Good article in the NYT. It discusses the fact that most mortgages may prohibit property owners from signing drilling leases with gas companies without prior approval. The point is that the mortgage holder must be concerned about preserving the value of the property and drilling could reduce it. This could be a case of banks doing what they are supposed to do.
Good article in the NYT. It discusses the fact that most mortgages may prohibit property owners from signing drilling leases with gas companies without prior approval. The point is that the mortgage holder must be concerned about preserving the value of the property and drilling could reduce it. This could be a case of banks doing what they are supposed to do.
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An NYT news story told readers that it doesn’t like Europe. That is the only thing that readers can conclude from an article that said Europe is “in economic and demographic decline.”
While the collapse of the housing bubbles in Europe have impaired growth, just as they have in the United States, and the drive to austerity has further slowed growth, there is no reason to believe that Europe’s economy will be condemned to permanent stagnation if it gets competent people at the European Central Bank and other policy positions.
Prior to the downturn, productivity growth in Europe had been little different than in the United States. If Europe can ever get competent economic managers, there is no reason to believe that its growth would not return to this path. Lower population growth (or decline) will actually help Europe since it will increase the ratio of capital to labor and reduce the stress on Europe’s infrastructure and natural resources. In other words, the story here is really a failure of the people designing economic policy for Europe, not a failure of Europe.
This fact is reversed in an article that seems to be trying to tell readers that Europe is fundamentally broken. To make this point, it includes the bizarre assertion that:
“Technologically, it is behind the United States, but its pay scales are too high to be an easily competitive exporter.”
The United States is running an annual trade deficit of roughly $600 billion, or 4 percent of GDP. By contrast, the European Union’s trade is roughly in balance. It is not clear how the NYT has determined that Europe is having trouble competing, but it clearly is not using a market measure.
The article also misleads readers on the importance of China, saying that the EUs GDP is three times the size of China’s. In fact, on a purchasing power parity basis, China’s GDP is $11.3 trillion, roughly two-third’s the size of Europe’s.
An NYT news story told readers that it doesn’t like Europe. That is the only thing that readers can conclude from an article that said Europe is “in economic and demographic decline.”
While the collapse of the housing bubbles in Europe have impaired growth, just as they have in the United States, and the drive to austerity has further slowed growth, there is no reason to believe that Europe’s economy will be condemned to permanent stagnation if it gets competent people at the European Central Bank and other policy positions.
Prior to the downturn, productivity growth in Europe had been little different than in the United States. If Europe can ever get competent economic managers, there is no reason to believe that its growth would not return to this path. Lower population growth (or decline) will actually help Europe since it will increase the ratio of capital to labor and reduce the stress on Europe’s infrastructure and natural resources. In other words, the story here is really a failure of the people designing economic policy for Europe, not a failure of Europe.
This fact is reversed in an article that seems to be trying to tell readers that Europe is fundamentally broken. To make this point, it includes the bizarre assertion that:
“Technologically, it is behind the United States, but its pay scales are too high to be an easily competitive exporter.”
The United States is running an annual trade deficit of roughly $600 billion, or 4 percent of GDP. By contrast, the European Union’s trade is roughly in balance. It is not clear how the NYT has determined that Europe is having trouble competing, but it clearly is not using a market measure.
The article also misleads readers on the importance of China, saying that the EUs GDP is three times the size of China’s. In fact, on a purchasing power parity basis, China’s GDP is $11.3 trillion, roughly two-third’s the size of Europe’s.
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CNNMoney wrongly told readers that the rise in prices that provided the basis for the 3.6 percent cost of living adjustment for Social Security beneficiaries will also cause 10 million workers to pay more in Social Security taxes. The reason it gave was that this rise in prices would increase the cap on wage income subject to the tax (currently $106,800). Actually, the cap on wage income subject to the tax is determined by the increase in average wages, not the increase in prices.
CNNMoney wrongly told readers that the rise in prices that provided the basis for the 3.6 percent cost of living adjustment for Social Security beneficiaries will also cause 10 million workers to pay more in Social Security taxes. The reason it gave was that this rise in prices would increase the cap on wage income subject to the tax (currently $106,800). Actually, the cap on wage income subject to the tax is determined by the increase in average wages, not the increase in prices.
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The NYT left this important fact out of a discussion of the state of the debt crisis in Europe. It noted that lower than projected growth is likely to cause Spain to miss its deficit target. The predicted result of cuts in government spending and increases in taxes in the middle of a severe downturn is lower growth. (GDP is equal to consumption, investment, government spending, and net exports. If government spending falls in the middle of a severe downturn, there is no obvious mechanism through which one of the other components would grow to fill the gap.)
The NYT left this important fact out of a discussion of the state of the debt crisis in Europe. It noted that lower than projected growth is likely to cause Spain to miss its deficit target. The predicted result of cuts in government spending and increases in taxes in the middle of a severe downturn is lower growth. (GDP is equal to consumption, investment, government spending, and net exports. If government spending falls in the middle of a severe downturn, there is no obvious mechanism through which one of the other components would grow to fill the gap.)
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The Post wrongly implied that the problem of a large national debt has been longstanding. It told readers that the Congressional supercommittee is trying to “break the impasse over taxes that has long blocked aggressive action to tame the national debt.”
Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a surplus after the Bush tax cuts were scheduled to expire this year. The large deficits were caused by the downturn, not inadequate taxation or excessive spending.
The NYT made the same mistake earlier in the week. The budget reporters and editors at these paper should familiarize themselves with the official deficit projections so they do not continue to make this mistake.
The Post wrongly implied that the problem of a large national debt has been longstanding. It told readers that the Congressional supercommittee is trying to “break the impasse over taxes that has long blocked aggressive action to tame the national debt.”
Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a surplus after the Bush tax cuts were scheduled to expire this year. The large deficits were caused by the downturn, not inadequate taxation or excessive spending.
The NYT made the same mistake earlier in the week. The budget reporters and editors at these paper should familiarize themselves with the official deficit projections so they do not continue to make this mistake.
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The Washington Post has to find economics reporters and/or editors who know some economics. Then it would not print without comment a statement like:
“‘The problem for the U.S. is they owe China so much debt,’ he [Shi Yinhong, director of the Center on American Studies at Beijing’s Renmin University] said, referring to the Chinese government’s vast holdings of U.S. Treasury bonds, estimated at about $1.5 trillion.”
This statement appears in the context of a discussion of whether the dollar is over-valued against the Chinese yuan. The way that China keeps up the value of the dollar is by buying up U.S. debt. The United States government would owe China exactly zero, if the Chinese government did not decide to buy up U.S. government debt with its dollar earnings instead of just selling them in international currency markets.
This is exactly what advocates of a lower dollar are complaining about. It is absurd for someone to say that the problem is not an over-valued dollar, but rather U.S. debt to China. These are the same problem — and reporters and editors at major newspapers should know this.
The article also wrongly tells readers:
“China is well known as the home of counterfeit products — from imitation iPads and iPhones to fake software to pirated CDs and DVDs.”
Actually, the vast majority of these products are not counterfeits, consumers know that they are not getting the brand name product. The products are unauthorized copies of brand products.
This is an important distinction. Consumers benefit from buying unauthorized copies at lower prices than the brand versions. Consumers are defrauded by counterfeit products. Consumers will assist law enforcement officials in exposing counterfeit operations, they will not help in shutting down sellers of unauthorized products.
If U.S. corporations succeed in excluding the sale of unauthorized copies in China’s markets then it will lead to higher prices for Chinese consumers. This will reduce real wages and incomes and slow growth. The Post should have interviewed an economist who could have explained this to readers.
The Washington Post has to find economics reporters and/or editors who know some economics. Then it would not print without comment a statement like:
“‘The problem for the U.S. is they owe China so much debt,’ he [Shi Yinhong, director of the Center on American Studies at Beijing’s Renmin University] said, referring to the Chinese government’s vast holdings of U.S. Treasury bonds, estimated at about $1.5 trillion.”
This statement appears in the context of a discussion of whether the dollar is over-valued against the Chinese yuan. The way that China keeps up the value of the dollar is by buying up U.S. debt. The United States government would owe China exactly zero, if the Chinese government did not decide to buy up U.S. government debt with its dollar earnings instead of just selling them in international currency markets.
This is exactly what advocates of a lower dollar are complaining about. It is absurd for someone to say that the problem is not an over-valued dollar, but rather U.S. debt to China. These are the same problem — and reporters and editors at major newspapers should know this.
The article also wrongly tells readers:
“China is well known as the home of counterfeit products — from imitation iPads and iPhones to fake software to pirated CDs and DVDs.”
Actually, the vast majority of these products are not counterfeits, consumers know that they are not getting the brand name product. The products are unauthorized copies of brand products.
This is an important distinction. Consumers benefit from buying unauthorized copies at lower prices than the brand versions. Consumers are defrauded by counterfeit products. Consumers will assist law enforcement officials in exposing counterfeit operations, they will not help in shutting down sellers of unauthorized products.
If U.S. corporations succeed in excluding the sale of unauthorized copies in China’s markets then it will lead to higher prices for Chinese consumers. This will reduce real wages and incomes and slow growth. The Post should have interviewed an economist who could have explained this to readers.
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Thomas Friedman tells readers that we should want China to raise the value of its currency, but the real problem for the United States is that we are not building up our infrastructure and we don’t save. While the first point is right, the second suffers from ignorance of national income accounting.
If we have a trade deficit then we must have negative national savings. At full employment, we will have a large trade deficit, unless our currency declines in value. This means that we will either have large budget deficits (which Friedman really doesn’t like) or we will have negative private savings. There is no way around this. So the problem of low savings is the problem of an over-valued currency, they are not separate issues.
Thomas Friedman tells readers that we should want China to raise the value of its currency, but the real problem for the United States is that we are not building up our infrastructure and we don’t save. While the first point is right, the second suffers from ignorance of national income accounting.
If we have a trade deficit then we must have negative national savings. At full employment, we will have a large trade deficit, unless our currency declines in value. This means that we will either have large budget deficits (which Friedman really doesn’t like) or we will have negative private savings. There is no way around this. So the problem of low savings is the problem of an over-valued currency, they are not separate issues.
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In a bizarre article, the NYT told readers that, “economists have only recently devoted serious study to how a decline in housing prices affects consumer spending.” Actually economists have studied the effect of house prices on consumption for close to a century.
The housing wealth effect is a well-known concept in economics, not something that economists have just stumbled upon. It is usually estimated as being between 5-7 cents on the dollar. This implies the loss of roughly $7 trillion in housing wealth would lead to a drop in annual consumption of between $350-$490 billion, more than twice as large as the number cited in this article.
In fact, rather than being depressed consumption is still somewhat higher relative to income that was normally the case through the post-war period. Prior to the run-up of the stock bubble in the 90s, saving averaged more than 8 percent of disposable income. At 5 percent, the saving rate is still well below this level, meaning that consumption is high, not low. The NYT should have been able to find an economist who could have explained these facts.
Source: Bureau of Economic Analysis.
[Thanks Jay R. for the correction. I understand there is some dispute as to whether the housing wealth effect has long been known, as I claim. I encourage readers to go Google Scholar and see for yourself.]
In a bizarre article, the NYT told readers that, “economists have only recently devoted serious study to how a decline in housing prices affects consumer spending.” Actually economists have studied the effect of house prices on consumption for close to a century.
The housing wealth effect is a well-known concept in economics, not something that economists have just stumbled upon. It is usually estimated as being between 5-7 cents on the dollar. This implies the loss of roughly $7 trillion in housing wealth would lead to a drop in annual consumption of between $350-$490 billion, more than twice as large as the number cited in this article.
In fact, rather than being depressed consumption is still somewhat higher relative to income that was normally the case through the post-war period. Prior to the run-up of the stock bubble in the 90s, saving averaged more than 8 percent of disposable income. At 5 percent, the saving rate is still well below this level, meaning that consumption is high, not low. The NYT should have been able to find an economist who could have explained these facts.
Source: Bureau of Economic Analysis.
[Thanks Jay R. for the correction. I understand there is some dispute as to whether the housing wealth effect has long been known, as I claim. I encourage readers to go Google Scholar and see for yourself.]
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The Washington Post told readers that Federal Reserve Board Chairman Ben Bernanke now says that it is appropriate for the Fed to target bubbles like the stock market bubble in the 90s or the housing bubble in the last decade which “were in hindsight dangerous bubbles.”
Actually, it was easy to see in real time that these were dangerous bubbles. Greenspan, Bernanke and other people in policy making positions simply chose to ignore the evidence. Since the Washington Post and other news outlets are covering up this failure, rather than holding these people responsible for the incredibly economic disaster that resulting from their mismanagement, we can anticipate more such failures in the future.
Economic theory predicts that people respond to incentives. There is clearly no incentive to challenge the conventional wisdom in the economics profession even when it is as wrong as it can possibly be.
The Washington Post told readers that Federal Reserve Board Chairman Ben Bernanke now says that it is appropriate for the Fed to target bubbles like the stock market bubble in the 90s or the housing bubble in the last decade which “were in hindsight dangerous bubbles.”
Actually, it was easy to see in real time that these were dangerous bubbles. Greenspan, Bernanke and other people in policy making positions simply chose to ignore the evidence. Since the Washington Post and other news outlets are covering up this failure, rather than holding these people responsible for the incredibly economic disaster that resulting from their mismanagement, we can anticipate more such failures in the future.
Economic theory predicts that people respond to incentives. There is clearly no incentive to challenge the conventional wisdom in the economics profession even when it is as wrong as it can possibly be.
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The NYT implied that large budget deficits have been a longstanding problem in an article discussing the progress of the supercommittee working on a deficit plan. It told readers that the committee is trying to find solutions:
“in a matter of weeks, to find fiscal answers that have eluded Congress and the White House for years.”
Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a surplus after the Bush tax cuts were scheduled to expire this year. The large deficits were caused by the downturn, not inadequate taxation or excessive spending.
The NYT implied that large budget deficits have been a longstanding problem in an article discussing the progress of the supercommittee working on a deficit plan. It told readers that the committee is trying to find solutions:
“in a matter of weeks, to find fiscal answers that have eluded Congress and the White House for years.”
Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a surplus after the Bush tax cuts were scheduled to expire this year. The large deficits were caused by the downturn, not inadequate taxation or excessive spending.
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