Archive for the ‘Uncategorized’ Category
To avoid another crisis, the Fed further fragments global finance
Feb 22nd 2014 | Washington, DC | From the print edition
THE economics of international banking are straightforward enough: raise funds in countries where they are cheap, lend where they are dear. Done right, this is both lucrative for bankers and good for the world, by channelling savings to their most productive use.
Those economics have begun to come apart over the past five years, battered first by the excesses of profit-seeking bankers and now by regulators. On February 18th the Federal Reserve Board voted to “ring-fence” foreign banks’ American operations, forcing them to meet the same standards for capital and liquidity as American banks, rather than allowing them to rely on their parents’ buffers. Read the rest of this entry »
America’s labour market has suffered permanent harm
Feb 15th 2014 | From the print edition
IT TOOK barely a month for the bubble of optimism that formed over the American economy at the start of the year to deflate. Job growth slowed sharply in December, and stayed weak in January, suggesting more than bad weather was to blame.
The unemployment rate, though, tells a much cheerier story: it dropped to 6.6% in January from 7% in November. Indeed, it could soon hit the Federal Reserve’s 6.5% threshold at which it may consider raising interest rates.
The benefits of shale oil are bigger than many Americans realise. Policy has yet to catch up
Feb 15th 2014 | MIDLAND, TEXAS | From the print edition
DENNIS LITHGOW is an oil man, but sees himself as a manufacturer. His factory is a vast expanse of brushland in west Texas. His assembly line is hundreds of brightly painted oil pumps spaced out like a city grid, interspersed with identical clusters of tanks for storage and separation. Through the windscreen of his truck he points out two massive drilling rigs on the horizon and a third about to be erected. Less than 90 days after they punch through the earth, oil will start to flow.
What if they’re dry? “We don’t drill dry holes here,” says Mr Lithgow, an executive for Pioneer Natural Resources, a Texan oil firm. In the conventional oil business, the riskiest thing is finding the stuff. The “tight oil” business, by contrast, is about deposits people have known about for decades but previously could not extract economically.
Read the rest of this entry »
How sexual equality increases the gap between rich and poor households
New estimates that health reform will discourage work
Feb 6th 2014, 0:39 by G.I. | WASHINGTON, D.C.
“It is wrong for a country as rich as America to have tens of millions of people without health insurance,” this newspaper wrote in 2010 in urging Congress to pass Barack Obama’s health reform. It “represents the last chance, perhaps for decades, of erasing one of the least creditable differences between America and the rest of the industrialised world.”
As that leader said, there were, and there remain, good, fundamental reasons to back Obamacare. But that should not blind one to its drawbacks, and one of the biggest, is its detrimental effect on the supply of labour. The Congressional Budget Office ignited debate over these effects with new estimates, released on February 4th , that the equivalent of 2.5m people would choose not to work because of the disincentive effects of Obamacare. For a country already facing a sharply slowing labour force, this is a serious problem. But rather than acknowledge it, Mr Obama and his allies have tried to spin the CBO’s findings as good news. On closer examination, their claims are either misleading or beside the point. Read the rest of this entry »
Feb 5th 2014, 2:10 by G.I. | WASHINGTON, DC
FOR the last five years Republicans have valiantly tried to blame the economy’s problems on supply rather than demand. Excessive government intervention, regulation and uncertainty have raised businesses’ costs and discouraged them from hiring, they argue, while an expanding safety net of food stamps, Pell grants and extended unemployment benefits has discouraged many from working.
They lost the economic argument, because despite efforts by the likes of Casey Mulligan, the evidence was overwhelming that jobs have been held back mostly by inadequate demand, thanks to fiscal policy that turned tight too quickly, monetary policy imprisoned by the zero nominal bound on interest rates, and credit growth bottled up by post-crisis deleveraging and risk aversion. They lost the political argument, too, because they too often characterised the debate as one of takers v makers, which struck many as heartless; Mitt Romney’s famous remark about the 47% of people who wouldn’t vote for him because they got government benefits was the high (or low) point for the Republican attack on the welfare state, depending on your point of view.
Today’s report by the Congressional Budget Office on how Obamacare affects the labour market could mark an inflection point in the competing arguments about demand and supply. Read the rest of this entry »
Jan 29th 2014, 20:34 by G.I. | WASHINGTON, D.C.
After presiding over the Federal Reserve for eight of the most turbulent, crisis-wracked years in its history, Ben Bernanke no doubt hoped to leave on a dull note. It is not to be. Read the rest of this entry »
Jan 28th 2014, 20:39 by G.I. | WASHINGTON, D.C.
If asked to compile a list of economists’ mistakes over the last decade, I would not know where to start. Somewhere near the top would be failure to predict the global financial crisis. Even higher on the list would be failure to agree, five years later, on its cause. Is this fair? Not according to Noah Smith: these, he says, were not errors of economics but of macroeconomics. Microeconomics is the good economics, where economists by and large agree, conduct controlled experiments that confirm or modify established theory and lead to all sorts of welfare-enhancing outcomes.
To which I respond with two words: minimum wage. Read the rest of this entry »
Jan 25th 2014 | From the print edition:
RISK has always had a bit of an image problem. It is associated in the popular mind with gamblers, skydivers and, more recently, the overpaid bankers who crippled the global economy. Yet long-term economic growth would be impossible without people willing to wager all they have by starting a business, expanding an existing one or trying to invent a better mousetrap. Such risk-taking has been disturbingly scarce in America of late: the number of self-employed workers, job-creation at start-ups and the sums invested in businesses have been low.
Though changing appetites for risk are central to booms and busts, economists have found it hard to explain their determinants. Instead, they tend to cite John Maynard Keynes’s catchy but uncrunchy talk of “animal spirits”. Recent advances in behavioural economics, however, are changing that. Read the rest of this entry »