November 30, 2010
Europe and China: is this deja vu all over again?
The autumn of 2010 is in some ways a replay of what we saw last spring. Is what we saw then a guide to what's going to happen next?
November 29, 2010
And This Is Going to Lead to High Inflation?
I struggle and struggle to understand the fear of near-term, rapid inflation that is being stoked by the likes of commentators noted here and here. This struggle becomes even more profound when I examine actual data.
November 27, 2010
Peak oil in Pennsylvania
Here I pass along a few items on the early history of the oil industry that I found interesting.
November 25, 2010
Core at Zero
At least, month-on-month. Three month annualized inflation -- either PCE or CPI -- both under 0.5%:
November 24, 2010
The Fed's communication problem
The start of the FOMC's November meeting is described in the minutes released yesterday as follows:
The meeting opened with a short discussion regarding communicating with the public about monetary policy deliberations and decisions. Meeting participants supported a review of the Committee's communication guidelines with the aim of ensuring that the public is well informed about monetary policy issues while preserving the necessary confidentiality of policy discussions until their scheduled release. Governor Yellen agreed to chair a subcommittee to conduct such a review.
Here I provide some suggestions for Governor Yellen's subcommittee to consider.
November 22, 2010
Representative Ryan Requests
November 20, 2010
Answering the bunnies
A cartoon has been making the rounds (e.g., Forbes, Zero Hedge, and Real Clear Politics) in which cartoon characters (bunnies maybe? or perhaps some other life form) ask questions about quantitative easing. I would have provided slightly different answers than did the didactic character in the cartoon, so I thought it might be fun to interject myself as a third character in the bunnies' conversation.
November 18, 2010
Assessing Fantasy Scenarios
With the EGTRRA/JGTRRA extensions and proposals for tax reform and debt reduction flying left and right, I think it behooves us to review what the theoretical (well, actually undergraduate textbook) literature and the empirical assessments suggest will be the impact of tax rate changes. I want to devote special attention to the hypothesis that there will be large dis-incentive effects on high income households should their tax rates go up, with correspondingly large negative ramifications for overall economic activity.
November 17, 2010
Billion prices project
November 16, 2010
Cut the Deficit!
The New York Times has provided a neat interactive graphic that allows one to see how various proposals affect the budget deficit in 2015 and 2030, here.
November 15, 2010
Jeffrey Frankel on QE2, Inflation Hysteria and Actual Facts
Recalling President Reagan's statement, "Facts are stupid things", it's no surprise that the disinformation campaign arguing that the Fed has been pressured into engineering a bout of high inflation continues. Jeffrey Frankel helps bring some facts to the table. From "The pot again calls the kettle red: Republicans, Democrats, the Fed and QE2".
November 13, 2010
Losing the Battle, Winning the War?
Or, the Economic Implications of the G-20 Meeting's Aftermath
The narrative emerging in the wake of the G-20 meetings is that, not only is the rest of the world angry at us over quantitative easing, but we also achieved none of our diplomatic objectives regarding rebalancing (the coverage seemed particularly negative on CNBC).    In addition, the outcome has been taken as a harbinger of the end of US dominance over economic policymaking, to the extent the US no longer has the intellectual high ground (given the failure to regulate the financial system in a sensible way) and the relative decline in economic weight.
November 11, 2010
Inflation Fears and Measures of Expected Inflation
Recent news items have noted the fears of several individuals that QE2 will spark rapid inflation, e.g. . For instance, Representative Paul Ryan, expected to become the Chairman of the House Budget Committee in January, stated: "I think it's going to give us a big inflation problem down the road."
Here are what various market-based indicators suggest.
November 10, 2010
I guess now we know that the Fed has the tools to prevent deflation.
November 09, 2010
Gold standard discussion
November 08, 2010
East Asian Exchange Rates and China’s Trade Surplus
By Willem Thorbecke
Today, we're fortunate to have Willem Thorbecke, Senior Research Fellow at Asian Development Bank Institute, and consulting fellow at Japan's Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of ADBI, RIETI, or any other institutions the author is affiliated with.
Alaska and the Gulf of Mexico and Oil
Several articles caught my attention: first, the impact on the Gulf from the largest oil spill in US history, in particular on coral , and second, the attempts to get approval to drill off Alaska's coast .
November 07, 2010
Current economic conditions
Things look slightly cheerier than they did a month ago. But that's not saying much.
November 05, 2010
The October Employment Situation: Upside Surprise and Shrinking Government
The Employment situation release for October surprised on the upside: the Bloomberg consensus was for 60,000 increase and the actual was 151,000. And yet I receive emails from the JEC-Republican stating:
November 04, 2010
"The Impact of Health Insurance Reform in Massachusetts"
The use of emergency rooms for routine care fell, as did hospital admissions for treating preventable conditions, and the proportion of uninsured among hospital inpatients (by 36%), while there was no increase in the growth of hospital costs. From the NBER Digest article summarizing NBER working paper 16012 [ungated version] by Jonathan T. Kolstad and Amanda E. Kowalski:
November 03, 2010
QE2, News, and Differential Impacts in Asset Markets
Typically, economists assume that news, defined as information that induces revisions to expectations of the future value of relevant variables, should affect asset prices simultaneously, and in a consistent manner. That's why today's announcement of QE2 has somewhat surprising effects, if one is to believe that QE2 had already been priced in .
QE2: Been there, done that
The Federal Open Market Committee announced today that:
the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
Arnold Kling notes that exit polls show that 52% of those who voted have an unfavorable opinion of the Democratic Party and 53% have an unfavorable opinion of the Republican Party. Arnold comes up with this conclusion:
People with an unfavorable view of Democrats went 88-10 for Republicans, but people with an unfavorable view of Republicans only went 76-22 Democrat.
That was the difference in the election. The "unfavorables" on net broke Republican. The way I would spin it is that there is a large block of voters who are negative on both parties, the Republicans captured a larger share of that block, and that block swung the election.
November 02, 2010
Detachment from Reality and Innumeracy as Impediments to Rational Discourse
Tax cut version