (Friday).
Sales Taxation of Business Purchases: A Tax Policy Distortion
One might think that the prevalence of the sales tax would be good news for citizens and economists who support efficient taxation. But such a tax raises relatively few efficiency problems.

Graphic of the Day
See also: Jobs may rebound in 2010

Economists’ Comments & Opinions
New Bank Taxes Under Financial Reform Will Raise Borrowing Costs, Hurt Growth
The beleaguered American taxpayer deserves a break. The housing-led financial crisis begat trillions of dollars of red ink.
Bad Policy Explains Dow Stuck At 10,000
To many... the Dow’s inability to sustain increases above 10,000 is a replay of a downward market cycle that began in 1966.
Of Brown Pelicans And Black Swans
No one could have ever predicted that a single exploding oil well in the Gulf of Mexico, the Deepwater Horizon, would destroy 50% of oil giant British Petroleum's stock market valuation.
Cutting the Pentagon Budget
The important question is not how much money we spend but whether we spend it effectively and meet our defense needs in the process.

Book Excerpts
"…I ultimately realized the profundity of the difference between the businessman and the bureaucrat. The businessman’s standard of efficacy is a solution to the problem, and the more responsive he is to external reality, the better. The bureaucrat’s standard of efficacy is obedience to the rules and respect for the vested interests of the hierarchy, however unyielding of a solution; response to external reality is often irrelevant. That is why bureaucracies so often produce nothing but wastepaper and destroy the productive institutions they supervise." –Former Treasury Secretary William E. Simon, A Time for Truth (1978)

"Did You Know"
The U.S. shed 2.3 million jobs since February 2009, Obama's first full month in office. Going back to World War II that is by far the worst record for any president in his first 17 months, outpacing the job destruction experienced in the early Bush years by more than 800,000 jobs.