US Tax Reform Debate

Roger Lowenstein on Buffett and the Tax Debate

http://www.bloomberg.com/news/2011-09-30/buffett-s-moral-foundation-shapes-tax-idea-commentary-by-roger-lowenstein.html

Biggest Pension Fund to Consider Emerging Markets

Government Pension Investment Fund, Japan's leading pension fund (and the world's biggest pension fund), will begin investing emerging market stocks:
http://www.bloomberg.com/news/2011-09-29/world-s-biggest-pension-fund-plans-to-start-investing-in-emerging-markets.html

Other Emerging Market News:

India Tries to Provide Banking Access to its Rural Population:

http://www.nytimes.com/2011/09/30/business/global/teller-atm-hybrid-takes-banking-to-rural-india.html

Putin’s Return – Not So Great News for Investors?

http://www.bloomberg.com/news/2011-09-30/putin-s-second-coming-is-no-gift-to-russia-s-workers-or-investors-view.html

Why are US Bond Yields So Low?

Stanford Economist Ronald McKinnon has some interesting thoughts on recent developments in the bond markets:
http://online.wsj.com/article/SB10001424053111904332804576538363789127084.html

Meanwhile, New Zealand becomes the latest advanced economy to face a sovereign debt rating downgrade:
http://www.nytimes.com/2011/10/01/business/global/New-Zealand-Double-Ratings-Downgrade.html

Price Signals and Incentives Work

As prices of rare earth materials rose, and as their supplies tightened, companies sought alternatives and workarounds (successfully):

http://www.bloomberg.com/news/2011-09-28/rare-earths-fall-as-toyota-develops-alternatives-commodities.html

Bernanke on Economic Growth

Interesting Speech by the Fed Chairman
http://www.federalreserve.gov/newsevents/speech/bernanke20110928a.pdf

Skill-Biased Technological Changes and High Unemployment

Watch the full episode. See more PBS NewsHour.

Related:
Wealth Distribution in the US

Watch the full episode. See more PBS NewsHour.

Chicago School of Economics & Robert Lucas

Here is a fascinating WSJ interview with Nobel Laureate Robert Lucas:
http://online.wsj.com/article/SB10001424053111904194604576583382550849232.html

MBA Applications

Not So Counter-Cyclical.

Understanding International Trade - A Modern View

Here is an excellent testimony on International Trade and US Prosperity By Philip I. Levy. Hopefully, the idiots in Congress were paying attention.


A key point made by Levy, which even some economists don't appear to grasp, is regarding the utter irrelevance of bilateral trade data:


"...related source of confusion comes from trying to interpret bilateral trade balances in an integrated, multilateral world economy. In recent years, this has focused public attention on the U.S. trade relationship with the People's Republic of China. I will return to the policy questions surrounding that relationship later, but the large and persistent U.S. trade deficit with China has been held responsible for significant U.S. manufacturing job loss by organizations such as the Alliance for American Manufacturing and the Economic Policy Institute.  While there are certainly serious issues with China's economic policies, the bilateral trade balance can be a deeply misleading measure. It evokes a two-country world, in which any job not undertaken in China would be done in the United States.  In fact, one key to China's emergence as a global trading power was that it enmeshed itself in an East Asian trading network, often taking in nearly-finished goods and providing the final touches. What's more, just because China may be the low-cost producer of a particular good does not mean that the United States is the next lowest-cost producer. This misconception helped prompt the misguided U.S. Section 421 action against Chinese tires in 2009, which seems to have served mostly to reshuffle the sourcing of U.S. tire imports to other countries, while doing little or nothing to spur U.S. domestic tire production." 
 
____________________________________________________________________




How to reduce US healthcare costs?
Open the sector to international trade.
http://money.cnn.com/2011/09/16/news/economy/debt_committee_health_costs/

Operation Twist

Perspectives on the Fed Action

http://www.bloomberg.com/news/2011-09-22/fed-sees-significant-risks-to-economy.html

http://online.wsj.com/article/SB10001424053111903791504576584870618136208.html

http://www.economist.com/blogs/freeexchange/2011/09/federal-reserve

Even the Fed has Copier Problems:

http://blogs.wsj.com/economics/2011/09/21/why-was-fed-statement-late-20th-century-technology/

Fall Reading Recommendations

Fall Reading List

Grand Pursuit: The Story of Economic Genius by Sylvia Nasar

Lost Decades: The Making of America's Debt Crisis and the Long Recovery by Menzie D. Chinn and Jeffry A. Frieden

Boomerang: Travels in the New Third World by Michael Lewis

Eclipse: Living in the Shadow of China's Economic Dominance by Arvind Subramanian

India: A Portrait by Patrick French

Knocking on Heaven's Door: How Physics and Scientific Thinking Illuminate the Universe and the Modern World by Lisa Randall

(See Lisa Randall on The Charlie Rose Show here:

http://www.charlierose.com/view/interview/11893)

BRIC, CIVETS, ...

CIVETS – The New Darlings of the Investment Community?

http://online.wsj.com/article/SB10001424053111904716604576546632573895382.html

Turkey – Star of the CIVETS

http://www.bloomberg.com/news/2011-08-23/turkey-boom-most-since-ataturk-lets-erdogan-take-up-masterpiece.html

The US Economy

The Buffet Rule

http://www.nytimes.com/2011/09/18/us/politics/obama-tax-plan-would-ask-more-of-millionaires.html

Tax Expenditure Debate
http://www.washingtonpost.com/business/economy/ever-increasing-tax-breaks-for-us-families-eclipse-benefits-for-special-interests/2011/09/15/gIQAgdjcaK_story.html

Interesting Charts

US Poverty Rates

http://www.nytimes.com/pages/business/index.html

Historical Performance of Federal Reserve Chairman

http://www.nytimes.com/2011/09/18/sunday-review/the-facts-on-the-fed.html

Interesting Application of Economics

The Economics of Beauty:
http://www.telegraph.co.uk/finance/economics/8765360/Does-being-ugly-make-you-poor.html

Dumb and Dumber

Treasury Secretary Tim Geithner offers financial advise to Europeans. The European response, as noted in this NYTIMES article, was not surprising:

““I found it peculiar that, even though the Americans have significantly worse fundamental data than the euro zone, that they tell us what we should do,” Maria Fekter, the finance minister of Austria, said after the meeting Friday morning. “I had expected that, when he tells us how he sees the world, that he would listen to what we have to say.””

Meanwhile, Continental Europeans push for a Tobin Tax (tax on financial transactions) to pay for the various bailouts, and, not surprisingly, the two countries with the most powerful financial lobbyists (US and UK) are dead set against it.
See economist Mark Thoma's arguments in favor of a Tobin Tax here:
http://blogs.reuters.com/great-debate/2011/08/17/merkel-and-sarkozy-are-right-about-a-tobin-tax/

BRICs Differ on Fighting Inflation

India Raises Rates Again
http://www.businessweek.com/news/2011-09-16/india-increases-rates-as-subbarao-breaks-with-bric-nations.html

Dealing with Economic Challenges

David Brooks of the NYTIMES summarizes the problems of the past few years wonderfully:
"Over the past decades, Americans have developed an absurd view of the power of government. Many voters seem to think that government has the power to protect them from the consequences of their sins. Then they get angry and cynical when it turns out that it can’t."

Other Interesting Items:

Will worker retraining help solve the unemployment problem?

Is Social Security a Ponzi scheme?

Robert Samuelson on the Eurozone Crisis

2011 SAT Scores - Student Performances Decline

Solyndra and Government Intervention

The recent recession and the slow recovery that followed has created pressure on governments to engage in old-fashioned industrial policy type activities. The US government has been pushing 'green jobs' and investments in alternative energy companies. Economists are typically wary of government attempts to pick "winners". Here is a great example indicating why governments are not likely to be better than markets at picking "winners":

The fall of Solyndra - a much hyped solar company
http://www.washingtonpost.com/politics/solyndra-solar-company-fails-after-getting-controversial-federal-loan-guarantees/2011/08/31/gIQAB8IRsJ_story.html

Update -
John Stewart at his best (saw the video first on Greg Mankiw's Blog)

Emerging Market News

African Energy Infrastructure and China:
http://www.businessweek.com/magazine/african-energys-new-friends-in-china-09082011.html

Mobile Banking in Africa
http://www.businessweek.com/magazine/in-kenya-securing-cash-on-a-cell-phone-09082011.html

Qualcomm Pushes Smartphones in India
http://www.businessweek.com/magazine/qualcomm-rewires-for-india-09082011.html

China's State Capitalism
http://www.economist.com/node/21528264

Tata in Britain
http://www.economist.com/node/21528653

Global Economic Power in Transition
http://www.economist.com/node/21528591

Promoting US Economic Recovery

Prominent Harvard Economists consider challenges facing the US economic recovery.

Greg Mankiw considers ways to improve the US business investment climate in his NYTIMES piece.

Meanwhile, Robert Barro offers very sensible prescriptions for fixing the US economy:

“Three of them were identified by the Bowles-Simpson deficit reduction commission: reforming Social Security and Medicare by increasing ages of eligibility and shifting to an appropriate formula for indexing benefits to inflation; phasing out “tax expenditures” like the deductions for mortgage interest, state and local taxes and employer-provided health care; and lowering the marginal income-tax rates for individuals.

I would add three more: reversing the vast and unwise increase in spending that occurred under Presidents Bush and Obama; introducing a tax on consumer spending, like the value-added tax (or VAT) common in other rich countries; and abolishing federal corporate taxes and estate taxes. All three measures would be enormously difficult — many say impossible — but crises are opportune times for these important, basic reforms.”

WEF's World Competitiveness Rankings for 2011

The World Economic Forum's annual country rankings (economic competitiveness rankings) are out.

The Top 5 (in order):

Switzerland

Singapore

Sweden

Finland

United States

European Developments

The Swiss try to implement a ceiling for the Swiss Franc exchange rate

Is Euro-zone considering a fiscal union?

Update: Euro-zone Banks - Facing Serious Trouble?

Cyclical vs Structural Unemployment, Part II

Some employers complain of difficulties in filling open positions despite large pool of unemployed workers.

Watch the full episode. See more PBS NewsHour.

Cyclical vs. Structural Unemployment, Part I

Some parts of the US are in fact experiencing a boom (with worker shortages):

Visit msnbc.com for breaking news, world news, and news about the economy

Education and Financial Security

The Schumpeter Column from The Economist makes the following interesting point:
"... the demand for educated labour is being reconfigured by technology, in much the same way that the demand for agricultural labour was reconfigured in the 19th century and that for factory labour in the 20th. Computers can not only perform repetitive mental tasks much faster than human beings. They can also empower amateurs to do what professionals once did: why hire a flesh-and-blood accountant to complete your tax return when Turbotax (a software package) will do the job at a fraction of the cost? And the variety of jobs that computers can do is multiplying as programmers teach them to deal with tone and linguistic ambiguity.

China in Africa

China's booming trade ties with Africa

Will China Shift Low-Cost Manufacturing to Africa?

Government versus Markets

Nobel Prize winning Economist Gary Becker examines the Government vs. Market debate in the context of the Great Recession.   His conclusion:

"Government regulations and laws are obviously essential to any well-functioning economy. Still, when the performance of markets is compared systematically to government alternatives, markets usually come out looking pretty darn good."




Meanwhile, David Brooks of NYTIMES has an interesting piece on areas where government may have a role to play.

August Labor Market Update

US Labor Market Update

US Unemployment Rate – August 2011: 9.1 %

Non-Farm Payrolls: Unchanged

Labor Force Participation Rate: 64%

Employment Ratio: 58.2%

Broader Unemployment (U-6): 16.2%

Long-Term Unemployed: Long-term unemployed (those jobless for 27 weeks and over) accounted for 42.9 percent of the unemployed.

Economic Updates

Global Manufacturing Activity - Cool Graphic
http://blogs.wsj.com/economics/2011/09/01/world-wide-factory-activity-by-country-17/tab/interactive/

US Economic Update
http://www.bloomberg.com/news/2011-09-01/u-s-manufacturing-index-shows-expansion-is-continuing-defying-forecasts.html

Growing World Middle Class
http://www.economist.com/blogs/dailychart/2011/09/middle-class

Mexico's Economic Rebound
http://www.economist.com/node/21526899

Brazil's Surprise Rate Cut
http://www.bbc.co.uk/news/business-14743866

The Freelance Economy
http://www.theatlantic.com/business/archive/2011/09/the-freelance-surge-is-the-industrial-revolution-of-our-time/244229/