Thursday, June 24, 2010
6/24/10 Post
New
US 30-yr mortgage rate drops to 39-year low
Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.69 percent for the week ended June 24, the lowest since Freddie Mac started the survey in April 1971.
DJIA, Euro, Treasurys Rise
The Dow Jones Industrial Average eked out a slight gain, as investors across financial markets digested the Federal Reserve's cautious remarks on the state of the global economy. Other stock indexes fell, the dollar dropped and Treasury prices ended higher. The 10-year note's yield fell to 3.119%, the lowest level since mid-May.
World leaders, their standing and their issues heading into summit meetings in Canada
Leaders of the world's major industrial countries, representing 85 percent of the global economy, will meet in Canada starting Friday for economic summits. Take a look at selected countries and their leaders’ stances.
Weekly jobless claims fall but remain elevated
The number of people filing first-time claims for jobless benefits fell last week by 19,000, the largest drop in two months. New claims declined to a seasonally adjusted 457,000.
Drilling ban: The jobs at stake
There are as many as 10,000 people that work on deepwater oil rigs in the Gulf of Mexico. Another 25,000 jobs could be affected by the six-month ban imposed by President Obama.
Durables fall in May after five straight gains
The steady upward trend in the manufacturing sector hit a bump in May as a big drop in orders for new airplanes pushed total durable-goods orders down 1.1%.
House panel drops demand for $150 billion bank fund
House members of a conference committee agreed to drop their demands for a $150 billion fund to be used to dismantle a failing mega-bank so its collapse wouldn't damage the markets.
Car Dealers Close to Winning Exemption From Consumer Law
The nation's car dealers appeared on the verge Wednesday of securing a measure that would largely protect them from Congress's wide-ranging financial-regulation overhaul, after an aggressive, months-long lobbying campaign.
Five States Get U.S. Funds to Aid Homeowners
State housing agencies in Arizona, California, Florida, Michigan and Nevada will receive a total of $1.5 billion from the Obama administration's "Hardest Hit Fund."
Democrats Would Cut Budget Below Obama's Plans
The cut amounts to less than 1 percent of the more than $1.1 trillion proposed for agency budgets funded by lawmakers each year through the spending bills.
States Face New Pinch as Stimulus Ebbs
Tax Receipts Aren't Rebounding Quickly Enough to Offset Declining Federal Aid; Push for Additional Medicaid Help Stalls
Blogs
Telling Congress to Reduce the Deficit by Cutting Spending
June 26, America Speaks will host a national town hall meeting in which any and all Americans will be able to voice their opinions on what Washington’s growing deficits will have on the U.S. economy.
European Weakness Is Fuelling U.S. Profligacy
The European debt crisis has demonstrated the painful costs of fiscal profligacy and short-sighted Keynesian stimulus.
A Closer Look at the Recent Trend in Layoffs
The data indicates that the Cash for Clunkers program did not significantly alter the established trend in layoffs during this period, which was declining in any case.
Home Sales: Distressing Gap
...expect that eventually this ratio will return to the historical range of new home sales being around 15% to 20% of existing home sales.
Research, Reports & Studies
Wells Farge Economics Group: New Home Sales Drop to its Lowest Level on Record
New home sales plummeted 32.7 percent in May likely reflecting the expiration of the homebuyers’ tax credit. April was significantly downwardly revised to 446,000 units. Seasonal adjustments may also be at play.
Appropriations and Fund Transfers in the Patient Protection and Affordable Care Act
...creates a mandate for most U.S. residents to obtain health insurance and provides for the establishment of insurance exchanges through which certain individuals and families will be able to receive federal subsidies to reduce the cost of purchasing that coverage. In addition, the new law expands eligibility for Medicaid; reduces the growth in Medicare spending that had been projected under preexisting law; imposes an excise tax on insurance plans determined to have high premiums; and makes other changes to the federal tax code, Medicare, Medicaid, and numerous other programs.
Do Developed and Developing Countries Compete Head to Head in High-tech?
While measures of across product specialization suggest China and other Asian economies have been moving into high-tech exports, the within-product unit value measures indicate they are doing so in the least sophisticated market segments and the gap in unit values between their exports and those of developed countries has not narrowed over time.
"Did You Know"
In France, firing a printing plant employee is hugely expensive. The gent is paid €50,000 per year, works 32 hours per week and 164 days per year. Firing him costs about €466,000 – that’s a French government estimate...
Graphic of the day
Durable Goods Orders dropped by 1.1% in the month of May
See: Initial Claims for the Week Ended Jun 19
See also: Federal Payments to Individuals (% GDP) 1940-2010
Economists’ Comments & Opinions
The best stimulus? Spend less, borrow less
The best stimulus is a solid, credible plan to radically reduce government spending, starting right now.
The Family Business Revenue Act
A tax on the wealthy becomes a tax on mom and pop.
Whither the Euro: Safe Harbor or Fractured Fate?
Even though some countries have taken steps to curb future meltdowns, comprehensive regulation has been stymied by a lack of agreement on the fundamental question of how much regulation is necessary...
Volcker and Derivatives
Financial reform in the hands of a Democratic Congress is looking eerily similar to health-care reform: Public skepticism is proving to be no brake on the liberal ambitions, and substance is increasingly divorced from the problems Washington claims to be solving.
Financial crisis: Worse bank balance sheets + Worse private balance sheets + worse government balance sheets. -Garrett Jones, Twitter
Book Excerpts
"It is often argued that Governments are in a position to inflate by carrying out ambitious schemes of public works. Undoubtedly during the earlier stages of the crisis such measures might have produced the desired effect. At present, however, they could hardly be adopted on any large scale. Practically every Government has a huge budgetary deficit, which makes it difficult, if not impossible, to raise loans for meeting the extraordinary expenditure of such public works. Any attempt to borrow for such purposes would inevitably lead to a further accentuation of distrust, which must be avoided at all costs." -Paul Einzig, The World Economic Crisis 1929-1932, (1932)
Wednesday, June 23, 2010
6/23/10 Post
News
Caution's the word as Fed wraps up meeting
As they wrap up a two-day meeting to review the U.S. economy, interest rates and monetary policy, Federal Reserve officials are expected to issue a cautious statement keeping rates on hold at record-low levels.
Derivatives: No special deals for Wall Street
As Congress debates the final language for reforming Wall Street, a behind-the-scenes battle is raging over the arcane details of derivatives regulation.
After a year off, millionaires back in bloom
After plummeting by a record amount in 2008, the number of millionaires in the world recovered last year despite ongoing weakness in the global economy.
Housing Market Threatens U.S. Recovery as Slide Resumes
The end of the tax credit in April is putting a strain on a market still hurting from the worst collapse since the Great Depression. Foreclosures may reach 1.9 million this year after a record 2 million in 2009.
Consumer Financial Protection Bureau closer to reality
House and Senate negotiators near agreement on creation of the controversial new agency.
Cities Grow as Housing Bust Slows Movement to Suburbs
Several of the nation's biggest cities saw populations grow faster last year than any year in the 2000s as the recession and housing bust kept people from moving out of state or to the suburbs, the Census Bureau said.
Hidden Costs of Moving to a New Home
Don’t forget to factor transportation, utility, and insurance costs into your moving decision
Daunted by deficits
Across the world - from the US to Greece - plans are under way to cut spending and raise taxes.
Medicaid’s Ticking Bomb Could Wipe Out State Budgets
A new study claims the costs of Medicaid’s long-term care services could cripple states’ already-fragile budgets.
What Would You Do With an Extra Hour?
Americans Are Spending More Time Watching TV and Sleeping as Unemployment Rises, Survey Finds
Blogs
Speak Out on Out-of-Control Spending
Can Washington really be trusted to use new revenues to close the deficit gap, or would they just spend the money on new programs?
Morning Bell: Obama’s Leadership Vacuum
There are several crises confronting America and President Obama isn’t quite sure what to do about it.
The Real “Anti-Stimulus” – The Nation’s Growing Debts
There is no magic in debt-financed infrastructure and economic-development, only a deferred tax bill to pay for the government’s gambles.
How high will Existing Home Months-of-Supply increase this summer?
...expect house prices to fall in the 2nd half of 2010 and into 2011 - probably another 5% to 10% for the major house price indexes (Case-Shiller and CoreLogic).
The Glories of Competition
Early Monday, Barnes & Noble Inc. cut the price of its Nook e-reader to $199 and introduced a Wi-Fi-only model for $149. Hours later, Amazon.com Inc. lowered the price of its Kindle e-reader to $189.
Estimate of June Decennial Census impact on payroll employment: minus 243,000
The Census Bureau released the weekly payroll data for the week ending June 12th this morning...
Another view of the structural versus cyclical unemployment question
...the relatively disappointing May private-sector payroll jobs numbers released last Friday and the improving but low level of job openings reported in the JOLTS data for April are reminders that weak labor demand is still the dominant factor inhibiting the overall employment recovery.
Research, Reports & Studies
Lots of Regulatory Expansion but Little Reform
The U.S. Senate’s financial “reform” bill, consisting of over 1,500 pages of regulatory expansion, is unlikely to achieve its own goal of preventing another crisis. But it is certain to produce an efflorescence of bureaucratic interventions, red tape, and costs.
In Russia, a Climate of Fear Is Stifling Innovation
Paralyzed with fear and uncertainty, Russian entrepreneurs are investing very little in their country beyond their immediate production needs.
The Crisis in Public Sector Pension Plans
A Blueprint for Reform in New Jersey.
"Did You Know"
According to a recent poll, 71% of people expect cancer will be cured by 2050, 66% expect artificial limbs to be working better than real ones and 53% say ordinary people will travel in space. 72% of people are expecting a major energy crisis, 58% saying there is likely to be another world war and 53% anticipating a terrorist attack on the U.S. involving nuclear weapons.
Graphic of the Day
New home sales plummeted to their lowest level in the history of the data set as only 300,000 contracts were signed.
See: Government Debt Issuers Most Likely to Default
See also: Government Spending on Defense, Social Security, and Medicare (%GDP)
Economists’ Comments & Opinions
Threat of Another Economic Stumble Is Real
The danger of deflation is still there. The risk of another stumble in our economy is real, including the continuing fragility of community banks over commercial real estate loans.
Schumpeter 2.0
A great thinker’s contribution not only appears in his or her finished works and arguments, but also within the rich intuitions or core ideas that underlie the arguments.
Book Excerpts
"...Suppose that it will cost six francs to repair the damage [of a window broken by a child]. If you mean that the accident gives six francs' worth of encouragement to the aforesaid industry [for glass], I agree. I do not contest it in any way; your reasoning is correct. The glazier will come, do his job, receive six francs, congratulate himself, and bless in his heart the careless child. That is what is seen.
But if, by way of deduction, you conclude, as happens only too often, that it is good to break windows, that it helps to circulate money, that it results in encouraging industry in general, I am obliged to cry out: That will never do! Your theory stops at what is seen. It does not take account of what is not seen.
It is not seen that, since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library. In brief, he would have put his six francs to some use or other for which he will not now have them. -Frédéric Bastiat, The Broken Window, What Is Seen and What Is Not Seen, (1848)
Tuesday, June 22, 2010
6/22/10 Post
News
Existing-home sales dip 2.2% in May
Resales of U.S. homes and condos fell 2.2% to a seasonally adjusted annual rate of 5.66 million.
Price hikes hammer individual health coverage
When health insurance costs rise for individual buyers, they soar: The average premium rose 20% in its most recent increase.
White House budget director is leaving
Peter Orszag has told President Barack Obama that he plans to leave his position as White House budget director in July.
Swipe-fee compromise won't help consumers
In the U.S., debit-card transaction fees alone add up to about $20 billion annually. However, it's unlikely any savings will be passed on to consumers, mainly because the banks will find other ways to drum up the lost revenue.
As Law Takes Effect, Obama Gives Insurers a Warning
Obama plans to sternly warn industry executives against imposing hefty rate increases in anticipation of tightening regulation under the new health care overhaul.
Taking on two economic summits
Much of the president’s focus in Canada this weekend will be on keeping global leaders on the path they set last year.
House defies President Obama on financial regulation reform
House negotiators on a Wall Street reform bill will push to shield auto dealers from new consumer protection lending rules — a move that bucks President Barack Obama, who has called on lawmakers to reject any carve-outs for special interests.
Geithner Says Access to Credit Improving, May Fuel U.S. Economy
“Credit conditions overall, which dragged our economy into a deep recession in 2007, no longer pose an obstacle to growth,”.
Can We Balance The U.S. Budget? Yes, But Only If We Cut Spending
With our nation headed toward a financial cliff, there is an urgent need and a will among the American people to change course and put our fiscal house in order.
FCC Holds Talks on Internet Rules
Regulators Meet With Phone, Cable Firms Over 'Net Neutrality' Compromise
Tighter Scrutiny For Bank Salaries
The Federal Reserve adopted sweeping new rules Monday that will give banking regulators more power over how the nation's thousands of banks compensate employees ranging from senior executives to traders.
Dems won't pass budget in 2010
The House has never failed to pass an annual budget resolution since the current budget rules were put into place in 1974.
Blogs
Some New Data on Income Inequality
The bottom line is that income mobility is alive and well and seems pretty consistent regardless of who is president or who controls Congress.
The Good Old Days Are Now
How much better off the average American is today than in the past?
Moody's: Commercial Real Estate Prices increase 1.7% in April
It is possible that commercial real prices have bottomed - in general - but it is hard to tell because the numbers of transactions are very low and there are a number of distressed sales.
Existing Home Sales: Inventory increases Year-over-Year
The key is the inventory and months-of-supply, and if these two measures increase later this year as I expect, then there will be additional downward pressure on house prices.
Will Yuan Revaluation Trigger Another Financial Crisis?
Watch for US long-term rates to rise, the risk here is US long-term rates start to spiral higher unless (ha ha!) Uncle Sam starts to borrow less.
Economic Reality: Nowhere to Run, Nowhere to Hide, Part 2
The onset of the Global Sovereign Crisis marks a new dangerous phase of the credit crisis.
Economists React: ‘Next Few Months Will Be Tough’ for Housing
Economists and others weigh in on the drop in May existing home sales.
When to Rely on Coercion
On the one hand, it is a great achievement to have worked out the precise conditions under which decentralized, competitive markets are optimal. On the other hand, mainstream economists do not seem to care about working out the conditions under which government will succeed where markets fail.
Like Taking Cyanide for a Headache
Far from being a momentary side-effect of stimulus spending, uncertainty is a systemic problem with interventionist economic policy. The poison is worse than the medicine.
Research, Reports & Studies
The Three Biggest Myths About Tax Cuts and the Budget Deficit
Balancing the budget by 2020 would require either eliminating one-third of all spending, raising taxes by 50 percent, or a combination of the two.
Controlling Federal Spending
Using Past Budgets as Guides for Spending Restraint
The Prospects for Ending Obamacare: Learning from Health Policy History
Washington’s obsession with controlling, defining, regulating, and restricting private-sector health insurance options overlooks the obvious. Congress must recognize that real cost control begins with the nation’s largest entitlements Medicare and Medicaid.
The Value Added Tax
Too Costly for the United States
EU Bailout: Impact on the United States
To watch developments in Europe today is to peer through a clear window into America’s own future. As the nation runs deficits in the Grecian mode and its own public debt soars toward 100 percent of its economy, a future crisis becomes as predictable as the sunrise—and just as widely predicted.
Weekly Economic and Market Review
The economic data continued its mixed performance last week with little in the way of surprises.
School accountability and teacher mobility
...accountability shocks influence the distribution of the measured quality of teachers (in terms of value added measures) who stay and leave their school, though the average differences are not large.
The Economy Hits Home: International Trade
If you look at the evidence, it’s clear that American and foreign workers, our economy, and the environment are all better off to the degree that we enjoy free trade.
Penalty APR Study
The CardHub.com Penalty APR Study evaluates the post-CARD Act Penalty APR policies of the top 10 credit card issuers, based on outstanding balances.
Graphic of the Day
Extra Taxes Required from Each Taxpayer to Erase the Deficit
See also: How Do Americans Save Money?
VIDEO: Bootleggers and Baptists: A Conversation with Bruce Yandle
Economists’ Comments & Opinions
Is U.S. Now On Slippery Slope To Tyranny?
Those who cannot see beyond the immediate events to the issues of arbitrary power — vs. the rule of law and the preservation of freedom — are the "useful idiots" of our time. But useful to whom?
Spain's Emerging Banking Crisis
The Spanish government narrowly passed a $15-billion austerity package in May. Tomorrow it faces the next big legislative challenge in a move towards more fiscal responsibility.
Bam's Climate Rx: All Pain, No Gain
The cap-and-trade bill won't lower global temperatures but merely make life more expensive. It'll force you to use energy sources that all have to be massively subsidized with your tax dollars.
Europe cuts deep, the U.S. spends on
Some experts think the United States should follow the lead of Britain and other nations in Europe and take steps to cut the deficit. Others warn it's too soon to worry about debt
Wells Fargo Economics Group: China Reintroduces Currency Flexibility
Chinese currency move: much ado about nothing?
Is Illinois the New California?
Illinois has overtaken California as the worst credit risk among American states.
Misguided housing subsidies promote unfairness, bailouts
Over the past half-century, the homeownership rate has risen only modestly, from 62% in 1960 to 68% at the height of the housing bubble. In Canada, which has no mortgage deduction or many of the other subsidies present here, the ownership rate is about the same.
The little secret of most New Keynesian models: they explain unemployment as voluntary vacations, just like RBC models. -Garrett Jones, Twitter
Book Excerpts
"The curious task of economics is to demonstrate to men how little they know about what they imagine they can design." F.A. Hayek, The Fatal Conceit (1989)
"Did You Know"
In 2000, the top quintile paid 66.6% of taxes, a share that dipped to 64.8% in 2002 and then rose, peaking at 69.3% in 2006 and settling at 68.9% in 2007. In 2009, 47% of households owed no income tax.
Monday, June 21, 2010
6/21/10 Post
News
US manufacturing crown slips
The US remained the world’s biggest manufacturing nation by output last year, but is poised to relinquish this slot in 2011 to China – thus ending a 110-year run as the number one country in factory production.
Bank failure is 83rd in '10; pace more than double last year's
The 83 closures so far this year is more than double the pace set in all of 2009, which was itself a brisk year for shutdowns.
In Budget Crisis, States Take Aim at Pension Costs
But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired.
Fannie and Freddie tab is $146B and rising
The Congressional Budget Office has predicted that the final bill could reach $389 billion.
Bureaucracy frustrates U.S. Gulf oil spill efforts
Those on the front lines of the U.S. Gulf Coast oil spill say they are forced to fight two battles -- one against the crude washing into lush wetlands and another against needless bureaucracy.
States See Growth in Jobs
The sluggish U.S. jobs recovery is inching beyond the industrial South and Midwest, and is spreading toward the service-heavy economies of the two coasts, in a sign of hope for a labor force hit by the worst recession in generations.
Wall Street reform comes down to the wire
With one week down and one week to go on negotiations melding the two Wall Street reform bills, lawmakers have a lot of tough decisions ahead.
Big Sis: Internet Monitoring Needed to Fight Homegrown Terrorism
Napolitano said it is wrong to believe that if security is embraced, liberty is sacrificed.
Is the Fed out of bullets?
Economists are more nervous about the chances of another recession. And one of biggest fears is that the Federal Reserve may have run out of bullets to fight another downturn.
Doc's win on Medicare too late to stop 21% cut
The Senate passed a bill Friday rescinding a 21% cut and adding a 2.2% increase for Medicare payments. The bill was passed by unanimous consent after lawmakers found a way to pay for the boost without raising the budget deficit.
Blogs
Economists React to Yuan News
Here are some initial reactions from China economists to the Chinese central bank’s statement vowing to make the yuan’s exchange rate more flexible.
Weekly Summary and a Look Ahead
Two key housing reports will be released this week: existing home sales on Tuesday, and new home sales on Wednesday.
Dead On Arrival: Financial Reform Fails
Welcome to the next global credit cycle – with too big to fail banks at center stage.
From the AER
It seems as though empirical work without the "con" of econometrics is in. Theorem-proving and low-credibility multiple regression is out.
Adam Levitin on Interchange Price Controls
...the problem with this argument is that it only looks at half of the market.
Response from Brad DeLong on fiscal policy
I believe the "zero bound" is perhaps the single largest "red herring" in the economics profession today.
Housing Starts and the Unemployment Rate
Usually housing starts and residential construction employment lead the economy out of a recession, but not this time because of the huge overhang of existing housing units.
Markets For Everything: North Korean Edition
It turns out that the people in red who were cheering for North Korea in their soccer game against Brazil weren't North Koreans at all, but Chinese actors.
CoreLogic: House Prices increase 0.8% in April
National home prices increased in April, the second consecutive monthly increase.
Research, Reports & Studies
The Case for Auditing the Fed Is Obvious
The profit or loss of the Fed’s investments would provide a very helpful indicator of whether the Fed’s actions served the economy as a whole or merely transferred wealth from ordinary taxpayers to bank shareholders.
Corporate Tax Incidence: Review of General Equilibrium Estimates and Analysis
The analysis identifies the major drivers of the results from open-economy models and compares estimates from four major studies that have examined corporate tax incidence in an open economy.
Crisis Economics
As Milton Friedman once put it: "The role of the economist in discussions of public policy seems to me to be to prescribe what should be done in light of what can be done, politics aside, and not to predict what is ‘politically feasible' and then to recommend it."
The Hudson Institute Weekly Economic Report
Housing starts are down, initial unemployment insurance claims are up, and some price indices show deflation.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Production seems to be running ahead of demand...
Looking Ahead to Economic Reports This Week
Data will include existing home sales for May (Tuesday); new-home sales for May (Wednesday); durable goods orders for May and weekly jobless claims (Thursday); and the Reuters/University of Michigan consumer confidence index for June and the revised first-quarter gross domestic product (Friday).
Sales Taxation of Business Purchases: A Tax Policy Distortion
One might think that the prevalence of the sales tax would be good news for citizens and economists who support efficient taxation. But such a tax raises relatively few efficiency problems.
Graphic of the Day
See also: Jobs may rebound in 2010
Economists’ Comments & Opinions
New Bank Taxes Under Financial Reform Will Raise Borrowing Costs, Hurt Growth
The beleaguered American taxpayer deserves a break. The housing-led financial crisis begat trillions of dollars of red ink.
Bad Policy Explains Dow Stuck At 10,000
To many... the Dow’s inability to sustain increases above 10,000 is a replay of a downward market cycle that began in 1966.
Of Brown Pelicans And Black Swans
No one could have ever predicted that a single exploding oil well in the Gulf of Mexico, the Deepwater Horizon, would destroy 50% of oil giant British Petroleum's stock market valuation.
Cutting the Pentagon Budget
The important question is not how much money we spend but whether we spend it effectively and meet our defense needs in the process.
Book Excerpts
"…I ultimately realized the profundity of the difference between the businessman and the bureaucrat. The businessman’s standard of efficacy is a solution to the problem, and the more responsive he is to external reality, the better. The bureaucrat’s standard of efficacy is obedience to the rules and respect for the vested interests of the hierarchy, however unyielding of a solution; response to external reality is often irrelevant. That is why bureaucracies so often produce nothing but wastepaper and destroy the productive institutions they supervise." –Former Treasury Secretary William E. Simon, A Time for Truth (1978)
"Did You Know"
The U.S. shed 2.3 million jobs since February 2009, Obama's first full month in office. Going back to World War II that is by far the worst record for any president in his first 17 months, outpacing the job destruction experienced in the early Bush years by more than 800,000 jobs.
Friday, June 18, 2010
6/17/10 Post
FCC Split as It Launches Internet Regulation Effort
What promises to be a contentious debate about government's role in controlling Internet traffic and access.
Consumer Price Drop Squeezes Profits
U.S. consumer prices fell 0.2% last month from April, even as commodity prices from metal to fuel to food remain higher than they were a year ago.
What Crisis? The Euro Zone Adds Estonia
According to economists, the preparation to join the euro zone created some disadvantages for Estonia compared with neighboring countries, which have enjoyed a relative degree of flexibility by hanging on longer to their legacy currencies.
State pension plans in crisis: underfunded by $1 trillion?
According to the Manhattan Institute for Policy Research pension plans for public school teachers, which comprise about half of states' total pension liabilities, were underfunded by $933 billion dollars in fiscal year 2008
House passes bill to increase lending by small banks as Senate defeats GOP jobless aid bill
A $30 billion government fund would be available to community banks to increase lending to small businesses under a bill passed by the House.
Foreclosure crisis hits minorities harder
Of the total homeowners, 17% of Latinos, 11% of African-Americans have lost their homes to foreclosure or are at imminent risk of losing their homes.
Estate tax in limbo
Unless Congress acts, the estate tax will be back next year and no more than $1 million of a person's estate would be exempt from it. That's below the $3.5 million exemption of last year.
Philippine Price Controls Hamper Rise of Generics
The recent embrace of drug-price controls to lower the cost of life-saving medications is creating unexpected problems.
Senators voted against scaled-down Republican package of extended jobless benefits and tax breaks
Thune's proposal would have cut funds for state and local governments to invest in infrastructure, dropped a temporary funding increase to help states pay for Medicaid, and eliminated a proposal to raise taxes on hedge-fund managers.
The euro is still trash
The euro may have enjoyed a slight bounce in the past week against the dollar. But it's still a long way from where it was in late 2009.
Blogs
State Unemployment Rates: Slightly lower in May
Sixteen states and D.C. now have double digit unemployment rates. New Jersey is close.
Regulation Grows Faster than Government Spending
"...the growth in dollar terms over the last ten years is more than double that of any previous decade."
Paul Samuelson Misread Hayek
Samuelson was mistaken to say that their socialism is of the sort that Hayek believed paved the road to serfdom. Those countries have reasonably free trade, only light regulation of capital markets and business, and strong private property rights. In short, all Scandinavia retains what for Hayek was the most significant protection against serfdom: competitive economies.
Zingales Joins the Swamp
Even if you think that the IMF truly would do the best job of resolving international bank failures, does anyone believe that there would be no further expansion of world-government power once this precedent has been set?
European Bond Spreads continue to widen
Greece is up to 668 bps, Ireland 290 bps, Portugal 293 bps, and Spain 211 bps. Oh, and Hungary is up sharply to 495 bps.
Drudge and Huffington Post Push the “Internet BS Switch”
Suddenly the Internet is full of chatter about Senator Lieberman (and Collins and Carper) proposing an “Internet kill switch.” It’s the one issue that Huffington Post and Drudge have agreed on in months: there’s a kill switch coming and they don’t like it.
Bruce Bartlett on Debt Default
On the prospect of U.S. government default on its debt...
Hail Interfluidity!
…we should expect a lot more austerity theater than actual austerity, for better and for worse.
Research, Reports & Studies
Oil, Automobiles, and the U.S. Economy: How Much have Things Really Changed?
…the effects of oil shocks on the mix of vehicle sold and on capacity utilization appear to have been proportional in recent decades to the effects observed in the 1970s.
Lugar’s Energy and Climate Plan: More Big Government, Less Consumer Choice
The bill does not contain a cap-and-trade or carbon pricing provision; however, it does include a host of mandates and regulations that would hurt the consumer.
"Did You Know"
Nevada passes Michigan for the level of unemployment; the State’s unemployment rate climbed to 14% in May, the highest in the state since 1976. It is now the highest in the country.
Graphic of the Day
After the recession ends, trillion-dollar deficits will persist
See also: The Post-Housing Tax Credit Slump Begins
Economists’ Comments & Opinions
Another Myth: Gov't Can Cure Economy's Ills
While the market produced a peak unemployment rate of 9% — briefly — after the stock market crash of 1929, unemployment shot up after massive federal interventions in the economy.
Durbin's antitrust fantasies
Instead of engaging in a serious economic analysis of interchange fees... the Durbin amendment is based on the simple-minded epithet of "duopoly" with no understanding of the past 30 years of antitrust economics. In the end, it will be consumers who will pay for this ignorance.
Obama’s actions prevent timely clean-up by U.S. allies
…even the staunchest supporters of the Jones Act are now distancing themselves from refusals to accept foreign help…
$7-a-gallon gas?
That's a Harvard University study's estimate of the per-gallon price of the president's global-warming agenda.
Financial Reforms Threaten Innovative Lending Option
The P2P business grew as the availability of traditional credit tightened during the recession.
Reality of America’s fiscal mess starting to bite
A report from the US Center on Budget and Policy Priorities issued last month estimates that in fiscal 2010 the US states collectively posted a $200bn-odd budget shortfall, equivalent to 30 per cent of all state budgets.
Bank bailouts: Institutionalizing debt overhang. –Garrett Jones, Twitter
Book Excerpts
"A mere enumeration of government activity is evidence -- often the sole evidence offered -- of "inadequate" nongovernment institutions, whose "inability" to cope with problems "obviously" required state intervention. Government is depicted as acting not in response to its own political incentives and constraints but because it is compelled to do so by concern for the public interest: it "cannot keep its hands off" when so "much is at stake," when emergency "compels" it to supersede other decision making processes. Such a tableau simple ignores the possibility that there are political incentives for the production and distribution of "emergencies" to justify expansions of power as well as to use episodic emergencies as a reason for creating enduring government institutions." –Thomas Sowell, Knowledge and Decisions
Thursday, June 17, 2010
6/17/10 Post
News
The End Is Near For Free Checking
Banks say they stand to lose billions of dollars in revenue from separate new restrictions on credit cards and overdraft transactions announced earlier this year. They could lose even more from legislation winding its way through Congress.
Inflation Tame Amid Continued High Jobless Claims
The elevated level of claims has worried economists. The sluggish pace of their decline may suggest that employers are still reluctant to hire, and are relying on existing workers to help fill demand.
Home Construction Fails to Lift Recovery
Homebuilders are sending a message: They won't be able to contribute much to the economic recovery now that government home-buying incentives have vanished
Start-Ups Get Free Chance to Pitch to Angel Investors
Start-ups hungry for cash are often expected to pay a fee to pitch to angel investors. But some free services are cropping up to counter the so-called pay-to-pitch model.
New Obama-backed stimulus package fails in Senate vote
A dozen Democrats joined Republicans in voting against a stimulus package that would add $80 billion to the deficit.
More Than 90 Banks Miss TARP Payments
More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations.
Va. Gov Sees 2010 Budget Surplus after Money Woes
McDonnell's administration said the state will finish the current fiscal year by month's end in the black if it can collect $1.7 billion in June.
Fed taking steps to beef up oversight to prevent replay of recent financial crisis
"Regulatory agencies must thus supervise financial institutions and critical infrastructures with an eye toward overall financial stability as well as the safety and soundness of each individual institution and system," Bernanke said.
Current account deficit rises in first quarter to $109 billion
The 8% increase in the first quarter deficit marked the third straight quarterly increase in the deficit, which now stands at the highest point since the final three months of 2008.
Consumer prices dip for second straight month
CPI dropped 0.2% in May, following a 0.1% dip in April. Less expensive energy bills were the main factor pulling down prices.
Blogs
Interch-ch-ch-changes
If regulatory measures push down interchange fees, …it may also mean that the least affluent credit card holders have to start paying annual fees again (or won't get cards at all) because interchange revenues no longer cover the cost of providing the card.
Do you know your broadband speed? Do you care?
…shame on anyone who tries to use my willful ignorance as an excuse for some new policy initiative.
The final tally isn’t in yet
…the final bill for the TARP bailout might not be the $50 to $100 billion that Alan Blinder mentions.
An initial double-dip indicator
The number to focus on as an indicator for the shape of the US recovery, Wells’ chief investment strategist Jim Paulsen says, is not the monthly payroll figure, but initial unemployment insurance claims, reported every Thursday.
Rajan and Reinhart
Raghu Rajan spoke at Cato about his new book, Fault Lines. One of the discussants was Carmen Reinhart, of Reinhart and Rogoff fame.
Jeffrey Sachs and the Keynesian Conundrum
Either Keynesians must come up with a better theory of when the Keynesian moment is over or they must follow Keynes himself and advocate the permanent state or quasi-state stabilization of investment. Of course, we need not accept the basic Keynesian framework. That would be best.
Philly Fed Index "decreased notably" in June, Employment turned slightly negative
The index has been positive for ten months now, but turned down "notably" in June.
Squam Lake or Swamp?
If you want to prevent bailouts, the issue is not so much the behavior of bankers as it is the behavior of government officials.
Priority-Based Budgeting, or Shoot the Cocker Spaniel
This is just another way of saying that the last increment of any item you spend money on should be the item with the lowest benefit and the highest cost.
Measuring Government Dependency: The Moocher Index
Is there a greater willingness to sign up for income redistribution programs, all other things being equal, from one state to another?
The Austerity Files
…the least likely arguments you will hear addressed.
“Did You Know?”
Arizona is spending $1.25M to save 250 endangered squirrels on rope bridges expected to save five squirrels a year from being road kill. The DOT plans to install 41 of the "canopy tunnel crossings" at a cost of $400,000. Another $160,000 will be spent on cameras to monitor the bridges, and the rest of the money will fund a project to monitor the rodents. That works out to about $5,000 per squirrel.
Graphic of the Day
Weekly Initial Unemployment Claims increase to 472,000
See also: How the World Spends Its Time Online
INTERACTIVE: Map: Where Americans Are Moving
Economists’ Comments & Opinions
The Bad News about ObamaCare Keeps Piling Up
It's obvious many millions will lose the coverage they have.
Deficit Doves v. Budget Hawks—Can America Grow Itself Out of Debt?
…deficit doves focus on the cyclical deficit, which is manageable, and the hawks worry about the structural deficit, which is unsustainable.
The President's Animosities
Since when was the American idea us versus them?
Bailout Nation Will Thrive as Long as AIG Lives
An end to bailouts? We can only dream.
Stop This Horror Before It Starts Again
…many auditors today are salivating at the fees they'll collect from the mammoth, laborious procedures necessary to "evaluate" millions of individual loans.
Vigilantes Out to 'Get' Equity Firms Will String Up Tax Policy
Congress is in a hurry, and when that happens, we should all be nervous about the potential for unintended consequences from rash action.
Monster stimulus brought more debt and fear, not jobs and recovery
…very scary: the increased prospect of massive debt that’s eroding public faith in what’s to come.
Research, Reports & Studies
Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from 2008-09 Global Crisis
We find that the level of reserves in 2007 appears as a consistent and statistically significant leading indicator of the current crisis, in line with conclusions of the earlier literature.
When Central Banks Buy Bonds
Central bank independence is not primarily a matter of reputation, but of reality – what matters is what central banks do, not whether they maintain an appearance of public disdain towards the messy realities of economic life.
Freedom and Exchange in Communist Cuba
Fidel Castro’s socialist revolution promised to satisfy the basic needs of the Cuban people, but the price demanded was the surrender of freedoms. Now that the state is out of money and there are no more rights to exchange for benefits, the demand for freedom is on the rise.
Book Excerpts
“Unfortunately, all that rhetoric about deficits and balanced budgets obscures the real danger that confronts us: the gradual disintegration of our free society… The real issue is the government’s share of the Gross National Product—of the earnings of every productive citizen in this land. That is the issue on which we should concentrate. What does it mean for our way of life? What does it mean for our free enterprise system? What is our free enterprise system? Isn’t free enterprise related to human freedom, to political and social freedom? God Almighty, our forefathers understood that. The millions of immigrants who came to participate in the American dream understood it. When we see this monstrous growth of government, we must realize that it is not a matter of narrow economic issues. What is at stake is equity, social stability in the United States of America.” –Former Treasury Secretary William E. Simon, testifying before the Subcommittee on Democratic Research Organization, A Time for Truth
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