General Economic News Jan. 31 - Feb. 4

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News
FRIDAY
Cubans warily become entrepreneurs
'Cuba is falling apart ... We could help rebuild it,' struggling carpenter says
Consumers aren't snowed in
So much for bad weather keeping consumers out of the shopping malls.
Japan's economy in deep trouble? Look again.
Standard & Poor’s cut its rating on Japanese sovereign debt one notch last week, strengthening the naysayers. But with falling unemployment, large reserves, and rising corporate profits, 'Japan is punching well above its weight,' says one analyst.
Suspended animation
Falling prices and rising foreclosures cause a policy quagmire
Protecting the middle class
China’s leaders nod to the left, but look anxiously to the right
Democrats eager to talk of government shutdown
Senate Democratic leaders held a news conference Thursday to warn about the dangers of a Republican-forced government shutdown.
Private Equity Boosting the Economy
The economy isn't yet out of the doldrums, but there is some good news to report for job seekers right now.
Angela in Wunderland
What Germany’s got right, and what it hasn’t
A machine running smoothly
German companies great and small are making the most of globalisation. Their success owes more to judgment than to luck
Protests and the pump
The Egypt effect may be more pronounced for food than oil

THURSDAY
World food prices hit record high: UN agency
World food prices reached their highest level ever recorded in January and are set to keep rising for months, the UN food agency said on Thursday, warning that the hardest-hit countries could face turmoil.
New Zealand Aims to Avoid Downgrade
New Zealand's finance minister on Thursday stressed a need to rein in borrowing, keep interest rates on hold and maintain a competitive exchange rate as the government seeks to boost exports after ratings agencies have criticized the Pacific nation for its deficit.
Factory Orders Rose Unexpectedly in December
New orders received by U.S. factories edged up in December and shipments of finished products were stronger, signaling a continuing pickup in activity for the nation's manufacturing sector.
Congress to rewrite rules on emissions
GOP seeks to strip EPA’s power.

WEDNESDAY
50% Now Oppose President’s New Spending Proposals
Rasmussen Reports asked voters the same three questions about the president’s economic proposals on the two nights prior to the speech and then again on Tuesday and Wednesday nights.
S&P Cuts Ireland Credit Grade over Bank Debt Fears
Ratings agency Standard & Poor's cut its credit grade for Ireland on Wednesday and warned it could fall further because of doubts about the true scale of defaulting loans yet to surface in the country's largely state-owned banks.
Help Fund a Project, and Get a Green Card
Once-Obscure U.S. Program Provides Alternative Financing for Developers, but New Flood of Interest Raises Concerns
Cotton Rises to Record as Adverse Weather Cuts World Supply
Cotton futures surged to a record on mounting supply concerns after flooding in Pakistan and Australia slashed crops.
Sugar Rises to 30-Year High as Storm Heads for Australian Crop
Sugar rose to a 30-year high in New York and reached the highest price since 1989 in London on speculation Cyclone Yasi will damage the crop in Australia, the world’s third-largest exporter.

TUESDAY
Egypt Turmoil Threatens U.S. Economy
Rising prices for food and fuel helped drive the uprisings racking the Middle East, now those uprisings are pushing prices higher still and threatening America’s economic recovery.
Construction Spending Lowest in 10-1/2 Years
U.S. construction spending unexpectedly fell in December to touch its lowest level in nearly 10-1/2 years as investment in both public and private projects declined, suggesting the sector would continue to struggle this year as federal stimulus spending tapers off.
Manufacturing revs up in January
The manufacturing sector started off 2011 with a bang, growing at its fastest pace in more than six years, a purchasing managers' group said Tuesday.
Whose house is being saved by Obama?
So who are these homeowners?
Cost Inflation Puts a Wrench Into the Works
Good news in the manufacturing sector has come with a sting in its tail.
Lawmakers not likely to evict Fannie, Freddie
Many members of Congress say they want to end the shotgun marriage between the federal government and mortgage giants Fannie Mae and Freddie Mac, which was arranged in the heat of the 2008 financial crisis. But breaking up could be hard to do.

MONDAY
TSA shuts door on private airport screening program
TSA chief John Pistole said Friday he has decided not to expand the program beyond the current 16 airports, saying he does not see any advantage to it.
Tensions rise on surging food prices
Food prices have been rising worldwide, as the cost of raw materials and agricultural products surge, contributing to political unrest around the globe.
Driven by the Recession, a Baby Bust Hits the U.S.
This is the first piece in a series that will examine the impact of a potential baby dearth in America. The recession is pushing the birth rate down, women are waiting longer to have children and the cost of raising a child is skyrocketing. Fewer babies means fewer young people to support an aging population , threatening already-strained social programs. Has America’s baby bubble burst?
Economic Reports for the Week of Jan. 31
Reports will include I.S.M. manufacturing index for January and construction spending for December (Tuesday); ADP employment for December (Wednesday); weekly jobless claims; I.S.M. service index for January; fourth-quarter productivity; and factory orders for December (Thursday); unemployment for January (Friday).
U.S. Corporate Profits Surge
With about 50% of companies already reporting, fourth-quarter profits for the biggest U.S. corporations have been exceptionally strong and 2010 is poised to deliver the third-best full-year gain since 1998—with sharp advances in the telecommunications and energy sectors and a rebound in financial services.
Americans earn and spend more, save less
As incomes slowly creep back up, Americans are spending more freely and saving less.
Fannie and Freddie's biggest deadbeats
Leaning on the megabanks can pay off, if you've got a little muscle and a lot of patience.
Despite China's might, US factories maintain edge
U.S. factories are closing. American manufacturing jobs are reappearing overseas. China's industrial might is growing each year.

Economist Comments
FRIDAY
The flip side of the pension crisis
Those pension recipients we eye with scorn as our state and local budgets are crushed under the burden of their generous benefits? They're being crippled too. Sort of.
Our standard of living Is it better than ever?
Absolutely, but tough times have us thinking otherwise.
Crony Capitalism Or Raw Corruption?
It's good to have friends in high places. Last month, the White House issued tough new rules on CO2 emissions. This month, its biggest corporate supporter wins an exemption. Something smells here.

THURSDAY
Yes, 80% of our electricity can be 'clean' by 2035
While Obama's 80% by 2035 is admirable and even reachable, it doesn't address the bigger need: to find a substitute for petroleum in transportation that works at massive scale. Ostensibly, we can get off coal over the next 30 years, but oil is a whole other, probably more significant, problem to address as a nation.
How a second euro could save Europe
The European sovereign debt crisis may be off the front pages while all eyes are on Egypt, but that doesn't mean its problems are any closer to being solved.
School choice is remedy for destitute states
Private schools offer better education for a lot less money.
How the SEC Stifles Investment—and Speech
Facebook, Playboy and regulatory uncertainty.

WEDNESDAY
IMF: Global rebound 'not the recovery we wanted'
Growing economic imbalances on a global scale and greater income inequality could fuel the next crisis, the head of the International Monetary Fund warned Tuesday.
Peter Foster: IMF chief twists Adam Smith’s view of inequality
The IMF’s Dominique Strauss-Kahn to the contrary, Adam Smith believed ­admiration of the rich was a market driver
From This Crisis Good May Come
The Greece/Ireland-like crisis battering local U.S. governments ranging from Illinois to California to New York, as well as who knows how many counties and municipalities, offers the opportunity for profound reforms.
Bond `Sensation' Should Make Investors Nervous: Matthew Lynn
The phrase “overnight sensation” isn’t usually applicable to the bond market. But if financiers had charts the way the music industry does, the debut bonds issued by the European Financial Stability Facility last week would be in the top slot.
Obama's Antique Vision of Technological Progress
Barack Obama, like all American politicians, likes to portray himself as future-oriented and open to technological progress. Yet the vision he set out in his State of the Union address is oddly antique and disturbingly static.

TUESDAY
Government against the People
Want more evidence that many government officials could not care less about protecting our person, property and liberty — which the American Founding Fathers saw as the basic purpose of government? Reports released this past week provided a bumper crop of evidence.
Spilled Milk
Despite the old saying, “Don’t cry over spilled milk,” the Environmental Protection Agency is doing just that.
Banking Insight Comes From Pitcher’s Sore Arm: Amity Shlaes
Can this economy go the distance? The U.S. expanded by 3.2 percent in the last quarter. Americans long for an economy that grows at 4 percent, quarter after quarter, strong enough to shrug off revolution in Egypt, central bank machinations in China and Steve Jobs’s health.
Don't Just Cut Government, Reinvent It
Across-the-board reductions will not improve efficiency.
4 reasons why Ireland's roar will return
Ireland's stringent austerity measures will almost certainly slow its growth in the coming years. But the country is better positioned than most troubled European nations to grow its way out of the crisis.

MONDAY
Washington's Financial Disaster
There is still hope. Few people remember that the early investigations of the 1929 crash also failed due to political battles and ambiguous missions. Ferdinand Pecora was Congress’s fourth chief counsel, not its first, and he did not complete his work until five years after the crisis. Congress should try again.
Egypt isn't facing a financial crisis, short-term
Country flush with reserve cash, but extended violence could change that quickly
An Unserious Speech Misses the Mark
The audience found it tiresome. Here's why it was irksome as well.
Successful Innovation Requires Failure Too
No one knows which of the President's technology picks will be winners and which will be losers. The important question, however, is what happens after we find out?
The Business of Restoring Trust
Corporate execs close to politics put their companies' reputations at risk.
Crisis Report Pins Blame on U.S. for Global Bust
Housing also crashed in Europe, Down Under. How's that U.S. institutions' fault?
Oliver Twist at the SEC
The agency's staff always wants 'more'—this time to regulate investment advisers.
Follow the Weak Mortgages
The Financial Crisis Inquiry Commission was impaneled to describe to Congress, the president and the American people what caused the financial crisis. What it produced was a story about the financial crisis, but not what caused the financial crisis.
Innovation Is Doing Little for Incomes
My grandmother, who was born in 1905, spoke often about the immense changes she had seen, including the widespread adoption of electricity, the automobile, flush toilets, antibiotics and convenient household appliances. Since my birth in 1962, it seems to me, there have not been comparable improvements.
High-Speed Rail, Budget Buster
Virtually everywhere it has been constructed, taxpayers have lost out.
Evil-Man Economics
Chairman Phil Angelides and the Democratic majority on the Financial Crisis Inquiry Commission have released their report, a textbook-worthy example of the “Evil Man School of Economics.” Something went wrong, and a villain must be identified. This is tediously familiar territory for those who have followed the political establishment’s years-long attempt to evade responsibility for the crisis of which it was a cause.
Money for Math Dummies Won’t Guarantee Einsteins: Caroline Baum
Better education for our kids is a goal, not a policy.

Blogs
FRIDAY
Food stamp usage up 14 percent from last year
In November, an additional 394,957 new recipients were added to the food stamps program.
Trains need a new conductor: the market
Railways usage is up, but fares and schedules don't meet the demand of passengers.
TSA: We’re the Best
Gee, I bet McDonalds would like to say there’s no “clear or substantial advantage” to allow Wendy’s to exist.  Fortunately, McDonald’s doesn’t have that power.  Unfortunately, the TSA bureaucrats do.
Household size and stagnant median income
The underlying question is whether figures for the median household are underrating the true growth in average living standards.  A few points are in order.
Ten Arguments Against a Government Guarantee for Housing Finance
Why there should not be a government role—explicit or implicit—in guaranteeing housing finance
Morning Bell: The Reagan Recovery vs The Obama Recovery
This Sunday is President Ronald Reagan’s 100th birthday. It’s hard to comprehend the debt of gratitude our nation owes the 40th President of these United States. As Heritage Foundation Distinguished Fellow in Conservative Thought Lee Edwards details, Reagan embodied many of the classical virtues that the best political leaders possess: courage, prudence, justice, and wisdom. And he used each of these virtues to create an environment where the U.S. economy could strongly recover from our last great recession. The current occupant of the White House ought to take some better notes.

THURSDAY
Daily Color: D-List Data
Not all data are created equal.
Some 43 Million Use Food Stamps
Nearly a year and a half into the economic recovery, some 43.6 million Americans continued to rely on food stamps in November.
Comparing Reaganomics and Obamanomics
Ronald Reagan would have been 100 years old on February 6, so let's celebrate his life by comparing the success of his pro-market policies with the failure of Barack Obama's policies
A Look in the GDP Crystal Ball
How much will real GDP for the last quarter of 2010 be after the U.S. Bureau of Economic Analysis finishes beating the still incoming raw data for the quarter into submission at the end of March 2011?
Real Adjustment Costs
I am disappointed by some of the reactions to my macro play. People are not being deliberately obtuse, but they are being obtuse. That is what happens when you are committed to one paradigm and someone tries to suggest something different.
Can Exports Save the Economy?
President Obama and several policy wonks think they have come up with a solution to America's jobs crisis: Exports.
What's wrong with Greece
We have read plenty about Greece's dismal public finances and risible public book-keeping. But if the country is to have any chance of recovering in the long-term it needs to rethink its approach to entrepreneurialism, which is one of the most hostile in the world.
Social Security’s Bleak Future Has Arrived
For the last couple of decades, Social Security analysts, public trustees, and even both Republican and Democratic Presidents have warned that unless the program is fixed, it faces perpetual cash-flow deficits. And now, the Congressional Budget Office (CBO) says that those perpetual deficits have arrived.

WEDNESDAY
Private Construction Spending decreases in December
Catching up ... the Census Bureau reported this morning that overall construction spending decreased in December compared to November.
FT’s Clive Crook on ‘Competitiveness’
A little belatedly, I want to refer everyone to Clive Crook’s column in yesterday’s Financial Times, “Economic growth is not a race to the moon.” As a critique of President Obama’s SOTU speech, it is a model of brevity and clarity.
Clarification on Consumer Surplus
Commenters on my previous post on consumer surplus (CS) raised some questions that I want to respond to.
Robert Samuelson misunderstands
Rescuing creditors 100 cents on the dollar creates the most moral hazard. Wiping out equity holders gives the illusion of punishing risk-takers. It’s an illusion. The creditors are the key.
The Tiger Mother versus Cost-Benefit Analysis
Even amazingly talented classical musicians have low earnings, high unemployment, and - if they tour - stressful, lonely personal lives.  Unless you love music from the bottom of your heart, a career in music is folly.  And since classical music is a declining industry, job prospects are only going to get worse.
The new housing boom, brought to you by Fannie Mae
Apartments are going up, and Fannie Mae is providing funding.
World-Wide Factory Activity, by Country
Global manufacturing started 2011 on a strong note with most countries in expansionary territory and strong gains in the U.S., U.K. and euro zone.
Construction spending: residential at four-month low
The US Census Bureau's December report shows small drops in residential and non-residential construction spending since November.
Personal Bankruptcies Declined in January
The number of personal bankruptcy filings dropped in January to its lowest level since in two years, according to a report Tuesday.
Recovery versus "recovery"
News on the employment front improved toward the end of last year, but increases were still lacklustre relative to the stronger recovery in output. This week, we'll receive the first set of jobs numbers for January, and all will be watching closely to see if the trend in the above chart will continue, and output will rise and rise and rise, leaving the unemployed behind.

TUESDAY
Trade is Mutually Advantageous – and Its Advantages, for All Parties, are Measured in Imports
Dan Ikenson and Scott Lincicome urge that the case for free trade be made on its strongest grounds – and not on grounds that implicitly concede the ‘us-vs.-them’ assumption of protectionists.  Here are key paragraphs:
The Economics of Kitchens
I'm not disputing that the improvements from 1900 to 1953 were large, probably even larger than those from 1953 to now.  I'm just saying that to know the magnitude of the change, we should specify what we mean.  Are we referring to the invention of labor-saving devices, or their diffusion? Major appliances or smaller gadgets? Do ingredients count? How about broader developments such as air conditioning? Shouldn't it count for something that our coffee no longer tastes disgusting?
Taking Consumer Surplus Seriously
Consumer surplus is the difference between the maximum amount the consumer is willing to pay and the amount he actually pays. As such, it's simply a measure of the consumer's gain from trade. That's what it is.
Fannie Mae reports slower decline of seriously delinquent loans
December's monthly report shows total serious single family delinquency is still falling, but at a slower rate.
Is Turkey bracing for a crisis?
Turkey has an emerging market, but it also has a history of financial crises and turbulence.
Hu's counting
DURING his state visit to America last week, President Hu Jintao of China offered some familiar banalities and worthy pieties, as this week’s Banyan remarks. But he also made a couple of hard, quantitative claims.
Hu's counting II
It's fine to carry out calculations on the back of the envelope, but be careful what lies on the other side of the ledger.

MONDAY
The TSA Blocks Private Screeners
CNN reports that the Transportation Security Administration has decided it will no longer approve applications from airports seeking to replace TSA screeners with private contractors. This is an abrupt reversal from the agency’s alleged “neutral” stance it announced just several weeks ago.
A Proposal in the Public Interest
One of the marks of a good economist is to recognize that money is not at all all that matters.  Incentives come in lots of different forms – often in monetary forms, but often (perhaps even more often) in non-monetary forms.
Credit Card Rates At “Record High”
Wow, who could have possibly predicted that the Credit CARD Act’s rules that limit non-interest fees and the ability to raise interest rates when a borrower’s risk changes would result in “record high” interest rates?
Schedule for Week of January 30th
The key report for this week will be the January employment report to be released on Friday, Feb 4th.
Economists Urge U.S. to Rethink Capital-Control Restrictions
In a letter delivered today to Treasury Secretary Timothy Geithner, Secretary of State Hilary Clinton and U.S. Trade Representative Ron Kirk, more than 250 economists urged the Obama administration to reform U.S. trade rules that restrict the use of capital controls. The letter argues that there is a growing consensus among economists that capital controls, while no panacea, are legitimate policy tools for preventing and mitigating financial crises. The full text of the letter follows.
Post Mortems on the Financial Crisis
Read more about the dissents. It is worth your time.
Economists React: ‘The U.S. Economy Is Back’
Economists and others weigh in on the acceleration in GDP growth.
The State Of the Union: An Excessive Amount of State
In the near week since President Obama’s State of the Union speech, commentators from all sides of the political spectrum have weighed in on the good, bad and innocuous of Obama’s vision for the country’s future. What’s perhaps not been commented on enough is how unfortunate it is that Obama’s policies – or those of any President for that matter – concern us so much such that we’re compelled to watch, comment, and worry about the implications of State of the Union speeches at all.
Number of the Week: Banks Should Hold More Capital
52%: Optimal bank capital-to-assets ratio, according to a new study.
That Old Competitiveness
President Barack Obama’s State of the Union address framed what he called a competitiveness agenda. GE CEO Jeffrey Immelt was tapped by the president to lead a successor to the President’s Economic Recovery Advisory Board called the Council on Jobs and Competitiveness. The competitiveness meme isn’t new. The following article by our colleague Bob Davis was originally published in the Journal in July 1992. We thought Real Time Economics readers might find it timely.
Egypt and Energy Policy
Energy policy will be an early test of whether the new House majority is serious about reducing the role of government in our lives.
GDP report shows economy is expanding
The first estimate shows a 3.2 percent increase from the third to fourth quarter.
Q4 2010: Homeownership Rate Falls to 1998 Levels
The Census Bureau reported the homeownership and vacancy rates for Q4 2010 this morning.


Reports
FRIDAY
ISM Non-Manufacturing Rises Again In January
The ISM non-manufacturing index came in at 59.4 for the month of January, which continues to signal strong growth in the services sector. Prices paid continue to trend upwards while new orders reached a new high.
Trade Adjustment Assistance: Let the Ineffective and Costly Program Expire
Under the Trade Adjustment Assistance (TAA) program, workers who lost their jobs due to foreign trade are eligible for job training, relocation allowances, and income maintenance while they attempt to shift into new occupations. TAA provides overly generous benefits for only a small fraction of laid-off workers. However, is there any evidence that this assistance and training improves earnings based on newly acquired job skills? Program evaluations of TAA say no.


WEDNESDAY
Ten (Mostly) Hayekian Insights for Trying Economic Times
The economist Friedrich Hayek attempted in his writings to spotlight the interlocking set of ideas­—constructivist rationalism, scientism, socialism, “the engineering mentality”—that was leading the West down what he famously called the road to serfdom and to propose in its place a return to a revitalized form of classical liberalism. In this essay, Professor Bruce Caldwell draws upon the writings of Hayek, other Austrian economists, and public choice theorists to distill 10 fundamental insights that not only apply to the current crisis, but also can help us to think more clearly about the nature and limits of economics more generally. His conclusion: We usually do not have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy, coupled with an ever-growing government sector. Hence the preference for smaller government among Austrian economists and public choice theorists.
ISM: Still a Growth Story—Prices Signal Input Cost Pressures
January’s ISM reading of 60.8 signals continued growth from production, orders and employment. The ISM has served us well as a signal of the turnaround and now of sustained expansion. Prices paid are a concern.

MONDAY
Economics Group
Weekly Economic & Financial Commentary
Beyond Exports: A Better Case for Free Trade
After four years of stasis on the trade front, the new environment is a welcome change. Removing barriers to trade — in both directions — is essential to sustained economic recovery and long-term growth.