Archive

  • Cheap Tip

    Last quarter the markets were surprised by a stronger than expected number for personal consumption expenditures in March. I commented that the surprise was surprising because March personal consumption expenditures were embedded in the first quarter GDP data that had been released the prior week. Here's a chance to look for more surprising surprises. The consensus number for June personal consumption expenditures is an increase of 0.4 percent. My arithmetic puts the figure at over 1.0 percent. There is always the possibility of a substantial upward revision to the April and May data, but absent a large revision, June expenditures should come in much higher than "expected." Will the markets be surprised? --Dean Baker
  • Can You Say "Lower Profit Margins?"

    Apparently the reporters at MarketWatch can't. An article noting the uptick in labor compensation reported in the second quarter Employment Cost Index reported that Fed Chairman Ben Bernanke said that higher labor costs need not lead to inflation, if they are offset by rising productivity. Well, in the very next sentence Mr. Bernanke also said that higher labor costs could be offset by lower profit margins: "Whether faster increases in nominal compensation create additional cost pressures for firms depends in part on the extent to which they are offset by continuing productivity gains. Profit margins are currently relatively wide, and the effect of a possible acceleration in compensation on price inflation would thus also depend on the extent to which competitive pressures force firms to reduce margins rather than pass on higher costs." But that part didn't make it into MarketWatch . Thanks go to my friend Jared Bernstein for this tip. --Dean Baker
  • House Moves to Boost Defenses Against Martians

    The House came up with the brilliant idea of linking the partial repeal of the estate tax with raising the minimum wage. In the words of West Virginia Representative Shelley Moore Capito, this linkage made sense because, "the sustaining of small businesses by keeping their vital assets will allow those making the minimum wage to continue working. This is a jobs bill." I'm sorry, this is nuts. Only a tiny percentage of small businesses will ever be liable for the estate tax and it is paid out after they are dead. It has no obvious effect on how they would operate their business. It is hard to see how cutting the estate tax will save even a single minimum wage job. How could a reporter just put these words in print and not talk to an economist to get a comment on this statement? Surely any economist, regardless of their political leanings, would explain that a district in West Virginia is represented in Congress by a crazy person. --Dean Baker
  • The Deflation of the Housing Bubble Continues

    The weak second quarter GDP numbers were driven in part by the housing sector as noted in the NYT . See also the separate piece on the housing market. In addition to the GDP data, the Commerce Department also released data on vacancy rates for the second quarter. The vacancy rate for ownership units hit a new record. Cheap tip for the months ahead -- watch for credit card debt to soar. People who can't borrow against their homes, now that prices have stopped rising, will turn to credit cards. It isn't pretty, but that's what desperate people will do to hold onto their homes in a collapsing bubble. --Dean Baker
  • The Inverted Yield Curve and Other Economic Fads

    Remember the inverted yield curve and the hoola hoop? A few months back, the prospect of an inverted yield curve was seen as an ominous warning sign of bad times ahead. An inverted yield curve was supposed to signal an upcoming recession. This seems worth mentioning now because the yield curve is becoming seriously inverted as long-term rates have edged downward, even as short-term rates remain relatively high. For those who have better things to do with their time, an inverted yield curve refers to a situation in which short-term interest rates are higher than long-term interest rates. This reverses the normal course of events, typically investors expect to get a higher rate of return if they agree to lock up their money in a long-term bond or time-lock account rather than keeping it in a checking account where they can get immediate access. A few months back, as the Fed was raising short-term interest rates, without much increase in longer term rates, many market analysts raised the...
  • LEBANESE DEMOCRACY?

    LEBANESE DEMOCRACY? I often had cause to wonder whether or not people understood this during the Cedar Revolution, and in light of the president's repeated insistence that Hezbollah is afraid of democracy during today's press conference , it's clear that the White House doesn't. Democracy, simply put, isn't what's at issue in Lebanese politics. Read up on Lebanon's demographics and odd electoral system and you'll see that both before and after the Cedar Revolution, Lebanon has been a democracy of sorts. They have elections (democracy!) but no "one person, one vote" principle (no democracy!). Instead, the Taif Agreement apportions parliamentary seats according to a formula that overrepresents Christian groups mainly at the expense of Shiites. One may or may not regard this as undemocratic, but nothing changed during the Revolution. Rather, what happened in essence was that leading Sunni and Druze politicians (notably Rafik Hariri and Walid Jumblatt ) defected from the pro-Syrian...
  • STALINIST BLOGGERS. Ah,...

    STALINIST BLOGGERS. Ah, the great blogofascism debate of '06 returns. Josh Marshall makes this inadvertantly hilarious entry into the fray: Actually did you know that TPM is related to Stalin by marriage? Little known fact. Actually not even sure if it's true. But it seemed to be from what I could tell. I'll look into it again. Matt quite rightly notes that linking and excerpting are akin to editing, which reminded me that one point I'd been meaning to make about the blogs is that rather than being a totally new thing in the world, they actually reproduce some really central textual forms in Western history. Take, for example, the Elizabethan commonplace book. Created in an era where books were extremely expensive, such "common readers" were created by single or multiple authors, who would excerpt, by hand, quotations, pages, or stanzas from their favorite works into the books, under common headings. Sometimes these books would circulate in society, gathering reader comments in the...
  • TRICKY, TRICKY. ...

    TRICKY, TRICKY. Oh, those Republicans. Tired of being such grinches on the minimum wage, they flipped on the bill, crafting a proposal to raise the wage and rollback the estate tax. The Democrats, it seems to me, have precisely the right response to this gambit: Its political blackmail to say the only way that minimum wage workers can get a raise is to give a tax giveaways to the wealthiest Americans," said Sen. Edward Kennedy, D-Mass. "Members of Congress raised their own pay � no strings attached. Surely, common decency suggests that minimum wage workers deserve the same respect." "It's outrageous the Republican Congress can't simply help poor people without doing something for their wealthy contributors," said Rep. Tim Ryan, D-Ohio. And it really is. But there's something kind of awesome about seeing the GOP's strings so clearly -- they really can't help the poor without further wrecking the country to aid the rich. According to my sources on the Hill, Democrats do plan to stand...
  • JUST POSTED ON...

    JUST POSTED ON TAP ONLINE: SURVIVING SUDOKU. Cruciverbalist Matt Gaffney ponders the love-hate relationship crossword writers have with the Japanese puzzle sensation. --The Editors
  • THE CONEHEAD ECONOMY....

    THE CONEHEAD ECONOMY . Among the best of the new Times Select features are their "Talking Points," long backgrounders penned by the editorial writers on all manner of major issues, from inequality to global warming. This week, Teresa Tritch published one on "The Rise of the Super-Rich," explaining that "[i]ncome inequality used to be about rich versus poor, but now it�s increasingly a matter of the ultra rich and everyone else." Few stories are as important, or as poorly understood. From 2003 to 2004, real average income for the top 1 percent of households shot up by 17 percent. For the remaining 99 percent, the average gain was under three percent. Indeed, the top one percent accumulated 36 percent of all income increases in 2004, a six percent increase from 2003. In the past, I've called this "The Conehead Economy" -- plenty of growth in the economic body, but all of it happening in the top percent. Were that to happen to a person, you'd see six inches of growth in their forehead...

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