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.
A potentially telling data point from today's Journal: But some investors don't expect the gains to continue. Barry James, president of James Investment Research in Alpha, Ohio, worries about the recent wave of selling by corporate insiders. Regulatory filings show executives have recently unloaded about $115 in stock in their own companies for each $1 in purchases, a pace unequaled since the market high in October 2007. "Those folks tend to be right in terms of getting out of harm's way," said Mr.
Strong advocates of our new G20 process are convinced that it will bring legitimacy to international economic policy discussions, rule-making, and crisis interventions. Certainly, it’s better than the G7/G8 pretending to run things--after all, who elected them? But who elected the G20? The answer is: No one. And, in case you were wondering, there is no application form to join the G20 (although you can crash the party if you have the right friends, e.g., Spain). The G20 has appointed themselves as the world’s “economic governing council” (to quote Gordon Brown). Is this a good idea? Not reall
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.
Or would that be a lagging indicator? Whatever the case, John Harwood reports in his NYT "Caucus" column that: [S]igns that economic growth is resuming have eased the sense of crisis surrounding Mr. Geithner’s work. The economic 'message' meetings in Mr.
It is easy to dismiss the G20 communique and all the associated spin as empty waffle. Ask people in a month what was accomplished in Pittsburgh and you’ll get the same blank stare that follows when you now ask: What was achieved at the G8 summit in Italy this year? Perhaps just having emerging markets at the table will bring the world closer to stability and more inclined towards inclusive growth, but that seems unlikely. Should we just move on--back to our respective domestic policy struggles? That’s tempting, but consider for a moment the key way in which the G20 summit has worsened our pre
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.
Could the Dems lose the House in 2010? Keynes' "General Theory" was all about rational expectations. And he was right that you could spend your way out of a recession. Significant outflows from mutual funds even as stock prices rise. A primer on how insurance companies make money. Death bonds ain't no mortgage-backed securities.