Saturday, April 30, 2011
Friday, April 29, 2011
The price of gas - real and nominal since 1976
"Now averaging $3.88 a gallon nationwide, gas prices have jumped 37% so far this year..."
Inflation? Numbers Show Faith in Fed - WSJ.com
"Ben Bernanke held the first postpolicy-meeting news conference by a Federal Reserve chairman in part to bolster confidence that the Fed remained committed to controlling inflation. The words "inflation expectations," or some variation of them, were uttered 21 times in the session.
While investors and the public have concerns about short-term price increases, they appear to have confidence in Mr. Bernanke's ability to control inflation over the long-term. That is crucial to the Fed's success in rebooting the economy, because once higher long-term inflation expectations take root, they can become self-perpetuating, which would mean higher interest rates that could slow growth.
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Long-term inflation-expectation gauges, from consumers and from the bond market, remain subdued and are little changed from a year ago. They point to inflation that isn't far above the average of the past decade, when inflation was historically low.
One rough gauge of future inflation expectations is the gap between yields on plain-vanilla Treasury bonds and Treasury inflation-protected securities of the same maturity.
TIPS are regularly adjusted for inflation, so this gap in yields, called the break-even inflation rate, shows how much future interest traders are willing to give up for inflation protection, which can be interpreted as the future inflation rate they expect.
The 10-year break-even inflation rate earlier this month surged to 2.66%, the highest since 2006. Amid a host of downbeat economic data in recently, that rate has retreated to less than 2.6%. These numbers are relatively high in the short history of break-even inflation rates, but that period was one of historically low inflation.
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Many economists, likely including those at the Fed, doubt longer-term inflation pressures can take hold with unemployment still near 9%. The Labor Department on Thursday reported a jump in weekly jobless claims, which have started drifting higher again, a sign of lingering job-market weakness.
"The prospect of a wage-price spiral is much less than the prospect of a sharper slowdown in the economy," said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, N.J.
Tuesday, April 26, 2011
Inflation in Argentina
EXCERPTS:
"Her policies are generating an annual inflation rate that private-sector economists estimate at around 25%-30%. The government's antibusiness bias and judicial insecurity have damaged investment flows, and energy shortages are growing.
**
"... at the end of February the Argentine money supply was up 28.6% year over year. And in recent months independent analysts who put out inflation numbers that do not agree with the government estimate (now around 10%) have been fined. For students of Argentina's past, this picture of inflation, repression and state control of the economy is all too familiar.
"Her policies are generating an annual inflation rate that private-sector economists estimate at around 25%-30%. The government's antibusiness bias and judicial insecurity have damaged investment flows, and energy shortages are growing.
**
"... at the end of February the Argentine money supply was up 28.6% year over year. And in recent months independent analysts who put out inflation numbers that do not agree with the government estimate (now around 10%) have been fined. For students of Argentina's past, this picture of inflation, repression and state control of the economy is all too familiar.
Inside the Fed, Not When but How - WSJ.com
EXCERPTS:
"The first step toward a tightening is fairly straightforward: stop easing. The Fed is widely expected to end its planned $600 billion of Treasury purchases in June. After that, the act of tightening policy, once it begins, gets more challenging.
**
"Selling securities could be especially hard to calibrate. The Fed's rule of thumb is that a $200 billion change in its holdings is roughly equivalent to a quarter-percentage-point change in the federal-funds rate.
**
"It faces several challenges.
First, the short-term interest rate that it controls, the federal-funds rate at which banks lend to each other overnight, could be harder to push up than in the past. The Fed has pumped so much money into the financial system that banks are flush with reserves, and that supply will work to hold the rate down.
Second, the Fed's purchases of longer-term securities, an effort to keep long-term rates down and aid the economy, left the Fed bank with $1.3 trillion of long-term Treasury debt and $934 billion in mortgage-backed securities. Over time, officials want to reduce these holdings.
"The first step toward a tightening is fairly straightforward: stop easing. The Fed is widely expected to end its planned $600 billion of Treasury purchases in June. After that, the act of tightening policy, once it begins, gets more challenging.
**
"Selling securities could be especially hard to calibrate. The Fed's rule of thumb is that a $200 billion change in its holdings is roughly equivalent to a quarter-percentage-point change in the federal-funds rate.
**
"It faces several challenges.
First, the short-term interest rate that it controls, the federal-funds rate at which banks lend to each other overnight, could be harder to push up than in the past. The Fed has pumped so much money into the financial system that banks are flush with reserves, and that supply will work to hold the rate down.
Second, the Fed's purchases of longer-term securities, an effort to keep long-term rates down and aid the economy, left the Fed bank with $1.3 trillion of long-term Treasury debt and $934 billion in mortgage-backed securities. Over time, officials want to reduce these holdings.
Fed Searches for Next Step - WSJ.com
EXCERPTS:
"The Federal Reserve is likely to begin closing a wide-open credit spigot this week—but faces a major decision: when to start draining the excess credit out of the economy by raising interest rates.
Federal Reserve officials on Wednesday are expected to signal that in June they plan to end their controversial strategy of buying $600 billion in U.S. Treasury bonds to spur the economy. That would mark a milestone in the historic efforts by the central bank to stimulate economic growth.
While analysts and investors debate whether the end to the bond-buying effort will have a significant impact on financial markets, the Fed is contemplating when and how to begin draining the credit it pumped into the economy during and after the global financial crisis. That tightening of credit still looks at least several months off, if not longer, and could take a while to unfold.
Most Fed officials, as well as many economists and investors, think the end of the Fed's two major bond-buying efforts—often called "quantitative easing" or dubbed QE and QE2—will pass without any significant disruptions to markets or the economy.
**
Some big investors worry that interest rates will rise when the Fed stops its purchases, which have amounted to 85% of all government debt sold by Treasury since the program started in November.
**
The keys to the timing of the Fed's exit are the health of the U.S. economy and level of inflation. The Fed expects unemployment to remain high and inflation to recede, but both are uncertain right now.
**
Starting essentially last year on Aug. 27—the day Fed Chairman Ben Bernanke laid the groundwork for QE2—investors have flocked to riskier investments. Since Aug. 26 the Standard & Poor's 500-stock index has gained 28%. Smaller, generally riskier stocks have done even better, with the small-company Russell 2000 Index gaining 41%. It stands just 1.15 shy of its all-time high set in 2007.
Corporate bonds have rallied and commodity prices have risen sharply, too. Gold is up 22% since Aug. 26 and silver is up 143%, both hitting nominal record highs. Even subprime mortgage securities, which were largely blamed for causing the financial crisis, are back in demand.
The biggest loser has been the U.S. dollar, the consequence of the Fed essentially printing more of them to buy bonds. The Fed's index of the value of the dollar against a broad basket of currencies is down 7.9% since Aug. 26.
"The Federal Reserve is likely to begin closing a wide-open credit spigot this week—but faces a major decision: when to start draining the excess credit out of the economy by raising interest rates.
Federal Reserve officials on Wednesday are expected to signal that in June they plan to end their controversial strategy of buying $600 billion in U.S. Treasury bonds to spur the economy. That would mark a milestone in the historic efforts by the central bank to stimulate economic growth.
While analysts and investors debate whether the end to the bond-buying effort will have a significant impact on financial markets, the Fed is contemplating when and how to begin draining the credit it pumped into the economy during and after the global financial crisis. That tightening of credit still looks at least several months off, if not longer, and could take a while to unfold.
Most Fed officials, as well as many economists and investors, think the end of the Fed's two major bond-buying efforts—often called "quantitative easing" or dubbed QE and QE2—will pass without any significant disruptions to markets or the economy.
**
Some big investors worry that interest rates will rise when the Fed stops its purchases, which have amounted to 85% of all government debt sold by Treasury since the program started in November.
**
The keys to the timing of the Fed's exit are the health of the U.S. economy and level of inflation. The Fed expects unemployment to remain high and inflation to recede, but both are uncertain right now.
**
Starting essentially last year on Aug. 27—the day Fed Chairman Ben Bernanke laid the groundwork for QE2—investors have flocked to riskier investments. Since Aug. 26 the Standard & Poor's 500-stock index has gained 28%. Smaller, generally riskier stocks have done even better, with the small-company Russell 2000 Index gaining 41%. It stands just 1.15 shy of its all-time high set in 2007.
Corporate bonds have rallied and commodity prices have risen sharply, too. Gold is up 22% since Aug. 26 and silver is up 143%, both hitting nominal record highs. Even subprime mortgage securities, which were largely blamed for causing the financial crisis, are back in demand.
The biggest loser has been the U.S. dollar, the consequence of the Fed essentially printing more of them to buy bonds. The Fed's index of the value of the dollar against a broad basket of currencies is down 7.9% since Aug. 26.
Friday, April 22, 2011
John B. Taylor: Obama's Permanent Spending Binge - WSJ.com
EXCERPTS: "The chart clearly reveals a number of important facts that are not coming up in town hall meetings. Most obvious is the huge bulge in spending in the past few years. In 2000 spending was 18.2% of GDP. In 2007 it was 19.6%. But in the three years since 2009 it's jumped to an average of 24.4%.
Second, and perhaps even more striking, the chart shows that Mr. Obama, in his budget submitted in February, proposed to make that spending binge permanent. Spending would still be more than 24% of GDP at the end of the budget window in 2021. The administration revealed its preference in the February budget for a much higher level of government spending than the 18.2% of GDP in 2000 or the 19.6% in 2007.
Third, the House budget plan proposed by Rep. Paul Ryan (R., Wis.) simply removes that spending binge—it gradually returns spending as a share of GDP back to a level seen only three years ago.
Wednesday, April 20, 2011
Government - Debt Subject to Limit Graph
This link shows the current ceiling on the national debt as well as the level of the debt as of the previous day. When the green line touches the orange line interesting things will happen.
Monday, April 18, 2011
Debt: S&P Affirms US AAA Rating, Cuts Outlook to Negative - CNBC
EXCERPTS:
"Standard & Poor's on Monday downgraded the outlook for the United States to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures.
"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.
In an interview with CNBC, David Beers, S&P's global head of sovereign ratings, said the agency has been "struck increasingly by the difference in how other governments are dealing with fiscal consolidation."
"The U.S. to us looks to be an increasing outlier in that context," Beers added.
"Standard & Poor's on Monday downgraded the outlook for the United States to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures.
"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.
In an interview with CNBC, David Beers, S&P's global head of sovereign ratings, said the agency has been "struck increasingly by the difference in how other governments are dealing with fiscal consolidation."
"The U.S. to us looks to be an increasing outlier in that context," Beers added.
Wednesday, April 13, 2011
Fed Plays Down Inflation - WSJ.com
EXCERPT:
"Top Federal Reserve officials sent a clear signal that the Fed is unlikely to follow the European Central Bank in lifting interest rates from rock-bottom levels anytime soon, playing down the idea that soaring commodity prices will lead to broader U.S. inflation.
At the Economic Club of New York on Monday, Janet Yellen, the Fed's vice chairwoman, said U.S. monetary policy "continues to be appropriate."
Recent increases in prices of oil, grain and other commodities are "unlikely to have persistent effects on consumer inflation or to derail the economic recovery" and are "not likely to warrant any substantial shift in the stance of monetary policy," she said. The key, Ms. Yellen added, is that households and businesses don't expect inflation to take off in the long run.
Speaking in Tokyo earlier, William Dudley, president of the Federal Reserve Bank of New York, said, "We think that it's important not to overreact to a rise in headline inflation because the increase in commodity prices is probably going to be temporary rather than persistent"—a sentiment Ms. Yellen echoed."
"Top Federal Reserve officials sent a clear signal that the Fed is unlikely to follow the European Central Bank in lifting interest rates from rock-bottom levels anytime soon, playing down the idea that soaring commodity prices will lead to broader U.S. inflation.
At the Economic Club of New York on Monday, Janet Yellen, the Fed's vice chairwoman, said U.S. monetary policy "continues to be appropriate."
Recent increases in prices of oil, grain and other commodities are "unlikely to have persistent effects on consumer inflation or to derail the economic recovery" and are "not likely to warrant any substantial shift in the stance of monetary policy," she said. The key, Ms. Yellen added, is that households and businesses don't expect inflation to take off in the long run.
Speaking in Tokyo earlier, William Dudley, president of the Federal Reserve Bank of New York, said, "We think that it's important not to overreact to a rise in headline inflation because the increase in commodity prices is probably going to be temporary rather than persistent"—a sentiment Ms. Yellen echoed."
Carrie Lukas: There Is No Male-Female Wage Gap - WSJ.com
EXCERPT:
"Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts."
"Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts."
Saturday, April 9, 2011
How to Get a Real Education at College - WSJ.com
EXCERPTS:
"To succeed, first you must do something. And if that doesn't work, which can be 90% of the time, do something else."
This article contains some really good advice. It's by Scott Adams, the creator of "Dilbert."
"To succeed, first you must do something. And if that doesn't work, which can be 90% of the time, do something else."
This article contains some really good advice. It's by Scott Adams, the creator of "Dilbert."
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