A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
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My guess is that many people reading this NYT article on Europe’s GDP growth will think that its 0.6 percent rate was only slighly better than the anemic 0.5 percent rate the U.S. had just reported for the first quarter. Actually, it is a lot better, because the the European Union (EU) rate is a quarterly growth rate, while the U.S. rate is an annualized growth rate. If the EU growth rate were also annualized, it would be approximately 2.4 percent.
In Europe and many other parts of the world it is standard to report growth figures at quarterly rates. In the United States they are always reported at annualized rates. This is no big deal as long as everyone is clear which rates they are using, but it is likely that many NYT readers will see the 0.6 percent figure and assume it is an annualized number. (The piece does indicate it is quarterly growth.)
The simplest solution would seem to be to just report all numbers as annual rates. It’s a pretty simply conversion that NYT economics reporters should be able to do in a second.
My guess is that many people reading this NYT article on Europe’s GDP growth will think that its 0.6 percent rate was only slighly better than the anemic 0.5 percent rate the U.S. had just reported for the first quarter. Actually, it is a lot better, because the the European Union (EU) rate is a quarterly growth rate, while the U.S. rate is an annualized growth rate. If the EU growth rate were also annualized, it would be approximately 2.4 percent.
In Europe and many other parts of the world it is standard to report growth figures at quarterly rates. In the United States they are always reported at annualized rates. This is no big deal as long as everyone is clear which rates they are using, but it is likely that many NYT readers will see the 0.6 percent figure and assume it is an annualized number. (The piece does indicate it is quarterly growth.)
The simplest solution would seem to be to just report all numbers as annual rates. It’s a pretty simply conversion that NYT economics reporters should be able to do in a second.
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Neil Irwin noted the incredibly weak productivity growth of the last six years and then considered three possible explanations. Unfortunately, he left out what may be the plausible one: labor is cheap.
The high unemployment of the last seven years has left many people desperate for work. As a result, they are willing to work for very low wages. If businesses can get people at very low wages, they don’t mind having them do relatively low productivity tasks. For example, Walmart will have large numbers of workers standing around waiting to help customers. Convenience stores will remain open all night even though only a few people an hour may come in between midnight and 5:00AM.
If these stores had to pay workers higher wages, then many of these jobs would disappear. This would raise average productivity by eliminating many of the least productive jobs. If the Fed doesn’t raise rates to reduce the pace of job creation, we may get a chance to test this theory.
Neil Irwin noted the incredibly weak productivity growth of the last six years and then considered three possible explanations. Unfortunately, he left out what may be the plausible one: labor is cheap.
The high unemployment of the last seven years has left many people desperate for work. As a result, they are willing to work for very low wages. If businesses can get people at very low wages, they don’t mind having them do relatively low productivity tasks. For example, Walmart will have large numbers of workers standing around waiting to help customers. Convenience stores will remain open all night even though only a few people an hour may come in between midnight and 5:00AM.
If these stores had to pay workers higher wages, then many of these jobs would disappear. This would raise average productivity by eliminating many of the least productive jobs. If the Fed doesn’t raise rates to reduce the pace of job creation, we may get a chance to test this theory.
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Sorry couldn’t resist, but the lecture on why we should not care about manufacturing jobs from Eduardo Porter brought it out in me. Porter makes many valid points. Manufacturing has been declining as a share of total employment in the United States for half a century. The same is happening almost everywhere else in the world. And, he’s right that the main cause has been productivity growth.
But that doesn’t change the fact that the huge explosion in the trade deficit in the decade following 1997 led to a collapse of manufacturing unemployment. This drop in employment had a huge impact on large segments of the workforce.
Manufacturing Employment
Source: Bureau of Labor Statistics.
The surge in the trade deficit, which did not have to happen (i.e. it was the result of policy) and could be reversed, cost 20 percent of manufacturing employment in a very short period of time. It is reasonable for politicians to talk about this policy even if the pundits don’t like it.
The other point is that opponents of “walls” should pay attention to patents. These are not god-given or natural features of the market. U.S. policy has been focused on making patent and copyright protection longer and stronger for the last four decades. To engage in this sort of policy and then wonder why income is being redistributed upward is a bit like filling a body with bullets and then wondering why the person is dead.
Sorry couldn’t resist, but the lecture on why we should not care about manufacturing jobs from Eduardo Porter brought it out in me. Porter makes many valid points. Manufacturing has been declining as a share of total employment in the United States for half a century. The same is happening almost everywhere else in the world. And, he’s right that the main cause has been productivity growth.
But that doesn’t change the fact that the huge explosion in the trade deficit in the decade following 1997 led to a collapse of manufacturing unemployment. This drop in employment had a huge impact on large segments of the workforce.
Manufacturing Employment
Source: Bureau of Labor Statistics.
The surge in the trade deficit, which did not have to happen (i.e. it was the result of policy) and could be reversed, cost 20 percent of manufacturing employment in a very short period of time. It is reasonable for politicians to talk about this policy even if the pundits don’t like it.
The other point is that opponents of “walls” should pay attention to patents. These are not god-given or natural features of the market. U.S. policy has been focused on making patent and copyright protection longer and stronger for the last four decades. To engage in this sort of policy and then wonder why income is being redistributed upward is a bit like filling a body with bullets and then wondering why the person is dead.
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Why are none of the “free trade” members of Congress pushing to change the regulations that require doctors go through a U.S. residency program to be able to practice medicine in the United States? Obviously they are all protectionist Neanderthals.
Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a “free” market? Are longer and stronger patent and copyright monopolies the results of a free market?
The NYT should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of a free trade.
First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously over-valued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the I.M.F.
If we had a more competent team in place, that didn’t botch the workings of the international financial system, then we would have expected the dollar to drop as more imports entered the U.S. market. This would have moved the U.S. trade deficit toward balance and prevented the massive loss of manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that “free trade” economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the later case.)
Finally, the fact that trade has exposed manufacturing workers to international competition, but not doctors and lawyers, was a policy choice, not a natural development. There are enormous potential gains from allowing smart and ambitious young people in the developing world to come to the United States to work in the highly paid professions. We have not opened these doors because doctors and lawyers are far more powerful than autoworkers and textile workers. And, we rarely even hear the idea mentioned because doctors and lawyers have brothers and sisters who are reporters and economists.
Addendum:
Since some folks asked about the botched bailout from the East Asian financial crisis, the point is actually quite simple. Prior to 1997 developing countries were largely following the textbook model, borrowing capital from the West to finance development. This meant running large trade deficits. This reversed following the crisis as the conventional view in the developing world was that you needed massive amounts of reserves to avoid being in the situation of the East Asian countries and being forced to beg for help from the I.M.F. This led to the situation where developing countries, especially those in the region, began running very large trade surpluses, exporting capital to the United States. (I am quite sure China noticed how its fellow East Asian countries were being treated in 1997.)
Why are none of the “free trade” members of Congress pushing to change the regulations that require doctors go through a U.S. residency program to be able to practice medicine in the United States? Obviously they are all protectionist Neanderthals.
Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a “free” market? Are longer and stronger patent and copyright monopolies the results of a free market?
The NYT should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of a free trade.
First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously over-valued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the I.M.F.
If we had a more competent team in place, that didn’t botch the workings of the international financial system, then we would have expected the dollar to drop as more imports entered the U.S. market. This would have moved the U.S. trade deficit toward balance and prevented the massive loss of manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that “free trade” economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the later case.)
Finally, the fact that trade has exposed manufacturing workers to international competition, but not doctors and lawyers, was a policy choice, not a natural development. There are enormous potential gains from allowing smart and ambitious young people in the developing world to come to the United States to work in the highly paid professions. We have not opened these doors because doctors and lawyers are far more powerful than autoworkers and textile workers. And, we rarely even hear the idea mentioned because doctors and lawyers have brothers and sisters who are reporters and economists.
Addendum:
Since some folks asked about the botched bailout from the East Asian financial crisis, the point is actually quite simple. Prior to 1997 developing countries were largely following the textbook model, borrowing capital from the West to finance development. This meant running large trade deficits. This reversed following the crisis as the conventional view in the developing world was that you needed massive amounts of reserves to avoid being in the situation of the East Asian countries and being forced to beg for help from the I.M.F. This led to the situation where developing countries, especially those in the region, began running very large trade surpluses, exporting capital to the United States. (I am quite sure China noticed how its fellow East Asian countries were being treated in 1997.)
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Robert Samuelson had what he thinks is good news, the pay gap in hourly wages between men and women is just 8.0 percent once we control for occupations and experience, not the more widely cited 21 percent. Samuelson tells us that it is a mistake to throw around this 21 percent figure since it doesn’t include proper adjustments. While Samuelson is correct that the 21 percent figure does not include all the controls that we would like to see, it is wrong to claim, as Samuelson is implicitly claiming, that the choice of occupation is not in part the result of discrimination.
In almost all occupations, there is a clear pattern where the most highly paid sub-sections are predominantly male, while the lower paid ones are predominantly females. This is clearest in the case of medicine. Highly paid specialists like neurosurgeons and cardiologists continue to be disproportionately male. Family practitioners and pediatricians are disproportionately women.
One can believe that women just don’t like to do things like learn about hearts, or one can believe that women face obstacles advancing in residency programs dominated by men. Samuelson seems to think the former. While it is probably not the case that women are ever formally blocked from entering higher paying areas of medicine or other occupations, there are many subtle ways in which the men already in these fields can make woman entrants feel uncomfortable. If these are not tackled then we are likely to end up with a situation where women’s pay remains well below the pay of men, even if it is comparable when we adjust for occupation and experience.
Robert Samuelson had what he thinks is good news, the pay gap in hourly wages between men and women is just 8.0 percent once we control for occupations and experience, not the more widely cited 21 percent. Samuelson tells us that it is a mistake to throw around this 21 percent figure since it doesn’t include proper adjustments. While Samuelson is correct that the 21 percent figure does not include all the controls that we would like to see, it is wrong to claim, as Samuelson is implicitly claiming, that the choice of occupation is not in part the result of discrimination.
In almost all occupations, there is a clear pattern where the most highly paid sub-sections are predominantly male, while the lower paid ones are predominantly females. This is clearest in the case of medicine. Highly paid specialists like neurosurgeons and cardiologists continue to be disproportionately male. Family practitioners and pediatricians are disproportionately women.
One can believe that women just don’t like to do things like learn about hearts, or one can believe that women face obstacles advancing in residency programs dominated by men. Samuelson seems to think the former. While it is probably not the case that women are ever formally blocked from entering higher paying areas of medicine or other occupations, there are many subtle ways in which the men already in these fields can make woman entrants feel uncomfortable. If these are not tackled then we are likely to end up with a situation where women’s pay remains well below the pay of men, even if it is comparable when we adjust for occupation and experience.
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The NYT had an account of the negotiations that led an agreement where holders of defaulted debt received billions of dollars in payments from the Argentine government. It made a point of contrasting the attitude of the new government, which was elected last fall, with the prior government, which it tells readers had referred to the debt holders as “vultures.”
In fact, this is not pejorative term invented by the prior Argentine government, it is actually the self-definition of these funds. They are called “vulture funds” because they buy up assets that are in default, or expected to be in default, with the expectation that they will be able to get more money than the current market price.
In the case of Argentina, this expectation was based on the (correct) belief that they could use their political power to block efforts to have the I.M.F. and the United States accept the deal under which more than 90 percent of Argentine bondholders settled with the Argentine government. Had this effort been successful, as many in both the I.M.F. and Treasury wanted, then these vulture investors would not have profited from their holdings of Argentine debt.
The NYT had an account of the negotiations that led an agreement where holders of defaulted debt received billions of dollars in payments from the Argentine government. It made a point of contrasting the attitude of the new government, which was elected last fall, with the prior government, which it tells readers had referred to the debt holders as “vultures.”
In fact, this is not pejorative term invented by the prior Argentine government, it is actually the self-definition of these funds. They are called “vulture funds” because they buy up assets that are in default, or expected to be in default, with the expectation that they will be able to get more money than the current market price.
In the case of Argentina, this expectation was based on the (correct) belief that they could use their political power to block efforts to have the I.M.F. and the United States accept the deal under which more than 90 percent of Argentine bondholders settled with the Argentine government. Had this effort been successful, as many in both the I.M.F. and Treasury wanted, then these vulture investors would not have profited from their holdings of Argentine debt.
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