Several new reports released in the past two weeks by the Workers Rights Consortium (WRC), Gender Action, and Better Work Haiti examine working conditions in Haiti’s garment factories and find that most workers are not being paid the wages they are legall

This blog post originally appeared on ThinkProgress. On October 6, 60 Minutes ran a report called “Disability, USA” that relied on anecdotes and misinformation to paint Social Security’s disability programs as wasteful and full of abuse. This comes just a

Dean Baker
Debate Club (U.S. News & World Reports), October 15, 2013

If the government had not been shut down on October 1, the Bureau of Labor Statistics (BLS) would be releasing the consumer price index (CPI) for September this morning. September’s data, together with the data for July and August, provide the basis for the annual cost of living adjustment (COLA) for Social Security.

While we do not yet have September’s data, based on the data from the prior two months, it is likely that the COLA will end up being either 1.5 or 1.6 percent, depending on exactly what the September data show. It is unfortunate that this number is not yet available.

Dean Baker
The Guardian Unlimited, October 14, 2013

There's a lot of silliness going around about how the dollar may lose its status as the world's reserve currency if we default. The ordinarily astute Floyd Norris contributed to this confusion in a column last week implying that we may no longer be able to borrow internationally in dollars if this happened.

In reality, it is unlikely that we do risk being the world's preeminent currency in any plausible scenario. (This is also Norris' conclusion.) Furthermore, the immediate result of this loss of status would be positive in any case.

A first point is useful just for clarification. Being a reserve currency is not a zero-one proposition. The dollar is the preeminent reserve currency, which means that most of the world's reserves (@70 percent, last time I checked) are held in dollars. However other currencies like the euro, the British pound, the Japanese yen, and even the Swiss franc are also held as reserves.

If there was a loss of confidence in the dollar, we are presumably talking about a drop in the ratio of reserves held as dollars. Maybe it would fall to 40 percent, perhaps 30 percent. It is almost impossible it will fall anywhere near zero as long as the United States is in one piece with a functioning economy.

The effect of this loss of confidence would not be to deny the United States the ability to borrow in its own currency. Many countries borrow in their own currency, including countries like Malaysia and Colombia, which are not ordinarily thought of as titans of the world financial system.

Less stable countries typically pay somewhat of risk premium based on the risk of inflation in that country's currency and the risk of the demise of the country (think Yugoslavia). In several cases this risk premium is negative. For example, the interest rates on Japanese, Swedish, and Danish bonds are all lower than the interest rates on U.S. bonds. These countries do not appear to have suffered from not having the world's preeminent reserve currency. 

There is the second issue of the dollar falling in value relative to the currencies of other countries if the dollar loses its status as the preeminent reserve currency. This possibility should be cause for celebration, not fear. First of all, a lower valued dollar was the ostensible goal of both the Bush and Obama administration when they demanded that China and other countries stop "manipulating" their currency.

In this context, "manipulation" means holding down the value of their currency against the dollar. In other words, it means pushing up the value of the dollar. In spite of it being official policy that we want a lower valued dollar we are now supposed to be terrified that we might get a lower valued dollar. Welcome to economics in Washington.

The reason why we would want a lower valued dollar is that it would make U.S. goods more competitive in the world economy. We would cut back our imports and increase our exports. This is hardly a novel theory, this is econ 101. And, in fact the world follows pretty closely on what the textbooks say should happen. The trade deficit exploded in the late 1990s when the value of the dollar soared following the East Asian financial crisis. (This is when developing countries like China first decided that they needed massive amounts of dollar reserves). The trade deficit then shrank in the last decade, with a lag, after the dollar fell in value. The chart shows the non-oil deficit, since we would not expect the demand for oil to be very responsive to the value of the dollar. (The chart does not include the increase in oil exports, since that data was not immediately available when I put the chart together and BEA's website is now down.)

 

Dean Baker
Truthout, October 14, 2013
The Huffington Post, October 14, 2013

Dean Baker
The Hankyoreh (South Korea), October 14, 2013

In a development that has received much media attention, lawyers working on behalf of Haitian cholera victims brought a class action lawsuit against the United Nations on Wednesday over U.N. troops’ role in introducing the cholera bacteria to Haiti three