"Business economists are split on whether the Federal Reserve's massive infusion of credit into the economy will lead to inflation in the next couple of years.
Half of 266 members of the National Association for Business Economics surveyed in August said the Fed's decisions to increase the money supply won't lead to inflation in the next few years, the NABE said Monday. Some 41% disagreed, though, citing 'lagged effects of policies now in effect,' 'monetization of the debt' and 'ineffective exit strategy' as their primary concerns.
The economists overall said they expect inflation excluding food and energy to average 3% from 2014 to 2018. 'This may reflect their view that an excessively stimulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires,' the NABE report said. The Fed aims to keep inflation between 1.5% and 2%.
Recent debate over the Fed's strategy for reducing its large holdings of government bonds and mortgage-backed securities has centered on timing. If the Fed waits too long to bring the programs to a close, the economy runs the risk of inflation. But if it attempts to wind them down too soon, while the economy is still weak, it could hinder the recovery....
Monday, August 31, 2009
Wednesday, August 26, 2009
Monday, August 24, 2009
Policy Makers Seek to Learn From 1937's Stalled Comeback - WSJ.com
"The Great Depression was W-shaped. The stock-market collapse led to a steep economic decline. But by 1933, the economy had rebounded. Then a series of monetary and fiscal blunders drove the country back into a deep recession at the end of 1937.
That episode is at the heart of the debate over how quickly the government and the U.S. Federal Reserve should unwind the emergency measures they have taken to fend off a Depression-like contraction."
Wednesday, August 19, 2009
Obama on Government-provided health care and the post office - Bloomberg.com
From Bloombergs:
"Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.
For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:
“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”
"Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.
For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:
“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”
... Government programs aren’t self-sustaining by definition. They’re subsidized by the taxpayer. If they were self-financed, we’d be off the hook.
Llewellyn Rockwell Jr., chairman of the Ludwig von Mises Institute in Auburn, Alabama ... put it this way in an Aug. 13 commentary on Mises.org:
“The only reason for a government service is precisely to provide financial support for an operation that is otherwise unsustainable, or else there would be no point in the government’s involvement at all....”
Tuesday, August 18, 2009
The Panel - WSJ.com
"The people behind the long table do not know what they've become. The drug of power has been sugared over in their mouths with a flavoring of righteousness. Someone has to make these decisions, they tell their friends at dinner parties. It's all very difficult for us. But you can see it in their eyes: It isn't really difficult at all. It feels good to them to be the ones who decide."
Monday, August 17, 2009
Households Start to Rival the Chinese in Treasury Market - WSJ.com
"China is center stage when it comes to fears that buyers will one day spurn U.S. Treasurys. The bond market has been the source of much political theater between the U.S. and China in recent months, with Chinese officials passing up few chances to lecture the U.S. on its profligacy.
But that has obscured an important change: The market for Treasury bonds is now more reliant on U.S. buyers -- including the Federal Reserve after its recent buying spree -- than the Chinese.
China held $801.5 billion in Treasury debt at the end of May. The Fed at that time held about $598 billion, although that has now risen to $704 billion. The latest figures for U.S. households, from the first quarter, showed holdings of $643.9 billion -- more than double the $266.6 billion in the fourth quarter of 2008."
But that has obscured an important change: The market for Treasury bonds is now more reliant on U.S. buyers -- including the Federal Reserve after its recent buying spree -- than the Chinese.
China held $801.5 billion in Treasury debt at the end of May. The Fed at that time held about $598 billion, although that has now risen to $704 billion. The latest figures for U.S. households, from the first quarter, showed holdings of $643.9 billion -- more than double the $266.6 billion in the fourth quarter of 2008."
Friday, August 14, 2009
YouTube - Reagan - A great 1964 speech!
YouTube - Reagan - A great 1964 speech!: "Reagan - A great 1964 speech!"
Thursday, August 13, 2009
Charles Murray: Tax Withholding and a Separate Payroll Tax Hide the True Burden of Government - WSJ.com
"Let's start with the rich, whom I define as families in the top 1% of income among those who filed tax returns. In 2007, the year with the most recent tax data, they had family incomes of $410,000 or more. They paid 40% of all the personal income taxes collected.
Yes, you read it right: 1% of American families paid 40% of America's personal taxes.
The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.
Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined."
Yes, you read it right: 1% of American families paid 40% of America's personal taxes.
The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.
Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined."
Wednesday, August 12, 2009
Lead Limits and Penalties Hurt Businesses - WSJ.com
"Jewelry makers now join the legions of other businesses on the hook for millions of dollars in lost sales, inventory or testing costs despite products that pose little to no risk of lead poisoning to children. In the spring, thrift-store operators like Goodwill and the Salvation Army predicted that without regulatory relief they would have to destroy more than $100 million of inventory. Toy stores expected some $600 million in playthings that would have to be trashed and another $2 billion in losses across the industry. Motorcycle and ATV makers predicted total losses and business disruptions around $1 billion. Children's clothing stores have suffered huge losses, with Gymboree losing 40% of its market value overnight after reporting losses related to the House's lead-paint panic."
Tuesday, August 11, 2009
Don’t Ruin Venture Capital Firms by Over-Regulation - WSJ.com
"The proposal now to tighten how venture firms operate suggests that we are in a stage of the regulatory cycle closer to the New Deal than to the entrepreneurial era that followed. Adding regulatory burdens would do nothing to help the investors in venture funds who are willing to take the big risks, knowing that about half of venture-backed companies fail. It would only increase the costs of doing business and make risk-takers more risk-averse.
No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise."
No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise."
Saturday, August 8, 2009
Data Mining Isn't Good Bet for Investors - WSJ.com
"Mr. Leinweber got so frustrated by 'irresponsible' data mining that he decided to satirize it. After casting about to find a statistic so absurd that no sensible person could possibly believe it could forecast U.S. stock prices, Mr. Leinweber settled on annual butter production in Bangladesh. Over an 13-year period, he found, this statistic 'explained' 75% of the variation in the annual returns of the Standard & Poor's 500-stock index.
By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to 'predict' past U.S. stock returns with 99% accuracy."
By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to 'predict' past U.S. stock returns with 99% accuracy."
'You Are Terrifying Us' - Peggy Noonan - WSJ
"The Democrats should not be attacking, they should be attempting to persuade, to argue for their case."
Friday, August 7, 2009
Cash-strapped Cuba says toilet paper running short
"HAVANA (Reuters) – Cuba, in the grip of a serious economic crisis, is running short of toilet paper and may not get sufficient supplies until the end of the year, officials with state-run companies said on Friday. Officials said they were lowering the prices of 24 basic goods to help Cubans get through the difficulties...."
Thursday, August 6, 2009
Utopia Versus Freedom - Thomas Sowell
"Back in the 18th century, Edmund Burke said, 'It is no inconsiderable part of wisdom, to know much of an evil ought to be tolerated' and 'I must bear with infirmities until they fester into crimes.'"
Tuesday, August 4, 2009
Buyers Brace for New Wave of Sales - Size of Treasury Auctions Last Week Took Many by Surprise - WSJ August 3, 2009
"After having to swallow a record $200 billion in new debt in just three days, the market for Treasurys is anxiously awaiting news this week on how much more is coming its way.
The Treasury Department is scheduled to issue a quarterly update Monday about its forthcoming borrowing needs. Wednesday, it will announce a series of auctions to be held next week, this time for three-year, 10-year and 30-year notes and bonds.
Few doubt the numbers will again be big, as the government seeks to finance a record budget deficit and to fund a continuing effort to stimulate the recession-bound economy.
The Treasury announcements are "going to set the tone for any new debt, to show how they are going to deal with the massive amount they still have to sell," said Jim Vogel, a strategist at FTN Financial.
Mr. Vogel said the large two-year, five-year and seven-year auctions "caught people off guard" last week.
Both the two-year and the five-year auction saw big declines in their bid-to-cover ratios and a drop in indirect bidders, which stoked fears that foreign central banks are losing interest in buying Treasurys. Such concerns could be heightened by the dollar, which dropped sharply Friday....
Saturday, August 1, 2009
GDP advance estimate, Q2 2009
"Highlights
The economy is coming closer to the end of recession based on the advance estimate for second quarter GDP. The economy contracted in the second quarter by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. The second quarter was close to the market consensus for a 0.7 percent dip. Today's report contains historical benchmark revisions to GDP. The previous estimate for the first quarter decline was 5.5 percent.
Weakness in the current quarter was almost offset by component strength. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending."
The economy is coming closer to the end of recession based on the advance estimate for second quarter GDP. The economy contracted in the second quarter by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. The second quarter was close to the market consensus for a 0.7 percent dip. Today's report contains historical benchmark revisions to GDP. The previous estimate for the first quarter decline was 5.5 percent.
Weakness in the current quarter was almost offset by component strength. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending."
The current recession (Dec. 2007 - ?)
This link is to the NBER's announcement of the current recession. Note the time lag: on December 1, 2008 the NBER is announcing that the economy went into recession in December 2007.
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
"The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months."
Recession and Business Cycle Dates
The official beginnng and ending dates for past recessions are shown at the link to the National Bureau of Economic Research's site. Wondering what a recession is? According to the NBER, the official arbiter of when recessions begin and end,
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
GDP Revisions: Deeper 2008-09 Contraction, Milder 2001 Recession - Real Time Economics - WSJ
"The update moves the current recession past the late-1950s downturn as the worst (in GDP terms) since the Great Depression. (Of course, the 2009 data could be revised next summer so you can’t say for sure.) The BEA now says inflation-adjusted GDP increased just 0.4% in 2008. Earlier estimates had put the growth at 1.1%. GDP is now shown dropping in last year’s first quarter (reported earlier as a gain), posting a smaller gain in the second quarter than shown earlier, a larger drop in the third quarter and a slightly-less-large tumble in the fourth quarter. From the fourth quarter of 2007 to fourth quarter of 2008, real GDP is shown dropping at a 1.9% annual rate compared with the earlier estimate of 0.8%."
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