Interesting Economic News

Impact of Aging Baby-Boomers on the US economy

http://www.bloomberg.com/news/2011-08-30/aging-baby-boomers-shrinking-labor-force-may-curb-u-s-growth-for-20-years.html

India’s China Obsession

http://www.nytimes.com/2011/09/01/business/global/india-looks-to-china-as-an-economic-model.html

Jim O'Neill of Goldman Sachs considers the possibility of a BRIC century
http://www.themoscowtimes.com/print/article/ready-for-a-bric-century/441453.html

Growing Number of Millionaires in Asia
http://www.bloomberg.com/news/2011-08-31/china-to-have-half-of-asia-s-millionaires-by-2015-baer-says.html

Bloomberg's William Pesek looks at what ails Japan
http://www.bloomberg.com/news/2011-08-31/rock-n-roll-line-rings-true-in-deflation-nation-william-pesek.html

Best Undergrad College Degrees, By Salary

http://www.payscale.com/best-colleges/degrees.asp

Economics has slipped slightly to 12 for 2011-2012, but is still the only non-science or engineering major in the top 12.

Best Undergrad College Degrees, By Salary
	Starting Median Pay	Mid-Career Median Pay
Petroleum Engineering	$97,900	$155,000
Chemical Engineering	$64,500	$109,000
Electrical Engineering (EE)	$61,300	$103,000
Materials Science & Engineering	$60,400	$103,000
Aerospace Engineering	$60,700	$102,000
Computer Engineering (CE)	$61,800	$101,000
Physics	$49,800	$101,000
Applied Mathematics	$52,600	$98,600
Computer Science (CS)	$56,600	$97,900
Nuclear Engineering	$65,100	$97,800
Biomedical Engineering (BME)	$53,800	$97,800
Economics	$47,300	$94,700
Mechanical Engineering (ME)	$58,400	$94,500
Statistics	$49,000	$93,800

Have Gold Prices Reached Bubble Territory?

This Bloomberg article appears to suggest that Gold prices are headed for a correction:
http://www.bloomberg.com/news/2011-08-28/gold-s-absurd-price-makes-stocks-look-cheap-chart-of-the-day.html

Emerging Markets - Slowing Down?

India real GDP grew only 7.7%.
http://blogs.wsj.com/indiarealtime/2011/08/30/india’s-gdp-growth-not-as-good-as-it-looks/

Is decoupling still possible?
http://www.economist.com/node/21526923

Prominent Economists Express Concern as Global Economy Slows

Stephen S. Roach
Kenneth Rogoff
J. Bradford DeLong
Jeffrey Sachs

Meanwhile, PIMCO's Bill Gross offers his take on where to invest in these troubled times:

"In this environment, the world’s biggest manager of bond funds favors investing in Australia, Mexico, Brazil and Canada, along with non-dollar currencies that have strong ties to the Asian continent, Gross, co-chief investment officer and founder of Pimco, reiterated. Although global equities are attractive because dividend yields in many cases are higher than bonds, they’re vulnerable to faltering growth, Gross wrote in a monthly investment commentary published on Pimco’s website today."

College Rankings - Based on Some Unusual Categories

Newsweek College Rankings:
http://www.thedailybeast.com/topics/college-rankings-2011.html

US National Debt - A Primer

http://online.wsj.com/article/SB10001424053111903480904576510660976229354.html

Alan Krueger to head CEA

Princeton University's Alan Krueger chosen to be chairman of the White House Council of Economic Advisers
http://online.wsj.com/article/SB10001424053111904332804576538200563908180.html

An interesting summary of Prof. Krueger's research work.


Prof. Krueger faces touch challenges ahead. As the Washington Post noted today, consumer confidence is low.

Interesting Items

US Manufacturing: Return of Industrial Policy?

http://www.nytimes.com/2011/08/28/magazine/does-america-need-manufacturing.html

Tracking Euro-zone Crisis

http://www.nytimes.com/interactive/business/global/european-debt-crisis-tracker.html

Barro is Skeptical of Keynesian Economics

Harvard's Robert Barro examines "Keynesian vs. Regular Economics" in his WSJ op-ed.

Wall Street Bailout Details

Bloomberg Reporters have put together extraordinarily detailed info on Federal Reserve's massive bailout of Wall Street stalwarts during the darkest days of the recent financial crisis:
http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html

Policy Choices in a Debt-Ridden World

James MacDonald has an interesting piece in Foreign Policy in which he notes that simplistic Keynesian prescriptions may not work this time around.

Also, see this interesting article on the limits of fiscal activism by Alan Greenspan.

An Interview Worth Checking Out

Charlie Rose's interview of Warren Buffett:
http://www.charlierose.com/view/interview/11845

US Macro Update

Mark Zandi provides an interesting outlook for the US Macroeconomy.

A NYTIMES article considers US consumer deleveraging. The following is an interesting aspect highlighted in the article:
"Under normal circumstances, the Fed’s announcement might have attracted new home and car buyers and prompted credit card holders to rack up fresh charges. But with unemployment high and those with jobs worried about keeping them, consumers are more concerned about paying off the loans they already have than adding more debt. And by showing its hand for the next two years, the Fed may have inadvertently invited prospective borrowers to put off large purchases."

August 15, 2011 - India's Independence Day

Thus spoke Jawaharlal Nehru (India's first Prime Minister) on the eve of India's Independence (1947):

"Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long supressed, finds utterance. It is fitting that at this solemn moment we take the pledge of dedication to the service of Inida and her people and to the still larger cause of humanity.


At the dawn of history India started on her unending quest, and trackless centuries are filled with her striving and the grandeur of her success and her failures. Through good and ill fortune alike she has never lost sight of that quest or forgotten the ideals which gave her strength. We end today a period of ill fortune and India discovers herself again. The achievement we celebrate today is but a step, an opening of opportunity, to the greater triumphs and achievements that await us. Are we brave enough and wise enough to grasp this opportunity and accept the challenge of the future?"

Brazil's Economy

http://www.nytimes.com/2011/08/13/world/americas/13brazil.html

Warren Buffett's Op-ed

Warren Buffett makes an excellent case for reforming US tax policy. A key point in his NYTIMES op-ed:

"Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places."

An Unvarnished Take on Britain's Problems

http://online.wsj.com/article/SB10001424053111903918104576504033881168802.html

WSJ Interview with Nouriel Roubini

An Odd Commitment from the FOMC

Given the level of uncertainty and rapidly changing expectations, it is a bit unwise for the the Fed to commit itself to keeping rates low at least until mid-2013. Why not just continue to state that rates will remain low for an extended period (and thus avoid putting a specific date). What will the Fed do if there are unforeseen shocks in 2012 that start to rapidly push up inflation in the US?

They key portion of the Fed statement reads:

"To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

History Lesson - The Nixon Shock

Roger Lowenstein provides a wonderful background on the so-called 'Nixon Shock' that ended the Bretton Woods System.
http://www.businessweek.com/magazine/the-nixon-shock-08042011.html

The Economic Rise of Africa

While the international news media is focused on famine in Somalia, the African continent as a whole is on a much more positive trajectory.
A good article on the improving fortunes of several African economies can be found here:
http://www.bloomberg.com/news/2011-08-09/new-african-middle-class-lures-investment-commentary-by-witney-schneidman.html

Decline of Finance

Global banks look to cut more than 100,000 jobs in the near term. This may herald the reduction in the role of finance in US and UK economies.


http://www.bloomberg.com/news/2011-08-08/global-banks-poised-to-slash-101-000-jobs-in-fastest-reductions-since-2008.html

Millennials and the Job Market

An interesting take on the Millennial Generation
http://www.cnn.com/2011/OPINION/08/05/navarrette.millennials.jobs/index.html

The following quote from the article sums up the generation accurately:

"They were raised in a world where grownups did everything possible to shield them from adversity and disappointment. Everyone got a trophy just for showing up; even red marker pens were banned from some schools because the color was considered too harsh and judgmental.
The catch: Having been told their whole lives that they were "special" and destined for greatness, she says, millennials are unequipped for setbacks. They feel entitled to the best of everything. And they want it now, since they were raised in a fast-food, drive-thru, high-speed Internet culture that believes waiting is for suckers."

Treasury Ratings Downgrade

The S&P finally does the inevitable - long dated Treasuries are downgraded to AA+

Here is the S&P Report in full.

Overview
http://online.wsj.com/article/SB10001424053111903366504576491421339802788.html

Reaction of major creditors:
http://online.wsj.com/article/SB10001424053111903454504576491230812389792.html

Basics of rating agencies:
http://www.bbc.co.uk/news/10108284

Are there any safe harbours left?
http://www.bbc.co.uk/news/business-14430643

Rise of the Emerging Markets

Excellent Data from The Economist
http://www.economist.com/blogs/dailychart/2011/08/emerging-vs-developed-economies

Related Article:
http://www.economist.com/node/21525373

The Onion Takes on Bernanke

Very funny satirical piece from the Onion ... interestingly, the brief snippets of economic wisdom stated by the 'drunk Bernanke' character is actually right on the money:

http://www.theonion.com/articles/drunken-ben-bernanke-tells-everyone-at-neighborhoo%2C21059/

What Ails the US Economy?

An interesting article by WSJ’s David Wessel discusses the following diagnosis put forth by NYU economist Paul Romer:

“Two big sectors of the U.S. economy have been on steroids: finance and health care. If anything is crowding out more productive activities, it's them, as Mr. Romer argued in a recent National Academy of Sciences lecture.

The bloated financial sector—all those brains lured by big bucks who might otherwise have been employed in science, software, engineering or other fields—has harmed the U.S. economy more than any of our post-World War II communist adversaries did.

The American health system costs more per person than any other, but isn't delivering the world's healthiest people. The U.S. isn't getting its money's worth from either sector.

Why have they grown so big? Mr. Romer has a theory: Profit-seeking players in finance and health care have captured Congress, resisted regulation that would curb their excesses and exploited antiquated rules and policy for private gain.”


Paul Romer's full lecture (referenced in the WSJ article) can be viewed here:
http://fednet.net/nas051011/

AAA Ratings in the Business World

Only 4 companies in the S&P 500 have AAA rating:
Automatic Data Processing, Exxon Mobil, Johnson & Johnson and Microsoft

http://www.nytimes.com/interactive/2011/08/03/business/20110803-for-big-companies-little-allure-in-aaa-ratings.html

Technology and Jobs - Even China Can't Escape Robots

Foxconn (aka Hon Hai) is planning to widely introduce robots in its manufacturing facilities.  Even one of the world's largest contract manufacturers, and one of China's biggest employers, finds it necessary to replace workers with robots to stay competitive. As noted previously, technology and productivity improvements are the most important factors behind job market developments.

This piece from The Economist provides a nice summary of Foxconn's plans:
http://www.economist.com/blogs/schumpeter/2011/08/foxconn
According to the article:
"To pacify its increasingly restive workers, Foxconn has repeatedly bumped up their wages, improved facilities, provided counselling and swathed its factories with nets to catch anyone leaping from a window. All this has resulted in higher costs, and signs that the company’s hitherto hugely successful business model has run its course. At a closed retreat in late July, Terry Gou, the chief executive of the company (which is also known as Hon Hai) unveiled a plan to replace a huge amount of human labour with robots by 2013."

Hayek vs. Keynes

A brief yet informative introduction to Keynesian vs. Hayekian economic visions
http://www.bbc.co.uk/news/business-14366054

Promulgating Hayek's viewpoint, Prof. Selgin notes:

"The economy is like a drunk throwing up the morning after the night before. 
It is disgorging itself - or trying to disgorge itself - of bad investments it was tempted to undertake largely because of easy money. 
Giving it still more money will not prevent the inevitable suffering."

Debt Ceiling Agreement

A flow chart explaining the proposed agreement to extend the debt ceiling:
http://www.nytimes.com/interactive/2011/07/22/us/politics/20110722-comparing-deficit-reduction-plans.html

The pact appears rather convoluted ... only a political scientist will love this deal.