Budget News Nov. 8-12

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News
FRIDAY
IMF Shadow Looms as Irish Sacrifice to Avoid Bailout
Unlike neighboring Britain in the 1970s, Ireland has never turned to the IMF for aid and the government is determined to avoid being propped up like Greece.
Scottish Parliament Faces Budget Crisis
While EU monetary commissioner Oli Rehn has been in Dublin trying to force through the Republic’s budget, across the water in Scotland a budgetary crisis looms large.
State budget hole deepens
Maryland lawmakers will face a $1.6 billion budget hole when they return to Annapolis in January, state fiscal analysts are reporting today, a deficit larger than what they had anticipated earlier this fall.
Greek Jan-Oct Budget Deficit Down 30% But Lags Targets
This result also significantly lags the International Monetary Fund and European Union EUR110 billion bailout agreement that requires a 36.9% reduction of the 2010 budget deficit on an annual basis.
Budget Deficit in U.S. Narrowed to $140.4 Billion in October
The deficit totaled $140.4 billion last month compared with $176.4 billion in October 2009, according to the Treasury Department’s budget statement released in Washington.
Facing Austerity, Britain Unveils Welfare Cuts
The measures include tough and politically contentious penalties aimed at what government ministers have described as the “work-shy” and “scroungers” among Britain’s five million long-term unemployed.

WEDNESDAY
Balance Budget Amendment to be pushed in new Congress
When Utah Senator-elect Mike Lee arrives in Washington, he will push for a balanced budget amendment in the Senate, while simultaneously, a group called Balanced Budget Amendment Now will pressure Congress through a grassroots campaign that encourages voters to write to their senators and ask them to support the amendment.
Federal workers vie to save the most money
No matter how savvy the ideas, they represent mere drops in a rather large bucket. Cutting the deficit is no easy task for a nation that racked up a $1.29 trillion deficit in fiscal year 2010.
Senate GOP to Vote Next Week on Earmarks, Balanced Budget
At the top of the pile of conference resolutions — none of which would be binding on Members — is an across-the-board earmark ban backed by Sen. Jim DeMint.
Fiscal Commission at Impasse over Debt Reduction
Although some deficit hawks believe the midterm elections were a defining moment for the country in facing the mounting federal debt, Senate Budget Committee Chairman Kent Conrad thinks Obama’s fiscal commission may not be able to pull the trigger.
UK: New dark age on our streets: Up to 75% of councils are dimming the lights to save money
Councils take step in order to slash costs in face of 26% funding cut.
Panels Tackling Deficit, but Doubts Remain that Consensus Can Be Forged
The cavalcade of recommendations is set to continue Wednesday, when the joint Peterson-Pew Commission on Budget Reform plans to release its report, "Getting Back in the Black," a project helmed by former congressmen Bill Frenzel (R-Minn.), Tim Penny (D-Minn.) and Charles Stenholm (D-Tex.).
White House: Rail funds are for rail. Period.
...Transportation Secretary Ray LaHood is threatening to take back stimulus funds from states if they do not follow through on proposed rail projects.

TUESDAY
Virginia operating budget grows 59 percent over past decade
Driven by spending on services like health care, education and social services, Virginia's total operating budget increased 59 percent between 2001 and 2010, a report released Monday shows.
Anti-Smoking Programs Are Slashed
As Budget Constraints Prompt States to Trim Cessation Efforts, Rate of Adult Smokers Stops Declining

MONDAY
GOP to Use Debt Cap to Push Spending Cuts
The U.S. currently has $13.7 trillion of debt outstanding, just shy of the $14.3 trillion limit Congress set in February. Barring big changes in federal spending, taxes or the economy, the government is expected to hit the ceiling by May, and administration officials have already said it will have to be raised by then.
Irish Debt Woes Revive Concern About Europe
An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit.
$14,300,000,000,000: Debt Limit Showdown Looming
...Rep. John Boehner, the likely new Speaker of the House, told ABC's Diane Sawyer on Thursday that there are "multiple options" for how to deal with the debt limit, noting that Congress will make sure the country is "ready to meet our obligations."
Now in Power, G.O.P. Vows Cuts in State Budgets
States face huge deficits, even after several grueling years of them, and just as billions of dollars in stimulus money from Washington is drying up.

Economist Comments
FRIDAY
On Fixing Social Security, and the Budget
So the commission has proposed a little bit from Column A, a little bit from Column B--a lengthy phased in hike in the retirement age; a refocus of benefits on the bottom 50% of the lifetime earnings distribution; and, of course, more taxes, so that Social Security levies will ultimately cover about 90% of taxable payrolls. Perhaps this isn't the best way it could be done--but I think it's better than trying to divine an answer from the polls.
Deficit Reduction Plan Draws Scorn From Left and Right
By putting deep spending cuts and substantial tax increases on the table, President Obama’s bipartisan debt-reduction commission has exposed fissures in both parties, underscoring the volatile nature and long odds of any attempt to address the nation’s long-term budget problems.
EDITORIAL: T&A at the TSA
Bureaucratic, one-size-fits-all approaches to security invite disaster. The $2.4 billion in taxpayer funds the agency plans to waste on whole-body scanners will do nothing to make America more secure. The new Congress needs to take note and rein in this rogue agency.
A Deficit of Nerve
Obama's commission has ideas that Republicans can use.
Beware Commissions Bearing Gifts
Bring federal spending from its present 25% of GDP down to 21%. Nice, but as the Cato Institute's Chris Edwards noted Wednesday, "federal spending was just 18% of GDP in President Clinton's last two years in office."

WEDNESDAY
Debt Limit Impasse Could Drag On For Months
The consensus view seems to be that a debt limit impasse will lead to an acute crisis: at least a government shutdown, possibly a failure to make interest payments on government bonds, and an ensuing spike in bond yields and fall in stock prices.

TUESDAY
Analysis: If Kansas' GOP fiscal conservatives want to cut budget, 2011 is their big chance
The incoming Republican governor has received a pessimistic scenario from legislative researchers, projecting a deficit of $492 million on June 30, 2012, the end of the next fiscal year.
The Republicans Will Have To Cut Some Lemons
Getting rid of small government programs like the Corporation for Public Broadcasting will put a dent in the deficit and earn GOP credibility to take on Medicare and Social Security.
WaPo’s Fiscal Truths
A Washington Post editorial today discusses the National Academy of Sciences “Fiscal Future” study. The NAS report modeled four possible tax and spending paths for the nation over the next 70 years.
RAHN: The real test for the GOP
What is new is the big jump in federal government spending in the past two years, from an average of about one-fifth of GDP to about one-quarter of GDP, and to this must be added another 13 percent for state and local government spending as a percentage of GDP, causing the total government sector to rise from about one-third of GDP to almost 40 percent.

MONDAY
SCHILLER: The anatomy of (stimulus) failure
The $100 billion in tax rebates was spent quickly by consumers. In the process, the negative growth in gross domestic product of the first calendar quarter was reversed in the second quarter. The tax rebates did the job of stimulating short-term growth, and did it quickly. The ideologues advising Mr. Obama ignored this evidence, relying instead on surveys of consumer intentions.
California: The Lindsay Lohan of States
You've racked up nearly $70 billion in general obligation debt, and that doesn't include your $500 billion unfunded pension liability. Your own analysts predict you'll face a hole of at least $80 billion over the next four years.
The Race to Erase Debt
American households are turning away from debt and embracing thrift, says columnist Chris Farrell. Can government do the same?

Blogs
FRIDAY
The Deficit Commission: A Good Try That Falls Short
...ultimately the report falls short because it fails to address the proper role of government. In fact, it tacitly accepts the idea that government should be doing everything it is doing now.
Fiscal Responsibility Commission Draft Report Quick Take
After taking a first brush through the fiscal commission co-chairs’ 50-page report, my initial conclusion is that the authors are headed in the right direction but remain trapped in a philosophical framework that misunderstands the role of government.
Debt Commission Reform Proposals – What Are Their Chances?
To improve the chances that history does not repeat itself, the commission’s proposals need to be combined with proposals to reform the budget process.
Heritage Reacts to Simpson-Bowles Deficit Reduction Panel Proposal
They would hike taxes to 21% of America’s economic output (i.e., gross domestic product or GDP), well over the historical average of 18% of GDP.
Obama’s Fiscal Commission: The Good and Bad
The report proposes to cut $200 billion from discretionary spending by 2015 from Obama’s proposed spending that year of $1,309 billion. That’s a 15 percent cut. However, the word “cut” needs to be qualified because discretionary outlays were $1,041 in the pre-stimulus year of 2007, and they were just $615 billion in the pre-Bush year of 2000.
European Debt Update
There is no immediate liquidity crisis for Ireland (unlike for Greece earlier this year), but clearly bond investors are spooked by the discussions of bond holders having to take haircuts if there is a bailout.
Co-Chairmen of Obama’s Fiscal Commission Unveil Real Tax Increases and Fake Spending Cuts
If you read through their report, it sounds like there are lots of spending cuts. But they never explain that these supposed cuts are really just reductions in previously-planned increases.
So, About That Deficit Commission …
The magnitude of deficit reduction required is far greater than anything we've had to do so far (except in post-war interludes where the solution was to um, not spend so much money shooting at people). There is no magic pot of money out there that does not come attached to some angry interest group.

Reports
FRIDAY
Bowles–Simpson Commission Co-Chair Report: A Good and Welcome First Step
These statistics offer a quick preview of one of the flaws of their plan—a 50/50 approach to eliminating the deficits and lowering the projected trajectory of the debt through tax increases and spending cuts. As revenues are projected to soon return to their historical level—even if the tax cuts are made permanent—spending is clearly the problem.

WEDNESDAY
Take the Austerity Cure: G-20 Should Resist U.S. Efforts to Spread More Debt Around
Austerity-favoring conservatives in the G-20 group—including U.K. Conservative Party Chancellor of the Exchequer George Osborne, European Central Bank President Jean-Claude Trichet, U.S. Nobel laureates in economics (such as Edward Prescott, Vernon Smith, and James Buchanan), and the leaders of several European governments—have the better answer: By reducing deficits, nations facing deepening deficits like the U.S. and U.K. can shore up confidence in their futures, encourage private investment, and accelerate their economic recoveries.

TUESDAY
The U.N. Should Pay What Its Owes the U.S. from Its Tax Equalization Fund
The United Nations reported that, as of December 31, 2009, it was holding nearly $180 million owed to the United States from the U.N.’s Tax Equalization Fund (TEF).
The Negative Consequences of Government Expenditure
The U.S. national debt currently stands at 62 percent of GDP—its highest level since WWII. Under plausible assumptions, this ratio will rise to at least 80 percent and possibly 185 percent of GDP by 2035 and continue increasing thereafter.

Employment News Nov. 8-12

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News
FRIDAY
Ex-weapons plant contractor planning 1,400 layoffs
The company that manages a former nuclear weapons complex in South Carolina announced Wednesday that it plans next year to lay off 1,400 contractors, 800 of whom were funded with federal stimulus money.

WEDNESDAY
Glimmers of Hope Among Consumers and Shopkeepers
NFIB survey: small business hiring plans up sharply.
A bright spot in the hiring picture
The number of first-time filers for unemployment benefits fell by 24,000 in the latest week to the lowest level in nearly four months, the Labor Department reported Wednesday.
Job Openings Drop for Second Straight Month
Job openings dropped sharply in September, a sign that hiring is likely to remain weak over the next several months.

TUESDAY
California's unemployment fund has deficit of $10.3 billion
The recession and the Legislature's decision years ago to raise benefits has draiend the state unemployment insurance fund, which now has an estimated $10.3 billion deficit.

MONDAY
1.2 million people want a job but aren't looking
A heartening jobs report last week masked an ominous statistic: Discouraged workers hit a record 1.2 million.
Ask Monster.com, and White House will answer
Wondering how the government is going to save the job market? Just ask Monster.com. The job-hunting website is teaming up with the White House to solicit questions on the topic from the general public.
Close Does Count When It Comes to Jobs, Education
Workers with less than a high school diploma were likelier to keep their jobs during the recession if they lived in a handful of metro areas with the highest concentrations of employees with college degrees, according to a paper released Friday by Alan Berube, a senior fellow at the Brookings Institution.
Unemployment Update: Surge, Decline Even Out in Gov't Report
Unemployment at 9.4% and Gallup's Job Creation Index at +10 in October.

Economists Comments
FRIDAY
Creating jobs "for the people" through Open Government
Apps for Californians was a contest to build the best tools to leverage government data for the public good. Besides creating new ways for citizens to understand their world, it also created new job opportunities and blueprint for the nation.
New EPA regs will kill jobs, stall economy
Without the proper pollution permits, existing facilities and new construction projects across the country either will grind to a halt or never get started. The cost estimates are indeed staggering, according to an econometric study by the Manufacturers Alliance that projects more than 7.3 million lost jobs by 2020.
The 77% of Income Fallacy
When Congress returns next week for a "lame-duck," post-election session, Senate Majority Leader, Harry Reid (D-Nev) will try to muster the 60 votes he needs to block a filibuster of a vote on the misnamed Paycheck Fairness Act. It would be better titled the Paycheck Rareness Act, because it would make paychecks rare by driving small firms out of business and sending larger corporations overseas.

MONDAY
Jobs Expand by 151,000, But Unemployment Will Still Be High for Another Decade
This month's rise in jobs was fueled by retail hiring, which isn't sustainable. Expect to see the unemployment rate back up above 10% in this cycle.

Blogs
FRIDAY
Long-Term Unemployed Cut Job Hunt
Most economic models say the amount of time spent job hunting should be steady — or rise — the longer a worker is unemployed, in part because they know they’re nearing the exhaustion of jobless benefits. But the researchers found the opposite: Workers cut the time they spent job hunting by about a third over the initial 12 week period. The economists posit that workers may run out of suitable jobs to apply for — or could simply get more discouraged the longer they are on the hunt.
Why ABC News Owes Rand Paul an Apology
ABC News’ The Note runs with a story claiming that Kentucky Senator-elect Rand Paul is citing bad numbers on federal employee pay. But could it be ABC that has its numbers wrong?
Inability to Cut Rates Fuels Joblessness
The recession was marked by those overextended households cutting spending and saving more in the face of hard times. The problem now is that the normal tool used to revive consumer spending and hiring — cutting interest rates well below the inflation rate — isn’t available because rates are nearly at zero. So unemployment has remained stuck at a high level, currently 9.6%.
Unemployment Benefits: Big Battle Ahead
When Congress returns next week it will have quite a lot on its plate—including whether to extend the emergency unemployment insurance benefits for nearly two million people who will otherwise see their benefits evaporate at the end of November.
Atlanta Fed’s Lockhart: Companies Remain Cautious on Hiring
Few of the businesses surveyed by the Federal Reserve Bank of Atlanta expect their sales to improve significantly in the near future—and are putting off or minimizing hiring as a result—said Atlanta Fed President Dennis P. Lockhart.

WEDNESDAY
Serious Workplace Injuries Fell In 2009
Fewer employees and shorter hours meant fewer serious workplace injuries last year.
Obama’s De Facto Oil Ban Still Killing Jobs
As Thomas Clements, co-owner of a Louisiana offshore drilling support business, explains in today’s Human Events the de facto drilling moratorium is killing jobs in the Gulf. Here is why...
Hires Rise, Still Five Unemployed Workers Per Job Opening
There were five unemployed workers per every available job in September, the Labor Department said Tuesday, a sign that even with October’s job growth the economy still has a lot of ground to make up.

TUESDAY
How Weak Was Friday’s Jobs Report?
It is true: the establishment survey of U.S. businesses did report that 151,000 jobs were created last month. But The Heritage Foundation points out that there was also some troubling news in Friday’s report
BLS: Job Openings decrease slightly in September, Low Labor Turnover
Although job openings declined slightly in September, it appears job openings are still trending up. However overall labor turnover is still low.

MONDAY
Disappointing Jobs Report: Unemployment Remains at 9.6 Percent
As we’ve come to expect, yet another lackluster jobs report has been released.
Employment: Participation Rate
The following graph shows the employment population ratio, the participation rate, and the unemployment rate.
Older Worker's Jobs Shellacked in October
The unemployment situation worsened in October compared to that of September.
NFIB: Small Business hiring "improves slightly"
The National Federation of Independent Business (NFIB) will release their small business confidence survey on Tuesday. They pre-released the employment results: Job Creation Plans on Main Street Improve Slightly
Unemployment: Some “Good” News
Here is a good summary of today’s employment news:
Milton Friedman and the Phillips Curve
The Phillips Curve has not died, I encountered it just the other day.
Economists React: ‘Step in the Right Direction’ on Jobs
Economists and others weigh in on the increase in jobs and steady unemployment rate.

Reports
MONDAY
Heritage Employment Report: A Mixed Bag of Tricks and Treats
Friday's Employment Situation Report by the U.S. Department of Labor actually consisted of two employment reports, and they paint two different pictures of the U.S. labor market

Monetary News Nov. 8-12

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News
FRIDAY
Obama’s economic view is rejected on world stage
Free trade deal with South Korea eludes president.
G-20 refuses to back US push on China's currency
Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency's value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.
Why there's gold fever
There is at present a profound uncertainty about currencies. That is why the president of the World Bank, Robert Zoellick, created such a stir with a brief reference to an enhanced role for gold in the course of a plea for a more sustainable international exchange rate system.
Bernanke's worst nightmare: Ron Paul
Ben Bernanke has had his hands full since his first day on the job as Federal Reserve. Chairman nearly five years ago. It's about to get even tougher.His harshest critic on Capitol Hill, Rep. Ron Paul of Texas, is about to become one of his overseers.
G-20: We'll avoid currency war
Completing a two-day summit in South Korea, the G-20 nations released their so-called Seoul Action Plan, a communiqué that outlines a wide range of macroeconomic policies.
Why Fed bond-buying plan is raising trade tensions
It turns out many foreigners are pretty angry, too. They say the Fed's $600 billion program is a scheme to give U.S. exporters an unfair edge - one that endangers the global economy.
Greenspan vs. Geithner in 'weak dollar' debate
Alan Greenspan, former chairman of the Federal Reserve, and U.S. Treasury Secretary Timothy Geithner locked horns Thursday over whether the Obama administration is supporting a weak dollar to bolster the economy.

WEDNESDAY
Analysis: German tempers fray as U.S. policy gulf widens
Germany's undiplomatic outbursts against U.S. policy, calling it "clueless" before a G20 summit, show growing estrangement on economics as America's focus shifts away from transatlantic ties to domestic challenges and Asia.
Economic Boost Or Bad Policy? GOP Denounces New Fed Plan
Backlash Building Against Central Bank's New $600 Billion Stimulus Program.
Fed Counts on 'Psychological Bump' With Borrowing, but May Just Add to Debt, Inflation
Investors beware: The Federal Reserve may have just agreed to make $600 billion more available for borrowing, but don't expect to see that money flooding the market any time soon.
China tightens bank holding requirement
China, in response to the Federal Reserve's move to inject billions into the U.S. economy, has raised the reserve requirement ratio on major banks in an attempt to control its flow of new money.
Enough already about dollar debasement
OK, maybe the dollar's not quite almighty any more. But neither is it the 98-pound weakling it's widely made out to be.

TUESDAY
China to Tighten Control on Inflows of Overseas Funds
China will force banks to hold more foreign exchange and strengthen auditing of overseas fund raising, stepping up efforts to curb hot-money inflows that may inflate asset bubbles and add pressure for a stronger yuan.
Key banker is skeptical about Fed plan
Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, whose district includes Houston, said he could envision this second round of Fed purchases leading to a weaker dollar, "super ordinary inflation," financial speculation and accelerating the transfer of wealth to the rich "from the "poor and the worker and the saver."
Global Fed bashing casts shadow over G-20
Growing criticism of U.S. Federal Reserve policy is fueling global tensions as leaders of the world's largest economies prepare to meet in South Korea Wednesday.
Oil near $90. Thanks a lot, Fed.
Crude is currently trading around $87 a barrel. Prices have not topped $90 in more than two years. But now that the Federal Reserve has made its latest round of quantitative easing official, some fear that crude at $90 is likely in the not-so-distant future.
Fed survey: new standards don't lure small firms
Banks loosened lending stnatdards for small businesses over the past three months but demand for loans remained weak.
Fed Global Backlash Grows
China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth.

MONDAY
Fed Governor Doubts Program
Close Bernanke Associate Fears the Risks of Bond-Buying, Wants Regular Review.
Obama returns fire after China slams Fed's move
Obama says U.S. low growth or no growth danger to world.
US Geithner says chances of double-dip recession receding
US Treasury Secretary Timothy Geithner said Monday that the US economy was starting to pick up and that chances of a "double-dip" recession were lower than at any time in the last 12 months.
Gold Falls From Near Record as the Dollar Gains; Silver Declines
Gold declined in New York, after nearing a record, as a stronger dollar curbed demand for the precious metal as an alternative asset. Silver fell from a 30- year high.
World Bank chief surprises with gold standard idea
Leading economies should consider adopting a modified global gold standard to guide currency rates, World Bank president Robert Zoellick said on Monday in a surprise proposal before a potentially acrimonious G20 summit.
US confident G20 will back new trade scheme
US Treasury Secretary Timothy Geithner said Monday he was confident China and other countries would support a global trade rebalancing plan at an upcoming G20 summit.
Bernanke's road to hell
Was Ben Bernanke lying then, or is he lying now?
Friedman Casts Shadow as Economists Meet
The central bank will indirectly be financing the government’s deficits on a scale not seen since World War II. It will buy the equivalent of most of the new Treasury debt issued through next June. The portfolio of federal bonds it amassed as a result of the 2008 crisis will swell further, just about doubling.

Economists Comments
FRIDAY
Good Ship QE2 Has Set Sail, Course Set for Japan Circa 1995
Watching precious metals, gold, the dollar, and especially Treasuries after the Fed's quantitative easing announcement.
Those nice chaps at the IMF
THE euro zone’s third-quarter GDP figures, released this morning, seemed only to highlight the theme being played out in bond markets: “core” economies are doing fine but “peripheral” countries are struggling.
The world against Bernanke and his easy money
The assault against Bernake's easy money has reached such fever that President Obama felt it necessary to defend the $600 billion in new-money printing in a news conference in India.

WEDNESDAY
Will QE2 Trigger War Games?
Global tensions are on the rise.
Is the Fed's Debt-Buying Unconstitutional?
Isn’t the problem fiscal incontinence and regulatory misfeasance, and business uncertainty about all of that, which is creating joblessness? Not a lack of liquidity and not deflation, which is not a clear and present danger, as instead inflation is still with us?
QE2's Days Could Be Numbered
Strategists suggest the Fed may be forced to scale back QE2 sooner than anticipated.
Tea Party Rallying Cry: Abolish the Federal Reserve!
is the Federal Reserve out of control? The Tea Party thinks so. Suspicion of our nation’s central bank is a recurring theme of the populist movement, which blames the Fed for soaring debt, high unemployment, and a sinking dollar. It also accuses the Fed of being the handmaiden of the Obama administration, and way too cozy with Wall Street.
No Soft Patch, No Excuse For Another Round Of Quantitative Easing
It is fiscal--not monetary--policy that has held back the economy and kept unemployment high.

TUESDAY
Bernanke Ignores Basic Laws of Economics
Bernanke proclaimed that lower interest rates wrought by QE will increase stock prices on the way to more consumer wealth and confidence. According to our Fed Chairman, this might boost spending, and "Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." One can't make this up.
QE2 Appears Factored Into the US Treasury Yield Curve
The second round of quantitative easing appears to be factored into the yield on the 10-Year note between the annual value level at 2.813 and quarterly and semiannual risky levels at 2.265 and 2.249.
The World Revolts Against Bernanke's QEII
The great Bernanke QE2 debate continues to heat up. In the run-up to the G-20 meetings, China, Russia, Germany, and others are all coming out against the Federal Reserve's quantitative-easing agenda. They don't want hot-money excess dollars to flow into their higher-yielding currencies.
Easing puts off real economic revamping
Quantitative easing (QE) should cease immediately on both sides of the Atlantic. In the short term it might cause a stockmarket crash, or even a double dip recession, but in the long term it could be the necessary step if the economic challenges facing the developed world are to be tackled.
Inflation Targeting Won't Fix the Fed
Successful inflation targeting by Ben Bernanke or his successors will do no more than paper over a debt-driven system that is beyond repair.
Ben Bernanke's Impossible Dream
In other words, Mr. Bernanke and his FOMC allies are risking higher interest rates and inflated commodity costs in the pursuit of the contradictory objectives of higher inflation and lower bond yields, seemingly oblivious to all the evidence that they are pursuing an impossible dream.
Bubble, Crash, Bubble, Crash, Bubble...
Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields.
'The US Has Lived on Borrowed Money for Too Long'
In an interview with SPIEGEL, German Finance Minister Wolfgang Schäuble, 68, criticizes US calls for Germany to reduce exports, outlines his plans for an insolvency framework for indebted European nations and the emphasizes the significance of the German-French axis for Europe.

MONDAY
Sarah Palin knocks Fed move
Our government is pumping money into the banking system by buying up Treasury bonds,” Palin will say in the speech. “And where, you may ask, are we getting the money to pay for all this? We’re printing it out of thin air.”
Reviving '70s stagflation
As President Obama restores the Jimmy Carter-era solar panels to the executive mansion, Federal Reserve Chairman Ben S. Bernanke is bringing back Mr. Carter's monetary policy, running the printing presses faster than they've run since lava lamps and disco were in style.
QE2 Hurts Main Street at Gas Pump; More Banks Close on Bank Failure Friday
Crude oil traded above its May 3 high with the price at the gasoline pump up about a dime since Wednesday's QE2 announcement.
QE2 Questioned From Within and Without
Get ready for a showdown at the "Is It OK?" Corral.
QE2, Midterm Elections Produce Better Than Expected Economic Reports
QE2 will likely be effective at lowering real interest rates, and the Republican victory will continue pushing Obama more toward "center."
America will survive the errors of Ben Bernanke's trigger-happy Federal Reserve
America is a resilient nation, with far healthier demographics than China, Japan, Korea, Germany, Italy or Russia. The storm will blow over.

Blogs
FRIDAY
Fed Insiders Doubt QE2
The pitfalls of central bank communication.
Will QE2 Actually Cause Interest Rates, Dollar to Rise?
We're told QE2 will create a wealth effect that will drive demand for borrowing and expansion. However, interest rates are currently rising.
QE2 Will Either Fix the Economy or Destroy It
There is no middle ground on this one and a lot of doubt surrounding the decision.
Bernanke's Experiment: Monetary Curiosities and Actualities
Basically, the Fed is firing up the digital printing presses to stimulate the economy by making it cheaper to borrow money. There has been a lot of debate over whether this will work. But perhaps a deep question is whether this is an appropriate role for monetary policy.
QEII follow-up: why do people hate the idea?
I believe the price of gold is high because of "financial-existential risk," not because of inflation per se.  The U.S. dollar and debt are no longer unambiguously safe and is there any real solution to the triple menace of highly leveraged banks, moral hazard, and financial strategies of extreme negative skewness?  It remains to be seen.
Hot Money, Gold, Foreign Exchange And The Fallout From QE
What do “hot money,” gold, sovereign debt, foreign trade, and Germany and China all have in common? Everything. They are all lined up against the U.S. and our new quantitative easing (QE2). There is fallout related to quantitative easing, and the markets are reacting, from the Fed’s perspective, badly.
Geniuses At Work
Inflation is the result of too much money chasing too few goods.  So by increasing the flow of goods (and services) produced in an economy, rapid growth decreases the risk of domestic inflation. That the finance ministers of three major world governments do not understand this fundamental fact is appalling.
Fed and Trade, Fed Critics, Fiscal Adjustment
A roundup of economic news from around the Web.
Speaking of the Fed...
I think this history is well worth reviewing. Just as most people casually assume that Roosevelt did a heckuva job during the Great Depression, most people casually assume that the Fed has done a heckuva job with its responsibilities.


WEDNESDAY
China's Sure Bet
As the dollar wobbles, China is pulling back from U.S. Treasury securities and buying up hard assets around the world.
What Quantitative Easing Means for the World
Capital controls and a fixed exchange rate distort local capital markets in ways that can lead to malinvestment or underinvestment; done badly they harm global trade flows; and they are often a source of rent-seeking for local elites. For this last reason, they are also pretty popular.
Don't flip out over QEII (repeating myself)
I'm not sure it will work, because it won't fix the housing market, may not restore the demands for wealth-elastic goods in a sustainable manner, may not restore the normal flow of credit to small businesses, may not lower subjective estimated risk premia, and may not fix the general disconnect between expectations and reality.
Notes on Bernanke’s Apologia for QE2
A strong argument can be made that, instead, the Fed’s actions created immense uncertainty and confusion about which commercial banks, investment banks, and other big firms would be bailed out and, if they were to be bailed out, how they would be bailed out.
Nobel Winner Gets Another Shot at Fed
Will a Nobel Prize put Peter Diamond over the finish line?  The Massachusetts Institute of Technology economist, rebuffed by Senate Republicans in September for a slot as a Federal Reserve governor, will get another shot soon.

TUESDAY
What Could Go Wrong With QE2
If it works, it is a much prettier picture for the economy. But if it doesn't work, there are some severe unintended consequences we may have to deal with—not the least of which is out of control inflation. Here are a few reasons QE2 might not work:
Fed’s Warsh Skeptical Bond Purchases Can Boost Economy
A top Federal Reserve official raised doubts about the central bank’s ability to boost the U.S. economy by buying more government debt, just days after the Fed took the step.
Just how absurd is central planning?
A warning to activist central planners: first step, quantitative easing, second step, communism.
Should Economists Just Stick to Core Inflation?
Making a point about why most economists look at core measures when gauging inflation, Paul Krugman runs a chart on his blog of the year-over-year change in the consumer price index with and without food and energy.
Gold Looking Bubblicious
It's not that quantitative easing may not cause inflation--it might.  In fact, that's sort of the point; the Fed wants a little more inflation in the money supply, in order to ease the unemployment rate.  But consider how much inflation there would have to be for this gold price to make sense.

MONDAY
Monetary Policy Is Looming Issue in 2012 Presidential Campaign
By implementing any level of austerity, Republicans can take advantage of the public's outrage at debt, deficits, and the Fed.
Digging oneself into a hole?
There are few universal truths in economics. One is if you put some of the best economists in a room together, you’re guaranteed to get wildly different opinions.
A QE2 Ditty
It's Called Quantitative Easing.

Reports
WEDNESDAY
The Hayek Rule
It is necessary for the economy to cleanse itself of bad investments after a bubble bursts and readjust itself through a reallocation of misplaced resources. As a result, some of the Fed’s policy responses to the crisis have prolonged this painful process, dragging out the economic woes of the country.

Tax News Nov. 8-12

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News
FRIDAY
25 Million Taxpayers May Owe $3,000 to $5,000 More at Tax Time
An estimated 25 million taxpayers -- more than five times as many as last year -- will owe an average of $3,000 to $5,000 more at tax time if Congress doesn't act on an expired provision, according to The Tax Institute at H&R Block.
Panel Seeks Social Security Cuts and Higher Taxes
The plan calls for deep cuts in domestic and military spending, a gradual 15-cents-a-gallon increase in the federal gasoline tax, limiting or eliminating popular tax breaks in return for lower rates, and benefit cuts and an increased retirement age for Social Security.
Obama says he's not caving on tax cuts
President Barack Obama declared Friday that his "number one priority" is preserving tax cuts for the middle class, and sharply denied that comments by his senior adviser David Axelrod suggest that his administration is about to cave in to Republicans who also want to extend the Bush tax cuts for the wealthy.
Blowing up the tax code
The truth is, there's no escaping the need to make serious tradeoffs on taxes if the goal is to create a tax code that supports economic growth, provides enough revenue to fund everything Americans want their government to do, and achieves real deficit reduction when paired with spending cuts.
Top Earners May Face Big Hit
Proposed Elimination of Deductions, Investment Breaks Aims to Lift Tax Revenue.
Proposed gas tax increase fires up debate
Federal fuel taxes currently stand at 18.4 cents a gallon for gasoline and 24.4 cents for diesel fuel.
Companies Would See Big Tax Shifts
Tax-reform plans proposed by President Obama's deficit-cutting commission would radically change corporate tax policy and, business groups say, could improve U.S. competitiveness in global trade.
Spending, taxes top agenda of 'lame duck' Congress
A one- or two-year extension is the most likely outcome, said Roberton Williams, a tax expert with the non-partisan Urban Institute. But Scott Hodge, president of the non-partisan Tax Foundation, said lawmakers may not reach consensus and could instead let the new Congress deal with the issue early next year.

WEDNESDAY
Extending Tax Cuts, but With a Catch
Top Democrats Link Keeping Bush-Era Breaks to an Overhaul of Tax Code; Republican Aides Say They Are Open to the Idea.
Bipartisan vow: We'll fix AMT
More than 20 million taxpayers are at risk of having to pay the so-called wealth tax when they file their 2010 taxes next year, if lawmakers fail to act. But that's not likely to happen.

TUESDAY
NZ: Tax revenue falls short by $1.1 billion
Tax revenue fell short of Budget forecasts by $1.1 billion or more than 8 per cent in the first three months of the Government's financial year, as the recovery from recession proves slower than the Treasury expected.

MONDAY
Battle Looms Over Tax Breaks, Spending Cuts
Newly empowered Republicans pushed Sunday to extend Bush-era tax levels for as long as possible and pledged significant cuts in spending, as President Barack Obama sought to maintain his footing in an escalating budget battle.
Tax cuts: Obama wants a deal
The White House indicated more than once that President Obama would be willing to negotiate with Republicans to ensure the tax cuts remain in place on Jan. 1.
Taxpayers' bill on Freddie, Fannie foreclosures: $2B
Taxpayer-funded Fannie Mae and Freddie Mac have spent more than $2 billion this year on foreclosed property expenses after acquiring tens of thousands of homes through foreclosures.

Economist Comments
FRIDAY
Use Options to Sidestep the Tax Man
A simple strategy can lock in the current 15% capital-gains rate on a bid-up stock while allowing for future profits from the same stock.
Commission Tax Plans Would Reshape American Economy
Huge swaths of the economy – housing, health care, and energy, in particular — would see their tax subsidies shrink or disappear, while wealthy investors would see higher rates on dividends and long-term capital gains.
A Growth Agenda for the New Congress
For now: Extend the Bush tax cuts, repeal ObamaCare, support free trade. After 2012: Enact a flat tax, stabilize prices, balance the budget, give politicians incentive pay.
It’s Time to Let the Estate Tax Die
The estate tax brings in only about $20 billion a year (with no revenue this year) despite marginal tax rates that have varied from 45 to 55 percent, because of its large exemptions and many loopholes.

WEDNESDAY
Tax-Unfriendly States For Retirees
Where's the best state for you to retire? For retirees living on a fixed income, state income and sales taxes can really eat into your nest egg.
The Worse Type of Bipartisanship
Based on fuel usage data from the Federal Highway Administration, the [25-cent per gallon] tax would raise about $43 million, and $17.2 million would be dedicated to deficit reduction.

TUESDAY
States' bailout: Largest 15 states spend over 220 percent of tax revenue
The federal government is quietly bailing out states whose tax revenues don't match state expenditures. Funding for this will run out in June 2011. What then?

MONDAY
Obama can cut a deal on taxes
...the current [tax] system is not well designed. In fact, there is no design, only the disordered meanderings of a sick mind.
Growth Through Taxes
Tax policy can play a key role in spurring an economic recovery—but not without sustained reform of both the corporate and individual income-tax systems.
Big question left for 2010: What about the tax cuts?
...should workers expect higher wage tax rates for 2011, those in a position to do so should accelerate work and invoices in 2010.

Blogs
FRIDAY
There Ain’t No Such Thing as a Tax Expenditure
...they describe those loopholes as “backdoor spending in the tax code.” It is incorrect and dangerous to equate tax loopholes with government spending.
Social Security and Family-Friendly Tax Cuts
...assuming all we cared about was Social Security’s finances, if we paid a lump sum tax credit of less than $22,000 for parents to have an additional child, Social Security would come out ahead.

WEDNESDAY
Our Tax Dollars Are Funding Bureaucrats Who Advise Congress that Higher Taxes Increase Prosperity
...CRS and CBO believe that government borrowing leads to higher interest rates, and they think that higher interest rates reduce investment. And since investment is a key to long-run growth, this leads them to endorse any policy — including higher taxes — that reduces red ink.

TUESDAY
Do Partisan Politics Spell Tax Hikes?
The argument that President Obama makes frequently—that tax hikes on the rich are necessary to close the deficit—holds no water. If President Obama and his supporters were intent on reducing the deficit by raising taxes, they would not just single out the rich for higher levies.

MONDAY
Morning Bell: Get to Work Stopping the Obama Tax Hikes
...at a time when our nation’s unemployment still hovers around 10%, President Obama’s tax plan raises taxes by $1.8 trillion over the next 10 years.
Debunking White House Pro-Tax Increase Propaganda
This new Center for Freedom and Prosperity video includes the full footage of the White House production, so viewers can decide for themselves which side is correct.
Thaler on the Estate Tax
He is in favor. [Greg Mankiw is] not.
Secondary Sources: Gold Standard, Fed Motive, Estate Tax
A roundup of economic news from around the Web.

Reports
None.

Health Care News Nov. 8-12

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News
FRIDAY
Hospitals after healthcare reform: 'Big guys getting bigger'
You believe that the healthcare reform legislation is speeding up healthcare system M&A. How come? Shouldn't it be slowing down, until everyone understands what the new laws really mean?
The Battle for the Future of Health Care Reform: How It Will Impact You
Thousands of Americans renewing their health insurance plans will see new benefits kick in, under the health care reform law passed this year. But the future of the controversial law remains in limbo as it faces challenges from the incoming Congress led by the Republicans, and in state capitals and courtrooms around the country.
Medicaid managed care programs grow; so do issues
Beginning in 2014, an additional 16 million people will become eligible for Medicaid under the health care law. People with incomes below 133% of the federal poverty level ($14,403 for an individual or $29,326 for a family of four in 2010) will qualify.
Some Companies Shift Health Costs to Better-Paid
With health care costs climbing even higher during this enrollment season, more employers are adopting a tiered system to pass on the bulk of those costs to their employees by assigning bigger contributions to workers in top salary brackets and offering some relief to workers who make less money.
Battle Lines Drawn Over Medicaid in Texas
A week after newly emboldened Republicans in the Texas Legislature floated a radical cost-saving proposal — opting out of the federal Medicaid program — health care experts, economists and think tanks are trying to determine just how serious they are, and if it would even be possible.

WEDNESDAY
Poll Gives Muddled Guidance on Health Law
Kaiser’s latest poll was conducted right after the election, from November 3-6, among 1,502 adults, 1,017 of whom said they voted in the midterms. Among those voters, 56 percent said they would like to see the law repealed entirely or in part.

TUESDAY
Health care law brings many expensive changes to FSA, HSA use
Health care and banking experts expect a good dealof confusion as details of the law are sorted out, as retailers and financialinstitutions try to cope with the change and as consumers try to make purchasesas the new year rolls in.
Cigna CEO: Don't repeal U.S. health law
Repealing the new U.S. healthcare overhaul would be a waste of time but there is room to improve it, the chief executive of health insurer Cigna Corp (CI.N) said on Tuesday.

MONDAY
Doctors to Congress: Don't cut our pay!
Doctors aren't wasting any time lobbying lawmakers to stop a 23% cut in Medicare reimbursements set to kick in on Dec. 1.
CBO Says Health Reform Causes Drug Costs to Rise
The health reform bill forces drug companies to pay billions of dollars annually in new fees beginning in 2012.

Economist Comments
FRIDAY
Obama's commission misdiagnoses Medicare cost crisis
"The commission's report is especially relevant because on Dec. 1 all Medicare physicians will face a 23 percent cut in rates, postponed from June. Reimbursements will decline an additional 2 percent in January.
The 8,011-Person Crisis
ObamaCare's pre-existing condition program is a bust.

WEDNESDAY
How Republicans can break Obamacare before they repeal it
Instead of making a dramatic but doomed effort to overturn the health-care law with one stroke, critics of Obamacare should take a more measured, strategic approach--one that forces the president to defend the massively expensive and bureaucratic bill that he's inflicted on the country.
How to fix health reform
Though overwhelming majorities of Americans support key provisions, such as extending coverage to individuals with pre-existing medical conditions, cracking down on bad practices of health insurers, preventing chronic disease and containing costs for middle-class families, the law’s failure to bend the cost curve is still upsetting to many voters.

MONDAY
What Republicans Can -- And Can't -- Do about ObamaCare
Of course, the real battle over ObamaCare will be fought two years from now in the 2012 presidential elections. But there is still a lot to be done between now and then.
The Wrong Argument in Favor of Obamacare
Now that the elections are over and that the House has changed hands, much of the debate will focus on whether or not we should repeal Obamacare and what to replace it with.
Don't try to repeal the new health care law, improve it
As if Congress didn't already have enough to do next year on jobs and taxes, incoming Republican leaders have made repeal of the new health reform law one of their top priorities.
How Medicare Killed the Family Doctor
Low government payment rates became the private-sector benchmark, resulting in fragmented care.

Blogs
FRIDAY
The Obamacare Burden To Your State Budget
Medicaid already eats up a huge share of state budgets. In Texas, for example, more than 20 percent of the state budget is spent on Medicaid. The crisis facing states across the country is that Obamacare forces states to massively expand their already burdensome Medicaid rolls.
More Proof ObamaCare Is a Sop to Industry
Reuters has helpfully published another article demonstrating that ObamaCare‘s biggest cheerleaders are the insurance and drug industries.  That’s because, barring repeal and despite the Obama administration’s fatuous rhetoric about standing up to the special interests, ObamaCare will shower those industries with massive subsidies.
Sick Americans Live as Long as Healthier Brits?
In the new study, researchers examined the prevalence of illness among those 55 to 64 and 70 to 80. They also looked for the first time at the onset of new illnesses in those age groups in the United States and England during the years spanning 2002 to 2006. Finally, researchers examined trends in death rates in each country.
Tea Party Not Keen on RomneyCare
The following exchange took place yesterday on the Christian Broadcasting Network between host David Brody and Tea Party Express Chairwoman Amy Kremer.
Obama’s Fiscal Commission and Health Care Spending
If the co-chairs were serious about reducing federal spending and deficits, they would have proposed a balanced-budget amendment.  They would have proposed block-granting Medicaid.  They would have proposed implementing Medicare vouchers immediately.

WEDNESDAY
Obamacare Encourages States to Drop Medicaid
Because of Obamacare, states are considering dropping out of Medicaid, the federal-state health program for the poor, rather than deal with the additional fiscal strain resulting from the health law.

MONDAY
Ireland facts of the day
In the past decade, Irish health spending has doubled, in real terms. In 2000, about 22 million items were prescribed; 10 years later, 52 million items were. People aren’t twice as healthy as a result.

Reports
FRIDAY
How Obamacare Burdens Already Strained State Budgets
A growing number of state budgets are in danger of collapsing under multibillion-dollar deficits—and are about to be burdened with billions more in costs imposed by the new Patient Protection and Affordable Care Act (PPACA).

TUESDAY
Repealing Obamacare and Getting Health Care Right
Americans want health care reform—but not the reforms put in place under the Patient Protection and Affordable Health Care Act (PPACA).

General Economic News Nov. 8-12

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News
FRIDAY
Super-sized Pension and a Doomsday Scenario
While the federal debt of $13.7 trillion raises issues of devalued currency, higher borrowing costs for Washington, D.C., and loss of international bargaining power, state debt – much of it driven by exploding pension costs – poses a more immediate risk to the U.S. economy, according to many experts.
Consumer sentiment edges up in November
Better-than-expected reading of 69.3 for the month, report shows
New deepwater drilling permits: Zilch
President Obama lifted his moratorium on deepwater oil drilling nearly a month ago, but the government still hasn't issued any new permits in the Gulf of Mexico.
Cashing in on Corporate America's $1 trillion
Corporate America's wallet is bulging with $1 trillion and the rumor mill is heating up. What will companies do with all that cash?
US homes lost to foreclosure drops 9 pct in Oct.
The number of U.S. homes repossessed by lenders last month fell by the sharpest margin this year, as several major lenders temporarily halted most or all of their foreclosures amid allegations thousands of foreclosures were handled improperly.
Still crazy after all these yields
Ireland’s plan for a brutal fiscal adjustment has done nothing to appease panicky bond markets. Portugal is also in their sights.
Home Prices Decline in Nearly Half of Metropolitan Areas
Home prices fell in nearly half of U.S. metropolitan areas in the third quarter, indicating that the market is losing steam without government tax credits, according to an industry report.

WEDNESDAY
China trade surplus heightens G-20 tensions
As global leaders prepare to debate international trade imbalances this week, both the U.S. and China announced data that points to a continued trade disparity between the world's two largest economies.
Ireland's Crisis Flares as Investors Dump Bonds
Ireland's financial troubles loomed large Wednesday as investors — betting that the country soon could join Greece in seeking a bailout from the European Union — drove the interest rate on the country's 10-year borrowing to a new high.
Bipartisan vow: We'll fix AMT
More than 20 million taxpayers are at risk of having to pay the so-called wealth tax when they file their 2010 taxes next year, if lawmakers fail to act. But that's not likely to happen.
Commodity Prices Surge
Gold, Cotton Touch New Highs as Fed Stimulus, Chinese Growth Drive Demand
GM: Best quarter in 11 years
General Motors reported its best quarter since 1999 Wednesday, setting the stage the automaker to begin selling shares to the public once again.

TUESDAY
Recession's casualty: Charity
As the recession whacked the economy, charitable giving by even the wealthiest Americans took a substantial hit, according to a study released Tuesday.
Bankruptcy filings jump 14% in 2010
As the U.S. economy struggles to recover from a deep recession, the number of Americans filing for bankruptcy continues to rise dramatically.
Ireland's Next Blow Could Be Home Loans
Ireland's commercial-property bust has knocked the country's banks to their knees. Now the lenders are bracing for another blow: losses on home loans.
Wholesale Inventories Surge 1.5%
Inventories surged 1.5%, matching a July gain that was the biggest increase in more than two years, the Commerce Department said. Analysts polled by Reuters were expecting a 0.7% increase.
Banks Ease Loan Standards, but Crunch Isn't Over
The credit crunch is easing in the U.S. but it's far from over.
Economic Stress Dips to 16-Month Low
The nation's economic stress fell in September to a 16-month low, thanks to more hiring in New England, fewer foreclosures in the mid-Atlantic and declining bankruptcy filings in the Southeast, according to The Associated Press' monthly analysis of conditions around the country.
Debt Worries Punish Euro Against Rivals
The euro declined against the dollar and yen amid concerns about debt problems of some euro-zone nations, especially Ireland.

MONDAY
Irish markets flounder as EU eyes survival plan
Shares in Ireland's banks fell to record lows and national borrowing costs reached new euro-era highs Monday as the government prepared to discuss its fiscal survival plans with the European Union's economic commissioner.
Banks fail in Md., Calif., Wash.; 143 total in 2010
Regulators shut down four banks Friday, bringing the total of 2010 failures to 143. That tops the 140 shuttered last year and is the most in a year since the savings-and-loan crisis two decades ago.
Leading economies set to diverge in recovery: OECD
The world's leading economies are set to diverge as they recover from the global economic crisis, with the United States, Germany, Japan and Russia gaining pace while China, Britain, France and India slowing down, the OECD said on Monday.
Greek prime minister wins voter mandate for cuts: analysts
Greek Prime Minister George Papandreou has beaten the odds in local elections to win a grudging mandate for radical austerity measures to overcome a debt crisis, analysts said on Monday.
Americans' debt slashing nears $1 trillion
Americans have paid off nearly $1 trillion in debt over the past two years, although the pace of repayment has slowed, according to a regional Federal Reserve report released Monday.
Economy recovering, but recession's shadow is long
Now the recession is over, at least technically, and the economy is growing again, at least a little. But many changes in spending habits that most Americans first saw as temporary have taken hold, perhaps for good, some economists say.
Fed's Hoenig hammers housing subsidies
Hoenig, the Fed banker who has said at seven straight Federal Open Market Committee meetings that he believes the Fed's current policy is a mistake, repeated Friday that he believes the Fed should raise interest rates to put the economy on a path to balanced growth.
Looking Ahead to Economic Reports This Week
Reports this week will include wholesale trade inventories for September (Tuesday); trade deficit for September, import prices for October and weekly jobless claims (Wednesday); and Thomson Reuters/University of Michigan consumer confidence index for November (Friday).

Economist Comments
FRIDAY
Periphery Proposal Ignores Greece's Recent Experience
Greece's present interest rate spreads suggest that the market is now assigning a high probability that Greece will default on its sovereign debt within the next five years.
The other recovery to watch: world trade
World trade suffered its worst slump since the Great Depression in 2008 and 2009.

WEDNESDAY
The Man Who Called the Financial Crisis—70 Years Early
Decades before anybody had ever heard of a mortgage derivative, an economist named Melchior Palyi predicted key causes of the 2008-2009 financial crisis with precision that makes a modern reader's hair stand on end.
Worry Over Trade Deficits
Acting on behalf of various interest groups, politicians fret over trade deficits but is it something that ordinary Americans ought to worry about?
US Needs to Become a Free Market Economy
Free market economists don't believe it's possible to predict human behavior by studying aggregates because aggregates don't make choices, only people do.
Progressives don't really get progress, but the American people do
Progressives claim to have a monopoly on progress – designed by intellectuals who 'know better' and brought about by a big, beneficent government. But Americans voted in last week's elections that this brand of progress actually impoverishes, and that a free market is much smarter.
Despite Warnings From States, Federal Regulators Failed to Act on Foreclosure Problems
Despite multiple warnings, Federal regulators appeared to rely on laissez faire idealogy and banks' own reporting rather than actually investigating.
Stealth Protectionism
We have heard every major world leader reject the notion that protectionism would be an appropriate response to the financial and economic debacle of 2007-08. And yet the signs are unmistakable: We are entering a protectionist era that does not speak its name.
It's Time to Discontinue the Basel Regimes
Before the G20 approves the Basel III capital regime this week, it should take a moment to examine the logic of Basel, what has happened under Basel II, and the potential future under these regimes.

TUESDAY
A checklist for Congress
Revamped House, Senate have much work to do.
The Age of the Entrepreneur
The way startups raise money is changing, fast. Angels, super angels and VCs have to figure out the new rules, but that's good -- really good -- for founders themselves.
10 Market Bubbles that could soon Burst
What other bubbles are out there lurking in the global economy? Here is a long list by experts:

MONDAY
Is Economics a Science?
It would be, if it weren’t for the people.
GM's Ultimate Sales Incentive
GM's IPO seems underpriced in the high 20s. That could be a boon for initial buyers, a fiasco for the Treasury. Is the stock really worth $35?

Blogs
FRIDAY
Federal Workers Need Reality, Not Raises
Yesterday the USA Today reported that not only has the number of federal workers making more than $150,000 a year doubled since President Barack Obama took office, but that President Obama wants to give federal workers a 1.4% across-the-board pay raise.
Chinese Economic Data: More Tall Tales
The Conference Board, a global research association, made a splash with their 2011 global outlook. The group’s most interesting claims are that emerging markets will drive “global growth” and that China could pass the U.S. on one measure of economic size as early as 2012. The Conference Board is making two mistakes many observers make, and which the media gladly eats up.
5 Most Important Issues at G20 Meeting
It seems like yesterday that the most recent G20 was gathering in Toronto to discuss a more coordinated response by governments and central banks to deal with potential crises. That was five months ago. We're about to start a new G20 meeting, this time in Seoul, today.
Secondary Sources: Capital Failure, Commodity Inflation, Productivity
A roundup of economic news from around the Web.
My New Favorite Christie Line
“Let me help you pack.” That’s what Gov. Chris Christie told one of the state’s top administrators when that administrator commented publicly that he could leave New Jersey and go to another state if his $242,000 total compensation were to be capped under the governor’s proposed rule.

WEDNESDAY
Get to Work Getting Control of Government
Conservatives must pay close attention to what this Congress does and be prepared to hold leaders accountable. The progressives that controlled the 111th Congress simply had no respect for the limitations on federal government power that the Founders placed in the U.S. Constitution.
How the Irish may save civilisation (again)
Despite the valiant efforts of government to cut spending since the crisis, the markets do not seem to believe they can solve the problem on their own. Government bond yields are now 8%, an unsustainable level. It looks inevitable that the Irish will have to seek help from the European Financial Stability Fund.
Humor: China Rating Agency downgrades U.S.
Dagong Global Credit Rating Co. — the Chinese rating agency which hit headlines earlier this year for its AA-view on the United States — is back. With a US downgrade.
Hazlett vs. Biden
Reacting to this short video of me discussing Joe Biden’s phantasmical delusion that government is the source of all good ideas of the past 300 years, my GMU colleague (and former Chief Economist for the F.C.C.) Tom Hazlett sent to me the following e-mail – posted here with Tom’s permission:
Uncertainty
Is uncertainty one of the reasons banks aren't lending and the economy remains lethargic? I'd say the answer is a clear yes.
Secondary Sources: Venezuelan Inflation, Sarah Palin, Fannie & Freddie
A roundup of economic news from around the Web.

TUESDAY
Upgrading Trade Transparency
AFP reported late last week that Sprint Nextel will not consider bids from two Chinese companies for large telecom contracts due to national security concerns expressed to Sprint Nextel by the American government. This is probably the right outcome, but it is the wrong way to achieve that outcome.
More Ireland
The WSJ has some interesting facts on the Ireland residential housing market.
Not Worrying About “Unequal” Wealth ‘Distribution’
Michael Norton and Dan Ariely surveyed us Americans and found that we “drastically underestimated the current gap between the very rich and the poor” (“Spreading the wealth,” Nov. 8).  They found also that Americans’ “ideal” distribution of wealth is one that is more even than is the wealth-distribution in reality.
Fighting Social Security Reform Is the Worst Thing Lawmakers Can Do for Seniors
When the next Congress arrives in Washington, Members will need to get to work to reduce runaway government spending. One area that has been identified as a good place to start—especially as the National Commission on Fiscal Responsibility and Reform prepares to give its recommendations on deficit reduction next month—is Social Security.
CR Index: Less money stress, but less interest in some holiday buys
Our financial difficulties and stress levels have declined, and employment numbers have climbed back into positive territory, according to the Consumer Reports Index for November.
Joe Biden’s Weak Case for Government Meddling
Vice President Joe Biden believes that human progress depends almost entirely on government vision and government incentive.
Small-Businesses Sentiment Improves
Small-business activity in the U.S. picked up in October, and job creation turned positive, according to a report released Tuesday that also took government economic policy to task for failing to turn the economy around.
CardHub Study on the Effects of the Durbin Amendment Debit Price Controls
CardHub has a new study that assesses the effects of the Durbin Amendment and its likely unintended consequences

MONDAY
Is the current banking system the worst possible?
We do have the worst possible banking system because it is built on two pillars of straw—proprietary information and leverage.
Reject All-of-the-Above Energy Approaches
With Congress divided, will anything actually get done in the next two years? President Obama recently suggested energy policy as an area in which bipartisan support could exist. Rather than trying to pass  a large climate change bill, Obama stressed the importance of increasing technologies and energy sources to reduce greenhouse gas emissions  – including nuclear, clean coal, electric vehicles, wind, solar, and renewable fuels.
Early Retirement Accounts Won’t Fix Social Security
The twist with early retirement accounts is that the account would pay your full benefit for the first few years of retirement—say, from 67 through 72—and then you’d receive your full benefit from the current program. This is an option I have not considered in a while. Heres why...
Ireland Facing House Price Collapse?
It's terrifying to contemplate that the federal government is now, for all intents and purposes, the source of nearly all the mortgage origination in the United States.  Doubly so for a libertarian, of course--but it's also terrifying to contemplate what the market would look like without those interventions.  Would other sources of mortgage finance exist? And if not, what's the value of a house in a market that has suddenly gone to all-cash deals?
California’s Multiplayer Version of Chicken
Sure enough, it looks like everyone in California is playing a multiplayer version of chicken, sometimes characterized as “someone around here better be reasonable, and it is certainly not going to be me.”
Multiplicative Growth: A Just-So Story that Deserves a Hearing
Policy is not enough to ensure economic growth.
Government Misstatements About Billionaires and Other Gold-Friendly Actions
We are nowhere near a bubble in gold prices. We are however looking at a U. S. government that may have invented tax numbers for political reasons. But it can’t invent physical gold.
Schedule for Week of Nov 7th
A light week for economic releases. The trade report on Wednesday is probably the key release and could lead to a revision in Q3 GDP.
Beware Policies that are Pro-Business
The fact that more than 200 American business executives are in India with the President is cause to fear that any pro-business policies he might adopt will be of the second, impoverishing sort
Consumer Credit Increases
Americans boosted borrowing for the first time in eight months in September, the Federal Reserve said Friday, but credit-card debt continues to decline.

Reports
WEDNESDAY
Wholesale Inventories Increase in September
Wholesale inventories rose 1.5 percent in September, led by gains in nondurable goods. Growth in August inventories was revised upwards to 1.2 percent from the originally reported 0.8 percent.
Fixing Transit: The Case for Privatization
America's experiment with government ownership of urban transit systems has proven to be a disaster. Largely because of government ownership, the transit industry today is beset by a series of interminable crises. Transit advocates propose to solve these problems with even more subsidies. A better solution is to privatize transit. Private transit providers will provide efficient transit services that go where people want to go. In order for privatization to take place, Congress and the states must stop giving transit agencies incentives to waste money on high-cost transit technologies.
U.S. International Trade in Goods and Services
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total September exports of $154.1 billion and imports of $198.1 billion resulted in a goods and services deficit of $44.0 billion, down from $46.5 billion in August, revised. September exports were $0.5 billion more than August exports of $153.6 billion. September imports
were $2.0 billion less than August imports of $200.1 billion.

TUESDAY
Does Haste Make Waste in Regulatory Analysis?
Most federal agencies must conduct economic analysis when proposing major regulations. Thispaper uses a new dataset scoring the quality of analysis that accompanied proposed regulations in2008 to assess whether some types of regulations receive more thorough analysis than others
The Truth About Entitlements
Does the United States really have to restructure the entitlement programs that affect seniors? Some would argue that Social Security is sound. Some would suggest that greater taxes on the highest earners would be a solution. Some would say that Medicare’s problems can be solved with painless reforms to control costs. Some would suggest that we have room to raise overall taxes to levels seen in European countries. Some would say that high economic growth is likely to eliminate the problem. This paper looks at the feasibility of these alternatives to scaling back spending promised for seniors.

MONDAY
Obama Should Approve Korea Trade Agreement
A greater potential success during the Seoul gathering would be the Obama Administration’s affirmation of the Korea–U.S. free trade agreement (KORUS FTA), finally allowing submission for legislative approval. Yet President Obama continues to genuflect to special interest groups, which has delayed the FTA’s progress. South Korean officials complained that, as late as last month, the U.S. had not even articulated its specific demands on altering the automobile section of the agreement.
Slaughter of the Innocents
What caused the financial crisis? Even though the Dodd-Frank Act (DFA) has been signed into law, this is still an important question. If we do not attribute the crisis to the right cause, we could well stumble into another crisis in the future; and if the DFA was directed at the wrong cause, we should consider its repeal.
Wells Fargo Economic Group
Weekly Economic & Financial Commentary