From Freddie Mac today: Mortgage Rates Continue Upward Trend
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey(R) (PMMS®), showing fixed mortgage rates trending higher for the third consecutive week and putting pressure on refinance momentum. ...
30-year fixed-rate mortgage (FRM) averaged 3.59 percent with an average 0.7 point for the week ending May 23, 2013, up from last week when it averaged 3.51 percent. Last year at this time, the 30-year FRM averaged 3.78 percent.
15-year FRM this week averaged 2.77 percent with an average 0.7 point, up from last week when it averaged 2.69 percent. A year ago at this time, the 15-year FRM averaged 3.04 percent.
Click on graph for larger image.
This graph shows the the 30 year an...more
In In re China Agritech Inc. Shareholder Derivative Litigation, C.A. 7163-VCL (May 21, 2013), Delaware VC Travis Laster has put forward a factually rich and legally detailed analysis of how 220 books...
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Tim Duy:
Bernanke Saves the Day, by Tim Duy: There was some initial consternation
yesterday after Federal Reserve Chairman Ben Bernanke gave the clarity we were
hoping to see. From
Reuters:
"If we see continued improvement and we have confidence that that's going
to be sustained then we could in the next few meetings ... take a step down
in our pace of purchases," he said.
"Next few meetings" sounds like September at the eariliest. Indeed,
September or December are the most likely meetings given both have an associated
press conference.
For financial market participants, I would say this was a mixed message.
Bernanke is dovish if you expect the Fed to move in June, hawkish if December
at the earliest. But imagine the message tha...more
There was some initial consternation yesterday after Federal Reserve Chairman Ben Bernanke gave the clarity we were hoping to see. From Reuters:
"If we see continued improvement and we have confidence that that's going to be sustained then we could in the next few meetings ... take a step down in our pace of purchases," he said.
"Next few meetings" sounds like September at the eariliest. Indeed, September or December are the most likely meetings given both have an associated press conference.
For financial market participants, I would say this was a mixed message. Bernanke is dovish if you expect the Fed to move in June, hawkish if December at the earliest. But imagine the message that would have been delivered to financial markets had Bernanke not spoken ...more
Notice the top headline in the upper left hand corner of this screen capture (5/13/2013 at 11:41 AM). Freudian slip or intentional pun? (Click on image for larger size)
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This is the kind of thing I had in mind when I called for
bold, creative proposals from the Fed to address the unemployment problem.
Via Brad DeLong:
Duncan Black:
Eschaton: Not Too Late For The Helicopters: A big tragedy of the last
few years is the failure to recognize that being in a low inflation world at
the zero lower bound was a tremendous opportunity to massively enhance human
welfare in this country. Mailing out 10 grand checks to everyone would have
been an egalitarian massive boost to the economic well-being of huge numbers
of people. Instead, the Fed has goosed asset prices, mostly benefiting the
rich. Trickle down through another means, but still trickle down. Better
than doing nothing, probably, but there were other ways.
How can you...more
Hazel Meade wrote:
The banning of catastrophic-only plans infuriates me the most. Those are the only plans that are actually financially sensible for a healthy individual to purchase. Everything else on the market is a perverse by-product of the employer-based insurance system.
Worst case scenario with a catastrophic-only plan is you end up with $10,000 in debt. That’s a debt load many times smaller than what the Federal government thinks students should take out to get a college degree. We’ll let you borrow $100,000 to get a sociology degree but, we think that $10,000 is an unconscionable amount to pay for medical expenses? So unconscionable that we have to FORCE YOU to buy a plan with more extensive coverage?
Of course, we all know the real reason for this. it’s...more
Obviously the new home sales report this morning was solid with sales above expectations and significant upward revisions to prior months. I try not to react too much to the month to month ups and downs; the key points right now are that sales are increasing and will probably continue to increase for some time.
Now that we have four months of data for 2013, one way to look at the growth rate is to use the "not seasonally adjusted" (NSA) year-to-date data.
According to the Census Bureau, there were 153 thousand new homes sold in 2013 through April, up about 26.4% from the 121 thousand sold during the same period in 2012. That is a very solid increase in sales, and this was the highest sales for these months since 2008.
Note: For 201...more
A few days ago, I argued for affirmative answer to the question If Obama was CEO of a public corporation and I was the company's general counsel, would I have told him about an audit of misbehaving...
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...more
1. Honeybees trained to find land mines.
2. Felix Salmon on bubbles, and Alen Mattich on bubbles, more from him here. And here is Krugman on the Japanese stock market plunge.
3. Ross Douthat, on the relationship between social and economic inequality.
4. Is this what an interview with a very smart person looks like?
5. On the origins of Paul Scott’s masterpiece.
6. www.thecorner.eu, new English-language site on EU economics, from Spain.
7. Can we improve on the egg carton?
...more
From the Kansas City Fed: Tenth District Manufacturing Survey Improved Somewhat
The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity improved somewhat, rising above zero for the first time in seven months, and producers’ expectations for future activity also increased.
“It was good to finally see a positive number after seven months of modest declines, and for optimism about future activity to return after dropping last month,” said Wilkerson. “Still, activity remains at only about year-ago levels and firms are having difficulty passing cost increases through.”
...more
Dan Drezner is sick of trying to reason with Michael Kinsley:
Sometimes a factual error is just a factual error: I've spent a rather alarming portion of this week wading into intellectual pissing matches, so I'm loath to respond to Michael Kinsley's response to last week's brouhaha over austerity policies. But one paragraph does merit a response. After noting the backlash to his last column, Kinsley writes the following:
There are two possible explanations. First, it might be that I am not just wrong (in saying that the national debt remains a serious problem and we’d be well advised to worry about it) but just so spectacularly and obviously wrong that there is no point in further discussion. Or second, to bring up the national debt at all in such disc...more
Renaissance Macro Research, May 14, 2013
Jeff deGraaf, technician extraordinaire (formerly of Lehman now at Renaissance Macro Research) makes an interesting observation about the heavily overbought markets.
Last week, the S&P500 had ~93% of all stocks trading over their 200 day moving average. Normally, this degree of overbought should lead to a correction. As you can see in the inset box, it sometimes does.
However, if you are looking out a year, we see that over the past 3 instances, markets have been higher.
The takeaway is that you should determine if you are a trader or an investor before thinking about whether to lighten up or add on dips.
Different timelines and holding periods should consider different responses to the volatility.
Note you can ...more
My morning reads:
• Japan’s mini crash: Blame China(FT Alphaville) see also Dumb money returns to Japan (ft.com)
• Extreme Fear (Joe Fahmy)
• Bernanke to Congress: I’m Not the Problem. You Are. (The Fiscal Times) see also Wonkbook: Bernanke lashes Congress (Wonkblog)
• Why Investors Fail (Motley Fool)
• Dudley Says Decision on Taper Will Require 3-4 Months (Bloomberg)
• Investing in Gold: Does It Stack Up? (Knowledge at Wharton)
• Teens are tired of Facebook ‘drama,’ find refuge on Twitter and elsewhere, says Pew (The Verge) see also Teens, Social Media, and Privacy (Pew Internet)
• Six Facts Lost in the IRS Scandal (ProPublica)
• Putting Apple in an Xbox (WSJ) see also The race to a “smart” television is over. Xbox won (pandodaily)...more
Here’s a letter to an e-mail correspondent:
23 May 2013
Mr. Denis D___
Dear Mr. D___:
Thanks for your e-mail explaining your “black hole theory of the minimum wage.R21;
A critical part of your theory, as I understand it (with help from the link you sent to a video of Sen. Elizabeth Warren talking about wages and worker productivity), is that the minimum wage hasn’t risen by as much as has overall worker productivity. Supply and demand, therefore, presumably aren’t working for low-skilled workers.
Ms. Warren and you are correct that worker pay in the long run is determined by worker productivity. The productivity that’s relevant, however, is marginal productivity – namely, the value that ‘the last’ worker added to a...more
Why oh why can't we have a better press corps?
Scott Lemieux:
Did Michael Kinsley Invent the Concept of Same-Sex Marriage?: [T]his great moment in unwarranted self-aggrandizement: "The first known mention of gay marriage is an article (“Here Comes the Groom” by Andrew Sullivan) commissioned by me and published in this magazine in 1989." I… wow. I don’t mean to suggest that the Sullivan article wasn’t important in its way…. But “first known mention?” I don’t know what the very first was, but I do know that there were lawsuits claiming that bans on same-sex marriage were unconstitutional that made it to state appellate courts in Minnesota, Kentucky, and Washington between 1971 and 1974…
The context:
Ben Carson:
Addressing Sean Hannity: Mar...more
… is from Sheldon Richman’s blog post yesterday at Explore Freedom:
Opponents of government regulation argue that artificially raising the costs of manufacturing in poor countries would harm intended beneficiaries by destroying jobs. If so, workers would face worse options, including life on the streets and prostitution.
Unfortunately, the debate is unnecessarily narrow. What needs discussing – and radical changing – is the country’s political-economic system, which benefits elites while keeping the mass of people down. The economists are correct that under the status quo, imposing safety standards would raise costs, cause unemployment, and aggravate poverty. But we can’t leave the matter there. We must go on to examine how the politi...more
Some appealing features of a parliamentary system | MinnPost http://t.co/4RJSNgEHc3 ->
Harassing @TWC about their dumb decision not to carry Premier League Extra Time & NBC LIve Extra next EPL season. ->
Wildfires ahead: SoCal vegetation moisture levels in some inland areas are driest in 100 years – http://t.co/bfFGi0KwRC ->
Vanguard graphic arguing that “low-cost portfolios” is an innovation seeing rapid adoption http://t.co/bo8f6g5x78 ->
.@BrianNorgard US DOE made only two loans to startups under ATVM: one was Fisker; other was Tesla. Not bad for a failed program. in reply to BrianNorgard ->
F-5/EF-5’s and The World’s Deadliest Tornadoes | Weather Underground http://t.co/6I7HXMZTVr ->
Great, albeit abbreviated: Men in Blazers w/ Di...more
While driving yesterday I listened for a while to ESPN radio. Among the topics that the show’s hosts explored was greed – in particular, the “greed” of professional sports franchises such as the Washington Redskins and the New York Yankees to produce and sell to fans ever-more logo-ladened paraphernalia. Some of the radio hosts were more sensible than others, but every one of them assumed without question that “greed” is the appropriate term to use to describe the motivation of owners of pro sports teams to earn more money by supplying more of the likes of baseball caps, jerseys, and jackets emblazoned with team colors and images of team mascots.
All of the hosts agreed that there’s something a bit sleazy and disreputable ab...more
Record Burmese python caught in Florida Guardian (Chuck L)
Trends in Amphibian Occupancy in the United States Plos One via Washington Post (Lambert)
Coral reefs ‘ruled by earthquakes and volcanoes‘ PhysOrg (Chuck L)
Moore Tornado an EF-5; $2 Billion Damage Estimate: 3rd Costliest Tornado in History Wunderground (Lambert)
The Hairy Building that Produces Clean Energy OilPrice
New Documents Reveal How a 1980s Nuclear War Scare Became a Full-Blown Crisis Wired (Chuck L)
“No to Profit”: Fighting Privatization in Chile Boston Review
China factory output hits seven-month low Financial Times
Asian Stocks Drop on China PMI, Fed Stimulus Concerns Bloomberg. Nikkei down 6% as of when I set up this post to launch later, although it came back to a mere negative 5.4%...more
By Yanis Varoufakis, a professor of economics at the University of Athens. Cross-posted from his blog.
Greece’s Prime Minister recently flew to China, to woo Chinese investors. In his bid to be persuasive, he adopted a radical narrative: Greece is a Success Story. A country that almost perished in 2012 is now on the mend; on the road to stabilisation and growth; a wonderful opportunity, currently, for investors to pick up ultra cheap investments and to benefit from the forthcoming growth. How much of this is true, however?
Greek Prime Ministers and Finance Ministers have been upbeat for the past three catastrophic years. Mr Samaras’ narrative is, therefore, neither here nor there per se. Indeed, one may credibly argue that it is his job to put on a brave face and t...more
By Martin Khor, Executive Director of the South Centre, Geneva. Cross-posted from Triple Crisis.
A key threshold measuring the march of global warming was crossed recently, when the concentration of carbon dioxide in the atmosphere topped 400 parts per million.
On 10 May scientists announced that 400.03ppm had been measured at a climate-observing station in Hawaii that is often used as a benchmark. The global average is expected to cross the 400ppm mark in the next year.
This means that there in for every one million molecules in the Earth’s atmosphere, there are 400 molecules of carbon dioxide.
CO2 concentration in the air is linked to the Earth’s temperature. The widely believed relationship is that the 450ppm level should not be crossed if global warming is to b...more
In the wake of the Boston Marathon attack last month, considerable attention is being paid to surveillance cameras, which played a key role in the identification of the two attackers; their identification led within days to the killing of one and the arrest of the other. Had they not been identified, they might have escaped from the Boston area and committed a terrorist attack in New York City or elsewhere.
Many businesses (notably banks) and even homes have surveillance cameras nowadays. Usually they are pointed at the interior of the building though sometimes also or instead at the entrance to or the grounds of the building. These uses of surveillance cameeras are uncontroversial. But there is controversy over surveillance cameras that are owned by or form part of a...more
Commerzbank sees high risk of housing crash in Sweden and Finland. Structural fiscal deficits in Australia: "Ringing the alarm on fiscal policy barely one week after the federal budget, two independent reports from the Parliamentary Budget Office and the federal Treasury reveal a sharp decline in the structure of the budget that will last for most of the decade. The reports show that last week's budget relied on unsustainably high commodity prices to achieve Labor's promised return to surplus in 2015-16, raising the risk of deficits for several years after that." ...more
Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for April showing an increase in sales with total home sales rising 0.6% since March and climbing 9.7% above the level seen in April 2012. Single family home sales also improved climbing 1.2% from March rising 9.0% above the level seen in April 2012 while the median selling price increased a notable 11% above the level seen a year earlier. Inventory of single family homes increased from March to 1.92 million units but still remained 11.9% below the level seen in April 2012 which, along with the sales pace, resulted in a monthly supply of 5.3 months. The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home...more
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications. The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases. The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) jumped 11 basis points to 3.65% since last week while the purchase application volume declined 3% and the refinance application volume dec...more
“He proposed a centi-million dollar dome over downtown”. Who is, Don Atchison. ->
I’ll take “CRAZY CANADIAN MAYORS” for $1,000, Alex. I’m aces at that category. ->
JotD (Job of the Day): Heard by millions of people each week, you’ll get to say, “This is NPR” each day. https://t.co/VHXJANiaFB ->
Poll: Teens migrating to Twitter — Facebook has too much "drama" http://t.co/12BVkrZD36 ->
...more
Lots of Fed chatter in the last week. For openers, some background from Reuters:
It decided on May 1 to keep buying at an $85 billion monthly pace, and many economists say mixed economic data warrants keeping up the purchases through year-end.
But persistent warnings from more hawkish Fed officials had fanned talk that it might start to wind back soon.
The hawkish Fed officials would be Dallas Federal Reserve President Richard Fisher, Philadelphia Federal Reserve President Charles Plosser, and Richmond Federal Reserve President Jeffrey Lacker. These are often colorful voices, but as a general rule are not voices that will hold much sway with regards to the pace of easing. What is much more important is to what extent remaining policymakers are coming along to t...more
The warnings are piling on and on: Chinese banks, corporations, and local governments have too much debt.Korean real estate: mixed signals. "The housing market shows clear signs of bottoming out, with three key indicators ― trade volume, sales prices and rent ― pointing to an upturn in April.""Major Korean building firms suffered huge losses in the first quarter of this year. [...] The loss is attributable to unexpected increases of raw materials prices at project sites overseas, combined with dwindling orders at home."Why rational people buy into conspiracy theories: powerlessness, confirmation bias, and tribalism on the internet....more
By Michael Pettis
One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings. By coincidence there was recently a very interesting debate on the subject involving several economists, and it is pretty clear from the debate that even accounting identities can lead to confusion.
The difference between household and national savings matters because of the impact of national savings on a country’s current account, as I discuss in a recent piece in Foreign Policy. In it I argue that we often and mistakenly think of nations as if they were simply very large households. Because we know that the more...more
Surveillance cameras, tax reporting, Internet-based data,
emails, mobile phone records and their cameras are some of the more salient modern
ways that provide information on individuals and organizations. Few object when
banks and other organizations use surveillance cameras on their premises to
deter theft and robbery. There is much greater concern when Internet companies
like Google and Facebook use their vast stores of data to learn about the interests
and other personal information, of the millions of individuals who use their
services. Probably, however, the most serious threat is the misuse of “big data”
by governments, including democratic governments.
This past week the possible misuse of extensive data by the
Internal Revenue Service and the Justice Departm...more
Several of my colleagues on the Harvard faculty have recently been casualties in the cross-fire between fiscal austerians and stimulators. Economists Carmen Reinhart and Ken Rogoff have received an unbelievable amount of press attention, ever since they were discovered by three researchers at the University of Massachusetts to have made a spreadsheet error in the first of two papers that examined the statistical relationship between debt and growth. They quickly conceded their mistake.
Then historian Niall Ferguson, also of Harvard, received much flack when — asked to comment on Keynes’ famous phrase ”In the long run we are all dead” — he “suggested that Keynes was perhaps indifferent to the long run because he had no childr...more
The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated worsening for the national economy with the index falling to a weak level of -0.53 from a level of -0.23 in March while the three month moving average declined to a level of -0.04. The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”. The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth. A value at or below -0.70 for the thr...more
Last year, we saw a sea change in official German policy regarding the euro crisis and inflation. The German government came out in favour of accepting higher inflation domestically in Germany as a sacrifice for eurozone wage and price adjustments to help alleviate crisis. The question is whether this matters. I believe it does, but only in part.
I am writing this in part because of a back and forth between Ryan Avent on Free Exchange and Paul Krugman at the New York Times and Tyler Cowen and Alex Tabarrok at Marginal Revolution where I think some of the assumptions made about German policy views on inflation are incorrect.
The general consensus about the euro crisis is that it involves three separate adjustments beyond bank and private sector balance sheets. And thes...more
Urban Dictionary: Highlingual – The belief that, when high, you can speak two or more languages http://t.co/F9sjt3Y77j ->
There hitherto unplumbed relationship between football passing direction and politician orientation http://t.co/14SOuKvnIS ->
Oh, ugh: Psychology tops SDSU list of most popular degrees among 2013 graduates – http://t.co/wrikqz1606 ->
That sound you hear is every VC in US rummaging thru portfolio for SFTTCSYBITL (Some Fucking Thing They Can Sell Yahoo Before It’s Too Late) ->
To paraphrase P.J. O’Rourke, giving money and an impatient board to a tech exec is like giving whiskey and car keys to teenage boys. ->
Dear Google: Tumblr is … ? http://t.co/ZU7SjNob61 ->
My learnings today: “skullduggery” has its origins...more
I am traveling today, so only have time to complain about some themes I keep coming across when reading the press and speaking to people out in the real world. No links.
1. There is no reason at all for the ECB to look around for transmission mechanisms to boost the eurozone economy. Europe is in recession because the ECB WANTS IT TO BE IN RECESSION. Yes, the ECB doesn’t know that it wants a recession, but the NGDP growth it is producing will inevitably produce a recession in the eurozone. OK, they aren’t even targeting NGDP, but the highly flawed CPI including oil and VAT that they are trying to hold well below 2% will inevitably produce the sort of slow NGDP growth that will inevitably produce recession.
2. The ECB is not at the zero bound. O...more
The Dollar continues to gain despite the supposed "Great Debaser" Federal Reserve Chairman Ben Bernanke bringing us multiple rounds of quantitative easing:
Just sayin....
Editors note: Moody’s released the following press release yesterday in conjunction with a ratings action it took on Turkish sovereign debt.
Moody’s Investors Service has today upgraded Turkey’s government bond ratings by one notch to Baa3 from Ba1, and has assigned a stable outlook.
The key drivers for today’s rating action are:
1. Recent and expected future improvements in key economic and public finance metrics.
2. Progress on structural and institutional reforms that Moody’s expects will reduce existing vulnerabilities to shocks to international capital flows over time.
Moody’s decision to assign a stable outlook on Turkey’s ratings reflects the rating agency’s expectation of continued prudence in the management of...more
Japan’s new GDP numbers look a bit puzzling:
Japan’s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami.
Gross domestic product rose an annualized 3.5 percent, a Cabinet Office release showed in Tokyo. Private consumption, making up 60 percent of GDP, contributed 2.3 percentage points to the jump. The Bank of Japan may upgrade its assessment of the economy after a May 22 policy meeting, according to people familiar with the central bank’s discussions.
. . .
Annualized real growth exceeded all but two of 36 estimates in a Bloomberg News survey. Nominal GDP, which is unadjusted for changes in prices, rose 1.5 percent, also the mo...more
The Atlanta Fed’s May survey of businesses showed little overall concern about near-term inflation. Year-ahead unit cost expectations averaged 2 percent, down a tenth from April and on par with business inflation expectations at this time last year.
OK, we’re going to guess this observation doesn’t exactly knock you off your chair. But here’s something we’ve been keeping an eye on that you might find interesting. When we ask firms about what role, if any, labor costs are likely to play in their prices over the next 12 months, an increasing proportion have been telling us they see a potential for upward price pressure coming from labor costs (see the chart).
(enlarge)
To investigate further, we posed a special question to our Business Infla...more
I am proud to say I learned my econometric from Art Goldberger, who had little use for R-squared.Anyway, a smart friend of mine (who works in industry and therefore might not want to be named) pointed out that he could probably fit the brushstrokes of a Jackson Pollack painting with a 17 degree polynomial and get an excellent R-squared. But he still couldn't predict what a next brush stroke might look like....more
Last month, I had the pleasure of hearing Christy Romer give a great talk about Japanese monetary policy at the NBER Macro Annual conference. You can now read it here....more
On Friday, my colleague Julie Hotchkiss shared in this space the results of her new research (with Fernando Rios-Avila, a Georgia State University colleague) on the recent and prospective behavior of the labor force participation rate (LFPR). The punch line, from my point of view, is this:
Our results suggest that relative to the average LFPR over the years 2010–12, the average LFPR over the years 2015–17 will rise by about a third of a percentage point—again, if the labor market returns to prerecession conditions. (Italics original)
As Julie notes:
[T]he Federal Open Market Committee has substantially raised the stakes on disentangling...movements in labor force participation...by introducing into its policy deliberations concepts like unemployme...more
In a recent blog post, Paul Krugman writes:As far as I know, among basic textbooks only Krugman/Wells even talks about the liquidity trap.This is probably a true statement. It is not that other books don't cover the topic, however. It is just that Paul Krugman doesn't know it.FYI, here is what the leading introductory text says about the topic:The Zero Lower Bound As we have just seen, monetary policy works through interest rates. This conclusion raises a question: What if the Fed’s target interest rate has fallen as far as it can? In the recession of 2008 and 2009, the federal funds rate fell to about zero. What, if anything, can monetary policy do then to stimulate the economy? Some economists describe this situation as a liquidity trap. Accord...more
During the past 30 years tuition at American colleges has
been growing at a fast pace. The increase has been greatest at 4-year private
colleges and universities, and least at 2-year public colleges, but all college
categories have had large tuition increases. For example, real tuition at the
4-year private colleges has more than doubled since 1980, while tuition at
2-year public colleges increased by over 50%.
Many commentators have criticized these large tuition
increases. Colleges and universities are said to be too greedy and are charging
what the traffic will bear, or colleges are
claimed to conspire together to increase tuition. Although colleges do conspire
on some financial issues, such as agreeing through the NCAA to prevent payments
to college athletes, cons...more
A commenter asked me to do a post on what would have happened if NGDP targeting had been put into effect in mid-2008.
The immediate effect would have been a boom in asset prices, and most likely Lehman would not have failed. The big financial crisis of October 2008 would not have happened. In other words, macroeconomic conditions in 2009 would have played out much like the consensus of economists expected in mid-2008—nothing special.
But let’s say I’m wrong, what then?
1. A sharp drop in demand for credit due to the real estate crash. Note that “demand” is a misleading term, as some of the drop comes from tighter lending standards. This drop in demand for credit would sharply reduce real interest rates in the US, which would reduce the va...more
It's not often that the mainstream media is interested in the nuances of labor market statistics, so last week’s debate over the meaning of labor force participation rates (LFPR) in the pages of the Washington Post and the Wall Street Journal was music to this labor economist's ears.
Sparked by an article by Ben Casselman in his April 29 Wall Street Journal Outlook column, the ensuing back and forth (here, here, here, and here) between Casselman and the Post’s Jim Tankersley focused on what has become a central preoccupation in assessing the likely course of the labor market: Is the recent decline in the labor force participation rate the result of structural factors (e.g., an aging population) or cyclical ones (such as weak economic conditions)? Almost con...more
Today’s House Committee on Oversight and Government Reform hearing on Benghazi:
Exposing Failure and Recognizing Courage chaired by Rep. Darrell Issa raised more questions than it
answered. These are not questions about the assault on Benghazi or the response
to the events, but rather questions on the process and rationale behind the hearing.
The tragic Benghazi
attack has been thoroughly examined and has established a record with more
than 30 hearings, interviews and briefings with senior government
officials – including high-profile hearings with former Secretaries Clinton and
Panetta as well as Chairman of the Joint Chiefs of Staff Martin Dempsey; the
review of more than 25,000 pages of documents; and a thorough
investigation by an Account...more
The World Economics Association recently interviewed me on the state of economics, inquiring about my views on pluralism in the profession. You can find the result on the WEA's newsletter here (the interview starts on page 9). I reproduce it below.
1. How would you briefly state your perspective on economics?
I would say I am pretty conventional and mainstream on methods, but generally much more heterodox on policy conclusions. I have never thought of neoclassical economics as a hindrance to an understanding of social and economic problems. To the contrary, I think there are certain habits of mind that come with thinking about the world in mainstream economic terms that are quite useful: you need to state your ideas clearly, you need to ensure they are internall...more
The recent surge in interest in Nominal GDP Targeting, as an alternative to money targeting or inflation targeting if the central bank is to commit to a nominal target of some sort, has prompted some pushback. This is not surprising. But one of the responses is most peculiar. This is the allegation (1) that the surge comes from liberals opportunistically adopting an idea that was originally proposed by conservatives, and (2) that they will not stick with this “fad” in the longer run because it is only designed to fit current circumstances of high unemployment and low output. Remarkably, every component of this argument is wrong.
I have in mind, especially, the views of Benn Steil and Dinah Walker of the Council on Foreign Relations, as expresse...more
I thought I’d quickly highlight a point made recently by two great posts. First, here’s J.W. Mason:
There is increasing recognition in the mainstream of the importance of hysteresis — the negative effects on economic potential of prolonged unemployment. There’s little or no discussion of anti-hysteresis — the possibility that inflationary booms have long-term positive effects on aggregate supply. But I think it would be easy to defend the argument that a disproportionate share of innovation, new investment and laborforce broadening happens in periods when demand is persistently pushing against potential. In either case, the conventional relationship between demand and supply is reversed — in a world where (anti-)hysteresis is import...more
Many of our debates about America's role in the world are merely different ways of asking how goody-goody we should be when faced with others' unruliness? This question is at the heart of a Jim Traub post a couple weeks ago on "Limits of Leading by Example." The piece asks whether President Obama's climb toward the nonproliferation moral high ground has gotten him anywhere. Do good deeds such as negotiating New START, narrowing doctrine for n-weapons in the Nuclear Posture Review -- and the yet-to-be-announced, though rumored, further reductions in the US arsenal -- help the United States gain others' cooperation?
Traub offers interesting thoughts about the special challenges posed by a troglodyte regime like North Korea. He also, ...more
This is so absolutely brilliant and important:
“One thing that experts know, and
that non-experts do not, is that they know less than non-experts think they do.”
It comes from Kaushik
Basu, currently chief economist at the World Bank and one of the world’s
most thoughtful expert-economists.
Economists would be so much more honest (with themselves and
the world) if they acted accordingly – letting their audience know that their results
and prescriptions come with a large margin of uncertainty. Public intellectuals would do so much less
damage if they did likewise. And if
experts are not aware of the limits of their knowledge – well, they do not
deserve to be called experts or intellectuals.
The real point, though, is that the other side –
j...more
A useful way to understand the pickle we’re in, I think, is that we are suffering from the so-called “resource curse”. If you are unfamiliar with the phrase, R20;resource curse” refers to the regularity with which countries “blessed” with abundant natural resources end up as dystopian polities with dysfunctional economies. Nigeria has a lot of oil but no one wants to live there.
The resource curse is pretty easy to understand. It’s not associated with just any sort of natural resource. Switzerland has beautiful mountains and stuff that people would pay a lot of money for, but it is still well-governed. Accursed resources are of a very particular type. They are valuable tradable goods the extraction of which requires a smal...more
This post was writtenby James Lamond and Bill French
Events and reports are coming out of Boston rapidly. Much of what we hear in the next few hours will be refined and corrected. This week’s media coverage has been a reminder of the need to wait until the facts are in before jumping to conclusions, speculation and accusations. However, it can be helpful to think through what questions need to be answered in the near term, what this means for the investigation and what lessons can be learned. Many of these questions are based on early reporting and speculation and may prove to be void in the coming days.
Did the Tsarnaev Brothers act alone? There have been reports about a third accomplice involved. Clearly if that is the case the manhunt will extend to that individu...more
My two cents:Within the past day or so, economics conversations have been all about Rogoff and Reinhart and their critics, Herndon, Ash and Pollin. The Rogoff and Reinhart (RR) paper purported to show that countries with more debt grow more slowly than countries with less; Herndon, Ash and Pollen (HAP) show that Rogoff and Reinhart’s data contains mistakes, and there is not much dispute about whether Herndon, Ash and Pollin’s corrections are right–they are.HAP also do a pretty good job of showing that connections between debt to gdp ratio are not robust–they are sensitive to time period and country. But they do not ask the question about direction of causality between debt and growth (page 3):For the purposes of this discussion, we fol...more
An amazing thing has happened over the last five years. Against all expectations, American emissions of carbon dioxide into the atmosphere, since peaking in 2007, have fallen by 12%, back to 1995 levels. (As of 2012. US Energy Information Agency). How can this be? The United States did not ratify the Kyoto Protocol to cut emissions of greenhouse gases below 1997 levels by 2012, as Europe did.
Was the achievement a side-effect of reduced economic activity? It is true that the US economy peaked in late 2007, the same time as emissions. But the US recession ended in June 2009 and GDP growth since then, though inadequate, has been substantially higher than Europe’s. Yet US emissions continued to fall, while EU emissions began to rise again...more
My newest Project Syndicate column is on the BRICS. These countries – Brazil, Russia, India,
China, and South Africa – have little in common. Most prognostications
suggested they would agree on very little. Yet they have surprised the world by
proposing a New Development Bank to focus on infrastructure finance.
This is a beginning, but is it a useful one? I suggest not.
What the world needs from the BRICS is not another
development bank, but greater leadership on today’s great global issues. The
BRICS countries are home to around half of the world’s population and the bulk
of unexploited economic potential. If the international community fails to
confront its most serious challenges – from the need for a sound global
economic architecture to addressing...more
Steve Roth (1, 2), Scott Sumner (1, 2, 3), Bill Woolsey, and Matt Yglesias have been debating questions of saving versus investment and paradoxen of thrift. See also JW Mason in the comments here, and Simon Wren-Lewis a while back. Cullen Roche reminds us that, even under conventional definitions, the accounting identity S≡I only holds for a closed economy without government spending, and of JKH’s useful tautology S=I+(S-I). [See Update below.] I think the recent recrudation of these issues owes something to Garett Jones’ and my conversation on capital taxation, which Jones has continued and on which Matt Bruenig has weighed in.
As is often the case, I think that the protagonists agree more than we think we do. Our various allegiances — to sch...more
To me, the central issue raised by this week's Cyprus debacle is how it has affected confidence across the eurozone. To what degree has the possibility of insured depositors at a eurozone bank losing a portion of their deposits affected the mindset of depositors? To what degree has ECB acquiescence to this possibility undermined the notion that deposit insurance in the eurozone means the same thing in all countries? And to what degree has the ECB's direct threat to end support for Cyprus's banking system in the event that the government of Cyprus can not arrange sufficient funds to meet its conditions made a farce of its earlier promise to "do whatever it takes to preserve the euro"?These, to me, are the interesting questions prompted by this week's ev...more
Note on this post:In the last while we have been provided with plenty of fodder for reflections on the virtual society. A virtual girlfriend that is (surprise) not real; a new product to help connect the dots across our indelible social network footprints; another product gathering steam that allows us to create footprints that, like those of real humans, wash away. (On the last two, here is a great article, crumbling footprints and all). A few months ago I had a post on the short stories of Borges, highlighting how various of his stories foreshadow issues of the virtual age, specifically the emergence of the double, i.e., a real and virtual self, and the problems that come with perfect memory and complete knowledge, which, though of course never obt...more
The International Olympic Committee has announced that wrestling will be removed from the summer games starting in 2020. I find this decision incomprehensible. I can only rationalize it if I rethink the Olympics as, well, some grand-scale ratings event. But if it has to do with athletics, and if it seeks to maintain a thread of history extending back to the Athenian Olympics, this decision is nonsensical.In the meantime, we have golf enter the Olympics. Not too many years ago that would have been thought to be a joke. For others, like tennis and soccer, the Olympics is overshadowed by other tournaments. Who would rather win the Olympics than Wimbledon or the World Cup? And yet others, like swimming, have become a numbing presence. We are treated to just about every pos...more
In the first paragraph of my book A Demon of Our Own Design(Wiley, 2007) I observe that “You don't deliberately obliterate hundreds of billions of dollars of investor money. And that is at the heart of this book – it is going to happen again. The financial markets that we have constructed are now so complex, and the speed of transactions so fast, that apparently isolated actions and even minor events can have catastrophic consequences.” I then spend a significant portion of the book explaining the mechanics that lead the financial markets to lurch from crisis to crisis; why is it that while engineering in other fields increases safety, financial engineering seems to make things get worse. I suggest that the problem stems from the complexity and tight coupling that...more
The big economic news of the week was, in fact, big economic news: the Fed's announcement of significant changes from past practice in the the quantity of its next round of large scale asset purchases ("unlimited"), and in the timing of any future reversal of this expansionary policy ("a considerable time after the economic recovery strengthens").I view this as a pretty fundamental shift in how the Fed hopes to affect the economy. Rather than trying to push economic activity one way or the other through its management of interest rates (which can alter economic activity through its portfolio-rebalancing and wealth effects, for example), the Fed is now quite explicitly trying to affect economic activity by altering interest rate and inflation expectations. As...more
Another jobs report in the US, another month where part of the private sector's job creation was undone by continued job destruction by the government sector. The 15,000 additional jobs lost in April brings total job losses in the government sector since January 2010 to over 500,000. While the US has not quite been experiencing European-style austerity over the past two years, that's still a pretty tough headwind to fight as it emerges from recession. ...more
You could think of the Aspen IDEA report published today as a letter to the head of the International Telecommunications Union, Hamadoun Touré, suggesting that he should reconsider his intent to put the "light touch" of government on the Internet's operations.
M. Touré will be running a major meeting of world governments in Dubai at the end of this year. The Dubai meeting, known as WCIT 12, may have an agenda that is a light touch only if that's what you can call a grab for the jugular vein of the Internet. The issues may include a "per click" tax on international Internet traffic, individual nation state regulation identities to online activity, national encryption standards to allow government surveillance, and multinational governance of the Internet. Russia, Chi...more
The political battle lines are being drawn for the general election debate over foreign policy and national security, and you can't do much better than my fellow Democracy Arsenal blogger Michael Cohen for a guide. One key theme of Michael's latest column for ForeignPolicy.com is what a difference it makes for a candidate to bear the responsibility of governing, or on the other hand, campaign to be commander in chief on the basis of self-serving pot shots. My only quibble regards how Romney's reed-thin foreign policy argument will fare with voters. Take Michael's analysis of Romney's potential advantage in the debate on Iran:
He can simply lob rhetorical haymakers that hype up the threat of an Iranian bomb or offer Churchillian declarations about his intention to stop...more
Hoping to head off alumni resistance to the brand-new "Yale-National University of Singapore" college that the Yale Corporation has created somewhat stealthily in collaboration with the government of that authoritarian city-state, Association of Yale Alumni chairman Michael Madison has inadvertently demonstrated one of the ways Yale College is being transformed from a crucible of civic-republican leadership, grounded in liberal education, into a global career-networking center and cultural galleria for a new elite that answers to no polity or moral code:
STATEMENT OF THE OFFICERS OF THE AYA BOARD OF GOVERNORS,
Michael Madison, Chair of the Board
"All Yale-NUS College graduates will be warmly welcomed as a part of the Yale alumni community. They will also be invited...more
Edwin G. Dolan is an economist and educator with a Ph.D. from Yale University. Early in his career, he was a member of the economics faculty at Dartmouth College, the University of Chicago, and George Mason University. From 1990 to 2001, he taught in Moscow, Russia, where he and his wife founded the American Institute of Business and Economics (AIBEc), an independent, not-for-profit MBA program. Since 2001, he has taught at several universities in Europe, including Central European University in Budapest, the University of Economics in Prague, and the Stockholm School of Economics in Riga, where he has an ongoing annual visiting appointment. During breaks in his teaching career, he worked in Washington, D.C. as an economist for the Antitrust Division of the Department of Justice and as a regulatory analyst for the Interstate Commerce Commission, and later served a stint in Almaty as an adviser to the National Bank of Kazakhstan. When not lecturing abroad, he makes his home in San Juan Islands, Washington.
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