Americana

Testing the Fed DUNCAN CURRIE 08/06/2008

From a recent speech by Charles I. Plosser, president and CEO of the Federal Reserve Bank of Philadelphia:

“I want to make clear that the rise in inflation expectations in the 1970s was not caused by a wage-price spiral. That story has things backwards. The wage-price spiral was a consequence of the inflation and the unanchoring of expectations of inflation, not the other way around. And the unanchoring of inflation expectations was caused by the public’s loss of confidence in the Federal Reserve’s resolve to bring inflation back down. The credibility of the Fed’s promise to deliver price stability was lost.

“In recent months I have heard some analysts suggest that the current economic situation is not like the 1970s because unions are less prevalent and there is no evidence as yet of a wage-price spiral. Thus, a weak economy, with rising unemployment and declining payroll employment, will presumably prevent workers from demanding higher wages. But, again, that story has things backwards. It is not demands for higher wages that kick off the spiral, but the loss of confidence that the central bank will keep inflation controlled, which, in turn, leads to a rise in inflation expectations. The wage-price spiral is not the cause of the inflation, but the result.

“This means that if monetary policymakers wait until they see the evidence of a wage-price spiral, they will be too late—the public will have lost confidence in the Fed’s ability to keep inflation under control, and this will make the job of bringing inflation down much more costly and difficult. Moreover, we could end up with a period of both low economic growth and high inflation.

“I want to emphasize that what we have been seeing in the economy this past year, and in my own outlook going forward, is very different from the 1970s, because I see the Fed as committed to keeping inflation expectations well-anchored. I agree with a statement Fed Chairman Bernanke made in June that the Fed will strongly resist an erosion of longer-term inflation expectations, because an ‘unanchoring’ of those expectations would be destabilizing for economic growth as well as inflation.”

The Oprah Factor DUNCAN CURRIE 08/06/2008

Harvard economist Greg Mankiw directs us to a new paper by University of Maryland economists Craig Garthwaite and Tim Moore, which argues that “Oprah Winfrey’s endorsement of Barack Obama prior to the 2008 Democratic Presidential Primary generated a statistically and qualitatively significant increase in the number of votes Obama received as well as in the total number of votes cast.” All told, Garthwaite and Moore “estimate that the endorsement was responsible for 1,015,559 votes for Obama.”

The Olympic Effect DUNCAN CURRIE 08/01/2008

“On balance, the award of the [Olympic Games] has done more harm than good to the opening up of China,” argues The Economist magazine.

Earlier this year, THE AMERICAN asked several China experts to discuss how hosting Olympics might affect the course of Chinese liberalization. Their comments were published as a symposium in our May/June issue.

The Economics of Arenas DUNCAN CURRIE 07/31/2008

Does the city of Baltimore “need” a new sports arena?

‘The New Solid South’ DUNCAN CURRIE 07/31/2008

Joel Kotkin and Mark Schill write that “America’s urban areas have evolved into a political monoculture that increasingly resembles the ‘solid South’ that provided a base for Democrats from the late 19th century to the 1960s. Since 1972, the year of the Nixon landslide, the Democratic share has grown 20 percent or more in most of the largest urban counties.”

Read the whole thing.

The Case for Romney DUNCAN CURRIE 07/31/2008

RealClearPolitics blogger Jay Cost argues that John McCain should pick the former Massachusetts governor as his running mate.

Californians for Drilling DUNCAN CURRIE 07/31/2008

From The San Francisco Chronicle:

“A majority of Californians favor more oil drilling off the coast, according to a statewide survey released Wednesday, for the first time since oil prices spiked nearly three decades ago.

“The support by 51 percent of residents polled this month by the Public Policy Institute of California represents a shift caused by renewed Republican advocacy for drilling as well as motorists’ reaction to soaring pump prices, according to the pollster.”

Goolsbee and Furman DUNCAN CURRIE 07/31/2008

Cesar Conda takes a closer look at two of Barack Obama’s chief economic advisers.

Doha Hits a Roadblock DUNCAN CURRIE 07/30/2008

Why did the global trade talks collapse?

The Latest S&P/Case-Shiller Data DUNCAN CURRIE 07/30/2008

Which metropolitan areas have been most affected by the housing crunch?

Bush and Truman DUNCAN CURRIE 07/30/2008

Writing in the British magazine Prospect, Edward Luttwak defends President Bush’s foreign policy legacy and argues that talk of American decline is overblown. His article can be found here.

‘Socialistic Tendencies’? DUNCAN CURRIE 07/29/2008

“For a country so steeped in the free market, America can show some strikingly socialistic tendencies,” writes Martin Waller.

Why Are Oil Prices So High? DUNCAN CURRIE 07/25/2008

“The big conclusion of the Interim Report on Crude Oil, the product of an interagency task force led by the [Commodity Futures Trading Commission], is that ‘current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors,’” writes Fortune senior editor Bryan O’Keefe.

“And it makes a really strong case. Global GDP has grown at close to 5% annually since 2004, the report points out, driving rising consumption of oil. And production has not been able to keep pace. In June, world surplus production capacity, the task force says, was a mere 1.35 million barrels per day, or about a third of what it average from 1996 to 2003. The market is getting tighter and tighter.

“Just as compelling are the report’s conclusions about what’s not happening: Analysis of the futures markets showed no evidence of speculators driving up prices.”

Read the whole thing.

Bidding for the Cubbies DUNCAN CURRIE 07/24/2008

From The Chicago Sun-Times:

“The Chicago Cubs have culled the number of bids for the team to five, all at $1 billion or more, and tossed out an offer from a group regarded as the favorite of Major League Baseball, sources said Wednesday.

“The Cubs, owned by Tribune Co., have rejected an offer from a large investment group led by John Canning Jr., chairman of Madison Dearborn Partners LLC. Canning, a part owner of the Milwaukee Brewers, is a close associate of baseball Commissioner Bud Selig.

“Making the cut as the Cubs winnowed the list of bids from an original 10 respondents was Mark Cuban, owner of basketball’s Dallas Mavericks, said a source familiar with the process. The identity of the other finalists couldn’t be learned.”

The CBO on Income Volatility DUNCAN CURRIE 07/24/2008

According to a recently released Congressional Budget Office (CBO) paper, “the year-to-year variability of [individual] earnings has changed little since the mid-1980s.”

What about household income? “Overall,” the CBO reports, “the fraction of households experiencing large changes in income has been relatively constant since the mid-1980s. Income tends to vary more for low-income households and for households headed by younger people, by those with less education, and by those who are not married.” 

The full paper can be found here.

Heading to Uruguay DUNCAN CURRIE 07/24/2008

From Bloomberg News:

“A third of Uruguay’s agricultural property may now be owned by foreigners, according to Uruguay’s Rural Association. They include farm companies PGG Wrightson Ltd. of New Zealand and Buenos Aires-based Adecoagro, which is backed by billionaire investor George Soros.

“International buyers, seeking to take advantage of rising global food prices, are attracted by the South American country’s relatively cheap land, policies that encourage foreign investment, and no tariffs on farm exports, said Roberto Vazquez Platero, a former agriculture minister. As a result, farm prices have more than doubled in three years.”

Cooling Off DUNCAN CURRIE 07/24/2008

From a recent article by Danish environmentalist Bjørn Lomborg (which was linked on the excellent website Climate Debate Daily):

“There is a kind of choreographed screaming about climate change from both sides of the debate. Discussion would be on much firmer ground if we could actually hear the arguments and the facts and then sensibly debate long-term solutions.

“Man-made climate change is certainly a problem, but it is categorically not the end of the world. Take the rise in sea levels as one example of how the volume of the screaming is unmatched by the facts. In its 2007 report, the United Nations estimates that sea levels will rise about a foot over the remainder of the century. While this is not a trivial amount, it is also important to realize that it is not unknown to mankind: since 1860, we have experienced a sea level rise of about a foot without major disruptions. It is also important to realize that the new prediction is lower than previous Intergovernmental Panel on Climate Change (IPCC) estimates and much lower than the expectations from the 1990s of more than two feet and the 1980s, when the Environmental Protection Agency projected more than six feet.

“We dealt with rising sea levels in the past century, and we will continue to do so in this century. It will be problematic, but it is incorrect to posit the rise as the end of civilization.”

Read the whole thing.

Should We Increase the Gas Tax? DUNCAN CURRIE 07/22/2008

Economist Gary Becker and Judge Richard Posner discuss.

‘Regulation and Distrust’ DUNCAN CURRIE 07/18/2008

What is the correlation between government regulation and social capital?

Baby Boom in the UK DUNCAN CURRIE 07/18/2008

From The Daily Telegraph:

“Recession could be looming but humankind keeps going forth and multiplying. In fact, women in the UK are having more babies than at any time since the 1970s, according to the latest official statistics.

“So while other markets are shrinking, sales of nappies, romper suits, baby food and all manner of products and services for these new arrivals are booming—fuelled by improved fertility treatment and the tendency for foreign-born mothers to have more babies.”

Favre Watch DUNCAN CURRIE 07/18/2008

What are we to make of the Brett Favre saga? Boston Globe sports columnist Bob Ryan offers a thoughtful take. Here’s a snippet:

“As a general rule, I believe the best time for an athlete to retire is either when he is certifiably on top and has absolutely nothing to prove and no more reason to subject his body to the rigors of his sport (e.g., John Elway), or when, while he fully recognizes he’s on the downside, he still has a little something left to give (any number of examples, but a good recent one would be Paul O’Neill, who walked away from the Yankees seven years ago following a 21-homer, 70-RBI, .789 OPS campaign capped by a productive postseason).

“But Favre fit neither category. The Packers were not coming off a championship. Rather, they were coming off a very difficult loss in the NFC Championship game against the Giants, a game whose deciding play was a bad interception thrown by Favre. The Packers have a strong youth base. With minor tweaking, or no tweaking whatsoever, there was ample reason to believe they could become NFL champions in 2009.” 

Read the whole thing.

Burgers on the Left Bank? DUNCAN CURRIE 07/18/2008

The New York Times reports that “hamburgers and cheeseburgers have invaded” Paris.

An ‘Identity Crisis’ for eBay DUNCAN CURRIE 07/18/2008

Chadwick Matlin explains why “eBay is going through an identity crisis.”

‘The New Power Brokers’ DUNCAN CURRIE 07/16/2008

“Four groups of investors—Asian governments, oil exporters, hedge funds, and private equity firms—are having a growing impact on global capital markets,” says a new McKinsey Global Institute report. “The combined financial assets of the four power brokers increased by 22 percent—even faster than before—to $11.5 trillion in 2007.”

Risky Business DUNCAN CURRIE 07/16/2008

“Only in the weird world of Washington are mistakes rewarded with major new responsibilities,” writes Carnegie Mellon economist Allan Meltzer, a visiting scholar at the American Enterprise Institute. “After mismanaging both housing loans and the dot-com mess, the Federal Reserve may now become responsible for supervising investment banks.

“The proposal by Treasury Secretary Hank Paulson to do so could lead investment banks to accept more risk, because they will be able to hide some of their mistakes by borrowing from Federal Reserve banks. This is cause for concern in itself. What’s more, most of the proposal is unnecessary.”