8/31/10 Post

BUZZ: India Economy Expands 8.8%

News
Japan Defends Economic Policy Steps as Stocks Slide
Japanese ministers defended measures pledged by the government and the Bank of Japan yesterday after concern deepened that the steps won’t be sufficient to halt the yen’s gain and boost economic growth.
Australia Trade Deficit Smallest Since 2002
The current account deficit narrowed to a seasonally adjusted 5.6 billion Australian dollars ($5 billion) in the second quarter of 2010 from a shortfall of A$16.46 billion in the first quarter, the ABS said Tuesday.
European Inflation Slows to 1.6%, Unemployment Holds at Highest Since 1998
European inflation slowed this month and unemployment held at the highest in almost 12 years in July as companies continued to cut costs to help shore up earnings.
Home Price Rise Better Than Forecast
Prices of U.S. single-family homes gained more than expected in June and rose in the second quarter, reflecting the lingering boost from homebuyer tax credits that ended in April, Standard & Poor's/Case Shiller home price indexes showed on Tuesday.
Russian economy grew official 4.0% in first half
Russia's gross domestic product (GDP) grew by 4.0 percent in the first half of 2010.
Paying Off the House in 15 Years
Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, says Bob Walters, chief economist at online lender Quicken Loans.
German official unemployment rate stable at 7.6%
The German unemployment rate was stable in August at 7.6 percent of the workforce, official figures showed on Tuesday as the number of people seeking work edged slightly lower to 3.188 million people.
U.S. Auto Sales May Hit 28-Year Low as Discounts Flop
U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.
Ron Paul questions whether there's gold at Fort Knox, NY Fed
Rep. Ron Paul (R-Texas) said he plans to introduce legislation next year to force an audit of U.S. holdings of gold.
Gold Rallying to $1,500 as Soros's Bubble Inflates
Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.
Public sours on health care reform as midterms loom
A new poll shows that public support for health care reform dropped sharply in August – a dagger in Democrats’ hopes that their landmark legislation will help them in November’s midterm.
August Torpor Leaves Dow in a Hole
This month's average daily trading of four billion shares in New York Stock Exchange composite volume makes it the slowest August since 2006, and is almost a third lower than the daily volume of 5.8 billion shares in August last year.
Democrats seek separation from Nancy Pelosi
Some of the Democratic Party’s most endangered lawmakers are taking steps to distance themselves from Speaker Nancy Pelosi in an attempt to inoculate themselves from charges that they are beholden to the unpopular House leader and supportive of the ambitious national Democratic agenda.
Obama Kicks Off Jobs Offensive
President Obama will close out the summer with a public relations blitz on jobs and the economy, the issue that is shaping the political landscape for November.
Analysts say US is expected to find that China unfairly helped its aluminum industry
The finding, which could spark higher import duties, was anticipated Tuesday as the White House attempts to strike a delicate balance ahead of November congressional elections that will be dominated by the weak U.S. economy.
U.S. Wants Report Card for Cars
System Would Rate Fuel Economy, Emissions; Industry Says Government Veers Into Issuing Opinions.
Car buyers won't see deals like 'Clunkers' for a long time as leaner automakers guard profits
Deals are getting more scarce because automakers, newly lean and profitable, are holding the line on those profit-eating promotions. And with no one expecting the government to offer a repeat of the Clunkers program, get ready for fewer discounts
Obama rips GOP for blocking small business aid bill
President Barack Obama blasted Senate Republicans on Monday for blocking a small business assistance bill, calling their opposition "pure partisan politics."
Coming Soon: Theaters, Airplanes to Post Calories
Regulators' appetite for calorie counts is about to extend beyond restaurants to thousands of other places that offer food, including airplanes, movie theaters and convenience stores.
Alabama schools turn to bank loans to operate
Alabama schools have been having a rough time of it, and it only looks like it's going to get rougher. Five school districts have already borrowed against lines of credit they have with local banks to fund basic school operations, and 25 additional districts are planning to follow suit in the next few months.
Poll: Americans Disapprove of Obama on Economy, Deficit
In nine of 15 issues examined in an Associated Press-GfK Poll this month, more Americans who expressed intense interest in a problem voiced strong opposition to Obama's work on it, including the economy, unemployment, federal deficits and terrorism.
Credit is finally available, but no one wants it
Finally, nearly two years after they were bailed out by Congress, big banks are beginning to ease lending standards for individuals and small businesses. Just when credit becomes more available, there's little evidence of a surge in demand for it.

Blogs
He Can’t Know
...between 1981 and 2008, taxes paid by this industry totaled nearly $2 trillion, an amount that exceeds oil-industry profits during these same years by almost 40 percent. The production and use of coal is also heavily taxed.
Higher Taxes May Not Push Firms to Cut Dividends
One big reason is that a growing share of U.S. equities are held by retirement funds and foreign investors that aren’t swayed by U.S. individual income-tax rates.
Inflation Regimes: the 5.5 percent barrier
The 5.5 percent barrier was crossed in 1990, with the six-month moving average peaking at 5.96 percent in August of 1990, but inflation turned down from there, falling below 5.5 percent in February of 1991 Until the 1990 recession, we might have been flirting with the high-inflation regime.
Immigrants Make U.S. Workers Richer
The research offers a detailed analysis of how, rather than depressing the wages of native born workers, immigrants help to raise them over time, largely through immigrants’ overall stimulation of economic growth.
Changes in Workers Compensation Taxes Over Time
In 2006, the taxes that support workers compensation insurance in a number of states were skyrocketing out of control. So much so that many businesses were seriously looking at uprooting their operations and moving cross country to where they could operate less expensively.
Economists React: Spending Data Indicate Recovery ‘Slogging Through the Mud’
Economists and others weigh in on the increase in consumer spending and incomes.
I, Fuel Pump
...overwhelming – and fun – evidence that markets work.
How Big a Stimulus Did We Need?
The CBO's numbers imply that even if we'd gotten a much larger stimulus--$1.3 trillion, say--unemployment would at best be something under 9%. The economy would still be underperforming.
The Unemployment Problem
We can argue about how generous the unemployment benefits should be overall, but for any level of benefits it is possible to reduce the disincentive to find work.
New database on the maturity structure of publicly-held debt
...a project with UCSD graduate student Cynthia Wu to try to assess the potential for the Federal Reserve to continue to influence long-term interest rates even when the short-term interest rate is essentially at zero.
Adam Smith on Ford's $5 a Day
Smith goes on to point out, in one of the first public choice insights in written economics, that, of course, the shopkeepers are quite happy for others to be taxed to finance imperialism because their pro rate share of taxes is less than their benefits from having a protected market.
Reversing reform
Over the past several decades, China has slowly reduced its interventions in the economy and it has encouraged state-owned firms to compete aggressively in the market. The effort to remove the heavy shackles on the Chinese economy has generated a period of record growth. Is the process of reform now threatened?
A Federal Right to Obfuscate
H.R. 3421, the “Medical Debt Relief Act of 2009,” has nothing to do with relieving people of medical debts. It adds to the list of information credit reporting agencies may not communicate to their clients.
Economic Problems Won’t Be Solved by Education Stimulus, Either
Mark Calabria does a fine job dismantling Laura Tyson’s argument that we need another stimulus to spur private demand and revive the comatose economy. I would just caution against the one thing he could be construed as implicitly supporting: more federal funding for education.
Trade Deficit Reality Check
Americans should hope for a big surge in imports in the near future. A fast-growing economy would give Americans more money to spend on imports and that—note to headline writers—would obviously be a very good thing.
Wind Energy: It’s Not Cheap or Clean
We’ve explained in detail how subsidized green jobs destroy jobs elsewhere, but it also turns out that increased wind power decreases carbon emissions much less than previously thought, and in some instances, could increase emissions.
The Obama Tax Hikes: It’s Not Their Money!
It doesn’t cost our government anything to allow us to keep the money we have earned. When a tax is not raised, the people get to keep their money, and that’s it.
More (Mis)forecasting Folly from the Keynesians
Advocates for more stimulus dollars such as economist Laura Tyson continue in their failure to recognize the fundamental adjustments needed on the economy's supply side before the economy can get back on a path of sustainable recovery.
What Can the Fed Do?
Less than most hope; more than many fear.
Don't Count the Bulls Out... Yet
In the age of feast or famine, it's alright to nibble.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Personal Income Rose Modestly in July
Personal income rose an anemic 0.2 percent in July, which was roughly in line with expectations. In real terms, spending rose a modest 0.2 percent. Increases in hours worked helped boost wage and salary growth.
Investing in Institutions
...the robustness of a country's growth path to political uncertainty depends on the degree to which individuals are invested in its current institutions.
After the Fall
Three years have elapsed since the troubles in the United States subprime mortgage market erupted in the summer of 2007. In the interim, a global panic developed and, just as normalcy began to return this year, concerns about a Greek default and widespread contagion in Europe shook the confidence of financial markets anew. As the dust has once again begun to settle, policymakers and financial market participants have begun to ponder the economic effects of these adverse shocks beyond their immediate and evident costs.
The Economic Principles of America’s Founders: Property Rights, Free Markets, and Sound Money
In light of the stark differences between the economies of the present day and the late 18th century in which the Founders lived, we can learn about economics by studying the principles and approach of our Founders.
Charter Schools: A Welcome Choice for Parents
Parents are substantially more satisfied with charter schools and the academic and social development of their children who attend compared to public school parents.

Economists’ Comments & Opinions
TARP and the Continuing Problem of Toxic Assets
It was a bold bet that the Treasury and Fed could engineer an economic recovery without allowing the repricing of U.S. housing stock.
Urban Plight: Vanishing Upward Mobility
Boosters still maintain that big cities remain unique centers for social uplift, but evidence suggests this is increasingly no longer the case.
The Fed Can't Fix An Overtaxed Economy
Big spending is another economy-killer. A recent OECD study noted that for every percentage point increase in spending among the nations studied, per capita GDP fell by 0.3% and investment by as much as 0.4%. So more government "stimulus" cures nothing.
Our Macroeconomic Fetish
Making sure that an economic recovery will never come.
PRICE: Trade is key to future prosperity
Democrats' stalling of pacts hurts American economy.
Bonds May Not Be as Safe as You Think: A Cautionary Tale
Investors seeking shelter from the uncertain economy and falling stock prices are moving into bonds in droves. But they may not be aware of the risks.
Tire-d Old Trade Policies
You can't boost exports by trashing imports.
It's a Good Time to Index Taxes On Capital
...one likely barrier to a higher inflation target is a quirk of tax policy: non-indexation of capital taxation means that higher inflation causes a stealth rise in the real tax rate on capital gains and interest income.
Social Security Bait and Switch
'Harry, am I making this up?' Yes, Mr. President, you are.
Along the Flaming Paper Trail of Crusader Elizabeth Warren
The Consumer Financial Protection Agency is the new kid on the block, a stranger among many agencies regulating financial institutions. The new kid has an agreeable name, but may turn out to be a bothersome nanny or the school bully.
Why World Markets May Continue Downtrend
Additional US stimulus will be proposed which will hold investors in the game, but additional sovereign shocks appear to be likely.
Double Dip Not Possibility but Reality
Will a weak economy bring quantitative easing estimated at $1 trillion?
Exploring Viable Policy Solutions to Fight Economic Headwinds
These actions could restore some business confidence, make a dent in unemployment, and garner a positive reaction from equity investors.

Graph of the Day
American Thinker: USA Today: Record Number in government anti-poverty programs
See: A Look at Case-Shiller, by Metro Area (August Update)
Video: President Obama’s Recovery Summer Vacation

Book Excerpts
"Opportunity cost tends to be defined acceptably, but the logic of the concept is not normally allowed to enter into and inform the subsequent analytical applications... In public finance alone, debates over tax incidence, tax capitalization, public-debt burden, and the role of cost-benefit analysis can be partially resolved when protagonists accept common concepts of cost. The unsatisfactory state of welfare economics can at least be understood and appreciated more adequately when the incorporated cost confusions are exposed. The once heated and long smouldering debate over the possibility of socialist calculation emerges with perhaps a different glow." –James M. Buchanan, Cost and Choice: An Inquiry in Economic Theory (1969)

Did You Know
Republicans led Democrats by 10 percentage points in Gallup’s most recent weekly poll of Congressional voting preferences, the largest lead for the GOP in Gallup’s history of tracking the midterm generic ballot. Gallup began tracking the generic midterm ballot in 1942. The GOP's largest previous lead was 5 percentage points in June 2002, while Democrats have regularly enjoyed far larger leads. The widest was 32 points in July 1974, just before President Richard Nixon resigned.