Monday, September 27, 2010

9/27/10 Post

European Central Banks Halt Gold Sales
Europe’s central banks have all but halted sales of their gold reserves, ending a run of large disposals each year for more than a decade.
Obama to sign $42 billion bill aimed at helping small businesses
President Obama will sign a $42 billion bill to aid small businesses Monday. The bill seeks to create thousands of jobs and will offer about $12 billion in tax breaks.
Bill to Slow Overseas Hiring Debated
Mr. McConnell said on the Senate floor last week that many American companies opening factories abroad are doing so to sell into the foreign market, not to export products back to the U.S.
California closer to getting a budget
California has created a framework for an agreement on a budget that could solve the state's $19 billion deficit.
Banks Keep Failing, No End in Sight
Since WaMu Fell, 279 Lenders Have Collapsed; Lost Jobs, Curtailed Lending and the Big Get Bigger.
Taxpayers could profit on GM bailout
General Motor's value has gone from zero to more than $60 billion in just over a year. That might just be fast enough for U.S. taxpayers to start recouping their investment.
Recession not over, public says
Economic experts may believe the recession is over, but try telling that to the public.
Thousands face job loss when part of stimulus expires
Tens of thousands of people will lose their jobs within weeks unless Congress extends one of the more effective job-creating programs in the $787 billion stimulus act: a $1 billion New Deal-style program that directly paid the salaries of unemployed people so they could get jobs in government, at nonprofit organizations and at many small businesses.
Southwest Airlines to buy AirTran for $1.4B
Southwest Airlines said Monday it will buy AirTran for about $1.42 billion. The move will put Southwest in head-to-head competition with Delta Air Lines in Delta's home base of Atlanta.
NFL ticket prices on the rise
The average ticket price for professional football games increased 4.5 percent this year to $76.47, even as some teams struggled to fill every seat. The increase comes largely at the expense of the fans of the New York Jets and New York Giants, who face ticket price increases of 38.1% and 26.0% respectively.
Japan: the next global time bomb?
A rapidly aging population and the government's deepening financial struggles make Japan a potential powder keg for international investments.
Tax cut stew for Christmas
It's official: Now that resolution on the Bush tax cuts has been postponed until after the Nov. 2 mid-term elections, lawmakers have punted nearly every major time-sensitive tax issue until the end of the year.
Bernanke says Federal Reserve's efforts to aid economy, lower unemployment have fallen short
Even though the Fed has held a key interest rate at a record low near zero for nearly two years, economic growth is only plodding ahead and unemployment remains elevated. It's now at 9.6 percent.
Poll: Rocky road seen ahead for Obama
A significant majority of voters are considering voting against President Barack Obama in the 2012 election, expressing sour views of his new health care law and deep skepticism about his ability to create jobs and grow the sluggish economy.

Secondary Sources: Unemployment, Bernanke, Housing
A roundup of economic news from around the Web.
Rebranding Additive Shocks
...suppose you had pneumonia, and then someone stabbed you in the gut. You show up at the hospital, and the doctor says "there's no need to patch up that knife wound, your real problem is pneumonia." I think you'd look for another doctor. A severe AD shock causes lots of unemployment; that's true whether you start from full employment, or whether you already have lots of unemployment from structural problems.
Mortgage Delinquencies Drop, as Foreclosures Jump
All together, 87.3% of mortgages were current and performing, unchanged from the first quarter but still 1.3 percentage points less than a year earlier.
Unofficial Problem Bank List increases to 872 institutions
"The Unofficial Problem Bank List underwent significant changes this week from failures and the FDIC releasing its enforcement actions for August 2010. The list finished the week at 872 institutions with assets of $422.4 billion, up from 854 institutions with assets of $416 billion last week."
Secondary Sources: Toxic Asset’s Death, Stressful Cities, Income Diversity
A roundup of economic news from around the Web.
Chicago Fed: Economic activity weakened in August
"Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index decreased to –0.53 in August from –0.11 in July."
Nick Bilton on how technology creatively disrupts society
He also discusses effects of combining human curation with computer algorithms, hyperpersonalization, informational veggies, and serendipity. He concludes with his theory about today’s news (and the reason he doesn’t worry about missing tweets): “If it’s important, it will find me.”
How Much Has the Fed Lost?
The Federal Reserve has spent over one trillion dollars buying mortgage backed securities, so-called toxic assets. How much are these assets worth? It's a simple question but one that is exceedingly difficult to answer not the least because the Fed has resisted being audited in defense of its so-called independence.
Taking on the Unions
Public pensions have unfunded liability of $1 trillion to $3.5 trillion...
The Shape of Things to Come and Not to Come
People will write profound books and papers on how and why "status quo bias" has strengthened, and then one day some new technological development will change everything. It's an open question whether this will happen before or after the sovereign debt crisis.
New Home Sales: Lowest Median Price since 2003
Over 52% of all home sales were under $200K in August - the highest percentage since 2003.
Judges in some jurisdictions have reacted by routinely throwing out foreclosures if the documents are not up to snuff. Interestingly in a high proportion of cases, the foreclosure is never refiled.
Weekly Schedule for September 26th
The key economic releases this week are the ISM Manufacturing index on Friday (and the regional releases earlier in the week), and the personal income and spending report for August (also on Friday). For housing, the key economic release is the S&P/Case-Shiller Home price index on Tuesday. There will be several Fed speeches this week to review for possible hints on QE2.
Europe’s $2.5 Trillion Pension Gap
To fill it would require an extra $15,800 per person in annul retirement saving, if retirees wish to maintain their pre-retirement standard of living. These findings are based on the base case scenario, which assumes that retirees need to replace 70 percent of their pre-retirement income to maintain their standard of living.
Cuban Government Will Choke the Nascent Private Sector
Don’t expect a thriving private sector in Cuba any time soon.
Why Public School Merit Pay Doesn’t Work
A sophisticated study released this week finds that merit pay for public school teachers doesn’t seem to improve student achievement. Why not?
How Many People Have Exhausted Their Unemployment Benefits?
The number could be higher than 6,927,372 because for every person who found a job, there was someone in the eligibility pool who exhausted all benefits.
The Heritage Pledge
The stakes couldn’t be higher for our nation at this moment. In the coming months, Americans will help choose which direction our nation’s future will take. Will the federal government continue to spend more, tax more, control more, and defend our liberties less?
Schools Need a Hero
National attention has been focused on education reform at unheard-of levels in the last weeks.
Obamacare at Six Months
Here’s a quick review of what’s happened since then and what we have learned about the law:
Pledge to America is Step in Right Direction
The Pledge rightly frames the argument to be about the choices we face going forward and the need to return to core first principles, about the role of the state, popular consent and self-government.

Research, Reports & Studies
In the Long Run, We’re All Crowded Out
...job creation and economic growth are affected not only by the easily observed results of policy, but also by the less-obvious results, many of which negatively impact the economy. What is more, these negative effects can last long after current policy makers have left office.
Hudson Institute Economic Report
Housing starts in August were higher than July, and higher than the consensus forecast among economists. Total starts were 598,000 at a seasonally adjusted annual rate, up 10.5 percent from July’s 541,000.
Spending Restraint in Florida
If Florida had held spending constant for the last 20 years while adjusting for inflation and population growth, it would have avoided its 2009 budget gap. Moreover, the state can avoid future budgetary problems by restraining the growth of spending, permitting Floridians greater economic freedom, and adopting stronger balanced-budget requirements.
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Housing Data Bounces, FOMC Refocuses on Prices; Sovereign Debt Issues Resurface in the Eurozone
Let’s Not Blame Immigrants for High Unemployment Rates
Throughout American history, immigrants have been among the usual suspects when looking for culprits in times of economic trouble. However, an understanding of how immigrants function in the labor market and an examination of the likely causes of high unemployment rates illustrate why the foreign- born are not at fault for unemployment in America.
Still No Good News for ObamaCare
ObamaCare addresses every healthcare problem, with every solution further centralizing power and decision making in Washington. The promises do not come cheap.
The Budgetary Impact of Ending Drug Prohibition
State and federal governments in the United States face massive looming fiscal deficits. One policy change that can reduce deficits is ending the drug war. Legalization means reduced expenditure on enforcement and an increase in tax revenue from legalized sales.

Economists’ Comments & Opinions
The Post Office Hustle
Next to the public schools, the postal service may be the most inefficient monopoly in America. The post office lost $3.5 billion last quarter, and losses are expected to be a cumulative $238 billion over the next decade, by its own admission.
Mad money: Why the rich are angry, and why you should worry about it
The President or the press can insult those people or try to jack up their taxes and give their money away to other people. But if we want recovery and growth rather than redistribution and recrimination, a better approach would be to stop treating rich people as though they are the cause of America's problems and start concentrating instead on what can be done to create more of them.
The Regulation Tax Keeps Growing
In per-household terms, the combined federal burden of regulation and taxes is a remarkable $37,962. Increased transparency in both the cost and benefit side of the regulatory equation is necessary to determine whether what we spend is worth the 35% of national income that it costs, and whether the distribution of the burden is relatively efficient.
Rather Than Bash the Rich, We Should Emulate Them
The rich, by virtue of being rich, are society’s ultimate benefactors thanks to them doing things that remove unease from the lives of others, and then, rather than wasting those gains, their delayed consumption is transferred to other ambitious entrepreneurs who access the capital they don’t consume in order to make our lives better themselves.
How to Grow Out of the Deficit
Limiting spending increases to inflation minus 1% would balance the budget in less than a decade.
If Congress Stalls, Do Stocks Rise?
...researchers found that more than 90 percent of the price gains over the 108-year life of the Dow Jones industrial average through 2006 came on days when Congress was out of session. And in periods when polls showed that Congress was least popular, this “Congressional effect” was most pronounced.
The Genius of the Tinkerer
The secret to innovation is combining odds and ends, writes Steven Johnson.
Exploring the Implications of a New Round of Quantitative Easing
Can a few trillion dollars spent purchasing government debt do the trick? What if invitations to an inflation party were sent out and nobody came?

Graph of the Day
Business Insider: Here's Where All That Government Spending Is REALLY Going
See: The gold and silver rush is on!

Book Excerpts
"Outlay on public works is not of itself, and apart from the revenue to be thence derived, different from the cost of war, or other unproductive expenditure. No readier or more dangerous mode of increasing debt can be found than the execution of works that are not economically productive. Vague assertions of indirect benefits should not be allowed to conceal the fact that 'improvements' of this kind should be paid out of income, and cannot be regarded as investments in the proper sense of the term." –Charles F. Bastable, Public Finance (1892)

Did You Know
A space ambassador could be appointed by the United Nations to act as the first point of contact for aliens trying to communicate with Earth. Mazlan Othman, a Malaysian astrophysicist, is set to be tasked with co-ordinating humanity’s response if extraterrestrials make contact. Aliens who land on earth and ask: “Take me to your leader” would be directed to Mrs Othman. She will set out the details of her proposed new role at a Royal Society conference in Buckinghamshire next week.