Monday, December 28, 2009

Keynes: The Return of the Master

Keynes: The Return of the Master - a recent discussion from World Bank

The author’s last note touched on Keynes’ idea of risk and his suggestions for developing countries. In developing countries, one can calculate the amount of fixed political parameters, without taking into consideration the authorities in charge. What remains uncertain is the political framework, however. Development policy must center on an attempt to establish constant and stable political parameters as a first priority.

Wednesday, December 16, 2009

Assorted on Samuelson

Edward L. Glaeser;
When Robert Lucas, the Nobel laureate who micro-founded macroeconomics and challenged Keynes, decided to switch from history to economics, he spent a summer reading Samuelson’s Ph.D. dissertation, “The Foundations of Economic Analysis,” by “working through the first four chapters, line by line, going back to my calculus books when I needed to.” As a result, “by the beginning of fall quarter I was as good an economic technician as anyone on the Chicago faculty.


David Warsh:
John Maynard Keynes may have had more influence on policy makers, Milton Friedman on citizens, Kenneth Arrow on economic theory, but Samuelson had more influence on the way economics is done today, and the purposes to which it is put, than any other economist of the twentieth century.


David Henderson;
Arrow challenged Samuelson's agnosticism about the relevance of economics, which spilled over to Samuelson's agnosticism about economic policy. Quoting Samuelson's statement, "there are no rules concerning the proper role of the government that can be established by a priori reasoning," Arrow replied, "such banalities are not entirely to the point. Economic theory, being abstract, cannot of course state that government expenditures should be 31.732 percent of gross national product. But it can state general principles which relate the allocation of resources between public and private uses to the underlying preferences of individuals, including those for public goods."


Arnold Kling
:
A lot of the feeling about him is correlated with how one feels about math


Krugman
;
There have been hedgehogs; there have been foxes; and then there was Paul Samuelson.


Peter Boettke
;
Samuelson famously remarked once that he didn't care who wrote the nation's laws, as long as he wrote the nation's economic textbooks. Which he indeed did. His Economics became the leading textbook for college freshman, and his Foundations became the leading text for first-year graduate students in economics.


Obituaries: NYT, Telegraph, WSJ,

Multimedia:
Paul Samuelson, Nobel Economics Laureate, Dies at 94
The National Bureau of Economic Research's James Poterba, Bank of Israel Governor Stanley Fischer, Massachusetts Institute of Technology's Robert Solow, Carnegie Mellon University's Allan Meltzer and Columbia University's Jagdish Bhagwati talk with Bloomberg's Tom Keene about Paul Samuelson

Summers Says Paul Samuelson Had Passion for Economics

Thursday, November 12, 2009

The Debate on the International Monetary System


Keynes’ original proposal envisaged a global bank (the International Clearing Union or ICU), which would issue its own currency (bancor), based on the value of 30 representative commodities including gold, exchangeable against national currencies at fixed rates. All trade accounts would be measured in bancor, while each country would maintain a bancor account vis-à-vis the ICU (expected to be balanced within a small margin), and also have an overdraft allowance vis-à-vis the ICU. When countries experienced large trade deficits (more than half of the bancor overdraft allowance), they would pay interest on their accounts, undergo economic adjustments (possibly also capital controls) and devalue their currencies. Conversely, countries with large trade surpluses would also be subject to a similar charge and required to appreciate their exchange rates. This mechanism would bring in a smooth symmetry of adjustments across countries and avoid global imbalances.


Interesting new staff position paper from the Fund.

Friday, September 25, 2009

The Great Depression Surge of September 2008


via Google Trends

For Discussion: What's the reason for the search surge in the latter half of 2008.

Friday, May 1, 2009

Friday, April 24, 2009

Lords of Finance

Ahamed Advises Central Bankers to Be Imaginative
April 20 (Bloomberg) -- Liaquat Ahamed, chief investment officer at Charter Atlantic Corp. talks with Bloomberg's Tom Keene about his book, ``Lords of Finance: The Bankers Who Broke the World,'' and central banks' monetary policies.

Sunday, April 12, 2009

Krugman on the Economy

East Asia Economic Update- Eas Asia Saves the World





East Asia & Pacific Update - Battling the forces of global recession;
-Prospects for recovery among the developed countries are uncertain.
-Over the medium term, the countries of developing East Asia can achieve high rates of economic expansion in a slowly growing world economy to the extent they are able to extract more growth from domestic demand, boost competitiveness, penetrate new markets, and further improve the attractiveness of the region as a key destination for foreign investment.


Related;

comparing the 1997-98 Asian financial crisis and the current crisis

Friday, April 3, 2009

Podcast of the Day- Mohammed El-Erian

Pimco's El-Erian Says to Take Investment Risk Incrementally ;
This is not the time for a pedal-to-the-metal approach to investing,” he said in an interview on Bloomberg Radio today. “We are going toward a highly derisked and slimmed-down financial system, which means there will be less credit available for the economy as a whole.”

El-Erian, 50, said he expects more government regulation, less available credit and an “age of thrift” for the world.

“There will be a lot more caution,” El-Erian said.



Related;
'Setback for All' if Financial Turmoil Slows Globalization

When Markets Collide: Investment Strategies for the Age of Global Economic Change


Discussion on the book at Foray TV


Dealing with Global Fluidity

Demystifying the Hype


A Crisis to Remember

Essential task for G20 leaders is a cinema trip to see 'A Beautiful Mind'
Mohamed A El-Erian and Mike Spence

Thursday, April 2, 2009

Let's help innocent bystanders says Calvo

Calvo Says IMF Funding `Key' From G-20 Meeting
Guillermo Calvo, a professor of economics at Columbia University, talks with Bloomberg's Tom Keene about Mexico's request for a $47 billion International Monetary Fund loan, the role of the IMF and the World Bank, and central bank polices in emerging markets.

Related;
Phoenix miracles in emerging markets: recovering without credit from systemic financial crises

A Master of Theory and Practice

Staggered Wage and Price Setting in Macroeconomics

Staggered prices in a utility-maximizing framework

One who saw the recession coming

Instead, the 81-year-old Taiwanese founder of the world's fourth-largest containerised shipping company started preparing for an economic downturn three years ago.

He had sensed then that a downturn was going to hit in a few years and that it would be a very bad one.

'I didn't have any special deduction, but I had a presentiment,' said the former seafarer in Hokkien at an interview on Monday.

He had also thought then that the shipping industry had massively over-ordered new ships and that there would be a capacity glut in time to come.

Dr Chang also rejected an offer of cooperation to build super-large container vessels from CMA, France's largest shipping conglomerate, last year.

'I asked (the CMA chairman), 'What will you do in bad times?' ' he recounted. It was a big risk to take, he said, adding that those who went into it were 'gua hang' or 'amateurs' lacking in understanding of the industry. The ultra-large container ships would be very difficult to fill in times of recession, he reckoned.

Many in the shipping industry, however, thought then that he was making a grave mistake in not building the very large ships that brought down unit costs.

Events since then show that he was right after all: The industry has slumped as a result of the global financial crisis that has hit consumption and manufacturing and therefore demand for transport of goods.

With great prudence, preparing for bad times during good ones, he has ensured that Evergreen, while adversely affected by the current downturn, is able to weather it without taking the drastic measure of retrenching any of its 18,000 employees or cutting their salaries, as many firms in Taiwan have done. He refuses to retrench because he believes in taking care of his employees' livelihood.

But he is not merely sitting out the downturn which he believes will last till 2012. He has plans to start building new ships next year or the year after next depending on the situation, in order to be ready for the upturn when it comes. He believes the best time to build ships is during a downturn when costs are low.

Despite the slump in global trade, he has started a new container shipping company here, the Evergreen Marine (Singapore), to take advantage of Singapore's standing as a flag of quality. It will initially have a fleet of 13 vessels re-registered from Panama and will have new ships added later.

Evergreen dealt a blow to Singapore in 2002 when it moved its regional transshipment business from Keppel to Tanjong Pelepas in Johor. Dr Chang said on Monday that he has no plans for expansion there.

At 81, he displays great spirit and vigour, which must have sustained him through his younger days when he struggled against great odds to build his shipping business. He had started out in 1968 with just one rickety second-hand vessel and little else apart from his strong business instincts, deep knowledge of the maritime industry from his days as a sailor, and his voracious reading.

In 40 years, he has developed Evergreen into a multibillion-dollar transport conglomerate that runs a gamut of transport and travel-related service companies including shipping, air and trucking services, port terminals, hotels and resorts.

Along the way, through sheer doggedness, he broke through the Far Eastern Freight Conference - a cartel of major shipping companies that closed down last year - to ply the Asia-Europe route successfully as an independent from 1979.

However, he eschewed beggar-thy-neighbour tactics and repaid more than fully kindness shown to him when he was most in need of it.

In his memoirs Tides Of Fortune, he recalled how a shipping agency boss lent him NT$100,000 (S$4,400) when he was facing cash-flow problems. He later invited this man, who had fallen on hard times, to join one of his firms as a shareholder and appointed him board chairman.

It is this sense that one has to lead a life of moral integrity that motivated him to start a magazine to promote traditional Chinese values at a time when he thought Taiwanese society morally degenerate.

The monthly Morals magazine started publication in January last year. Through stories of good deeds, generous acts and inspiring events written in simple Chinese and illustrated by cartoons, it hopes to transmit moral values to young and old Taiwanese. The 12-page, paperback-size magazine is handy to carry around. There are no advertisements. The Chang Yung-fa Foundation foots the bill for publishing the magazine and postage, which last year exceeded NT$10 million.

Distributed free through subscription, it was meant for Taiwanese and the first print run was just 20,000. But subscription quickly shot up to the current 220,000, with ethnic Chinese from all over the world also requesting copies. It was the response from overseas Chinese that gave Dr Chang the idea of raising awareness of the magazine among Chinese communities outside of Taiwan, beginning with Malaysia and Singapore.

-Shipping boss saw the recession coming

Smart entrepreneurs hold key to bubble prediction?

Colbert's word on the Dow

The Colbert ReportMon - Thurs 11:30pm / 10:30c
The Word - Fine Line
comedycentral.com
Colbert Report Full EpisodesPolitical HumorNASA Name Contest

Wednesday, April 1, 2009

Assorted

Rodrik: Simon Johnson's Morality tale;

Finance needs to be cut down to size. What the U.S. needs is what the IMF would have told any country...


Stiglitz: Obama's Ersatz Capitalism

A quick guide to the G-20 summit

One Economics, Many Recipes


Snapping ropes and breaking bricks

Macroegonomics


How Not To Convince People You Are Capable Of Having An Internal "Devaluation"

Obama’s Nobel Headache

Can We Trust the World Bank to be a Knowledge Bank?

Podcasts

Wyplosz Sees G-20 Agreeing to Add More Money to IMF

Shiller Says U.S. Housing Prices Back to Pre-Bubble Levels

Phelps Says U.S. Needs Banks Dedicated to Businesses

Shiller Says Failure of GM Would Shock Confidence
Robert Shiller, chief economist at MacroMarkets LLC and an economics professor at Yale University, and George Akerlof, economist at the University of California, talk with Bloomberg's Tom Keene about their book, ``Animal Spirits: How Human Psychology Drives The Economy, and Why It Matters For Global Capitalism.''

Nobel Winners Lucas, Prescott Discuss Financial Crisis, Theory
(very highly recommended)

Eichengreen Sees Treasury `Overpaying' For Toxic Assets

OECD economist David Turner assesses the stimulus measures being taken by governments to kick-starts their economies.

Tuesday, March 31, 2009

Paper by Roubini, authorized by Timothy Geithner

A Balance Sheet Approach to Financial Crisis
Allen, Mark | Rosenberg, Christoph B. | Keller, Christian | Setser, Brad | Roubini, Nouriel

Carmageddon '09

The Daily Show With Jon StewartM - Th 11p / 10c
Carmageddon '09 - Lemon Aid
comedycentral.com
Daily Show Full EpisodesEconomic CrisisPolitical Humor

How Has India Been Hit By the Crisis?

14. The contagion of the crisis has spread to India through all the channels – the financial channel, the real channel, and importantly, as happens in all financial crises, the confidence channel.

15. Let us first look at the financial channel. India's financial markets - equity market, money market, forex market and credit market - had all come under pressure from a number of directions. First, as a consequence of the global liquidity squeeze, Indian corporates found their overseas financing drying up, forcing corporates to shift their credit demand to the domestic banking sector. Also, in their search for substitute financing, corporates withdrew their investments in domestic money market mutual funds (MFs); consequently, non-banking financial companies (NBFCs) where the MFs had invested a significant portion of their funds came under redemption pressure. This substitution of overseas financing by domestic financing brought both money markets and credit markets under pressure. Second, the forex market came under pressure because of reversal of capital flows as part of the global deleveraging process. Simultaneously, corporates were converting the funds raised locally into foreign currency to meet their external obligations. Both these factors put downward pressure on the rupee. Third, the Reserve Bank's intervention in the forex market to manage the volatility in the rupee further added to liquidity tightening.
16. Now let me turn to the real channel. Here, the transmission of the global cues to the domestic economy has been quite straight forward – through the slump in demand for exports. The United States, European Union and the Middle East, which account for three quarters of India's goods and services trade, are in a synchronized down turn. Services export growth is also likely to slow in the near term as the recession deepens and financial services firms – traditionally large users of outsourcing services – are restructured. Remittances from migrant workers too are likely to slow as the Middle East adjusts to lower crude prices and advanced economies go into a recession.

17. Beyond the financial and real channels of transmission as above, the crisis also spread through the confidence channel. In sharp contrast to global financial markets, which went into a seizure on account of a crisis of confidence, Indian financial markets continued to function in an orderly manner. Furthermore, our banks have continued to lend. However, the tightened global liquidity situation in the period immediately following the Lehman failure in mid-September 2008, coming as it did on top of a turn in the credit cycle, increased the risk aversion of the financial system and made some banks cautious about lending.

18. The purport of the above explanation is to show how, despite not being part of the global financial sector problem, India has been affected by the crisis through the adverse feedback loops between external shocks and domestic vulnerabilities


See the entire speech

Also recommended Financial Sector Self Assessment ;

Housing Finance Companies
For the growing and important segment of housing finance companies, the CFSA has noted that having a National Housing Price Index and a Housing Starts Index is a priority.

Foreign Exchange Market
With the economy moving towards fuller capital account convertibility in a calibrated manner, focussed regulation and monitoring of the foreign exchange market assumes added importance. There is though a need to strengthen infrastructure, transparency and disclosure, and product range in the forex derivatives segment. Strengthening the trading infrastructure, market conduct, transparency of Over-the-counter (OTC) derivatives in the forex market, accounting and disclosures in line with international practices, including disclosures by non-bank corporates, needs to be done on a priority basis. The recent introduction of currency futures is a step in this direction.

Government Securities Market
The government securities market has witnessed significant transformation in its various facets: market-based price discovery, widening of the investor base, introduction of new instruments, establishment of primary dealers and electronic trading and settlement infrastructure. This is the outcome of persistent and high-quality reforms in developing the government securities market. Increased transparency and disclosures, gradual scaling down of mandated investments and development of newer instruments are some major areas which could be considered for further development. Regulatory incentives to increase the size of trading book could also be considered as a measure to further develop the government securities market.

Corporate Governance
In India, there is a comprehensive corporate governance framework in place for listed companies and the listing agreement forms an important pillar of corporate governance framework. There is a need to strengthen the corporate governance framework with regard to risk management in listed companies. Listed companies need to disclose the reasons for non-compliance with non-mandatory requirements. Steps need to be taken to protect the interests of shareholders, such as equitable treatment of all shareholders including minority shareholders and alternate methods of voting, which are convenient for shareholders and in which investor associations can play a constructive role. There is a need for strengthening the disclosure mechanism to bring about greater transparency in ownership structures and stringent penal action needs to be taken where such practices are unearthed. Penal provisions for fraudsters may be strengthened in corporate law by providing for disgorgement of gains and confiscation of assets. The corporate governance framework needs to evolve with the changing times and there is a parallel need to strengthen the corporate governance framework for unlisted companies.

Transparency in Monetary Policy

India is largely compliant with the IMF’s Code of Good Practices on Transparency in Monetary Policy. The roles, responsibilities and objectives of the Reserve Bank are well-defined. The Reserve Bank has explicit multiple objectives of monetary policy with changing relative emphasis. It also follows a multiple indicator approach, which has been reasonably effective. The present legislative framework provides enough room and manoeuvrability for the Reserve Bank to operate monetary policy in consonance with evolving needs and circumstances. The key element of the framework at present is the flexibility enjoyed by the Reserve Bank while going about its assigned task of maintaining the monetary stability of India. The main issues that have come out of the assessment of transparency in monetary policy pertain to the review of legislations with regard to the objectives of monetary policy, the issue of operational independence and accountability of the Reserve Bank and the separation of debt management from monetary management.

As far as the issue of operational independence of the central bank is concerned, the Reserve Bank enjoys independence vis-à-vis the executive arm of the state through conventions, agreements and MoUs in specific areas. The specification of procedures and reasons for the removal of the Governor/Deputy Governor as also for supersession of the Board could potentially lead to the loss of well-established de facto independence. Any modifications that might be required to strengthen monetary policy as also the regulatory framework might be carried out by necessary amendments to existing legislations as needed, which would not call for a fundamental review of legislations or an overhaul of the existing legal framework. The CFSA feels that an overhaul of legislation may not be appropriate at the current juncture.

Following the announcement in the Union Budget 2007-08, the Central Government is proceeding with the establishment of a Middle Office, as a prelude to setting up of a full-fledged Debt Management Office (DMO). While most members of the CFSA concurred with the proposal to set up a DMO, one member felt that the DMO should be an independent body. The Chairman, however, was personally of the view that the time is not ripe for the complete separation of debt management from the Reserve Bank at the current juncture.

Transparency in Financial Policies

The Reserve Bank, SEBI and IRDA are compliant with the relevant standards in transparency in financial policies. Any move to institutionalise the High Level Coordination Committee for Financial Markets (HLCCFM) could prove to be counter-productive as it could reduce flexibility in the formulation of financial policies; however, the present information-sharing mechanism could be improved.

Fiscal Transparency
The major area of concern arising out of the assessment of fiscal transparency is in the reporting of off-budget items, like oil bonds, and the need to have an additional augmented fiscal deficit measure to capture these items. Likewise, any move towards accrual-based accounting should also be attempted in a gradual manner.

Go for Narrow Banking says Edmund Phelps

Phelps Says U.S. Needs Banks Dedicated to Businesses -podcast


Related;
6th Annual Conference: Emerging from the Financial Crisis

A summary of the conference

Ned Phelps of Columbia and Robert Shiller of Yale took up the issue of the housing market, with Phelps arguing that banks should be financing productive business endeavors rather than creating real estate bubbles. Shiller felt it was time to take steps to democratize finance by making professional financial advice more accessible and providing homeowners with simple risk management tools, such as clearly priced mortgage contracts.




John Kay finally on Bloomberg talking heads!

Assorted on Financial Crisis

The Financial Crisis: Where Do We Go From Here? (October 13, 2008)

Nouriel Roubini, Brad W. Setser and Benn Steil


Crisis in Financial Markets (December 15, 2008)

Panelists include Joseph Stiglitz, Richard Robb, and Christian Deseglise; moderated by Jose Antonio Ocampo

Monday, March 30, 2009

One winner from the Financial Crisis


For years, he has been a manic host of everything from small dinner parties to big bashes. The soirees are more crowded of late, attracting everyone from members of the hedge-fund set to a former Miss Ukraine and propelling the bachelor economist onto the tabloid gossip pages. (He has become a New York Post regular, and CNBC often plays disco music when he appears on the air.)

Roubini’s partying side may have remained below the media radar but for his energetic use of Facebook. He kept his profile on the social-networking site open to the general public until a few months ago, something more privacy-minded users typically choose not to do. On his profile, he said he was single and interested in meeting women, and he posted photos of himself hamming it up with females who look two or three decades younger than he is.

Among Roubini’s Facebook friends is Sarah Austin, a pretty blond who is featured in a black minidress on the website she runs, Pop17.com, which posts interviews with internet “personalities.” Austin says she received an unsolicited email from Roubini last fall—complete with links to articles about himself—praising her site and inviting her to a party. She has yet to take him up on the invitation, but the two are now regular correspondents. She assumes he approached her because he wanted to be written up on her website—­and also because, she says, “I fit the criteria for his loft parties. There are a lot of women.”

Roubini’s Facebook presence brought the media-gossip blog Gawker into the Roubini story last fall. In a post called “The Secret Pleasures of Dr. Doom,” Nick Denton, the site’s founder, flagged what he saw as a disconnect between Roubini’s “gloomy public image” and “his playboy lifestyle”: “The 50-year-old Iranian-Jewish economist is a ­promiscuous Facebook friend who draws a cosmopolitan crowd to the frequent parties at his Tribeca loft—an apartment with walls indented with plaster vulvas, incidentally.”...

Still, at the party I attended, occasional whispers could be heard among the guests: “Where are the vaginas?” Such chatter notwithstanding, the gathering was a friendly and civilized affair—no inappropriate behavior, not even a preponderance of booze; mostly scattered wine bottles and bubbly water. “I’m a serious professional economist. I live in New York and have a social life,” Roubini says. “I have book parties and social dinners. And, you know, people will take pictures of you with your friends, and there are some attractive women. It doesn’t mean I go out with them. They’re my friends. I have nothing to hide.” When I send him a thank-you email, I can’t resist adding, “If you ask me, the deep mystery at the center of your life is why you would want to subject your apartment to that sort of abuse.” He quickly wrote back, “I do not subject my apt. to abuse. It is nice to have friends over, and I have a housekeeper that cleans up everything afterward.”

-The Prime of Mr. Nouriel Roubini

Not related;
Why beautiful people are more intelligent

Part of the Thai Stimulus



More about Stimulus Policies of other countries

Deep Impact across the World

Kenyan coastal city of Malindi, which has a population of 70,757 and depends entirely on tourism


The town of Huaxi, China


The town of Danville, Virginia


The town of Luton, near London

Sunday, March 29, 2009

Frederic Mishkin on the Makings of a "Classic" Crisis

David Leonhardt- your favorite economics columnists


"After the Recession: Can the Obama Administration Fix the Economy?"-David Leonhardt

The Financial Meltdown: Causes, Consequences, and Options

A discussion from Dartmouth

Andrew Samwick, Professor of Economics and Director, Rockefeller Center - Moderator, Nancy Marion, Professor of Economics, Bruce Sacerdote, Vice-Chair and Professor of Economics, and Eric Zitzewitz, Associate Professor of Economics

From Sub-Prime to Prime-Time


Panelists:
- Guillermo Calvo, Professor of Economics, International and Public Affairs, Columbia University; former Chief Economist, Inter-American Development Bank.
- Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia University.
- Richard Clarida, C. Lowell Harriss Professor of Economics and International Affairs, Columbia University; former Assistant Secretary for Economic Policy, US Treasury, 2001-2003.
- Vincent Reinhart, Resident Scholar, American Enterprise Institute, Washington, DC; former Director of the Division of Monetary Affairs, and Secretary and Economist of the Federal Open Market Committee.

Investment Advise from Nobel Laureates


Solow, Samuelson and Merton

Interesting Conference

Macroeconomic and Policy Challenges Following Financial Meltdowns

Discussants include Calvo, Hyun-Song Shin and others

Saturday, March 28, 2009

Link of the Day

At an auction of foreclosed US homes: Audio slideshow

Podcast of the Day

A Conversation with Timothy F. Geithner

More South Park version of the Financial Crisis

Anne Krueger on the impact of financial crisis on Latin America

Still another talk on the Financial Crisis

Brad De long at California Budget Project (recommended).

How did a few failed banks add up to a financial meltdown?

A short explanation of the financial crises from Krugman

China's Stimulus- the gold standard

The key point I would emphasize is that China is the gold standard in terms of its response to the global economic crisis. If you look at the magnitude of what they are doing in several domains, it is very substantial, and among the economies that matter, at least according to the International Monetary Fund (IMF), China's stimulus program relative to the size of its economy is larger than that of any other country including the United States, and I think they may have underestimated what China is doing.

-China's Role in the Origins of and Response to the Global Recession

Wednesday, March 25, 2009

Assorted Must Reads

Sachs: Will Geithner and Summers Succeed in Raiding the FDIC and Fed?

Calvo: We Need a Global Lender of Last Resort

Rapid and large liquidity funding for emerging markets

Why are we bailing out foreigners?


Rodrik roundtable: Central authority necessary

Will the Geithner Plan Work?

Geithner plan will rob American taxpayers: Stiglitz

China Takes Aim at Dollar

Volcker: China Chose to Buy Dollars

'Paul Krugman, where the Hell are You'

Somebody's upset that Krugman didn't join the administration

Michael Spence Discusses the U.S. Federal Reserve's Latest Moves












Geithner's Backup Plan and more





Media on Macroeconomic Management

In Ten Trillion and Counting, FRONTLINE traces the politics behind this mounting debt and investigates what some say is a looming crisis that makes the current financial situation pale in comparison.


The other documentary that came out last year

I.O.U.S.A.

More on Financial Crisis

Origins of and Responses to the Ongoing Financial Market Crisis

Speaker: Klaus Regling, EU Fellow, Lee Kuan Yew School of Public Policy, Senior Advisor, European Commission

Mr Paul Volcker, Chairman, Board of Trustees, The Group of Thirty

Assorted on the Financial Crisis

Paul Krugman


Robert Shiller


Alan Blinder

Galbraith on the Bank Rescue


Macro Podcasts

Wachter Says Parts of the U.S. Are in Depression
Susan Wachter, a professor at the University of Pennsylvania's Wharton School, talks with Bloomberg's Tom Keene about U.S. housing, the rental market and the economic crisis

Calomiris Sees Another Financial Shock Ahead From Europe

Clarida Says Geithner Proposal Should Help Economy

Retsinas Says U.S. Built 1 Million Too Many Homes
Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, talks to Bloomberg's Tom Keene and Ken Prewitt about U.S. housing.

Does spending work?

Capitalism and innovation
In response to the global financial crisis most commentators equate Capitalism with Wall Street. But Edmund Phelps argues that it's also to do with Main Street: small towns and small entrepreneurs.

Understanding and blame while the money runs out

Index of the Day

2008 Barometer of Asian Development

More background

Soda Index


According to the Canadean Soft Drinks Service—a market research company established by a former Financial Times journalist—growth in nonalcoholic drink sales are slowing in some Asian countries and declining in others. India’s sales increased 8.5% in 2008 down from a 10% increase in 2007. China’s sales increased 15.4% in 2008 down from a 16.4% increase in 2007. Finally, Russia’s sales declined 2.6% in 2008 from an increase of 13.2% in 2007.

Friday, March 6, 2009

Assorted on Payroll figures

'The recession is intensifying and the economy is rapidly shrinking. We are staring into the abyss.' –Stephen A. Wood, Insight Economics


Is the second derivative positive?

651,000 Jobs Reported Lost in February

The February Employment Situation

Broader Unemployment Rate Hits 14.8%

Economists React: ‘Staring Into the Abyss’

Understanding Economic Statistics: An OECD Perspective

A book review;

Good economic statistics are fundamental for good research and policymaking, and Understanding Economic Statistics: An OECD Perspective shows how to avoid confusion and get to the information the user really wants. Its aim is to help readers to better understand how to use economic statistics in general and OECD statistics in particular.

If you want to know how the production of international statistics is organised, who the main data producers are and what databases are available over the internet, this is the book for you. Students and researchers will find it useful in gathering the evidence they need to do their work. The book will help journalists and other analysts evaluate economic trends or assess the effectiveness of policies.

It starts by giving a brief account of how the demand for statistics has evolved over the last 50 years and also takes a look into the future. If you wish to know the difference between a trend, a cycle and a seasonal variation, or how an economic system is defined, or even how the growth of an economy is measured, then this book will tell you. Understanding Economic Statistics describes how the international statistical system is organised and tells us who the main producers of economic statistics are. It also contains references to the main databases available on the internet. A whole chapter is entirely devoted to the OECD’s own statistical work and shows how to compare the economic structure of OECD countries, or measure innovation or globalisation.

So, can you always believe the numbers you read? This book debates this question and helps distinguish between good and bad data, including official ones. Readers will quickly realise that, much to statisticians chagrin, not all policy decisions are based on them!


Chapter 1. The Demand for Economic Statistics
Chapter 2. Basic Concepts, Definitions, and Classifications
-The Economic System
-Economic Agents
--Households
--Enterprises
--General Government
-Economic Aggregates
--Production
--Consumption
--Values at Current and Constant Prices
--Index Numbers
--Time Series
Chapter 3. The Main Producers of Economic Statistics
-The International Statistical System
-The OECD Statistical System
-The European Statistical System and the European System of Central Banks
Chapter 4. An Overview of OECD Economic Statistics
-Agriculture and Fisheries Statistics
-Energy Statistics
-Industry and Services Statistics
-General Government
-Science, Technology and Innovation
-Globalisation
-Short-Term Economic Indicators
-Labour Statistics
-Income Distribution and Housholds' Conditions
-Monetary and Financial Statistics
-National Accounts
-OECD Economic Forecasts
-Territorial Statistics
-Economic History
Chapter 5. Assessing the Quality of Economic Statistics
-The Dimensions of Quality
-International Initiatives for the Evaluation of Quality

Sunday, January 25, 2009

Terms of Trade in Down Under

The December quarter trade prices release saw the largest quarterly and annual increases in export prices since the current series began in the September quarter 1974, at 15.9% q/q and 54.9% y/y. Import prices were up 10.8% q/q and 21.1% y/y, the largest annual increase since the December quarter 1985. The merchandise terms of trade are up nearly 30% on a year ago.

How did Australia pull-off a further gain in the terms of trade against the backdrop of collapsing world commodity prices? The depreciation in the Australian dollar over the quarter, which supported Australian dollar commodity prices. This is a very good illustration of the role of a floating exchange rate in insulating the economy against external shocks.

- The Terms of Trade: Not Dead Yet

Wednesday, January 14, 2009

“People hunkered down pretty dramatically,”

THE INDICATOR; ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES
FREQUENCY: MONTHLY
ECONOMETRICS: The advance estimates are based on a subsample of the Census Bureau's full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms. Responding firms account for approximately 65% of the MARTS dollar volume estimate. For an explanation of the measures of sampling variability included in this report, please see the Reliability of Estimates section on the last page of this publication.

Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the lack of credit led Americans to cut back on everything from car purchases to eating out.

The 2.7 percent slump marked the sixth straight month of declines, the longest string since comparable records began in 1992, the Commerce Department said today in Washington. Labor Department data showed the global collapse in commodities caused prices of goods imported by the U.S. to fall for a fifth month.

Today’s sales figures indicate the hit to spending in the recession is even deeper than estimated, and spurred a sell-off in stocks. The loss of 2.6 million jobs and declining home and stock values are squeezing households, hurting retailers from Wal-Mart Stores Inc. to Tiffany & Co., which today said its holiday sales fell 21 percent and cut its earnings forecast.

“There is a major retrenchment going on,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “All that policy can do at this stage is cushion this. You can’t short circuit it.”

Commerce also reported that inventories at all businesses in November dropped 0.7 percent, more than economists estimated and the third straight decrease. A 1.7 percent decline in stockpiles at retailers, as furniture stores and auto dealers cut back, paced the overall slump.

-Retail Sales Decline for a Record Sixth Month

See the following Table;
TABLE 2A. ESTIMATED CHANGE IN SALES FOR RETAIL AND FOOD SERVICES, BY KIND OF BUSINESS--December 2008



Related;
Economists React: ‘Proof in Christmas Pudding’;
One sign of the extent of the pullback in consumer spending is the behavior of core retail sales, i.e., sales excluding vehicles, gasoline, and building materials. In two of the past three months, core retail sales have posted declines in excess of 1.0 percent, and even the small gain originally reported for November was revised lower. While lower gasoline prices may have freed up some extra cash for consumers, there is little to suggest that this extra cash is being spent. Other than personal care stores and “miscellaneous” retailers, sales declined in each of the major categories reported in the monthly data. We had expected at least a modest rebound in spending at nonstore retailers, i.e., catalog and online retailers, in December, reflecting that cyber Monday fell in December this year.


We’ve Only Got Government to Do the Consuming Now;
Now is not the time to try in vain to get the private sector to consume. It’s only the public sector who is in the mood to spend right now, and it’s only the public sector who can afford it. If government spending is able to “fill in for” private-sector consumption, that will be one of the best ways to marry the goals of short-term economic stimulus and longer-term economic growth. In fact, economists who are not so worried about the longer-term implications of the large amount of public-sector dissaving (deficit spending) that is now occurring, are not so worried because they’re actually counting on the private sector to step back from its consumption binge. Goldman Sachs, for example, has said they are not troubled by the implications of the surge in government borrowing in terms of America’s reliance on foreign capital, precisely because they “are optimistic that the markets will absorb this surge in government borrowing because it is matched by an even greater drop in private borrowing” such that “private sector saving will finance more than 100% of the incremental public sector dissaving” (from Goldman’s December 31, 2008 U.S. Economic Analyst newsletter).


The end of consumption

Retail Sales Collapse in December;
Although the Census Bureau reported that nominal retail sales decreased 10.2% year-over-year (retail and food services decreased 9.8%), real retail sales declined by 11.3% (on a YoY basis). This is the largest YoY decline since the Census Bureau started keeping data.


Retail Sales Fall 9.8%;
• December 2008 Sales = $343.2 billion

• December 2008 Sales down 2.7% from November and down 9.8% percent versus December 2007

• 2008 total sales (12 months of calendar year) were essentially flat — down 0.1% percent from 2007, less than the margin of error (±0.4%).

• Total sales for the October through December 2008 holiday shopping period were down 7.7% from the same period a year ago.• Retail trade sales were down 2.7 percent (±0.5%) from November 2008 and were 10.8 percent (±0.7%) below last year.

• Gasoline stations sales were down 35.5% from December 2007, and off 15.9%;

• Auto sales were down 22.4% from last year.


How did the Markets react?

Stocks Tumble as Retail Sales Report Shows Sharp Decline;
Consumer spending, which accounts for more than two-thirds of the economy, has virtually dried up since mid-September as the problems on Wall Street began to spread. With the uncertainty of jobs weighing on consumers, economists do not expect a turnaround anytime soon. The recession, which began in December 2007 and is already the longest on record, is expected to last into the second half of 2009.


Stock futures lower ahead of retail sales

Deflation exaggerates retail-sales decline
There aren't many ways to sugar coat the numbers, but I'll try. First of all, these are seasonally adjusted, which is problematic. December retail sales are the seasonal variant to end all seasonal variants. December sales weren't really 2.7 percent less than November's. Are you kidding? The holiday shopping season always makes December huge. But Census Bureau statisticians adjusted the December results so they could try to make a month-to-month comparison with November. This is fraught with difficulty and prone to error. Still, there is one way to get around seasonal-adjustment potholes: compare the numbers from December 2008 with those of December 2007. Result: Major ugliness. Year-over-year sales for December, the most important shopping month of the year, were down 9.8 percent. No way to pretty up that warthog.


Weak Retail Report Lifts Treasurys
Treasury prices rose Wednesday after a bleaker-than-expected December retail sales report that showed sales tumbled for the sixth consecutive month.

The gains were the most pronounced in the long end of the curve, with the 10- and 30-year issues outperforming.

Prices had been hovering around unchanged ahead of the data, with longer-term government debt a bit stronger, but prices shot up after the report. Data showed retail sales fell 2.7% last month, compared to the 1.2% drop expected by economists surveyed by Dow Jones. Sales excluding autos plunged 3.1%. November data were also revised down, with sales decreasing 2.1% compared to the originally reported 1.8% decline.


Weak Retail Sales Would Validate Short-term Bearish Dollar Technical Outlook

Dollar up after grim retail sales, import data
The U.S. dollar gained Wednesday against most rivals, as lower-yielding currencies benefited from reports showing retail sales in the U.S. fell more than expected and import prices declined....

Import prices fell 4.2% last month, mostly due to oil prices, the Labor Department said. See Economic Report on import prices.
"We're importing deflation, and are the first country to do so," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. Expectations that deflation will eventually hit other countries are hurting their currencies more.

The euro gained overnight, causing U.S. traders to reestablish bets in favor of the dollar ahead of the European Central Bank meeting on Thursday, Chandler said.
The euro declined to $1.3158 from $1.3187.


Dollar Weakens Versus Euro on Speculation Retail Sales Declined

Monday, January 12, 2009

Understanding LIBOR

Published each day in the UK, it is the rate at which the banks lend to each other and it influences over $150 trillion (£100 trillion) of funds worldwide.

The Libor number is compiled by putting together the estimates of the cost of borrowing from at least eight banks, and then discarding the highest and lowest of the sample to leave an average rate which then becomes the daily 'Libor Fix'.

But the figure's validity is being questioned, with critics dubbing it "the rate at which banks won't lend".


Tim Harford explains the LIBOR

Saturday, January 10, 2009

How does the government figure unemployment?

Like many big reports, the Labor Department's monthly jobs report is based on data that is extrapolated from a randomly selected sample of all U.S. households, a much smaller group than the total number it seeks to determine.

For the monthly jobs report, the Labor Department contacts 60,000 households to determine the unemployment picture for the entire workforce, which consists of about 154 million Americans.

This is how almost all big surveys are done. Statistically speaking, if you're trying to get data out of a large population -- like a national presidential poll -- once you survey about 1,000 randomly selected people, you can be 95 percent confident that the answers you get are within 3 percentage points of the actual number. If you count every person, it's not a survey; it's a census. (And that is very expensive and time-consuming.)

Each month, 15,000 of the sample's households are switched out, so the 1,500 U.S. Census workers who take the labor data aren't talking to the same people each month.

Interestingly, people who are interviewed for the monthly survey are never asked: Are you employed or unemployed? If that sounds silly, it's because the agency has criteria to classify various kinds of employment: full, part-time, unemployed but looking, unemployed but not looking and so forth.

Instead, the poll-takers ask, for example: Last week, were you on a layoff from a job? Last week, did you do any work for pay or profit?

Once the data are taken, they are weighted to take into account age, race, sex and so on, to make certain the sample numbers more closely represent the general population numbers. So, for instance, if a certain 60,000-household sample contains more residents of Hispanic origin than exist in the general population, the Hispanic sample numbers are weighted downward.

Given all this, how accurate are the unemployment reports?

"A sample is not a total count and the survey may not produce the same results that would be obtained from interviewing the entire population," reads the Labor Department's Web site. "But the chances are, 90 out of 100, that the monthly estimate of unemployment from the sample is within about 230,000 of the figure obtainable from a total census.

-How the Government Tallies That Grim Jobless Rate

Related;
Worse Than the Early ’80s;
Ian Shepherdson, an economist at High Frequency Economics, called it “a terrible report.” He added that “the only possible glimmer of light is that the maximum rate of fall of payrolls is hopefully not far off.”

As is typical during a recession, employers are cutting costs mostly by laying off workers and reducing the hours of their remaining workers, rather than cutting workers’ pay rates. The average hourly pay of rank-and-file workers — who make up four-fifths of the work force — rose 3.7 percent during 2008. But the average workweek dropped to 33.3 hours, from 33.8 hours a year earlier, forcing many families to take an effective pay cut.

The unemployment rate in December rose to 7.2 percent, from 6.8 percent, and is now at its highest level in 16 years. That rate also understates the weakness of the job market, because it doesn’t count people who have given up looking for work or those working part-time even though they want full-time work.

The number of part-time workers who said they couldn’t find full-time work rose sharply again last month. More than 8 million people now fall into that category, up from 4.6 million at the end of 2007.

An alternate measure of joblessness that includes many such people rose to 13.5 percent, its highest level on record. That alternate measure has been calculated only since the early 1990s, however.


Over 8 Million Part Time Workers

After Eight Months, Landing the Job;
After searching for the last eight months, I have finally determined the next step in my professional career: I will be accepting an associate position at a boutique investment bank that specializes in restructuring and distressed M&A advisory services. The ironic part about this is that I didn’t discover the position through my own efforts. Instead, it was presented to me by an executive recruiter who had been referred through a friend and former Bear colleague. It makes me laugh when I think about it. After all the months I spent searching for a job, it actually found me! It reinforces what I’ve always thought–staying in touch with former coworkers can turn out to be one of the best resources in your arsenal of job-seeking weapons.

What’s even more interesting than how I came across the position is how perfect of a match it is for what I am looking to do. The interview process consisted of four separate rounds and spanned a couple months from start to finish. As each round progressed, not only did the interviewers get a glimpse of who I was but I also got to know a little more about them. I was able to answer what I felt were the two most important questions: Is this the type of work I want to be doing and can I see myself working with this person day in and day out?


As Bad as It Gets