ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

Latin America and the Caribbean

Venezuela

World

Will the U.S. Government, Media Seek to Improve Relations with Venezuela?

Venezuelan Vice President Nicolas Maduro’s announced today that President Hugo Chávez had died at 4:25pm. According to Venezuela’s constitution [PDF], new presidential elections are supposed to be held within 30 days.

The news could present an opportunity for an improvement in U.S.-Venezuelan relations, but that is unlikely. Earlier in the day, Maduro announced that the Venezuelan government would expel the U.S. military attaché for unsanctioned meetings with certain Venezuelan military officers. While this is of course a significant development in U.S.-Venezuela relations that marks yet further deterioration, unfortunately it seems safe to say that most U.S. media outlets will not provide the crucial context necessary in order to understand current relations and why they are so tense.

Maduro mentioned the April 2002 coup d’etat in his press conference today. Declassified C.I.A. and other government documents reveal the U.S. role in that coup against Hugo Chávez. As Scott Wilson, former foreign editor at the Washington Post has explained:

Yes, the United States was hosting people involved in the coup before it happened. There was involvement of U.S.-sponsored NGOs in training some of the people that were involved in the coup. And in the immediate aftermath of the coup, the United States government said that it was a resignation, not a coup, effectively recognizing the government that took office very briefly until President Chavez returned.

I think that there was U.S. involvement, yes.

(Video clip here. This information has however never been reported this fully in the pages of the Washington Post itself.)

CEPR / March 06, 2013

Article Artículo

Another Inspector General Audit, Another Failing Grade for USAID in Haiti

The U.S. Agency for International Development Inspector General (IG) last week released an audit of a program to provide loans to businesses in Haiti (available here). The audit is just the latest report from the IG to find significant problems with USAID’s programs in Haiti, following previous findings regarding cash-for-work programs, shelter provision, food aid and USAID’s largest contractor, Chemonics. The Associated Press’ Trenton Daniel reports that:

An audit of a U.S. Agency for International Department program that aimed to boost Haiti's economy by providing loans to businesses has found that the program failed to award loans to intended targets, train workers and keep accurate records.

The aim of the audit released in late February by USAID's Office of the Inspector General was to see whether a USAID loan program was indeed introducing lending practices to overlooked areas and borrowers, particularly in the areas of agriculture, construction, tourism, handicrafts and waste management. Most of the loans were supposed to go toward women, first-time borrowers and small- and medium-sized enterprises.

The loan program provided some $37.5 million in guarantees, of which just over $19 million in guarantees have been extended. According to publicly available data, only about a quarter went to woman-owned businesses, less than 30 percent went to first-time borrowers, and 75 percent were concentrated in the West department, though these numbers likely overstate the reality on the ground. In addition to many other problems, the audit found that “the key monitoring data was outdated, incomplete, or inaccurate,” for example, information on whether the recipient was a first-time borrower was “recorded incorrectly 41 percent of the time.”

The focus of the audit, Daniel reports, was the four largest of the seven guarantees, “worth $31.5 million,” of the $37.5 million total. Of these Daniel notes that two were made after the 2010 earthquake:

They were a Haitian bank named Sogebank, a Haitian development finance institution named Sofihdes that USAID helped create in 1983 and an agriculture-focused outfit named Le Levier Federation.

The audit found that few women and first-time borrowers received loans and lenders didn't make much effort to work with them.

And while the loans were intended to target “development corridors,” Daniel notes,

Instead they stayed in the Port-au-Prince area.

Ninety percent of Sogebank's loans were confined to the capital and the bank didn't give loans to other parts of the country. Some 81 percent of the Sofihdes loans were in Haiti's capital.

Jake Johnston / March 05, 2013

Article Artículo

The Fed Is Still Way Out to Lunch on Financial Bubbles

The Federal Reserve Board disastrously missed and/or ignored two huge bubbles in the last decades: the stock bubble in the 1990s and the housing bubble in the 2000s. The collapse of both bubbles led to recessions from which it was difficult to recover. Neil Irwin inadvertently tells us today that the Fed is still utterly clueless when it comes to dealing with bubbles.

The problem is that, at least according to Irwin's account, no one at the Fed seems to understand how bubbles hurt the economy. On the one hand, he presents the views of Fed governor Jeremy Stein, a bubble hawk, who he tells us:

"argued in a Feb. 7 speech that there are already signs of overheating in the markets for certain kinds of securities, including junk bonds and real estate investment trusts that invest in mortgages. And if those or other potential bubbles get so large that if they popped the whole U.S. economy could be in danger."

By contrast we have Fed chair Ben Bernanke and vice-chair Janet Yellen, the latter of whom he quotes as saying:

"At this stage there are some signs that investors are reaching for yield, but I do not now see pervasive evidence of trends such as rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would clearly threaten financial stability."

Unfortunately, the concern about financial stability and discerning bubbles in a wide array of economic data completely misses the point. First, financial instability is not what caused our problems in either 2001 or in the current downturn. As much fun as it is to see the Fed chair, Treasury Secretary and other important people sweating over the collapse of huge financial institutions, this crisis was very much secondary to the country's economic problems. We know how to paper over a financial crisis, which the Fed eventually did (as did the European central bank), the hard part is replacing the demand that had been generated by a bubble once the bubble has burst.

This directly leads to the second point. The bubbles that we have to worry about are not hard to find. Suppose there is a huge speculative bubble in soy beans that pushes their price to 20 times their normal level. This could be bad news for people that like soy beans and derivative products. It may also be disastrous for producers in the industry if they get caught on the wrong side of things. However, the collapse of this bubble will have minimal impact on the economy. If for some reason our bubble watchers at the Fed failed to notice the rise in soy bean prices, the problems caused by its eventual bursting will not sink the economy.

Dean Baker / March 05, 2013

Article Artículo

Robert Samuelson Identifies the Sequester Culprit: John Kennedy

I'm not kidding, it's right there in the Washington Post. And we thought Bob Woodward was creative.

But Samuelson's economic history is even more striking than the linking of Kennedy to the sequester. He notes the fiscal stimulus that was sparked by the Kennedy tax cuts (and the Vietnam War and Johnson's Great Society programs) and the boom that resulted, and tells us that "it was a disaster."

"High inflation was the first shock. An initial boom (by 1969, unemployment was 3.5 percent) spawned a wage-price spiral. With government seeming to guarantee 4 percent unemployment, workers and businesses had little reason to restrain wages and prices. In 1960, inflation was 1 percent; by 1980, it was 13 percent. The economy became less stable. From 1969 to 1982, there were four recessions, as the Federal Reserve alternated between trying to push unemployment down and prevent inflation from going up. Only in the early 1980s did the Fed, under Paul Volcker and with Ronald Reagan’s support, crush inflationary psychology."

Before looking at Samuelson's horror story here, it is worth noting what happened in the boom, which can be treated as going through 1973, in spite of the recession in 1969. Growth over the 10 years from 1963 to 1973 averaged 4.4 percent, by far the most rapid stretch in the post-World War II era.

The unemployment rate hovered near 4.0 percent for most of this period, as Samuelson complains. This led to large gains in real wages and sharp declines in poverty. The overall poverty rate fell from 19.5 percent in 1963 percent to 11.1 percent in 1973, an all-time low. For African Americans the poverty rate fell from 55.1 percent in 1959 (annual data is not available) to 31.4 percent in 1973. I suspect most folks wouldn't mind a few more disasters like this one.

Dean Baker / March 04, 2013

Article Artículo

Time to Bury Pew Report on Wealth by Age Group

I realize that Pew is a very prestigious outfit, but Pew's garbage is still garbage. Its report on wealth by age group, or at least the interpretation that it and others have given this report, fits the bill.

A couple of years ago, Pew did an analysis that gave breakdowns of wealth by age group. It found that the median household over the age of 65 had $170,500 in net worth. I was actually pleased that they came up with this number, since it meant that the projections that I had done more than two years earlier with my colleague David Rosnick were almost right on the nose. It's always gratifying to see other researchers independently corroborate your findings. 

But what was remarkable about this report was that the Pew researchers took this number as evidence of the affluence of the elderly. The study points out that this was a 42 percent real increase from the 1984 level. By contrast, households under age 35 saw their median net worth fall by 68 percent to just $3,700. This disparity in wealth by age continues to be the take away from this report in the media.

To realize the absurdity of this position, try thinking for a moment. The bulk of people who are now turning age 65 do not have a defined benefit pension. (They did in 1984.) This means that the only income they have is their Social Security check, which averages a bit over $1,200 a month. Right off the bat, $100 a month is subtracted to pay for their Medicare Part B premium. This means that our high living seniors have an income of $1,100 a month, plus their $170,500 in net worth.

Is this rich? My guess is that 90 percent of the reporters who have covered this Pew study have no clue what net worth means. The $170,000 figure includes every asset that seniors own. That means everything in retirement accounts and other personal savings, the value of their car and the equity in their home. To put this in perspective, the median house price is roughly $180,000. That means that if our typical senior household sold off every other asset they held they would have roughly enough money to pay off their mortgage. Then they would be entirely dependent on their Social Security check to support themselves.

Dean Baker / March 03, 2013