Thursday, July 30, 2009
Even aside from this major factor, Dudley argued that the Fed's large and growing balance sheet is nothing that prevents the Fed from controlling inflation once the economy corrects. 'It is not the case that our expanded balance sheet will inevitably prove inflationary,' he said.He complete speech is here. I need to revise my material on the Fed as the result of what it has done in the last year, and writing that the Fed now has four tools to control monetary policy--open market operations, the discount rate, reserve requirements, and the interest on excess reserves--is a first step. I wonder, though, if this does not make their job harder rather than easier.
Specifically, Dudley said the Fed's new ability to pay interest on excess reserves is a critical tool it uses to keep banks from lending these reserves and thereby creating new credit and boosting inflation. 'Thus, through the IOER rate (interest on excess reserves), the Federal Reserve can effectively retain control of monetary policy,' he said, noting that the Fed can increase the IOER rate if banks begin to find it more profitable to lend these reserves.
Here is more from the Fed on what new Fed powers, found on Donald Marron.
Monday, July 27, 2009
Sunday, July 26, 2009
For the first time in 30 years, officials in the country’s economic capital have urged eligible parents to plan for a second child. The move was prompted by the growing demographic imbalance in the city and fears that the younger generation will not be able to support the ageing population. The one-child system, where all pregnancies are monitored and sometimes terminated by order, was enforced to control a population that is the largest in the world at more than 1.3 billion.
One couple in Beijing with a two-year-old son, who are entitled to a second child, said that they preferred to forgo the privilege. “It costs more than 35,000 yuan (£3,500) a year just to leave our baby in a kindergarten. Why spend this amount of money on a second?” one of the parents said. Many young couples are willing to have one child to continue the family line, but they let the grandparents raise it so that they can go to bars and restaurants and go shopping and travelling without being restricted by the responsibilities of children.
Friday, July 24, 2009
The battle heated up in June, when Mr. Orszag visited Capitol Hill to discuss health care with a small group of House Democrats. The meeting started well, with one lawmaker after another echoing his message that spending controls were critical to any health-care overhaul, according to two administration officials.
Then one member said her top priority was winning higher payments for oxygen suppliers, the officials say. Mr. Orszag was taken aback. Officials had been trying for years to cut payments to suppliers of oxygen and other medical equipment, which critics say are inflated. Yet when a new competitive bidding process was set to take effect last year, industry supporters in Congress were able to delay the plan. They are still fighting to block changes.
"One of the reasons we currently have such disjointed and skewed incentives is that we have an excessively political process," Mr. Orszag said in an interview.
So the solution to disjointed and skewed incentives causes by an excessively political process is to increase the role of the government in health care? I cannot figure out what the logic is to this argument.
It is an interesting article about one of the big players in the changing of health care policy. He reminds me a lot of the very bright Keynesian economists of the 1960s, who were sure that they could solve the economy's problems if only they did not have to worry about the politics that goes with government spending, regulating, and taxing.
But the greatest waste is the hidden cost of defensive medicine: tests and procedures that doctors order for no good reason other than to protect themselves from lawsuits. Every doctor knows, as I did when I practiced years ago, how much unnecessary medical cost is incurred with an eye not on medicine but on the law.PS This is part of what economists call "rent seeking."
Tuesday, July 21, 2009
Dear Yahoo! GeoCities customer,I checked quantcast.com to see how much traffic it got, and it was still getting almost 12 million visits from the U.S., down about 3 million from six months ago, but still big enough to rank as 58th biggest site. It is remarkable that yahoo was not able to make money on that much traffic, but that may say a lot about why yahoo has not done well.
We're writing to let you know that Yahoo! GeoCities, our free web site building service and community, is closing on October 26, 2009.
On October 26, 2009, your GeoCities site will no longer appear on the Web, and you will no longer be able to access your GeoCities account and files.
A comment on the closing at techcrunch.com:
There are plenty of other Website creation and hosting services out there, including blog platforms such as Wordpress, Blogger, and Typepad, as well as Website creation and hosting services such as Ning, Webs, Jimdo, Snapages, Weebly, and countless more. GeoCities never really kept up with the times, but always remained a decent pageview generator.Geocities was founded in 1995 Yahoo purchased it in 1999 for several billion--the number differed. Wikipedia has a good history of the site.
A PC World blog was rather snarky, but pointed to the problems the site had:
GeoCities grew weaker by the month. The proliferation of low-cost hosting options, combined with the increasing popularity of social network-style services in place of personal home pages, only contributed to its demise.
GeoCities is survived by two cousins, Angelfire and Tripod, along with an uncle, Jeeves. All three are believed to be terminally ill.
Others will follow, including, in time, this site. I have (soon had) a page there, along with pages at tripod and angelfire. Since angelfire and tripod put google ads on the pages, they may actually be making some money.
Monday, July 20, 2009
Seven of the ten indicators that make up The Conference Board LEI for the U.S. increased in June. The positive contributors – beginning with the largest positive contributor – were interest rate spread, building permits, stock prices, weekly initial claims (inverted), average weekly manufacturing hours, index of supplier deliveries (vendor performance), and manufacturers' new orders for consumer goods and materials*. The negative contributors – beginning with the largest negative contributor – were real money supply*, manufacturers' new orders for nondefense capital goods*, and index of consumer expectations.Maybe we are approaching recovery.
The press release is here, though its address may change when it is archived. Here is Carpe Diem's report on the release.
Sunday, July 19, 2009
I made their list in this way to make it easier to click on them. (The original list goes through each, page by page with a description.) I have heard of most but not all. Some that I have looked at did not impress me enough to keep me coming back. Others are on my list of links to the right. Some of them are not really blogs.
Maybe as I explore this list I will add a few to my favorites.
These hard cases and emotional scenes are the equivalent of the old argument for abortion, that if you didn’t fully legalise it people would go to dangerous amateurs and die horribly.
And as soon as it was replaced by a more liberal law, the present annual massacre began, and continued to grow. The same will happen to the old and unwanted. It will start with a few dozen annual trips to Zurich, urged on by ‘compassionate’ relatives and complaisant doctors. It will end with our hospitals switching on the morphine pump earlier and earlier.
Any one who does not understand that a "right" to die will quickly become an obligation to die has his head in the sand.
Saturday, July 18, 2009
For much of the developed world, the "credit crunch", the debt burden, and the rest are not part of a cyclical economic downturn but the first manifestations of an existential crisis.Joseph Schumpeter argued that even though capitalism is economically successful, it might not be socially successful. However, his story of decline does not seem to be what is happening. If we wanted to re-make his story for the decline of capitalism, we could argue that only a heavy reliance on markets creates wealth, but once people are wealthy, they increasingly worry about risk. To some extent private markets, including insurance markets and financial markets, allow them to reduce risk, but people also use the political process to try to reduce risk, which creates the welfare state. Wealth plus the welfare state then create the incentives that reduce fertility rates below replacement, making the welfare state, and perhaps wealth itself, unsustainable in the long run.
Why aren't people more worried about the long-run demographic trends? Why are there people still running around worrying about overpopulation in the developed world? My guess is that one reason, but an important reason, is that part of the intellectual elite is unable to process numerical data, that is, they do not "get" numbers. It is mastery of verbal skills, not of numerical skills, that makes one a member of the intellectual elite. I have met enough Ph.D.s in the humanities who have a hard time reading a graph to make me suspect that a lot of people we think are very intelligent are lost when it comes to anything involving interpretation of numbers.
(Related--people judge the intelligence of politicians largely on their verbal skill. George Bush was judged a bozo and Barack Obama a genius because of the way they spoke. I wonder what they and other politicians would look like if we could see them trying to do a variety of numerical tasks.)
Thursday, July 16, 2009
They forgave Jackson his dysmorphia and even his alleged pedophilia, for Jackson only expressed in extreme form his generation's refusal to age. In his self-disfigurement and eventual self-destruction, this fey child-man fought madly against maturity with a reckless abandon that his fans secretly admired. They loved him, not in spite of his personality failures, but because of them.
Something astonishing had happened, compared to which the tulip bulb craze and the South Sea bubble seem like models of sobriety. The eternal adolescence that Michael Jackson so ably represented in fantasy turned into the foundation for the great investing wave of the 1990s
Youth culture disoriented the entrepreneurs of America so thoroughly that conventional wisdom - including that of the Vatican and the Barack Obama administration - now ignores the entrepreneur as a source of economic growth.
The hangover from America's obsession with perpetual youth will last for a decade or more. Judging from the rock-star adulation accorded to Obama, Americans haven't yet learned their lesson, which is: after a certain age, no, you can't.
Wednesday, July 15, 2009
Everyone favors benefits and opposes burdens (taxes). Republicans want to cut taxes without cutting spending. Democrats want to increase spending without increasing taxes, except on the rich. The differences between the parties are shades of gray. Hardly anyone asks the hard questions of who doesn't need benefits, which programs are expendable and what taxes might cover remaining deficits.There is nothing new in what he writes. However, not enough people realize that eventually someone will end up losing in this gigantic Ponzi scheme that we are all running. Governments have finite lifetimes, but they budget on the assumption that they are immortal.
The CBO notes that elevated deficits would penalize saving, investment and income, while unprecedented tax burdens could "slow the growth of the economy, making the [government's] spending burden harder to bear." To such warnings, Americans' collective response is: Go away.
- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.
- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago.
- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.
Tuesday, July 14, 2009
President Obama may think he can quickly “reset” the faltering U.S.-Russia relationship, but there is no “reset” button for the demographic woes that afflict Russia today. Demographic realities are unforgiving—and even under the best of circumstances, they change only slowly and gradually. For the next generation, Russia’s prospects—social, economic, and geopolitical—will be compromised by the tragic conditions we have described in these past five posts. Much as we may wish it were otherwise, a rapid turnaround in Russia’s dismal demographics does not look to be in the cards any time soon.
Sunday, July 12, 2009
And that means rippling throughout this key sector of the economy — even before these taxes have been enacted — are hesitation, stasis, and ultimately constriction — at first for psychological reasons, soon confirmed by the actual facts of less money. In short, very bright people will be thinking how to hide income, how to barter, how to slow down and not produce goods and services, rather than blast full speed ahead and enrich angry others.
They favor an incremental approach or believe that doing nothing is somehow an answer. But that is exactly the thinking that led us to this predicament.
His critics are not impressed. Here is Stephen Spruiell on The Corner
We should not allow Obama to take credit pre-emptively for any future recovery when there is such a strong case to be made that his policies created a level of uncertainty that prevented the recovery from starting sooner.Keith Hennessey does an almost sentence-by-sentence critique:
This did not have to be a two-year program. Congress could have front-loaded the stimulus had they instead given the cash directly to the American people, as they did on a bipartisan basis in early 2008. We would have saved much of it, paying off our mortgages, student loans, and credit cards (which would not be a bad thing). We would have spent the rest much more quickly than the federal and state government bureaucracies now stumbling through their usual corrupt, slow and inefficient processes. Instead the President handed the money and program design over to a Congress of his own party, who saw it as a big honey pot rather than as an exercise in macroeconomic fiscal policy. The President’s primary macroeconomic policy mistake was allowing Congress to pervert a rapid Keynesian stimulus into a slow-spending interest-based binge.Finally, Ed Morrissey at hotair.com:
Note too that Obama has quietly dropped the promise to “save or create at least 3 million jobs by the end of 2010,” as Romer’s support of Porkulus claimed. Nowhere in this essay does Obama put a number on jobs. Suddenly, Porkulus has stopped being a jobs project — the entire basis on which Obama pushed Congress to pass it — and has become instead a foundational, long-term rebuilding of the American economy.
Wednesday, July 8, 2009
A multi-million pound initiative to reduce teenage pregnancies more than doubled the number of girls conceiving.
The Government-backed scheme tried to persuade teenage girls not to get pregnant by handing out condoms and teaching them about sex.
But research funded by the Department of Health shows that young women who attended the programme, at a cost of £2,500 each, were 'significantly' more likely to become pregnant than those on other youth programmes who were not given contraception and sex advice.
A total of 16 per cent of those on the Young People's Development Programme conceived compared with just 6 per cent in other programmes.
John Maynard Keynes once compared investing in the stock market to picking the winner of a beauty contest. In each case, it's not who you think will win, but who you think others will pick. It's the same for those trying to sort out the stimulus debate. The argument of stimulus opponents hinges on their belief that consumers and businesses will predict that stimulus won't work. The fact that stimulus opponents are far less numerous, have less distinguished academic credentials, on average, and are far less ideologically diverse than their counterparts does not guarantee they're wrong. But these factors should make rational consumers and investors less likely to side with them. And since this is really an argument about expectations, that's probably enough.If we believe it will work, it will work.
(If he is consistent, he should be very harsh on the talking-down of the economy before the stimulus package was passed in February.)
A legal device like Alaska’s drive-thru ethical complaint system will always do more damage in the hands of political operations, than good in the hands of well-meaning individual citizens. Organized groups with agendas to push have abundant time, energy, and discipline to exploit such mechanisms. If the Alaskan system was adopted in the fabulously corrupt political climate of Chicago, the likely result would be the elimination of the last few reasonably honest politicians, who would be buried under a flood of bogus ethics complaints mass-produced at the local union halls. The lovely dream of the lone citizen crusader, using his lunch hour to file a complaint against an untouchable crook in high office, fades into the ugly reality of groups like ACORN, issuing target lists to their foot soldiers.
Sarah Palin supported the ethics reforms that were used to mummify her in legal paperwork. John McCain was hamstrung by the elaborate campaign finance laws he helped design, even as his opponent cheerfully ignored them, disabling minimal security from his campaign donation website to accommodate a flood of shadowy cash.
Tuesday, July 7, 2009
Monday, July 6, 2009
Obama and his team seem sharply opposed to the view that creative destruction is a valuable economic force. They seem happy with what might be called destructive destruction--the obliteration of value and wealth without any resulting positive change.
The soaring number of taxicab operators in D.C. -- roughly 8,000, most of whom own their own cars -- is a "pressing and urgent problem," Graham said. There are more licensed drivers in D.C. per capita than any place in the world, he said, and new applicants continue to take the required class, giving them access to the driver exam administered by the D.C. Taxicab Commission. A glut of drivers could jeopardize the chances of any cabbies making an adequate living, Graham has said.
New York City's medallion system, established in 1937 during the Great Depression in response to a ballooning number of unregulated taxis, artificially capped the number of cabs on the road, to what is now about 13,000.
The medallion program, however, made it very difficult for the average New Yorker to join the industry as an owner: The May 2009 price for an individual medallion, those held by owner-operators, was $568,000. The cost of a corporate medallion was $744,000.
D.C. Taxicab Commissioner A. Cornelius Baker said during a recent meeting that the city must move "toward a regulated taxi force" and create a system "that sustains our drivers and also creates wealth for them in the long term."
When the ordinary workings of a competitive market are seen as a problem, what chance does capitalism have? (The New York medallion program was being used as an example of the problems of regulation forty years ago when I was a student. It is amazing that other cities want to emulate it.)
It takes years and years to make a mess as terrible as the California debacle, but the recipe is simple. All that you need is two political parties that are always willing to offer easy government solutions for every need of the voters, but never willing to make the tough decisions necessary to finance the government largess that results. Voters will occasionally change their allegiance from one party to the other, but the bacchanal will continue regardless of the names on the office doors.
The federal picture is so bleak because the Obama administration is the most fiscally irresponsible in the history of the U.S. I would imagine that he would be the intergalactic champion as well, if we could gather the data on deficits on other worlds. Obama has taken George W. Bush’s inattention to deficits and elevated it to an art form.
Friday, July 3, 2009
Lopez Eastlick says there is another major factor: rising minimum wage requirements. Minimum wage increases raise the bar for entry-level employment. From 1997 until 2007, the minimum wage stood at $5.15. Congress raised it to $5.85 in 2007, to $6.55 last year, and in July it is scheduled to increase again to $7.25.
"For teens who are not in the work force, as many as 10 years later there are financial impacts to that. Ten years later, if you were not employed, you're lagging behind your peers," says Lopez Eastlick. "There's an invisible curriculum you learn from having a job."
(For more bad news for young people in today's job market, see the last link here.)
Update: From the New York Times, "Say Hello to Underachieving":
If the only problem were tedium, students might find a recessionary summer unpleasant but endurable. But some expressed concern that the economic gloom might be a preview of harsh career realities that await.Lack of hope? Didn't we just elect Hope? The problem with the unwanted leisure?
“The worst thing about this summer is the lack of hope felt by so many kids,” Lydia Wiledon, a Barnard undergraduate, wrote in an e-mail message. “College students ready to thrust themselves into work find nothing, and those most in need are edged out by older, more skilled individuals who are overqualified for such foot-in-the-door opportunities. I worry about how this employment drought will affect my generation in the future.”
Students who enter the job market during a recession can see their wages lag behind comparable students who graduated in better times for as long as 15 years, according to a recent study by Lisa B. Kahn, an economist at the Yale School of Management.
A month ago Iowahawk outdid himself with his post on "funemployment":
As frivolous as it sounds, funemployment is a statement about American society. Experts say it's a sign that Americans are slowly embracing a healthier lifestyle that centers on self-actualization, survival, and Twitter rather than the often soul-crushing burdens of corporate careerism. These experts frequently credit the Obama Administration.Read the whole thing if you need a laugh.
"Recession is a great opportuning for people to get outside, enjoy a sunny park bench, and have fun," said Robert Lester, a professor at UCLA's Anderson School of Business. "And President Obama is making that kind of fun possible for more and more people every day."
Wednesday, July 1, 2009
China is still a relatively young country, with a median age of around 30. But, uniquely among developing countries, it is ageing extraordinarily fast, so by 2050 its median age will have risen to about 45. Over the next few decades the ratio of elderly dependants to people of working age will rise steeply, from 10% now to 40% by 2050. From about 2030 the country will have more elderly dependants than children (see chart 8), whereas in most other developing countries the opposite will remain true for the next few decades. China’s pattern of ageing is very similar to that in Japan, Hong Kong, Singapore, South Korea and Taiwan. The difference is that in China this is happening at a time when the country is still relatively poor.
So there is now an economic, as well as a human-rights, case for relaxing the country’s “one-child policy”. Many Chinese academics think it can be only a matter of a few years, but the government seems in no hurry. “Family planning”, as it likes to call the policy, is seen as a success, easing pressures on the environment and resources of all kinds. There is no explicit population target, but the latest forecasts suggest that numbers will keep growing from about 1.3 billion now to a peak of around 1.46 billion by 2030 and then start declining gently.
In fact, even if the restrictions were loosened immediately the birth rate might not tick up by very much. In the big cities many people are already leading the sort of lives that have brought down fertility in richer countries.
For my part, it reminds me of a paper I once graded at Yale. The student author was absolutely persuaded that carbon monoxide caused global warming.
When I pointed out that CO was indeed toxic, but that no one called it a greenhouse gas, and that it was not the same as CO2, the student had no idea what I was talking about (and refused to revise the draft). All evidence had become irrelevant: what mattered was asserting his ill-informed belief, and refusing to reconsider on the grounds that doing so would be akin to apostasy. In a student, that is sad; in the making of policy, it’s both expensive and foolish.
See the comments, and also this at the American Spectator Blog.
As newly anointed Minnesota Senator Al Franken prepares to take his seat in Washington, a new survey published today indicates that a majority of Minnesota voters can no longer remember whether or not they voted for him.Should we trust people's choices in the political arena (democracy) but reject them in the market?
By trying to help dolphins, groups like Greenpeace caused one of the worst marine ecological disasters of all time. Few other fisheries are as bad for groups like sharks and sea turtles as the purse seine fishery, and none are as large in scale.