Economic Concerns and the Fed Rate Cut Debate

Wall Street Turns Skittish on Eve of Rate Cuts
https://www.wsj.com/finance/wall-street-turns-skittish-on-eve-of-rate-cuts-5e97c19c
Bond investors are suddenly bracing for a downturn, while equity investors appear more sanguine.
 
Interest Rates Are Too High. The Fed Should Cut by a Half Point.
https://www.wsj.com/economy/central-banking/interest-rates-are-too-high-the-fed-should-cut-by-a-half-point-e7855ea8
With rates so far from ‘neutral’ and the labor market cooling, it’s better to start big.

The Fed’s Rate-Cut Dilemma: Start Big or Small?
https://www.wsj.com/economy/central-banking/fed-interest-rate-cut-size-861c9600  
That the Fed will cut rates at its meeting next week is all but settled. But how much is shaping up to be a close call. 

A Recession Signal Is Flashing Red. Or Is It?
https://www.wsj.com/economy/central-banking/a-recession-signal-is-flashing-red-or-is-it-da02b509
When the yield curve turns positive, the country is usually about to plunge into recession. Hope this time relies on a few historical exceptions. 

Layoffs Are Few. So Why Are Jobs Harder to Find?
https://www.nytimes.com/2024/09/12/business/economy/layoffs-jobs-economy.html
Past economic cycles show that unemployment starts to tick up ahead of a recession, with wide-scale layoffs coming only later.

Why a Fed Rate Cut Won’t Solve the Housing Wealth Gap
https://www.wsj.com/economy/housing/interest-rate-cut-housing-mortgage-prices-8c12464b
With home prices near record highs and cost of home insurance and property taxes rising, affordability remains an issue.

Housing’s Worst Crisis in Decades Reverberates Through 2024 Race
https://www.bloomberg.com/news/articles/2024-09-12/homebuyers-hit-by-price-surge-supply-crunch-rock-2024-election

Intangible Assets and the Performance Economy

What Taylor Swift and Oasis can teach us about the economy
https://www.ft.com/content/5ec68526-7cdc-4449-945d-182e345e1b73
The music industry’s shift from product to performance foreshadows a widespread move towards intangible assets 

White-Collar Workers Are Getting Squeezed. Even Oscar-Winning Producers.
https://www.nytimes.com/2024/09/15/business/economy/hollywood-producers-challenges.html
Corporate consolidation and technology have upended many jobs in recent decades. But few arcs are more surprising than that of the Hollywood producer

Low Income Households are Hurting

What the struggles of dollar stores reveal about low-income America
https://www.ft.com/content/4fd6ae31-520e-4e2b-ae06-4f45218c4fdf
Discounters often prosper in downturns, but recently they have been hurt by rising costs and their customers’ precarious finances 

Will Ireland Remain a Tax Haven for Multinational Firms?

Ireland’s special relationship with Apple and Google has created a multibillion-dollar windfall—and an existential crisis
https://finance.yahoo.com/news/ireland-special-relationship-apple-google-104213731.html
 
Ireland Mulls How to Use Apple’s €13 Billion It Didn’t Want
https://finance.yahoo.com/news/ireland-decide-13-billion-said-150757868.html
 
Ireland Struck It Rich With Apple. Others Struck It Poor.
https://www.bloomberg.com/opinion/articles/2024-09-13/ireland-struck-it-rich-with-apple-others-struck-it-poor
 
Unpacking Discrepancies in American and Irish Royalty Reporting
https://www.stlouisfed.org/on-the-economy/2024/aug/unpacking-discrepancies-american-irish-royalty-reporting 

Skilled versus Unskilled Immigrants

Low-skilled migrants cost taxpayers £150,000 each
https://www.telegraph.co.uk/business/2024/09/12/low-skilled-migrants-cost-taxpayers-150000-each/
Pressure on public services outweighs tax take for low-earners, finds OBR 

The Hard Truth About Immigration
https://www.theatlantic.com/ideas/archive/2023/10/us-immigration-policy-1965-act/675724/
If the United States wants to reduce inequality, it’s going to need to take an honest look at a contentious issue. 

David Leonhardt: 

https://www.nytimes.com/2019/07/17/opinion/immigration-trump-racism.html

I think our immigration policy should take into account the sharp rise in inequality over the last few decades. One way to do so would be to reduce, or at least hold constant, the level of immigration by people who would compete for lower- and middle-wage jobs while increasing immigration among people who would compete for higher-wage jobs.

The Case for Boosting Immigration of Skilled Workers:

Skilled Migration and Innovation

https://vivekjayakumar.blogspot.com/2024/02/skilled-migration-and-innovation.html

Skilled versus Unskilled Immigrants

https://vivekjayakumar.blogspot.com/2022/10/the-case-for-selective-immigration.html

Evidence on Assortative Mating

Online Dating Caused a Rise in US Income Inequality, Research Paper Shows
https://www.bloomberg.com/news/articles/2024-09-14/online-dating-caused-a-rise-in-us-income-inequality-research-paper-shows
Online dating may be partially to blame for an increase in income inequality in the US in recent decades, according to a research paper.
Since the emergence of dating apps that allow people to look for a partner based on criteria including education, Americans have increasingly been marrying someone more like themselves. That accounts for about half of the rise in income inequality among households between 1980 and 2020, researchers from the Federal Reserve Banks of Dallas and St. Louis and Haverford College found.

From Dating to Marriage: Has Online Dating Made a Difference?
https://www.stlouisfed.org/on-the-economy/2024/sep/dating-marriage-has-online-dating-made-difference
 
Marriage Market Sorting in the U.S.
https://research.stlouisfed.org/wp/more/2023-023
Working Paper 2023-023B by Anton Cheremukhin, Paulina Restrepo-Echavarria, and Antonella Tutino
We examine shifts in the U.S. marriage market, assessing how online dating, demographic changes, and evolving societal norms influence mate choice and broader sorting trends. Using a targeted search model, we analyze mate selection based on factors such as education, age, race, income, and skill. Intriguingly, despite the rise of online dating, preferences, mate choice, and overall sorting patterns showed negligible change from 2008 to 2021. However, a longer historical view from 1960 to 2020 reveals a trend toward preferences for similarity, particularly concerning income, education, and skills. Our findings refute two out of three potential explanations -- reduced search costs and growing spatial segregation -- as potential causes of these long-term shifts. In particular, we conclude that people's capacity to process and evaluate information hasn't improved despite technological advancements. Among the remaining demographic factors, we identify enhanced workforce participation and college attainment among women as the primary drivers of the U.S. marriage market transformation. Furthermore, we find that the corresponding changes in mate preferences and increased assortativeness by skill and education over this timeframe account for about half of the increased income inequality among households. 

Related:

https://vivekjayakumar.blogspot.com/2023/06/assortative-mating-interesting-item.html  

Left-Behind Places and the Rise of Populist Parties

The Complicated Rise of the Right in Germany’s Left-Behind Places
https://www.newyorker.com/news/dispatch/the-complicated-rise-of-the-right-in-germanys-left-behind-places
As populist parties surge in the eastern part of the country, the ruling coalition is stumbling and the traditional political spectrum is being scrambled. 

The Political Rage of Left-Behind Regions
https://www.nytimes.com/2024/09/03/opinion/trump-afd-germany-manufacturing-economy.html
Paul Krugman:
So what’s the matter with the heartland? The most likely story is that the 21st-century economy is driven by knowledge-intensive industries that flourish in metropolitan areas with highly educated work forces. This has led to a self-reinforcing process in which jobs migrate to places with lots of college graduates, and college graduates migrate to the same places, leaving less-educated places like West Virginia stranded. 

Clever AI

OpenAI Releases New AI Model That Answers More Complex Questions
https://www.bloomberg.com/news/articles/2024-09-12/openai-releases-o1-model-with-reasoning-capabilities
The new model, known internally as Strawberry, can handle complicated math and coding problems.  

Is it Worth Getting a Master's Degree?

Master’s Programs Are Cash Cows for Universities. Do They Pay Off for Students?
https://www.aei.org/wp-content/uploads/2024/09/RPT_-Schneider-Masters-Programs-Are-Cash-Cows-Aug-2024-final.pdf
Mark Schneider (American Enterprise Institute):
The absolute increase in lifetime earnings is the average gain in income between students completing the degree and the counterfactual earnings of similarly situated students without the degree. Incorporating the time spent getting a master’s degree, the cost of obtaining the degree, and the probability of completing a program generates an “adjusted ROI.” Taking these costs into account drastically reduces the return to the student—and puts the return for master’s degrees dead last. [But] Averages Hide Lots of Information. Business is the single largest field of study for master’s students; but, on average, business master’s degrees have a negative ROI. But graduates from the top performing programs—including Dartmouth, the Massachusetts Institute of Technology, and the University of Pennsylvania— can earn millions more than graduates from other business programs. Students who choose badly could experience a negative ROI of over $1 million. Even in computer science, the field with the highest overall ROI, graduates from some programs experienced negative ROIs. 

Core versus Headline CPI Inflation Rate

Core US Inflation Picks Up, Damping Odds of Outsize Fed Cut
https://www.bloomberg.com/news/articles/2024-09-11/core-us-inflation-picks-up-as-housing-costs-continue-to-rise
Underlying US inflation unexpectedly picked up in August on higher prices for housing and travel, undercutting the chances of an outsize Federal Reserve interest-rate cut next week.
The so-called core consumer price index — which excludes food and energy costs — increased 0.3% from July, the most in four months, and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday.

CPI Report: https://www.bls.gov/news.release/pdf/cpi.pdf 

Interview - Finance Whiz Michael Moritz

From his rural idyll in the Tuscan hills, the Welsh venture capitalist reflects on his extraordinary journey through Silicon Valley
https://www.telegraph.co.uk/money/investing/news/michael-moritz-interview/ 

Do Cryptos/Stablecoins Enable Illegal Activities?

The Shadow Dollar That’s Fueling the Financial Underworld
https://www.wsj.com/finance/currencies/tether-crypto-us-dollar-sanctions-52f85459
Cryptocurrency Tether enables a parallel economy that operates beyond the reach of U.S. law enforcement 

Immigration Becomes a Hot Button Political Issue

PBS Newshour Report:  Ohio city with Haitian migrant influx thrust into political spotlight
https://youtu.be/FA80DOcJnu8 

The truth behind Trump’s pet-eating conspiracy theory
https://www.telegraph.co.uk/world-news/2024/09/11/trump-pet-eating-haitians-debate-claim-facts/

Can Apple Retain its Dominance?

How Apple Rules the World
https://www.bloomberg.com/features/2024-apple-rules-the-world/
The world’s most valuable company is loved, and feared, because of the fanatical control it maintains over the iPhone. How long can that last?
 
Apple, Google Lose Multibillion Dollar Court Fights With EU
https://www.bloomberg.com/news/articles/2024-09-10/apple-loses-eu-top-court-fight-over-13-billion-irish-tax-bill

Poor Management Decisions and the Downfall of Boeing

Boeing’s landmark union contract seeks to reverse its horrible executive decisions since the turn of this century
https://www.latimes.com/business/story/2024-09-10/column
 
Related:
https://vivekjayakumar.blogspot.com/2024/03/boeing-decline-of-american-corporate.html 

Wealth Taxes – A Bad Idea?

America’s rich never sell their assets. How should they be taxed?
https://www.economist.com/finance-and-economics/2024/06/20/americas-rich-never-sell-their-assets-how-should-they-be-taxed
 
Unrealized gains taxes are a pointless hassle
https://www.noahpinion.blog/p/unrealized-gains-taxes-are-a-pointless
 
It’s Time to Tax the Billionaires
https://www.nytimes.com/interactive/2024/05/03/opinion/global-billionaires-tax.html

Taxing the Superrich Is More Possible – and More Necessary – Than Ever
https://www.project-syndicate.org/commentary/billionaire-wealth-tax-progress-made-at-the-g20-must-continue-by-gabriel-zucman-2024-08

Wealth Taxes Are the Obvious Revenue Target for Reeves
https://www.bloomberg.com/opinion/articles/2024-08-12/wealth-taxes-are-the-obvious-revenue-target-for-reeves
 
What happened when Spain ‘punished’ its millionaires
https://www.telegraph.co.uk/business/2024/09/09/how-spain-shows-why-wealth-tax-will-fail-britain/ 

Be Wary of the Return of Industrial Policy

Industrial Policy’s Deceptive New Clothes
https://www.project-syndicate.org/commentary/industrial-policy-subsidies-tariffs-regulations-will-add-costs-harm-innovation-by-raghuram-g-rajan-2024-09
If the new "industrial strategy" is offering ideas for better public governance, it is useful. But it becomes positively dangerous when it turns to the private sector, where state interventions inevitably undermine competition, disrupt price signals, and dampen the motivation to innovate.  

Concentration in the Economics Field (Dominance of Elite Programs)

Break Up Big Econ: The economics profession has become insular and status-obsessed, and not focused enough on making a positive impact on the world.

https://www.theatlantic.com/ideas/archive/2024/09/break-big-econ/679748/

Harvard’s David Deming:

Economics has long chafed at its association with “soft” fields such as philosophy and history and thus spent most of the 20th century trying to imitate the hard sciences by becoming more mathematically rigorous. But this attempt didn’t work, because trying to explain the world via mathematical models is still fundamentally interpretive, requiring crucial assumptions about which factors belong in one’s formula at all. The shift instead plunged economics even deeper into esoteric theorizing and insider jargon.

The problem isn’t the use of math itself. Abstruse mathematics can lead to immense real-world benefits; the theoretical improvements in auction design by the Nobel laureates Paul Milgrom and Robert Wilson, for example, ended up saving the Federal Communications Commission and taxpayers billions of dollars. The problem is that examples like that one are not as common as they ought to be. In economics, professional incentives too often reward theoretical elegance over solving real-world problems.

 

Is economics in need of trustbusting?
https://www.ft.com/content/d973dc8c-b1a1-4dd1-bd4e-be6225494ded
FT:
But what if the concentrated business is economists themselves? A study documents a “high and rising” concentration of Nobel Prize winners in a handful of top US universities: more than half their combined career time has been spent at just eight economics departments. Equivalent measures for other disciplines, from natural sciences to the humanities, are going the other way.
There are other signs of economics turning into an elite closed shop: the handful of journals acting as gatekeepers to career advancement are largely controlled by economists from the same top departments, who also disproportionately pass through the revolving doors into policymaking jobs. 

High and Rising Institutional Concentration of Award-Winning Economists

https://conference.nber.org/conf_papers/f204525.pdf

State of the US Tech Sector

AI exuberance masks broad weakness in tech sector, say investors

https://www.ft.com/content/0b14d871-2d19-46f1-9660-5466301e8066

Many companies unconnected to artificial intelligence boom are yet to recover from post-pandemic downturn

IT Unemployment Hits 6% Amid Overall U.S. Jobs Growth

https://www.wsj.com/articles/it-unemployment-hits-6-amid-overall-u-s-jobs-growth-bc2f2915

AI and general streamlining efforts leave tech workers in a tough labor market