General Economic News Jan. 10 - 14

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News
FRIDAY
Best holiday shopping gain in 6 years
Retail sales in the 2010 holiday season showed the biggest percentage gain in six years, an industry group said Friday, while a separate government report showed a December sales increase on strength in e-commerce.
S&P, Moody's Warn On U.S. Credit Rating
With attention focused on sovereign-debt worries in Europe, two major credit-rating firms reminded investors again that the U.S. has debt problems of its own.
Global food chain stretched to the limit
Soaring prices spark fears of social unrest in developing world
Younger Workers Have Most to Lose In Social Security Breakdown
Ten thousand baby boomers will retire every day for the next 19 years, which will double the number of those collecting benefits instead of paying taxes.
Inflation rate headed up? The impact of higher food, energy prices.
Higher food and energy prices helped propel the Producer Price Index up by 1.1 percent in December. But the outlook on the inflation rate is not entirely bleak, some say.
Foreclosures at All-Time High—May Rise in 2011
Home foreclosures hit an all-time high in 2010, according to the latest report from RealtyTrac—and experts expect similar activity in 2011.
Still scary
Portugal has looked increasingly in need of a bail-out. Firm demand for a bond auction this week cannot mask deep problems with its public finances
Rising gasoline prices sour U.S. consumer mood
Rising gasoline prices beat down U.S. consumer sentiment in early January, overshadowing an improved job outlook and passage of temporary federal tax breaks, a survey released on Friday showed.
OPEC ministers say world can handle $100 oil
Other exporters indicate that cartel may not increase crude production
Economists Optimistic on Growth
Economists surveyed by The Wall Street Journal are increasingly optimistic about the pace of the recovery, predicting the U.S. will grow at better than a 3.2% annual rate in each quarter this year.
Under siege
Quantifying the difficulties of a country’s banking system

THURSDAY
Hong Kong ranked world's freest economy: report
Hong Kong remained the world's freest place to do business for the 17th year in a row in an annual US league table published Wednesday.
1 million homes repossessed in 2010
Foreclosures were at a record high in 2010, and more than 1 million people lost their homes, even as notices started leveling off during the end year.
Economy grows at moderate pace
Economic growth continued to expand moderately over the past few weeks, the Federal Reserve said Wednesday.
Banks repossessed 1 million homes in 2010
The bleakest year in foreclosure crisis has only just begun.
Trade Deficit Dips to $38.3 Billion in November
November's deficit was the lowest since January 2010.
Producer Prices in U.S. Increased 1.1% in December on Fuel
Wholesale costs in the U.S. rose in December by the most in 11 months, led by higher prices for commodities such as fuel and food.
Banking Law Hung Up On Down Payments
Banks are sparring over looming U.S. mortgage-lending rules that could raise costs for millions of borrowers.
Moody's warns stimulus could trample Treasuries
Moody's warned Thursday that the tax cuts enacted last month could push up U.S. borrowing costs and erode some of the dollar's global appeal.

WEDNESDAY
Floods to slash $13bn from economy as inflation becomes a danger
The Queensland floods may end up costing the economy $13 billion through lost productivity and damage to key infrastructure.
Housing Market Slips Into Depression Territory
As the economy revs back to life, with signs of hiring on the horizon, the housing market is being left behind like Macaulay Culkin in “Home Alone.”
Get ready for (slightly) fatter paychecks
The most obvious sign of the economic recovery may be in your paycheck.
Personal bankruptcies rose 8 percent in 2010
Personal bankruptcy filings slowed theirprecipitous climb, rising 8 percent in 2010. While it's a far cry from the 32percent jump from 2008 to 2009, many experts believe filings are far fromreaching level ground.
Wealthy treated themselves during the holidays
The rich treated themselves like royalty this holiday season. That spun the holidays into gold for Tiffany and other high-end retailers.
Import Prices in U.S. Rise 1.1% in December, Led by Fuels, Food
The cost of goods imported into the U.S. rose in December, led by higher prices for commodities such as fuels and food.
Chamber chief: State of business 'improving'
The head of the U.S. Chamber of Commerce Tuesday praised what he called a "new tone" in the Obama administration's dealings with the business community but warned that rising energy prices, the new health care law and a "regulatory tsunami" continue to hurt businesses and slow the drive to create more jobs.

TUESDAY
NJ casinos end 4th straight bad year, down 9.6 pct
In just four years, the nation's second-largest gambling market has lost nearly a third of its business.
Small business sales pick up
Entrepreneurs trying to sell their businesses seem to have had an easier time of it last year, although they may not have gotten the price they wanted.
Portugal Says Economy Will Shrink
However, Europe's Short-Term Debt Sales Smooth
10 States Where Poverty Rates Are Soaring
During 2010 6.8 million more Americans had to resort to the federal food stamp program. The rate of increase is very dramatic in several states. The two states with the lowest increase in food stamp participation are also among the top ten poorest states. This implies that other relatively well-off states are getting worse and catching up with chronically poor states such as West Virginia and Kentucky.

MONDAY
Economists foretell of U.S. decline, China's ascension
To hear a number of prominent economists tell it, it doesn't look good for the U.S. economy, not this year, not in 10 years.
China trade gap narrows, easing tensions
In what has become a sore point for other major world economies, China still exports far more goods and services than it imports.
Pressure on Portugal Heightens Amid Bailout Fears
Europe's debt crisis looked increasingly likely to claim another victim on Monday, as Portugal's borrowing rates spiked to euro-era highs amid reports Germany and France are pushing it to accept outside help and prevent contagion to other countries.
Economic Reports for the Week of Jan. 10
Scheduled for this week are wholesale inventories for November (Tuesday); import prices for December and the Federal Reserve beige book (Wednesday); weekly jobless claims; Producer Price Index for December and trade deficit for November (Thursday); Consumer Price Index for December; retail sales for December; industrial production and capacity utilization for December; Thomson Reuters/University of Michigan consumer confidence index for January; and business inventories for November (Friday).
Nations Seek Success Beyond GDP
Money isn't everything. But in measuring the success of nations, it isn't easy to find a substitute

Economist Comments
FRIDAY
After Billions of Dollars in Aid, Little Progress in Haiti
It's sure as hell clear international aid has done nothing to make Haiti rich
The Congressional Accountability Act
A proposal to ban regulation without representation.
Foreclosure Situation to Worsen in 2011
The worse part? There is no solution coming from the government, the legal folks sorting through the mess, or the financial marketplace.

WEDNESDAY
Baby Boomers Could Force Economic Catastrophe
Lawmakers will look back on 2011 as the year the U.S. started down into a financial Grand Canyon, because the first baby boomers turn 65 this year -- the front edge of a tidal wave of baby boomer retirements.
Haiti one year later: Got trash? Make thread.
One year after Haiti's devastating earthquake, Pittsburgh entrepreneurs aim to help Haitians turn garbage into high-performance fabric.
Small Businesses and Big Unintended Consequences
No matter how benevolent, intelligent, and farsighted policy makers might be, they cannot anticipate how markets will react to laws and regulation.
The rights stuff
The "Coasean" wisdom advises these officials to do their best to determine how the environmental asset would be used if people could bargain. While such officials will often err in attempting to make these determinations, at least their guideposts will be the results that would be produced by markets rather than by special-interest groups

TUESDAY
Chamber head cautiously optimistic about economy
The president of the U.S. Chamber of Commerce straddled the Democratic and Republican divide Tuesday, endorsing the GOP drive to repeal President Barack Obama's signature health care law, yet supporting the White House on immigration and new spending to spur the economy.
Only a united, federal Europe can end its financial turmoil
The global financial crisis continues, threatening countries across the European continent. A united Europe requires a united solution. To survive this and future economic storms, the European Union needs the capacity to coordinate economic and fiscal policies on the federal level.

MONDAY
Who Failed on Haiti's Recovery?
What went wrong? How did such a huge outpouring of foreign assistance — donor countries have pledged some $11 billion — manage to accomplish so little?
Why Teacher Pensions Don't Work
Defined-benefit systems aren't merely Ponzi schemes. They discourage talented teachers who would prefer front-loaded compensation.
Some Manure, Please, to `Grow the Economy:' Commentary by Caroline Baum
“Grow the economy?” The phrase is painful to the ears -- and only one reason it makes me wince. We grow old, we grow up, we grow out of our bad habits (hopefully). But grow the economy?
Grading the Ivory Towers
Texas A&M shocks the professoriate with cost-benefit analysis.

Blogs
Friday
Future shock: inflation. But maybe not quite yet.
Flooding economies with money hasn't boosted inflation much – yet. But nations have trouble turning off the spigot.
Race and Homeownership: Historical Trends
A common rationale for federal policies to expand homeownership is the desire to reduce observed racial differences in homeownership.  Receiving the most attention has been the gap in homeownership rates between white households and African-American.  The current homeownership rate for whites is 76.5%  (2007), while that for African-Americans is 54%, leaving a gap of 22.5%.
Economic Freedom Is Foundation Of All Other Freedoms
We cannot adequately protect ourselves without a modernized military. A modernized military depends on a strong U.S. economy. That is why economic freedom is not just a pocketbook issue: It is fundamental to American security.
States Where Housing Will Rebound First
Housing will rebound moderately in 2011, economists at the International Building Show here are predicting and should gain even more steam in 2012.
Ronald Coase interview
Interview with Ronald Coase, on the occasion of the establishment of the Coase China Society, an effort to stimulate study and application of Coase’s ideas in China. Interview conducted by Wang Ning, a student of Coase’s now teaching at Arizona State University and co-author with Coase of the book How China Became Capitalist.
AARP reaches out to a new kind of senior: Is 17 the new 50?
Readers who've reached the age of 49 or so will know how it feels to get that first unsolicited AARP card in the mail.
Some Economics of Trade
As I pondered the issue of Americans trading with low-wage nations, Miles Stevenson e-mailed me to say that he’d just discovered Paul Krugman’s superb 1996 essay “Ricardo’s Difficult Idea.”  I couldn’t recall if I’d posted that essay here at the Cafe, so I searched.  Turns out that I did indeed post it, three years ago.

THURSDAY
Boomtime prices without boomtime conditions
THE Economist's commodities index has notched up an all-time high in early 2011, and most analysts attribute the surge to demand strength. Our index excludes oil, but crude is now causing concern, briefly pushing past $98 a barrel yesterday. Throw in the recent strength of equities, and things would seem to be pointing to a very robust recovery.
A surplus, but for oil and China
EARLIER this week we learned that China's trade surplus fell sharply in November, to just $13.1 billion. A look at the latest American data would indicate that trade between the two big economies didn't have that much to do with the tumbling Chinese surplus.
PSST vs. the Aggregate Production Function
Regular readers know that I am trying to nudge them toward a different paradigm in macroeconomics. I want to get away from thinking of economic activity as spending, and instead move toward thinking of it as patterns of sustainable specialization and trade. Even if there is only a small chance that this alternative paradigm is useful, I think it is a worthwhile exercise.
Entrepreneurialism Under the Law
I don't think that tax rates are the reason that a clear majority of Americans have thought about striking out on their own, while the number in Europe is more like a third.
Foreclosure Mess
My solution going forward would be to modernize the land-title system. My hope is that would achieve a libertarian's goal of clarifying property rights and reducing the costs involved with the transfer of property.
Foreclosure Options
I don't think that we should seek legal remedies against those who walk away from underwater mortgages.  But I still think it's wrong if you have the means to pay, just as it would be wrong for banks to seize the house you'd been faithfully making payments on, even if they could get a judge to sign off.
Reflections on Freedom in New York
When I think of New York city abstractly, I think of a city that doesn't work. Taxes are high, there are too many crowds, people are pushy and unfriendly, etc. Then, when I actually experience New York, I see how well it works. People are trying to give me what I want, at a fairly low price. The immigrants I run into--and there have been many over the last two days--don't seem to have come here for welfare but for opportunity to get wealthier. And people are friendly.
CR Index: Consumers face fewer financial woes at start of 2011
Consumers are more optimistic, with sentiment numbers climbing to their highest level in more than two years, according to the Consumer Reports Index for January.

WEDNESDAY
Happy Meal ban didn't go far enough. Ban Popsicles!
Guest blogger Art Carden looks at the logical implications of the recent ban on Happy Meals.
Will home prices fall back below 2009 low?
An index of home prices, more current than the Case-Shiller index, suggests they will.
The secret to a libertarian state
Without taxes, there's no security net. So who takes care of the poor in a libertarian state? Guest blogger and libertarian PJ Byrne has some ideas.
This little piggy went to market
Portugal's successful bond auction comes at a price
Surprise, Surprise
Last year I wrote about the intriguing proposal by the North Dakota Farm Bureau to do away with federal farm subsidies. I expressed at the time my doubt that the proposal would find much traction with the national American Farm Bureau Federation and, indeed, the group voted yesterday (at their annual conference in Atlanta) against the milder proposition to cut direct payments — the approximately $5.2 billion per year of your money that flows to farmers regardless of what, or even whether, they farm.
Where Profit Comes From
Labor unions like to argue that the payment of higher wages is to the self-interest of employers because the wage earners will use their higher wages to make additional purchases from business firms, thereby increasing the sales revenues and profits of business firms. However, wrong and foolish it may be, this is an argument worth analyzing in some detail, because it can provide a gateway to a discussion of the actual sources of profit in the economic system.
Energy Fact of the Week: ‘Brown’ Energy Brings Prosperity
The biggest story in domestic oil production is . . . North Dakota.
Facts about European banks
The problem, of course, is this: if the government stops payment on some of the debt, they then will have to bail out their domestic banks.
In the long run it's all microeconomics
Most of us are familiar with JM Keynes quip that in the long run we are all dead. To change this slightly, I want to point out that in the long run, it's all microeconomics.
The Half-Full Glass of Economic Mobility
When people look at data on economic mobility, they see different things.  For example, it is well known that if your father had high income, you are more likely to have high income than if you father had low income.  According to this study (which I found thanks to a pointer by Paul Krugman), the elasticity of son's income with respect to father's income is about 0.5 in the United States.  How do you interpret this fact?

TUESDAY
F.H. Knight Reviews J.M. Keynes
Here’s one of the 20th-century’s premier economists,’ Frank Knight’s, review of Keynes’s General Theory. It is a classic.
Texas is different, a continuing series
The blogosphere continues to debate whether or not Texas' economy is special, and today the Bureau of Labour Statistics has provided us with another piece of evidence
The Southwest is parched. Would pricier water help?
If the price of water were allowed to rise naturally, you'd see fewer green lawns in Arizona and fewer pools in L.A.
A "Relatively Modest" Income
It occurs to us that we have the ideal tool to determine where, by President Obama's standards, the annual income needed to be considered "rich" begins. Or perhaps more appropriately, the annual income the President believes to be where "relatively modest" ends!

MONDAY
Fuzzy Thinking by Famous Economists
It is not just California. There are lots of places where housing is abundant and inexpensive and economic activity is dismal, Michigan for example. Maybe bringing up Michigan is a little unfair, Glaeser does mention demand for housing in the essay, and there is clearly little demand for Michigan housing. Still, it brings up the question of where demand for housing comes from. It’s a question Glaeser does not address.
Economists React: Explaining the Rise in Imports to China
China Customs data released Monday showed the country’s trade surplus fell to $13.08 billion last month, a nine-month low, from $22.9 billion in November. The full year surplus also declined for the second straight year. Analysts weigh in:
On the worthlessness of Japanese government debt
Japan's national debt is twice their GDP. What does that mean for investors?
Americans Boost Student Loan Debt, Cut Credit-Card Borrowing
Americans kept their credit cards at bay in November, subdued by high joblessness and fallen home values.
The race ahead
The world's biggest economies are changing fast
Economists Say Europe Faces Low Growth for a Decade
Europe’s currency project will probably survive, but the price paid by the euro zone area is likely to be dismal economic growth for the next decade.
Census Data Illustrated
This graphic was in the NYT this morning. It illustrates recent data pulled together from the Census Bureau from the 2010 census.
Texas Triumphant
Actually what is triumphant is the economic model of low taxes, light regulation and economic liberty.
Unofficial Problem Bank list at 932 Institutions
Here is the unofficial problem bank list for Jan 7, 2011.
The Case for Social Security Personal Accounts
There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely caused by demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.

Reports
FRIDAY
http://www.realclearmarkets.com/blog/MonthlyEconomicOutlook_01122011.pdf
MONTHLY OUTLOOK

THURSDAY
Economic Freedom Advanced in 2010
Though faced with continuing fiscal challenges, more countries embraced greater economic freedom than shied away from it last year, according to the latest Index of Economic Freedom, released today by The Heritage Foundation and The Wall Street Journal
Import Prices Rose Further in December
Registering a third consecutive monthly gain above one percent, import prices increased 1.1 percent in December. Once again, higher food and fuel prices proved to be the primary drivers.
Three Policy Changes to Help with Gasoline Prices
Must it always be opposite day in Washington? Petroleum and gasoline prices are surging while the Obama Administration and its allies seem intent on making things worse. Instead of taking actions to increase supplies of petroleum and gasoline, the Administration pursues policies to restrict U.S. access to its own petroleum, ban imports of vast quantities of Canadian oil, and drive up costs of refining.

WEDNESDAY
Strong Sales and Declining Wholesale Inventories
Wholesale inventories unexpectedly declined 0.2 percent in November. Sales at wholesalers jumped 1.9 percent following a strong 2.6 percent increase in October.
The Impact of Regulation on Investment and the U.S. Economy
From an economic perspective, however, it is important to note that the total number of jobs can be a misleading measure of the costs and benefits of regulation. Bad policies can increase total jobs, and good policies can decrease total jobs.

TUESDAY
Liftoff or Cold Shower? The Economy in 2011
The extra fiscal stimulus from the tax cuts late in 2010 could produce a 4 percent growth rate for the first half of 2011—a sharp turnaround from December’s gloomy news on US employment. However, China’s overheating and Europe’s sovereign-debt crisis continue to threaten the global recovery. In addition, four risks could make liftoff difficult for the US economy: hostility in the new Congress to additional fiscal stimulus; higher energy costs, which could offset the boost from the payroll tax cut; a housing sector under heavy stress; and fiscal drag from state and local governments as the federal stimulus wears off. We have already fired the economic and monetary stimulus guns for the second time. If these measures fail to provide liftoff, we could face a cold shower in 2012.

MONDAY
Weekly Economic & Financial Commentary
Disappointing Jobs Report, but Labor Market Improving.