US Monetary Stimulus Debate Continues

WSJ has an interesting piece on Prof. Woodford’s influence on US monetary policymaking. Doctoral students specializing in macroeconomics will be familiar with his 2003 tome – “Interest and Prices: Foundations of a Theory of Monetary Policy”

http://online.wsj.com/article/SB10000872396390444772804577621604109639454.html

Meanwhile, Gerald P. O'Driscoll JR. argues that further monetary stimulus (QE 3) will be largely futile:

“The trouble with all forms of temporary spending is that they have no permanent effects. They delay needed adjustments in the economy.”

Update:

Ben Bernanke's Jackson Hole speech
http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.pdf


Further Updates:

Two prominent economists provide their viewpoints on timely monetary policy issues -
Martin Feldstein on the Fed and Future Inflation

http://www.project-syndicate.org/commentary/is-inflation-returning-by-martin-feldstein

John Cochrane on the Fed’s Expanding Role

http://online.wsj.com/article/SB10000872396390444812704577609384030304936.html

Updates on US and Global Economic Conditions

Global Economy

Global Economic Conditions – An Update

http://www.economist.com/node/21561933

Policy Response to the Chinese Economic Slowdown

http://www.economist.com/node/21561887

US Economy

The second estimate of 2012 Q2 US real GDP indicates that the economy grew at a 1.7% rate compared to the advance estimate of 1.5%:

http://www.nytimes.com/2012/08/30/business/economy/second-quarter-growth-revised-up-to-1-7-percent-rate.html

There is an ongoing debate regarding the significance of structural factors vis-a-vis cyclical factors in explaining US labor market conditions. Here is a rather interesting Brookings Institution report that highlights the significance of education gap:

Brookings Institution’s report on skill-mismatches and unemployment

Current Policy Debates

Systems in Need of Reform:

Patents and Litigation

Sebastian Mallaby has an interesting take on the malfunctioning US Patent system

http://www.ft.com/cms/s/2/ea9503c2-f0f9-11e1-89b2-00144feabdc0.html#axzz24webG8Oi

Media analyst, Michael Wolff, captures the insecurities underlying Apple’s litigiousness:

http://www.guardian.co.uk/commentisfree/2012/aug/28/apple-rot-starts-with-samsung-lawsuit-win

“This fierce defensiveness might be rightly understood in a psychological sense: Apple itself is based on stolen iconography. There was first the Beatle's Apple and there was Xerox PARC's desktop design. Apple's self-righteousness masks its guilt. (It may be sheepish, too, about being more of a marketing organization than a technology company.) What's more, it knows better than anybody that if you relax your vigilance, somebody can easily walk off with what you've done – and improve it.”

Regarding the dysfunctional patent system, Wolff notes:

“Patents are, arguably, no longer a system of protection; they are a system of litigation. Great numbers of patents are now filed, in an over-burdened system, to protect not innovations but the right to litigate over innovations. Indeed, any patent of value will ultimately be litigated.”

US Corporate Tax System – In Desperate Need of Reform

http://online.wsj.com/article/SB10000872396390444230504577615232602107536.html

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On the Consequences of Fed’s Monetary Policies:

QE 3 Debate

http://video.ft.com/v/1790131579001/The-QE-face-off

Arguing for a shift to a single mandate for the US central bank, Bob Corker makes an interesting point regarding the Fed in his FT op-ed:

“We need a Federal Reserve that will help, not hinder, our country’s vital transformation to an economy comprised of savers, and not wholly reliant on over-leveraged consumers.”

Meanwhile, Asian policymakers are already worried about the consequences of another (potential) round of QE

http://online.wsj.com/article/SB10000872396390444230504577615152310618494.html

International Finance and Trade Issues

Economist Fred Bergsten argues that the Euro will survive after all

http://www.piie.com/publications/papers/paper.cfm?ResearchID=2202

Meanwhile, Adam Davidson looks at some challenges ahead for the Eurozone

http://www.nytimes.com/2012/09/02/magazine/7-story-lines-to-watch-in-the-euro-crisis-this-fall.html

Economist Dean Baker on the Trans-Pacific Partnership (TPP) agreement’s hidden agenda

http://www.guardian.co.uk/commentisfree/2012/aug/27/pacific-free-trade-deal

Aug 24 - Friday Highlights

Interesting Links

Paul Volcker and the Great Inflation Episode of the 1970s and Early 1980s (Three-Part Series)

http://www.bloomberg.com/news/2012-08-20/how-volcker-launched-his-attack-on-inflation.html

http://www.bloomberg.com/news/2012-08-21/how-volcker-created-a-gold-standard-without-gold.html

http://www.bloomberg.com/news/2012-08-22/volcker-restored-fed-s-credibility-on-inflation.html

Assessing College Readiness - ACT has some interesting data on the preparedness of high school grads for college work: http://media.act.org/documents/CCCR12-NationalReadinessRpt.pdf

The gist of the ACT report is that not many high school graduates are prepared for college-level courses involving math and science.

THE TRACK-STAR ECONOMY by JAMES SUROWIECKI

http://www.newyorker.com/talk/financial/2012/08/27/120827ta_talk_surowiecki

Wall Street Gets Its Way Again

http://www.bloomberg.com/news/2012-08-23/a-case-study-in-wall-street-getting-its-way-in-washington.html

Origin of Indo-European Languages
http://www.nytimes.com/interactive/2012/08/24/science/0824-origins.html

Theodore Dalrymple on the Irrelevance of (British) Foreign Aid

http://www.telegraph.co.uk/news/worldnews/asia/india/9480279/India-is-heading-for-Mars-it-doesnt-need-British-aid-money-to-pay-the-bills.html

Politics and Economics

U of Chicago’s Casey Mulligan Looks at Deficit Spending:

http://economix.blogs.nytimes.com/2012/08/22/is-deficit-spending-the-answer/

Larry Kotlikoff on the Politicization of Economics

http://www.bloomberg.com/news/2012-08-21/economists-risk-labeling-as-political-hacks.html

On a Lighter Note, See the WSJ Piece by Scott Adams
http://professional.wsj.com/article/SB10001424052748703293204576106164123424314.html

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Neil Barofsky Interview – Interesting Insights Regarding the TARP Bailout

Watch Why the U.S. Government Bought 'Troubled Assets' on PBS. See more from PBS NewsHour.

Jobs, Technological Progress and Government Policy

Robots, Technology & the Future of Jobs

http://www.nytimes.com/2012/08/19/business/new-wave-of-adept-robots-is-changing-global-industry.html

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Economists are typically wary of government driven industrial policies aimed at boosting favored sectors. Here is a reason why:

Politics and Medicare Reform

Medicare Reform Debate

Th Economist on the Politics of Medicare Reform

http://www.economist.com/node/21560552

Robert Samuelson Derides the Current Political Debate on Medicare:

http://www.washingtonpost.com/opinions/robert-samuelson-ryans-budget-asks-nothing-of-the-elderly--unfortunately/2012/08/15/ed2c6c2c-e6fb-11e1-8f62-58260e3940a0_story.html

From Bloomberg TV:

India News

Bollygarchs and Politics

http://www.economist.com/node/21560545

A Very Funny Piece

http://www.nytimes.com/2012/08/17/world/asia/relationships-troubled-young-indians-seek-help-from-police.html

Bruce Riedel on Key Historical Developments affecting Indo-US Diplomatic Ties
http://nationalinterest.org/article/jfks-overshadowed-crisis-7073?page=show

Indo-US Relationship

http://www.project-syndicate.org/commentary/india-s-american-relations-by-shashi-tharoor

The World's Top 500 Universities - 2012 Edition

The Latest Ranking of Top Global Universities:
http://www.shanghairanking.com/ARWU2012.html

On International Economics

Economist Robert Barro Discusses Political Misunderstandings Regarding International Trade & Market Intervention

http://online.wsj.com/article/SB10000872396390444184704577587144261496760.html

Gillian Tett’s Excellent Colum in the FT – “Global shift in US business confounds Washington”

http://www.ft.com/cms/s/0/b64abc56-e2d5-11e1-bf02-00144feab49a.html#axzz23chbIM7z

Eurozone’s Double Dip Recession

The Questionable Status of Social Security Trust Funds

On Social Security Trust Funds

An excellent AP piece, via WashPost, highlights several critical aspects regarding the status of the US Social Security system, including the following:

“Here’s how it works: For nearly three decades Social Security produced big surpluses, collecting more in taxes than it paid in benefits. The government, however, spent that money on other programs, reducing the amount it had to borrow from the public, including foreign investors. That’s why some advocates complain that Congress has “raided” Social Security.

In return, the Treasury Department issued special bonds to Social Security. The bonds are now valued at $2.7 trillion. They are accounted for in two Social Security trust funds, one for the retirement program and one for the disability program.”

Debates Regarding Economic Growth, Taxes & Stocks

Bloomberg’s Postrel reflects on McCloskey’s reexamination of what drives economic growth over the very long run:

http://www.bloomberg.com/news/2012-08-02/the-bad-history-behind-you-didn-t-build-that-.html

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WSJ’s David Wessel examines the American tax system:

http://online.wsj.com/article/SB10000872396390444246904577571042249868040.html

Here are a few key stats from the article –

“In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.

In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes

In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes.”

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PIMCO’s Bill Gross vs. Wharton’s Jeremy Siegel on equities:

Excellent Friday Op-eds

NYTIMES columnist, Roger Cohen, makes a great point:

http://www.nytimes.com/2012/08/03/opinion/roger-cohen-personal-freedom-government-oversight.html

“… But safety should not be paramount; it is not a supreme value; it should not be the altar at which freedom is sacrificed. Just because more and more tools exist to control people does not mean authorities should use them, and just because accidents happen does not mean life should be lived as if they are always imminent.”

David Brooks on life:

http://www.nytimes.com/2012/08/03/opinion/brooks-the-credit-illusion.html

WashPost’s Pozen on discount rates and pension accounting:

http://www.washingtonpost.com/opinions/pension-savings-in-transportation-bill-may-be-costly/2012/08/02/gJQAvjmtSX_story.html

Capitalism & Free Trade

American Capitalism – Is There an Image Problem?

http://online.wsj.com/article/SB10000872396390443931404577549223178294822.html

Capitalism vs. Culture

http://www.washingtonpost.com/opinions/fareed-zakaria-capitalism-not-culture-drives-economies/2012/08/01/gJQAKtH9PX_story.html

Benefits Arising from Global Supply Chains

http://www.economist.com/node/21559944

Interesting Economic News Items

The Strong Yen and the Aged Population of Japan

http://www.nytimes.com/2012/08/02/world/asia/strong-yen-is-reinforced-by-japans-generation-gap.html

Changing Dynamics in China’s Property Market

http://www.economist.com/node/21559645

US Inequality Affecting Neighborhood Composition

http://www.washingtonpost.com/local/rich-and-poor-grow-more-isolated-from-each-other-study-finds/2012/08/01/gJQABC5QPX_story.html

WSJ Highlights the Current FOMC Members:

http://blogs.wsj.com/economics/2012/08/01/whos-who-at-the-fed/tab/interactive/

US Local & State Government Public Pension Liabilities – A Growing Nightmare

http://www.bloomberg.com/news/2012-08-01/police-chief-s-204-000-pension-shows-how-cities-crashed.html