Keywords: Uncertainty, Black Swans
found on Slate:
Keywords: Monetary Policy, Inflation
Hausman, Naomi, University Innovation, Local Economic Growth, and Entrepreneurship (June 1, 2012). US Census Bureau Center for Economic Studies Paper No. CES-WP- 12-10. Available at SSRN: http://ssrn.com/abstract=2097842
"Universities, often situated at the center of innovative clusters, are believed to be important drivers of local economic growth. This paper identifies the extent to which U.S. universities stimulate nearby economic activity using the interaction of a national shock to the spread of innovation from universities - the Bayh-Dole Act of 1980 - with pre-determined variation both within a university in academic strengths and across universities in federal research funding. Using longitudinal establishment-level data from the Census, I find that longrun employment and payroll per worker around universities rise particularly rapidly after Bayh-Dole in industries more closely related to local university innovative strengths. The impact of university innovation increases with geographic proximity to the university. Counties surrounding universities that received more pre-Bayh-Dole federal funding - particularly from the Department of Defense and the National Institutes of Health - experienced faster employment growth after the law. Entering establishments - in particular multi-unit firm expansions - over the period from 1977 to 1997 were especially important in generating long-run employment growth, while incumbents experienced modest declines, consistent with creative destruction. Suggestive of their complementarities with universities, large establishments contributed more substantially to the total 20-year growth effect than did small establishments." Source: SSRN
Keywords: Innovation, Creative Destruction
Find here an opinion on FT Alphaville:
...."Payrolls, the trade deficit, the Fed senior loan officer survey, retail sales, homebuilder confidence, and industrial production all came out better for July than had been anticipated. And all the while it increasingly appears that housing has finally bottomed.
Of course there are exceptions, and the unemployment rate remains stuck at 8.3 per cent. But the recent trend has been enough for some analysts and economists to begin suggesting that QE3 may not happen in September."... read more on FT Alphaville
Keywords: US Economy, Monetary Policy, QE3
Keywords: Business Cycles, Austrian Economics
..."Prominent articles in The Wall Street Journal and The New York Times on Tuesday discussed interviews given Monday by the head of the Federal Reserve Bank of Boston, Eric Rosengren, and they naturally goosed the market while also getting under my skin.
For one, the articles made it painfully obvious that Rosengren is a central planner at heart. If he had his way, he would unleash as much money as it took to force the economy to deliver the lower job and higher inflation rates he wants:".....
..."What is really disturbing about his views -- albeit not surprising, I'm sorry to say -- is that, once again, we see that no lessons have been learned. The Fed is the epicenter of the financial disaster and ruined lives that have become the America of the past decade or so, and yet no one there can see it."... read more on MSN Money
Keywords: Monetary Policy, Inflation
You’ve seen the gold commercials. You’ve heard the commenters and prognosticators. They’ve told you (correctly) that the U.S. central banking system has increased the monetary base of the United States at a pace previously unheard of in our history. They’ve told you over and over again to brace for an imminent wave of high, even hyper, inflation. But it hasn’t come. read more in Forbes
Keywords: Monetary Policy, Inflation, M2, M3, Money Multiplier
Will robots bring manufacturing bring back from China to the US?
Keywords: Manufacturing, US, China
European policy makers, in search for growth, might see further monetary expansion as the most appropriate short term measure. This will put pressure on the value of the Euro:
"To resolve its debt crisis, Europe has to continue to cut social spending and reform its labor laws, but it must also engage in a massive stimulus program. Will the euro fall to parity with the buck?"
Forsyth states that Europe is currently missing highly productive cheap labor and thus European firms start to see the US as a real manufacturing alternative:
"There, in sharp relief, is the tangible evidence of the crisis that besets Europe's economy; the only way Airbus can compete with the rest of the world is to move away from the Old Country. Just as BMW and Mercedes-Benz before it, Airbus is moving to America's Deep South in search of what it can't find in Southern Europe -- a highly productive, low-cost workforce that can compete globally, with the help of a competitive currency."
Keywords: European Crisis, European Manufacturing
.. Given the economic hardships the United States has endured in recent years, it is tempting to conclude that free markets are no longer best for us — but that would misread our history, and buy into myths about the impact of free enterprise. read more in the Washington Post
Keywords: US Economy, Free Markets, Free Enterprise
Most economists reading the title of this article probably think I am an idiot. Easier money is what causes low interest rates and bringing down the rate of interest is the principal means by which the Federal Reserve eases monetary policy. So saying we need higher interest rates and easier money appears to be a contradiction in terms.
However, there is method to my madness. First, let me explain some of the reasons why we need higher interest rates. read more in The Fiscal Times
Keywords: Easy Money, Interest Rates
Are central banks loosing control and do we need a global institution? We believe definitely not .... by observing the instrumentalisation of the transnational ECB. More federalism in central banking could be another route to think about ... local versus global planners ... more competing systems... ?
The BIS Annual report released this Sunday is jam-packed with data, charts, observations and analysis. Joseph has already stuck up some of the most compelling…
But one of the other key points to emerge is in its chapter on the “limits of monetary policy”. There is, it appears, a marked admission that central banks may be losing control.
We don’t mean that in the old cynical sense we’ve heard before — that because central banks are zero-bound they are running out of tools — we mean it existentially. read more on FT Alphaville
Keywords: Central Banks, Monetary Policy
"Inflation-adjusted spending on means-tested subsidies has increased sharply since 2007, and most of the growth was due to changes in eligibility rules, and increases in subsidies per eligible person, rather than increases in the number of people who would have been eligible under pre-recession subsidy rules. In 2007, the non-elderly parts of the safety net paid about $10,000 in benefits per person-year that non-elderly heads of household or spouses were unemployed. By the end of 2009, the annual subsidy rate per person-year unemployed was up to $16,000. As a result, the average private returns to employment are substantially less than they were in 2007. One result of the paper is a monthly time series for the overall safety net’s marginal income tax rate from the point of view of the average marginal worker."
Keywords: Recovery, Social Security
Would you have expected the the US is much better off regarding Debt/GDP than many European states? The US, as compared to European Union States, has the advantage that they have their own central bank.
There are more and more voices telling that only the ECB will be able to bring major changes to the European debt crisis:
Keywords: Europe, European Crisis, Debt to GDP Ratio
Interesting reflections of two Johns Hopkins scholars on Europe, tackling bank runs, austerity, productivity, short term liquidity measures, Role of ECB etc.
They tackle a scenario which could have some chance to get implemented quite quickly:
..."Euro bonds would be one way of resolving this problem. A quicker and easier way would be for the ECB to commit to buying the sovereign debt of all euro zone countries at a fixed small spread over corresponding maturity German bonds. The magic of this solution is that the credible commitment to do so might be enough-- the ECB might not even have to buy bonds in size.
The strategy we describe would have a very good chance of resolving the immediate crisis. Unfortunately, if the past is any guide, European policymakers will prefer a "compromise" of taking a half-measure, thinking that this brings at least half of the gain. But half measures will do nothing. Policymakers will have to go back and try again at even greater cost (if they get another shot)....But following a hypothetical Greek exit, we would be in totally uncharted territory. Europe may well have only one shot at getting this right."
Keywords: Europe, European Crisis
These four paragraphs really form the meat of the speech. They're worth reading in full:
..."I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive. The EU was the embodiment of an open society –an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.
The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.
Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany’s leaders realized that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it. When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement. At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.
The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.
Bubbles always look stupid and unjustifiable in retrospect, but at the time they usually contain an internal, coherent logic. And as Soros puts it, the logic of this bubble was: Anytime the existing Eurozone structure reached an impasse, the leaders would fix it."... Source: Money Game
Here is Soros' original speech, published on his website:
Keywords: Europe, European Crisis, Construction of EU Area
Keywords: Europe, European History
Kenneth Rogoff, in a new column on Project Syndicate asks whether Keynesians or people who favor austerity are naïve. He does not see a black and white answer:
"But who is being naïve? It is quite right to argue that governments should aim only to balance their budgets over the business cycle, running surpluses during booms and deficits when economic activity is weak. But it is wrong to think that massive accumulation of debt is a free lunch."
Exactly as a responsible entrepreneur would run his business..
Keywords: Financial Crisis, Revovery after Financial Crisis, Keynesian, Austerity
Keywords: Europe, European Financial Crisis
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