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A generous donor has agreed to give BTP big bucks for every case of a silly article complaining about deflation caused by a drop in energy prices. (I wish.) Anyhow, the NYT gave us another one today, thankfully with at least some qualifying language.
As I’ve pointed out many times before (most recently here), it doesn’t matter if prices are falling if the decline is primarily due to an imported product like oil. The reasons that low inflation or deflation are troubling do not apply. Let’s see how long the NYT takes to get it straight and maybe the rest of the media will follow.
A generous donor has agreed to give BTP big bucks for every case of a silly article complaining about deflation caused by a drop in energy prices. (I wish.) Anyhow, the NYT gave us another one today, thankfully with at least some qualifying language.
As I’ve pointed out many times before (most recently here), it doesn’t matter if prices are falling if the decline is primarily due to an imported product like oil. The reasons that low inflation or deflation are troubling do not apply. Let’s see how long the NYT takes to get it straight and maybe the rest of the media will follow.
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The media regularly report the mixed signals from Japan on the state of its recovery (here, for example), but for some reason, they never seem to mention the state of the labor market. The news here is actually quite impressive. Since Shinzo Abe took over as prime minister in 2012 the employment to population ratio (EPOP) for adults under 65 rose by 2.4 percentage points. By comparison, the rise in the EPOP in United States over the same period, which has frequently been celebrated as a boom, was just 1.6 percentage points. Japan’s EPOP is now 2.1 percentage points above its pre-recession level. By contrast, the EPOP in the United States is 3.2 percentage points lower for this group of workers.
In Washington policy debates, 90 percent of the story is what adjective gets applied to a particular set of facts (as in the “crushing” burden of the baby boomers’ retirement). I know that I am not important enough to determine which adjective gets used, but I can take advantage of the adjectives used by others. If the United States has experienced an employment boom in the last two years, then Japan has experienced something better than a boom. It is remarkable that no news outlet has chosen to mention it.
The media regularly report the mixed signals from Japan on the state of its recovery (here, for example), but for some reason, they never seem to mention the state of the labor market. The news here is actually quite impressive. Since Shinzo Abe took over as prime minister in 2012 the employment to population ratio (EPOP) for adults under 65 rose by 2.4 percentage points. By comparison, the rise in the EPOP in United States over the same period, which has frequently been celebrated as a boom, was just 1.6 percentage points. Japan’s EPOP is now 2.1 percentage points above its pre-recession level. By contrast, the EPOP in the United States is 3.2 percentage points lower for this group of workers.
In Washington policy debates, 90 percent of the story is what adjective gets applied to a particular set of facts (as in the “crushing” burden of the baby boomers’ retirement). I know that I am not important enough to determine which adjective gets used, but I can take advantage of the adjectives used by others. If the United States has experienced an employment boom in the last two years, then Japan has experienced something better than a boom. It is remarkable that no news outlet has chosen to mention it.
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Good piece on a study by AARP. (I was a discussant on a panel yesterday.) It will be interesting to see how Obamacare affects this story.
Since older workers can now get insurance through the exchanges, employers will be less concerned about picking up an older worker’s health care costs. It will be interesting to see if this has a positive effect on their reemployment prospects.
Good piece on a study by AARP. (I was a discussant on a panel yesterday.) It will be interesting to see how Obamacare affects this story.
Since older workers can now get insurance through the exchanges, employers will be less concerned about picking up an older worker’s health care costs. It will be interesting to see if this has a positive effect on their reemployment prospects.
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It would have been worth mentioning this fact in a Washington Post article on the cost of providing Medicare and Medicaid patients with Sovaldi. Gilead Sciences, the manufacturer of Sovaldi, can get away with charging $84,000 for a treatment because the government will arrest anyone who tries to produce the drug without its permission.
Of course there is nothing to prevent people from going to India to get treatment there. It would be possible to pay $20,000 for the treatment and travel of a patient and family member, give them $10,000 for their troubles, and still come out $54,000 ahead. This would be a great win-win situation but apparently the Washington Post doesn’t want anyone to consider ways to save the government money at the expense of drug companies.
And yes, we do have to finance the research, but patent monopolies are a horribly inefficient mechanism for this purpose.
It would have been worth mentioning this fact in a Washington Post article on the cost of providing Medicare and Medicaid patients with Sovaldi. Gilead Sciences, the manufacturer of Sovaldi, can get away with charging $84,000 for a treatment because the government will arrest anyone who tries to produce the drug without its permission.
Of course there is nothing to prevent people from going to India to get treatment there. It would be possible to pay $20,000 for the treatment and travel of a patient and family member, give them $10,000 for their troubles, and still come out $54,000 ahead. This would be a great win-win situation but apparently the Washington Post doesn’t want anyone to consider ways to save the government money at the expense of drug companies.
And yes, we do have to finance the research, but patent monopolies are a horribly inefficient mechanism for this purpose.
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The NYT ran an a piece by Hugo Dixon that boldly proclaimed that if Alex Tsipras, the prime minister of Greece is rational, he will get tough with his left-wing supporters and impose more austerity measures. This is an interesting notion of rationality.
Greece’s economy has shrunk by more than 25 percent since 2008. Its unemployment rate is close to 25 percent. The current projections from the I.M.F. and others show little improvement in these numbers by the end of the decade if it sticks to this austerity path. By contrast, if it breaks with the euro its goods and services would suddenly become far more competitive in the world economy as their price would fall due to a lower valued currency. It would also no longer have to run primary budget surpluses since it would be able to avoid payments on its debt for a period of time.
While this break would undoubtedly lead to a short-term hit to the economy as it put its new currency place and worked out patchwork arrangements on trade, it is likely that it would bounce back quickly. The model here is Argentina which went into default in December of 2001. It’s economy went into a free fall for three months, then stabilized in the second quarter of 2002. By the fall of the year it was growing rapidly and it continued to grow rapidly for the next five years. It made up all the lost ground before the end of 2003.
It is worth noting that at the time, the I.M.F. and most other “experts” confidently predicted a disaster for Argentina. While there are issues about the accuracy of Argentina’s numbers, this has mostly been more a problem in the post-recession period when an over-valued currency and extensive price controls have led to serious economic distortions.
If we want to use the words “tough” and “rational,” they would probably better be applied to the strategy of breaking with the euro rather than continuing an austerity policy that promises a level of pain for the Greek period that far exceeds that experienced by the United States in the Great Depression.
The NYT ran an a piece by Hugo Dixon that boldly proclaimed that if Alex Tsipras, the prime minister of Greece is rational, he will get tough with his left-wing supporters and impose more austerity measures. This is an interesting notion of rationality.
Greece’s economy has shrunk by more than 25 percent since 2008. Its unemployment rate is close to 25 percent. The current projections from the I.M.F. and others show little improvement in these numbers by the end of the decade if it sticks to this austerity path. By contrast, if it breaks with the euro its goods and services would suddenly become far more competitive in the world economy as their price would fall due to a lower valued currency. It would also no longer have to run primary budget surpluses since it would be able to avoid payments on its debt for a period of time.
While this break would undoubtedly lead to a short-term hit to the economy as it put its new currency place and worked out patchwork arrangements on trade, it is likely that it would bounce back quickly. The model here is Argentina which went into default in December of 2001. It’s economy went into a free fall for three months, then stabilized in the second quarter of 2002. By the fall of the year it was growing rapidly and it continued to grow rapidly for the next five years. It made up all the lost ground before the end of 2003.
It is worth noting that at the time, the I.M.F. and most other “experts” confidently predicted a disaster for Argentina. While there are issues about the accuracy of Argentina’s numbers, this has mostly been more a problem in the post-recession period when an over-valued currency and extensive price controls have led to serious economic distortions.
If we want to use the words “tough” and “rational,” they would probably better be applied to the strategy of breaking with the euro rather than continuing an austerity policy that promises a level of pain for the Greek period that far exceeds that experienced by the United States in the Great Depression.
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Alexandra Levit tells readers of her NYT column that we should be thankful that Generation Z is entering the workforce because, “the United States is facing a skills gap in most industries.”
Really? I wonder how Ms. Levit knows about this skills gap? Usually we would look to things like high vacancy rates, longer hours for the workers that employers can find, and of course, rapidly rising wages. We don’t see this for any major occupation group. So what is the basis for asserting there is a skills gap?
Note: Thanks to Stefano Monti for calling this one to my attention.
Alexandra Levit tells readers of her NYT column that we should be thankful that Generation Z is entering the workforce because, “the United States is facing a skills gap in most industries.”
Really? I wonder how Ms. Levit knows about this skills gap? Usually we would look to things like high vacancy rates, longer hours for the workers that employers can find, and of course, rapidly rising wages. We don’t see this for any major occupation group. So what is the basis for asserting there is a skills gap?
Note: Thanks to Stefano Monti for calling this one to my attention.
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The Washington Post missed the opportunity to correct Stanley Fisher, the vice-chair of the Federal Reserve Board, on his arguments for raising interest rates. An article on the prospect of Fed rate hikes later this year quoted Fisher on the desirability of raising rates so that the Fed would have room to use normal monetary policy (i.e. lower interest rates) if there was a shock to the economy leading to a slowdown. There are two major flaws in this logic.
First, if the Fed delays raising interest rates and allows more job creation and economic growth, we are more likely to see higher inflation. If the inflation rate starts to rise, the Fed could raise the federal funds rate along with it, leaving real interest rates unchanged. If the inflation rate goes to a somewhat higher level, this would provide the Fed with considerably more ability to boost the economy in a downturn with conventional monetary policy since it could have lower real interest rates. (The real interest rate is the nominal interest rate minus the inflation rate.) This would be especially the case if it allowed the inflation rate to rise above its current 2.0 percent target.
In this respect, it is important to remember that the 2.0 percent target is just a number chosen by former chair Ben Bernanke. It is not part of the Fed’s legal mandate to promote high employment and price stability.
The other flaw in Fisher’s logic is that he is effectively advocating that the Fed deliberately slow growth now so that it will have more ability to speed growth later. This is a rather peculiar argument, sort of like committing suicide to ensure that you won’t be killed. Would it make sense to say, slow growth by a total of 1.0 percentage points over the next two years to ensure that the Fed has enough room to lower interest rates and thereby speed growth by 1.0 percentage point in response to a possible future shock? (Fisher undoubtedly would have different numbers.)
It is at least peculiar to argue that we should for certain take a large loss now, in the form of higher unemployment and lower wages for those at the middle and bottom of the wage distribution, in exchange for being better able to respond to a possible loss in the future. Unless the potential gains from the latter action are much larger than the certain losses from raising interest rates, this would be a bad trade-off.
The Washington Post missed the opportunity to correct Stanley Fisher, the vice-chair of the Federal Reserve Board, on his arguments for raising interest rates. An article on the prospect of Fed rate hikes later this year quoted Fisher on the desirability of raising rates so that the Fed would have room to use normal monetary policy (i.e. lower interest rates) if there was a shock to the economy leading to a slowdown. There are two major flaws in this logic.
First, if the Fed delays raising interest rates and allows more job creation and economic growth, we are more likely to see higher inflation. If the inflation rate starts to rise, the Fed could raise the federal funds rate along with it, leaving real interest rates unchanged. If the inflation rate goes to a somewhat higher level, this would provide the Fed with considerably more ability to boost the economy in a downturn with conventional monetary policy since it could have lower real interest rates. (The real interest rate is the nominal interest rate minus the inflation rate.) This would be especially the case if it allowed the inflation rate to rise above its current 2.0 percent target.
In this respect, it is important to remember that the 2.0 percent target is just a number chosen by former chair Ben Bernanke. It is not part of the Fed’s legal mandate to promote high employment and price stability.
The other flaw in Fisher’s logic is that he is effectively advocating that the Fed deliberately slow growth now so that it will have more ability to speed growth later. This is a rather peculiar argument, sort of like committing suicide to ensure that you won’t be killed. Would it make sense to say, slow growth by a total of 1.0 percentage points over the next two years to ensure that the Fed has enough room to lower interest rates and thereby speed growth by 1.0 percentage point in response to a possible future shock? (Fisher undoubtedly would have different numbers.)
It is at least peculiar to argue that we should for certain take a large loss now, in the form of higher unemployment and lower wages for those at the middle and bottom of the wage distribution, in exchange for being better able to respond to a possible loss in the future. Unless the potential gains from the latter action are much larger than the certain losses from raising interest rates, this would be a bad trade-off.
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