Dean Baker

Recent Articles

Japan's Central Bank Holds Much of Japan's Debt

An AP story in the Washington Post on the IMF's warnings about debt levels told readers that: "Japan's debt is proportionately even bigger -- about twice its GDP -- but the impact is cushioned because most is held by Japanese households." Actually the fact that the debt is mostly held by Japanese households by itself is of little consequence. If Japan had been running large trade deficits and foreigners had bought private assets but not government bonds, then Japanese households and its economy would be in the same situation as if foreigners had bought its debt. The key point is that Japan has been running trade surpluses so that it has accumulated foreign assets rather than selling off domestic assets. It is important that a very high portion of Japan's debt is held by its central bank. This means that the interest on the debt is paid to the bank. It is then refunded to taxpayers so this debt does not impose any burden whatsoever. --Dean Baker

NPR Covers Up for Economists' Responsibility for Pennsylvania Pension Shortfall

A Morning Edition piece on the shortfall in Pennsylvania's public employee pension funds told listeners that just 10 years the funds were over-funded, then the good times went away. Actually, 10 years ago the stock market was in the middle of a huge bubble. This temporarily inflated the assets of pension funds, including the public pension funds in Pennsylvania. While competent economists recognized this bubble and warned of the consequences of its collapse, virtually all of the economists who were steering economic policy, and being relied upon as sources by media outlets like NPR, insisted that stock prices would continue to rise and that the stock market would offer 7 percent real returns on average in the years ahead. Because Pennsylvania and other states listened to these incompetent economists in planning its pension contributions and benefit levels, they now face enormous funding shortfalls. Few, if any, economists have suffered at all in their careers for this incredible...

$85 Billion is 2 Percent for the Pharmaceutical Industry

The NYT article on the passage of the health care reform package noted that the pharmaceutical industry had agreed to reduce their charges by $85 billion over the next decade. It would have been helpful to tell readers that this is a bit more than 2 percent of projected revenues over this period for the industry. The patent monopolies granted by the government on prescription drugs give them about three times as much money every year. --Dean Baker

Does the Post Know How Patent Monopolies Affect Drug Prices?

It seems that they don't. The paper has a good article in the business section discussing how drug companies use illegal or unethical methods to push their drugs in order to take advantage of the huge patent rents available. However, the lengthy article never once notes that the patent system is at the heart of the problem. If drug research was financed through a mechanism that allowed drugs to sell at their market price, the incentives for this sort of corruption would disappear. --Dean Baker

Bernanke, Who Engineered Huge Bank Mergers, Rails Against Giant Banks

The NYT reported that in a speech before the Independent Community Bankers of America Federal Reserve Board Chairman Ben Bernanke lashed out against the risks created by giant too big to fail banks. It would have been worth mentioning that Bernanke had helped to engineer several mergers that made very large banks even larger during the financial crisis in 2008. For example, when Bear Stearns was collapsing, the Fed supported an arrangement whereby it was taken over by J.P> Morgan in exchange for a guarantee of $30 billion in assets. The Fed also supported the takeover of Wachovia by Wells Fargo. If Mr. Bernanke has changed his view on the risks posed by very large banks, it would have been appropriate to call readers attention to this fact. --Dean Baker