The economy and employment: On the turn?
The original article is linked here.
The economy and employment
On the turn?
From The Economist print edition
The gloom about jobs is overdone, but the outlook remains tenuous
AFTER ebbing steadily since the start of the year America’s monthly job losses figure abruptly jumped from 322,000 in May to 467,000 in June, deflating talk of an imminent exit from recession. Hand-wringing in Washington quickly followed. Read the rest of this entry »
Corporate tax: Escaping the shakedown
The original article is linked here.
From The Economist print edition
Governments are not raising corporate tax, but firms can no longer count on the taxman to treat them ever more kindly
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WHEN the Irish government, reeling from bank failures and a monumental property crash, unveiled an austerity budget in April, it socked individuals with higher taxes. But it left its corporate-tax rate—the lowest among OECD countries—unchanged at 12.5%. Last year Germany cut its corporate-tax rate from 39% to 30%. Canada is pressing ahead with plans to lower its combined federal-provincial rate to 25%. Russia has also reduced its corporate taxes, and Singapore intends to do so. According to the International Bureau of Fiscal Documentation (IBFD), an Amsterdam-based group that follows international tax developments, no country plans to raise its main corporate levy. Read the rest of this entry »
Economics focus: Put out
The original article is linked here.
Economics focus
Put out
From The Economist print edition
Uncertainty over the size of the output gap complicates the task of central banks
HAVING raised the alarm on deflation, the Federal Reserve has now begun to sound the all clear. The statement it released after its policy meeting on June 24th notably omitted the warning from its three prior meetings that “inflation could persist for a time below rates that best foster economic growth and price stability”. To be sure, with the economy gradually finding a bottom and the rate of decline in home prices slowing, the chances of a downward spiral of deflation and economic activity have diminished. Yet it seems premature to write off the threat as long as a large output gap persists. Read the rest of this entry »
The recession and pay: The quiet Americans
The original article is available here.
From The Economist print edition
Employees are proving stoical in the face of pay cuts and compulsory unpaid leave
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BACK when times were better and the newspaper industry wasn’t fighting for dear life, reporters at the Cleveland Plain Dealer would regularly grumble at the measly pay increases their union negotiated. Last month, when the union announced it had negotiated a 12% pay cut in exchange for a promise of no lay-offs, there was applause. “It took me aback,” says Harlan Spector, a medical reporter and one of the negotiators.
Like many long-standing economic relationships, “wage stickiness” is being tested by the savagery of the recession. Read the rest of this entry »
Reforming financial regulations in America: Better broth, still too many cooks
The original article is posted here.
From The Economist print edition
Barack Obama’s plan for regulatory reform is not bold enough
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FINANCIAL regulation in America has two problems: there is both too much of it and too little. Multiple federal agencies oversee the financial system: five for banks alone, and one each for securities, derivatives and the government-sponsored mortgage agencies. They share these duties with at least 50 state banking regulators and other state and federal consumer-protection agencies. Yet all these regulators failed to anticipate and prevent the worst financial crisis since the Depression, because risk-taking flourished in the cracks between them. Toxic subprime mortgages were peddled by lenders with little federal oversight and shoved into off-balance-sheet vehicles. The greatest leverage accumulated in firms that avoided the capital requirements of banks.
On June 17th Barack Obama took aim at these weaknesses (see article). Read the rest of this entry »
Sovereign credit-default swaps: Muffled signals
The original article is linked here.
Sovereign credit-default swaps
Muffled signals
From The Economist print edition
Credit derivatives on countries are behaving oddly
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GOVERNMENTS in the rich world are announcing record-breaking deficits and their credit ratings are under threat. Yet the market that should be most worried is not. An index of credit-default-swap (CDS) spreads on the seven biggest rich economies maintained by Credit Derivatives Research (CDR), a research outfit, has widened in recent weeks, but still signals half the risk it did in February, before the full scale of the damage to public finances became clear (see chart). The trend holds true even for Britain, which is threatened with a credit-rating downgrade, and Ireland, which on June 8th suffered its second sovereign downgrade in three months.
Dave Klein at CDR admits to being puzzled by the trend. Read the rest of this entry »
Central banks’ exit strategies: This way out
The original article is available here.
From The Economist print edition
The Federal Reserve weighs plans to unwind its unconventional stimulus
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A FIREFIGHTER’S first rule of survival is “know your way out”. The same can be said of financial firefighting. Though it has no intention of exiting soon, the Federal Reserve is planning its path out from the extraordinary measures it has taken to free credit markets and boost demand. Read the rest of this entry »
Federal Reserve Bank of New York: The president speaks
The original article is available here.
From Economist.com
William Dudley, president of the Federal Reserve Bank of New York, speaks with The Economist about quantitative easing and exit strategies
Q: Treasury yields are up sharply in the past few weeks. Why?
A: The economy is looking less dark so people are taking away the Japanese deflation scenario. Basic financial conditions have generally eased quite a bit in the last six weeks. If you thought the equilibrium funds rate was wildly negative six weeks ago, it’s not so negative anymore. I don’t know if the economy has turned out better than forecast, but the adverse tail has diminished significantly. The risk of the banking system melting down, the deflation outcome, has very much diminished. And supply is enormous. Another thing of course is the mortgage market, which has its own dynamics: rates go up, duration extends. The third reason is some uncertainty by some people about the whole exit from all these programmes and the possible inflationary consequences of that. Read the rest of this entry »
Government and business in America: Piling on
The original story is available here.
From The Economist print edition
In his zeal to fix capitalism, Barack Obama must not stifle America’s dynamism
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DEFENDING American capitalism these days is a thankless job. Reckless lending by American financiers produced a crisis that has pushed the world into its worst recession since the 1930s. Tales of greed and fraud during the boom years abound.
Small wonder that although Americans still prefer their government neat and local, they are a little less hostile to federal activism these days (see article). Such sentiments, last November, helped propel Barack Obama into the White House and his Democratic Party to bigger majorities in both houses of Congress. As Rahm Emanuel, the president’s chief of staff, says, Mr Obama does not want to waste this crisis. He is using it to create a bigger role for government throughout the economy, from education and health care to banking and energy.
He, and Congress, risk overreaching. Read the rest of this entry »
Government v market in America: The visible hand
The original article is available here.
From The Economist print edition
Americans have grown slightly more receptive to the idea of an activist government. Will they go along with Barack Obama’s aspirations?
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THE demonstrators thronging the steps of the war memorial in central Indianapolis are a small but spirited bunch. Steps away from the head office of one of the country’s biggest health-insurance companies, they chant slogans calling for a single government-run health plan and wave signs with slogans like “One plan one nation” and “Patients not profits”. One cheekily advises: “Accept personal responsibility. Do your own colonoscopy”. After pursuing their cause for years, advocates of universal health care got a jolt of energy when Barack Obama took office. “Something happened in January that changed our cultural story for ever,” a folk singer tells the crowd before launching into a song, “If not now, tell me when.”
Across the street, an argument breaks out. Dennis Majewski, a public-defence lawyer, agrees with the protesters. “We’ll never rebound until we have national health-care insurance.” But should the government look after “a known druggie whose drug habit gets him to the point he is seriously ill?” queries his cousin, Tom Majewski, a retired executive. Well, yes, says Dennis: “That person has a serious illness.” Tom shoots back: “But it’s a choice!”
The debate in Indianapolis is a microcosm of a broader re-examination by Americans of government’s role in the economy. Read the rest of this entry »
