Quantitative Easin', ctd.

At Greg Mankiw's blog, a reader responds to the above with this ditty:

I heard it in the headlines
It's news all over town
We might be double dippin'
Green shoots have all turned brown

It's a balance sheet recession
With a housing overhang
But they've got a brand new program
And it will start you with a bang

And it's called, quantitative easing
They say results are always pleasing.
When liquidity all starts freezing
Just warm things up with quantitative easing

I will say it straight and simple
It's clear, just like a bell
There's some long term bonds to buy
There's some short term bonds to sell

Don't talk about the good times
Don't ask me where they went
Just move your inflation target
On up to three point five per cent

And it's called, quantitative easing
This ain't no joke, it ain't no teasing
When the GDP starts wheezing
Treat with a shot of quantitative easing

Good and magic things will happen
It might take a week or three
Unemployment plunging downward
Recovery shaped just like a V

You'll see Nobels at the Treasury
There'll be rock stars at the Fed
It'll take hair off of Krugman's face
Put it on top of Ken Rogoff's head

And it's called, quantitative easin'
This ain't no scam, so don't call no policeman
When the engine of commerce starts seizin'
Just add a quart or quantitative easin'

Show no mercy to the critics
Don't let no one stop your nerve
You can mock Ricardian Equivalence
You can laugh at the Laffer Curve

Tell that guy at the Minneapolis Fed
To shut up, or you'll break his legs
And if the Bond Vigilantes don't like it?
Well, they can go suck eggs

And it's called quantitative easin'
You know I say this for a reason
When the economy just sits there squeezing
Loosen things up with quantitative easing

Quantitative Easin'

More on TARP

Will Wilkinson at the Economist's DIA.

Why do we care if China manipulates its currency in our favor?

Mark Perry has some editing fun with Harold Meyerson's article in today's Washington Post:

"This week, committees on both sides of Capitol Hill will plumb the conundrum of Chinese currency manipulation. The conundrum isn't that -- or why -- China is manipulating its currency: By undervaluing it, China is systematically able to underprice its exports, putting American (and other nations') manufacturing consumers and businesses that purchase China’ cheap imports at a significant disadvantage. The conundrum is why the hell the United States isn't doing thinks it should do anything about it.

There are certainly plenty of senators and congressmen -- and Main Street Americans U.S. producers that compete with China -- who'd like to see the White House place some tariffs taxes on American consumers and businesses who purchase the underpriced low-priced Chinese imports. If the administration doesn't act, Congress may just consider mandating some tariffs punitive taxes against American consumers and business on its own."

A little economic realism?

David Brooks seems to make some sense.

Paul Krugman is predictably horrified, as are Steve Benen and someone at Balloon Juice.

Dean Baker goes into detail with a response that seems particularly well argued.

The three classes of American business

Ow.

Dow 11,000

Nice round number, up 66% since March 2009.

CBO re-scores the president's budget

"The CBO forecasts a debt-GDP ratio in 2020 of 90 percent."

Uhm. Would someone like to remind me of any reason we should not vote for divided government in November?

I'm the last person to argue Republicans have been fiscal saints when they control all the levers. But insofar as this chart shows the Obama administration's proposed new budget relative to a no-change baseline, I want an opposition to stand up and obstruct it.

How did the financial crisis happen?

Via Mankiw:

Yale economist Gary Gorton offers a very readable Q&A explaining his view of recent events. (.pdf)

It's sixteen pages and well worth the read--print it out in color if you can.

Quote of the day

"I do not accept second-place for the United States of America. As hard as it may be, as uncomfortable and contentious as the debates may be, it's time to get serious about fixing the problems that are hampering our growth." —Barack Obama, 2010 State of the Union


Source: Heritage

It seems we have different ideas about fixing the problems that are hampering growth.

The economy recovers

...in Zimbabwe.

So, no more trillion dollar note jokes? Aw. One last show...

The U.S.'s largest trading partner

Is not China. Can you guess which country?

(I also enjoyed the comments section, where a mercantilist/protectionist gets owned by Prof. Perry and others who actually know what they're talking about)

Capitalism, market economy slowly take root in N. Korea

WASHINGTON POST -- Kim's government in the past two years has closed some large markets, shifted Chinese-made goods to state-run shops and ordered that only middle-aged and older women can sell goods in open-air markets, to try to limit the number of North Koreans who abandon government jobs for the private sector. But capitalism seems to have already taken root. U.N. officials estimate that half the calories consumed in North Korea come from food bought in private markets, and that nearly 80 percent of household income derives from buying and selling in the markets, according to a study last year in the Seoul Journal of Economics.

Private markets are flooding the country with electronics from China and elsewhere. Cheap radios, televisions, MP3 devices, DVD players, video cameras and cellphones are seeping into a semi-feudal society, where a trusted elite lives in the capital Pyongyang. Surrounding the elite is a suspect peasantry that is poor, stunted by hunger and spied upon by layers of state security.

In the past year, the elites in Pyongyang have been granted authorized access to mobile phones -- the number is soon expected to reach 120,000. In the border regions with China, unauthorized mobile phone use has also increased among the trading classes. And unlike most of the mobile phones in Pyongyang, the illegal phones are set up to make international calls. Chinese telecom companies have built relay towers near the border, providing strong mobile signals in many nearby North Korean towns. Those phones have become a new source of real-time reporting to the outside world on events inside North Korea, as networks of informants call in news to Web sites such as the Seoul-based Daily NK and the Buddhist aid group Good Friends.

Affordable electronics are also cracking open the government's decades-old seal on incoming information. Imported radios -- and televisions in border areas -- are enabling a substantial proportion of the North Korean populations to tune in to Chinese and South Korean stations, as well as to Radio Free Asia and Voice of America, according to an unpublished survey of newly arrived defectors in South Korea. It found that two-thirds of them listened regularly to foreign broadcasts.

(via Perry)

Available labor rate increases to 10.2%

WASHINGTON—In what is being touted by the Labor Department as extremely positive news, the nation's available labor rate has reached double digits for the first time in 26 years, bringing the total number of potentially employable Americans to an impressive 15.7 million.
Enlarge Image Solis

"This is such an exciting time to be an employer in America," said Labor Secretary Hilda Solis, adding that every single day 6,500 more citizens join America's growing possible workforce. "There's such a massive and diverse pool of job-ready Americans to choose from. And each month the number only gets higher."

"While our current available labor rate of 10.2 percent isn't quite as robust as it was in 1982 or 1933, we're happy to say that reaching that benchmark is no longer out of the realm of possibility," Solis continued.

According to the Department of Labor's report, nearly 200,000 more Americans suddenly became fully hirable in October alone. And November saw unprecedented gains in the number of high-quality auto workers, teachers, lawyers, part-time retailers, and even doctors who could be employed.

The surge^H^H^H^H^Hstimulus is working!

NYT gathers projected counterfactuals...

Regional world GDPs

The United States' almost-constant share of GDP over recent decades is quite striking and surprising.

The less efficient and less dynamic economies of European welfare states, meanwhile, have not been able to keep up the same growth rate.

Perry's bottom line:

World GDP (real) doubled between 1969 and 1990, and has increased by another 60% since then, so that world output in 2009 is more than three times greater than in 1969. We might mistakenly assume that the significant economic growth over the last 40 years in China, India and Brazil has somehow come "at the expense of economic growth in the U.S." (based on the "fixed pie fallacy") but the data suggest otherwise. Because of advances in technology, innovation, and significant improvements in U.S. productivity, America's share of total world output has remained remarkably constant at a little more than 25%, despite the significant increases in output around the world, especially in Asia.

Blaming the president for unemployment

Megan says bugger off:

The president has very little control over employment in the economy. The stimulus undoubtedly kept the economy from losing even more jobs than he did. But the economy is undergoing a hell of a deep structural adjustment: from debtors to savers, from housing-and-finance led growth to . . . well, if we knew that, the recession would already be over. Those adjustments need to happen, because the previous situation was totally unsustainable. But they definitionally imply higher unemployment and less consumer demand in the short run.

A third stimulus might lower the unemployment rate a little, at least from where it would otherwise be. But it would not put us back at 5% unemployment, and it would have a lot of other costs, including further risking our AAA bond rating. Stimulus is at best an incredibly blunt instrument. And it is made blunter by all of the procedural checks we've accumulated over decades of government growth, not to mention very powerful public sector unions. FDR could tell his government to go out and hire people to paint hallways or build dams. The current president needs Environmental Impact Statements, public review periods, and the okay of ACFSME.

The fact is, most of the time, the best the president can do is avoid making things much worse. And though I have many disagreements with the specifics of Obama's policies, I'd say that largely, he's kept from making stuff worse, and eased the worst of the damage on hurting families. We could be doing more with more generous unemployment benefits or other income assistance, less with atrocious auto bailouts. But the economics of recession is truly a dismal science, and demanding that the president cure the recession is about as effective as expecting him to cure Hep C.

Agreed on all counts.

But this won't stop me from gawking at the laughably rosy scenario Obama's economic team painted to sell the stimulus last February:



Though I suppose reassurance is part of the president's role, so as to avert greater panic. Don't worry people, everything is gonna be just fine!

Stephen Colbert vs. Stephen Colber on AGW

With a little help from Mr. Gore...

The story so far

World industrial production in the Great Depression and now:



Writes Krugman:

Basically, we started out with a year that matched the Great Depression, but have since pulled back a bit from the edge of the abyss.

80% reduction in world poverty rate (1970-2006)

Perry's bottom line:

Both graphs are based on a poverty measure of $1/day, but the authors obtain similar results using four other measures of poverty from $2 to $10 per day, both for the overall reduction in world poverty (top graph) and the regional differences (bottom graph).

Assuming these estimates are accurate, the 80% reduction in poverty between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span in the history of the world, and the 97% reduction in East Asia has to be the most significant improvement in regional standard of living in history as well. The authors don't explore the reasons for the record reduction in world poverty, but some likely candidates might be: globalization, market-based reforms, liberalization, Information Age technology, productivity gains in agriculture, the collapse of central planning in China and India, etc.

Africa is a big negative outlier. It gets the most economic aid, yet is performing the worst in terms of absolute poverty levels and not making much headway at reducing them.

Perhaps there's something wrong with Africa itself, or perhaps there's something wrong with the economic aid model (counterproductive, ala Dambisa Moyo's argument, fostering dependence like welfare), or some combination of these.

Either way, more aid for Africa does not seem to be a solution to the problem nor a smart use of resources, despite what TV ads tell us.

Meanwhile, East Asia is an extraordinarily positive outlier. Ain't it amazing what embracing modernity can accomplish?