Archive for the ‘economy’ Category
Posted by Charles II on August 7, 2015
Heather Stewart, The Guardian:
Fresh evidence of the dramatic impact of the Greek debt crisis on the health of the country’s finances has emerged, with official figures showing tax revenues collapsing.
As talks continued over a proposed €86bn third bailout of the stricken state, the Greek treasury said tax revenues were 8.5% lower in the first six months of 2015 than the same period a year earlier. The bank shutdown that brought much economic activity to a halt began on 28 June.
Public spending fell even more dramatically, by 12.3%, even before the new austerity measures the prime minister Alexis Tsipras has been forced to pass to win the support of his creditors for talks on a new bailout.
To recap: public spending fell and tax revenues fell. In Keynesian theory, this is understood as a decline in demand causing a decline in sales, incomes, and other taxable events. To Austerians, this is proof that the degree of austerity was insufficient.
Posted by Charles II on July 20, 2015
People have been roasting Paul Krugman because he advocated that Greece give the EZ the finger and then saying he questioned the government’s competence when it failed to do so.
Ben Bernanke, Brookings:
This week the Greek parliament agreed to European demands for tough new austerity measures and structural reforms, defusing (for the moment, at least) the country’s sovereign debt crisis. Now is a good time to ask: Is Europe holding up its end of the bargain? Specifically, is the euro zone’s leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations.
What Bernanke is saying is that unless there’s a major course correction, Europe is likely to fall apart. But he manages to say it soothingly, talking about taking regional growth and trade balance into consideration when demanding a timetable for fiscal balance. As Krugman points out, he’s calling the German approach to Greece as based on a far more Serious level of incompetence than negotiating without a parachute during freefall. Bernanke just knows how to say it more soothingly.
It’s a shame that Bernanke won’t set his hair on fire, which is what the situation calls for.
Posted by Charles II on July 13, 2015
Interview with Varofiakis here:
HL: What was it like? Did you like any aspect of it?
YV: Oh well a lot of it. But the inside information one gets… to have your worst fears confirmed … To have “the powers that be” speak to you directly, and it be as you feared – the situation was worse than you imagined! So that was fun, to have the front row seat.
HL: What are you referring to?
YV: The complete lack of any democratic scruples, on behalf of the supposed defenders of Europe’s democracy. The quite clear understanding on the other side that we are on the same page analytically – of course it will never come out at present. [And yet] To have very powerful figures look at you in the eye and say “You’re right in what you’re saying, but we’re going to crunch you anyway.”
HL: You’ve said creditors objected to you because “I try and talk economics in the Eurogroup, which nobody does.” What happened when you did?
YV: It’s not that it didn’t go down well – it’s that there was point blank refusal to engage in economic arguments. Point blank. … You put forward an argument that you’ve really worked on – to make sure it’s logically coherent – and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply. And that’s startling, for somebody who’s used to academic debate. … The other side always engages. Well there was no engagement at all. It was not even annoyance, it was as if one had not spoken.
Posted by Charles II on April 24, 2015
Lawrence Fink, CEO of Blackrock, is one of the great pirates of our age. So, when even he is saying that executives are looting their companies and destroying the middle class, maybe someone will listen. Rex Nutting, Marketwatch:
There’s something seriously wrong with an economy that nurtures a few billionaires but can’t sustain the middle class.
Last week, the CEOs of America’s 500 biggest companies received a letter from Lawrence Fink, CEO of BlackRock BLK, +0.25% the largest asset manager in the world, saying exactly the same thing.
“The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” Fink wrote, adding that favoring shareholders comes at the expense of investing in “innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth.”
In case you have forgotten who Larry Fink is, click here.
Posted by Charles II on October 6, 2013
Not a big move so far. But a roughly three-quarter point drop in S&P futures for a Monday does not bode well. And Asia ex-Shanghai looks to go red. I would not be surprised to see the markets down 2 percent on Monday, though of course that’s pure speculation.
And then there’s this Reuters piece:
While most on Wall Street continue to believe it very unlikely the United States will default on its debt later this month, banks and securities firms are already gearing up for how to handle any U.S. Treasuries tainted by missed payments.
Borrowing costs could surge for businesses and consumers and the stock market could plunge. The Treasury warned on Thursday that a default could trigger a financial crisis and the worst recession since the Great Depression.
SIFMA will be on high alert for a default beginning on October 16, the day before the Treasury says it might be forced to stop adding to the national debt.
Playing with nitroglycerin is so much fun… according to the Republican Congress.
And then there’s this:
Art Cashin says traders have a very cynical explanation for why the government shutdown fight hasn’t been resolved yet.
Cashin, UBS’ director of floor operations at the NYSE, told CNBC’s Bob Pisani around midday that “they don’t want to cut it off because both sides are getting partisan donations pouring like a water faucet in as long as they go nose to nose.”
Cashin predicts that once the contributions start to dry up, Congress will go back to “doing the people’s business.”
Posted by Charles II on October 2, 2013
XE.com has picked up Bonddad and his trusty sidekick, New Deal Democrat. Bonddad:
About a year ago, I received a communication from the website XE.com who wanted to add economic commentary to their website. We exchanged a few emails about the possibility, but the negotiations slowed at the beginning of the year. Over the last few months they picked up again culminating in our signing contracts with them to provide content. And the best part is we’re finally getting paid! On top of that, they have over 14 million hits per month on their website, so our visibility will increase. And we’ll eventually be doing podcasts. I’ll be doing one/week that focuses on international developments while NDD and I will be doing a bi-weekly podcast on the US economy.
Posted by Charles II on May 9, 2013
Reinhart and Rogoff have re-done their calculations regarding debt and growth:
Setting the noise aside, growth in the high-debt category is less than half of what it averages for the low-debt category. [note: this quote just refers to post-war economies, but their longer data series shows the same effect]
But actually, what this shows is that the noise caused by the details of the model is larger than the effect being studied. Yes, debt reduces growth. But to say that there is a debt “cliff” is indefensible.
More as reaction becomes available, maybe.
Update: for the record, two other papers on the effects of debt.
Cechetti et al., concluding that above 85% debt/GDP, a 10% increase in debt reduces growth by 1%.
Arcand et al., concluding that when private sector debt exceeds 80-100% of GDP, it begins to impact growth.
Posted in economy | Comments Off on More on Reinhart, Rogoff, and whether there is a debt “cliff”
Posted by Charles II on May 3, 2013
The fact is that Carmen and Ken are fine economists. Carmen has been doing terrific empirical work on banking crises for a long time. Ken is arguably the world’s leading international macroeconomic theorist. In fact, the main reason I knew that the case for fiscal policy remained strong even in the context of New Keynesian models was that I carefully read the canonical text by Obstfeld and Rogoff.
So what happened here? My interpretation is that after writing a very good book, R-R dashed off a careless paper on debt and growth that was so much what the VSPs wanted to hear that it made them instant celebrities in a way they hadn’t been before — and they didn’t know how to say stop the merry-go-round, we want to think about this a bit harder. The temptation involved was one of fame and becoming a part of the alleged real world, not some crude mercenary consideration.
The Reinhart-Rogoff rehabilitation tour has been really depressing. There are a number of routes they could have gone; unfortunately, they seem addicted to the notion that they can end the discussion by arguing with straw men.
There should be a serious investigation of how these errors crept into Reinhart and Rogoff’s work. They have been a poor example to younger researchers of the proper response to finding error in one’s work, responding with arrogance and defensiveness when they should have apologized for all the harm their work has caused.
But Krugman doesn’t think they should be accused of fraud, and–at this point–neither do I. Even though the selective use of data ought to be scrutinized very closely.
Posted by Charles II on January 4, 2013
Sometimes a piece of snark is so good that you know it will be remembered as best-in-class. Now, you must know that there is a site called Shadowstats, written by John Williams, which has been claiming that inflation is running much higher than the government says it is. Not only has the BLS delivered a convincing rebuttal, the claims do not pass the common sense test. They predict, for example, that American incomes fell disastrously during the 1990s (because inflation, Williams says, was very high).
So, in a long, detailed discussion on inflation and why it has not re-appeared during this period of quantitative easing as the inflationistas have predicted, James Hamilton of Econbrowser said this:
I also like Paul Krugman’s suggested inflation measure– the change over time in the dollar price for a one-year subscription to Shadowstats. Six years ago, it would cost you $175 to get a one-year subscription. For 2013, Shadowstats is offering a one year subscription for … $175.
Well, ok. Krugman wins the award, and it was in 2012. But Hamilton gets an assist.