Labor Dept. model might have undercounted job cuts by 824,000. Education sector job losses are biggest on record. Further evidence that monetary policy was tight late last year. More bank losses could be on the way. Why we can't create a liquid housing derivatives market.
Despite the ugly headline numbers, there were at least a couple of rays of hope in other details of this morning's jobs report.
Greenspan says taxes must rise. Bernanke backs council of regulators proposal. Gwyneth Paltrow offers some investment advice. Fiscal multipliers in U.S. have dropped sharply since 1980. Leonhardt: Let's stop arguing about the opt-out revolution.
A philosopher of science critiques the Chicago School and sides with Krugman. Why Greg Ip is a good economics journalist. Robert Shiller thinks home prices will stagnate for 5 years. Plus, what's wrong with Shiller's financial innovations? Krugman and DeLong have good thoughts on policy at the zero bound. An attempt at peer-review of working papers on the web.
An oft-repeated argument against the notion that speculation drove the recent price-spike in oil is that we never saw an increase in oil stockpiles. The logic goes like this: If prices are increasing, then buyers of oil would cut back while producers would pump more to sell at the higher price. Who buys the extra supply? Speculators who hope that prices will go even higher. This process would involve the stockpiling of oil by speculators/manipulators.
Yale's Ray Fair, well-known for his economic model predicting the outcome of presidential elections, has a new forecast out on the macroeconomic effects of large budget deficits -- and it's not pretty: A depreciation of the dollar leads to inflation, as expected, but this is of only modest help regarding the debt problem. It does not appear that the United States can inflate away its debt problem. The picture is worse regarding output if there is a flight from U.S. stocks as well as the dollar. Personal income tax increases and transfer payment decreases have similar effects on the economy.
Joe Stiglitz wants limits on regulatory discretion. Public option dies in the Senate Finance Committee. China's trade surplus is slowly shrinking. S.E.C. watchdog wants overhaul of agency's practices. Price-to-rent ratios return to earth.
Many commentators assume so. But the role of declining lending standards may be overstated. In a new Atlanta Fed paper, Kristopher Gerardi, Adam Shapiro, and Paul Willen take a look at Massachussets home prices over two housing cycles from 1989 and 2008 and conclude that falling home prices (rather than weak underwriting standards) played the key role in the crisis: [H]ad prices not fallen, we would simply not have had a major foreclosure crisis, regardless of whether lenders had lowered underwriting standards in 2003 and 2004.
NY Mag profiles the founder of conspiracy-theory mongering blog Zero Hedge. On the search for fraudulent pollsters. Cleveland Fed says end of Treasury support for Fed won't be inflationary. Robert Shiller defends financial innovation. A case against mortgage securitization. How the Fed's plan to drain reserves could go wrong.
This chart from Princeton's Hyun Shin is the best illustration I've seen of the unsustainability of the boom in the securities sector: In absolute terms, most sectors grew by a factor of 80 between since 1954. But, at its peak, the non-commercial-bank financial sector had grown by a factor of 800. From Shin: The greater detail afforded by the chart in log scale reveals that the securities sector kept pace with the rest of the economy until around 1980, but then started a growth spurt that outstripped the other sectors.