Thursday, October 7, 2010

10/7/10 Post

Oil heads for $84 in Asia amid US dollar slide
Oil closed in on $84 a barrel Thursday in Asia as a weak U.S. dollar fueled gains in commodity prices.
Gold hits record, set for best week in six months
Gold rose to a third successive record high on Thursday, putting it on track for its strongest weekly performance in six months, as expectations for the
Federal Reserve to prop up the economy undermined the dollar.
Food Stamp Recipients at Record 41.8 Million Americans in July, U.S. Says
The number of Americans receiving food stamps rose to a record 41.8 million in July as the jobless rate hovered near a 27-year high, the government said.
Fed Officials Mull Inflation as a Fix
The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
Dollar tumbles to fresh 15-year low against yen
The dollar tumbled to a fresh 15-year low at 82.22 against the yen in Tokyo trading hours on Thursday on persistent fears over the US economic outlook.
NY seeks to ban sugary drinks from food stamp buys
New Yorkers on food stamps would not be allowed to spend them on sugar-sweetened drinks under an obesity-fighting proposal being floated by Mayor Michael Bloomberg and Gov. David Paterson.
Jobless claims fall to lowest level in 3 months
New U.S. claims for unemployment benefits unexpectedly fell last week, touching their lowest level in nearly three months, according to a government report on Thursday that pointed to some stability in the troubled labor market.
Nations see dip of dollar as threat to economies
The dollar's rapid decline has provoked a chain reaction in other countries, ranging from a decision by Australia not to raise interest rates this week to a forceful intervention in currency markets to support the dollar by Japan and a dramatic move by the Bank of Japan to slash interest rates to zero this week.
Midnight grocery runs part of the grim new reality
A monthly spurt of spending when food stamps are replenished.
Poverty is becoming a suburban problem now
Battered by the downturn, America's suburbs are bearing the brunt of poverty among those of working age that has climbed to its highest level in almost a half century, creating strains on dwindling safety-net programs focusing mostly on the inner-city poor.
Hill digs in for lame-duck tax fight
An orderly lame-duck compromise on expiring tax rates is starting to look a lot less likely as both parties dig in and refuse to negotiate ahead of elections.
Malls Begin Healing Process
Vacancy Rates in Top U.S. Markets Improved for the First Time Since Late 2006.
Teachers union to spend $15M to protect vulnerable Dems
The National Education Association, the country’s largest labor union, said Wednesday it will spend $15 million on independent television and radio ads to help re-elect a handful of public-education-minded Democrats facing tough races this fall.
Loan chaos may pose wider peril
These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate "robo-signers."
Economics vs. politics on deficit
Martin Feldstein, Ronald Reagan’s former chief economist, Paul Krugman of The New York Times and Princeton University and Jan Hatzius, chief economist of Goldman Sachs, all called for far more aggressive economic intervention.
Cities Still Feel Sting Of Recession
Despite experts recently declaring that the economic recession is over, U.S. cities continue to feel the pinch as revenues in 2010 dropped 3.2 percent, adjusted for inflation.
Report Questions Income-Disparity Figures
The Census Bureau released data last month showing the widest gap since 1968 between the well-to-do and the poor. The Census Bureau does not factor capital gains into their calculations. Economists of different political bents agree that it's fair to consider stock market gains or losses when measuring total income.
Earmark Reformers Reach Out to Hill Staff
Critics of earmarks complain that the provisions tucked into various bills do not get proper scrutiny and can have a corrupting influence.
Splurges likely to stay part of Christmas past
The Christmas shopping season doesn't kick off for another six weeks, but retailers already are signaling they're prepared to discount aggressively if needed to entice shoppers still skittish about spending. Stores expect gift buyers to scrutinize every purchase, from $20 toys to $1,000 designer jackets, and to limit how many stores they visit.
Electronic medical records: great, but not very private
If you live in Texas, your medical records are definitely up for sale by the state. If you live anywhere else in the United States, they probably are for sale there, too.

Secondary Sources: Goolsbee on Uncertainty, Currency War, Unemployment by Income
A roundup of economic news from around the Web.
The Curious Task
I do not believe we are on the road to serfdom or that President Obama is a socialist. But this scares the hell out of me...
Roubini: 40% Chance of Double-dip Recession
And, as Roubini noted, it doesn't matter if the economy is technically in a recession - it will feel like a recession to millions of Americans as long as jobs are scarce and incomes are under pressure.
States and Cities: Call Them ‘The Fiscally Challenged’
The Pew Center on the States and the Public Policy Institute of California surveyed the public in five populous, and very different but all “fiscally challenged” states: Arizona, California, Florida, Illinois and New York. The bottom line: Residents are “more likely to say their elected leaders are wasting money and could deliver services more efficiently than complain that state government is too big.”
Return to Solipsism
Notice, though, that my example shows the productivity effects of trade if you and I have different absolute advantages: you're a better farmer, I'm a better steel-worker. What about the case where you're better at both jobs?
How GDP Affects the Unemployment Rate order to make the unemployment rate fall, at least on average, the real rate of GDP growth in the U.S. must be greater than 3.1%.
The Paradox of Voter Distrust in Government
The survey reveals that while many economists may view government inefficiency in terms of public versus private goods, the impossibility of ranking voter preferences, the calculation problem, institutional economics, and public choice theory, most people think of their governments as a kind of hybridized marketplace-bureaucracy capable of responding to individual constituency demands by offering better “prices” for a service they, as individuals, desire.
The Problem of Bad Patents
In this case, the government seems to allow quite a lot of bad patents, particularly in the software/technology field, but more broadly in all sorts of areas. This is a regulatory change that we probably could effect with relative ease compared to changing patent and copyright rules--although obviously, boundary cases would remain.
Obama: Give us More!
Now that the Feds have increased spending to $3.5 trillion and given us a horrible $13,685,832,391,141 national debt, the administration wants to spend still more.
The Obama Tax Hike and Lessons from 1937
Raising taxes on successful businesses is one thing we cannot afford to do. Large, successful businesses that create jobs would be hit the hardest, but small businesses would also be hurt by such a tax increase.
Rare Earths: Cause for Worry, not Panic
There are legitimate concerns over Chinese dominance in rare earth minerals but the near-frenzied nature of some of some assessments is unjustified.
The Obama Tax Hike Would Slam Seniors
There are many reasons to be against the Obama tax hikes, especially as the economy struggles to recover. Even the poorest seniors would face higher taxes: about 1 in 5 seniors in each of the first 3 income quintiles have capital gains income, and 40–50 percent of them have dividend income. All of these lower-income elderly would face a tax increase.
Surprise! Oil Spill Commission Critical of Government Response
“The federal government created the impression that it was either not fully competent to handle the spill or not fully candid with the American people about the scope of the problem.”
Is the Market Coming Back to Earth?
The market action on Wednesday may be a sign that a dramatic reversal is ahead, whether it be in October or even pushed out until January.
Does the Buck Stop Here?
Currency wars are being waged around the world.
Consumer Deleveraging Means Commercial Real Estate Collapse
Retail expansion into an oversaturated market in the midst of a depression will lead to the destruction of companies and the loss of millions of jobs.
Where are the ’60s Hippies Now that They’re Needed to Fight Keynesianism?
Keynesian economic theory is the social science version of a perpetual motion machine. It assumes that you can increase your prosperity by taking money out of your left pocket and putting it in your right pocket. Not surprisingly, nations that adopt this approach do not succeed. Deficit spending did not work for Hoover and Roosevelt is the 1930s. It did not work for Japan in the 1990s. And it hasn’t worked for Bush or Obama.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Will India Reach Its Long-Run Growth Potential?
Real GDP rose 8.8 percent in the second quarter of 2010, the strongest year-over-year growth rate since the 2005–2007 period when growth rates between 9 percent and 10 percent were the norm.
The Case Against a China Currency Case
Relying on a World Trade Organization filing to address China’s undervalued currency won’t get very far.

Economists’ Comments & Opinions
Fear undermines America’s recovery
The instinctive reaction of businessmen and householders to uncertainty is to disengage from those activities that require confident predictions of how the future will unfold.
President Obama's Tax Piracy
A family of four earning $50,000 per year will pay more than $2,100 in higher taxes. A single mom earning $36,000 per year will pay over $1,100 more in taxes. Married senior citizens earning $40,000 per year will pay more than $1,400 in higher taxes.
TARP Did Not Save Us From A Great Depression, It Nearly Created One March 9, 2009, just a little over five-months after TARP, the Dow Jones bottomed at 6440. Shortly, after this bottom, sanity actually returned to the marketplace, and “all” global markets returned to the levels of today, which is essentially the same level that they were at the time prior to the initiation of TARP in America.
Toward a New American Century
Immigration reform, investments in human capital, and a saner housing policy can help restore U.S. economic leadership.
The enemy is not cheap goods
Affordable imports are a godsend, not grounds for a trade war. It’s distressing that so many members of Congress have trouble understanding that. Maybe a return to private life would help them figure it out.
The Protectionist Instinct
Political support for free trade is a remarkable achievement of civic education—one threatened by our weak economy.
Joseph Stiglitz sees bleak future for euro as New Malaise takes hold
Exclusive extract: In an updated edition of his critically acclaimed book, Freefall, Joseph Stiglitz analyzes the response to the financial crisis and finds new threats stalking the global economy.
Coming Full Circle on Monetary Policy
Oct. 6, 1979 marked the beginning of disinflation. Now we're headed in the opposite direction.
Congress Can't Repeal Economics
This is just the beginning of reality's backlash. President Obama promised that under his scheme no one will have to change medical plans, but some 840,000 Americans are already left without coverage because their insurer, the Principal Financial Group, decided to leave the market.
Bad Policies Push U.S. in Wrong Direction
No one at the Federal Reserve, Treasury or Council of Economic Advisors foresaw the crisis. When the crisis hit, the predictions were that unless the government dramatically increased its role in the economy, the U.S. would fall off a cliff. In reality, after billions in stimulus spending, unemployment is still unusually high, growth is sluggish, and uncertainty prevails.
BCBSNC's Premium Refunds Show the Perils of ObamaCare
Some of the worst news for President Barack Obama's beleaguered health care law comes from North Carolina. Yet the law's supporters are treating it like good news.
What Consumer Metrics Institute's Data Is Saying About the Economy
Dr. Rick Davis, founder of CMI, created a new leading indicator because he says current measures of economic growth use outmoded data. Here's what he's seeing.

Graph of the Day
Canada’s Spending Cuts and Economic Growth
See: New Jersey State Spending, 1987-2009
See Also: Jobless claims fall below 450,000

Book Excerpts
"It would scarcely be an exaggeration to say that the greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regards as the public good." –F.A. Hayek, The Constitution of Liberty, (1960)

Did You Know
"Nationwide, about one in 18 women working full time earned $100,000 or more in 2009, a jump of 14 percent over two years, according to new census figures. In contrast, one in seven men made that much, up just 4 percent... Only a relatively small segment of either sex has passed the $100,000 benchmark - about 2.4 million working women and 7.9 million men earn that much."