Beat the Press

Buying and Selling a Home Does not Strengthen the Housing Market

In a measure of ungodly stupidity Congress extended the first-time homebuyers' tax credit to existing homeowners. Somehow, it didn't occur to them that if someone sells their home to buy a new one it does not provide a net boost to the housing market. (One more home is purchased, one more home is put up for sale.) Somehow this simple logical point escaped the reporters who cover the issue as well, as they are still waiting for the credit to provide a lift to the housing market.

--Dean Baker

The NYT Interupts the Europe Bashing to Complain that Germany is Too Competitive

There is an ongoing refrain in economic reporting that the European welfare state is an outmoded relic that is dragging Europe into an economic abyss. It's a very compelling tune, since it gets repeated endlessly by "experts" who pretend to know what they are talking about.

The only problem is that there isn't really any evidence to support the story. By most standard economic measures Europe is doing about as well as the United States. On the most basic measure of economic prowess, productivity, Western Europe is pretty comparable to the United States with some countries, like France, actually reporting somewhat higher levels of productivity.

The Washington Post Invents a Chinese Demographic Crisis

The Washington Post (a.k.a. Fox on 15th Street) is once again touting the "demographic crisis" shtick, this time in reference to China. The Post tells readers that China faces a "looming demographic crisis" that: "it is going to be the first nation in the world to grow old before it gets rich. By the middle of this century the percentage of its population above age 60 will be higher than in the United States, and more than 100 million Chinese will be older than 80."

Fourth Quarter Final Demand Growth Revised Down to 1.9 Percent

The reporting on the revisions to fourth quarter GDP noted that the growth rate was revised up from 5.7 percent to 5.9 percent. However, this increase was attributable to revisions to the rate of inventory accumulation (actually slower de- accumulation). The rate of final demand growth was actually revised down from 2.2 percent to 1.9 percent. This bad news went largely unnoticed.

--Dean Baker

NYT Should Rely on Experts Who Are Not Employed by J.P. Morgan

The NYT reports that strong demand is causing wages to rise rapidly in China. While the article describes this as a "labor shortage," this is actually a normal process in a growing economy. Workers move from less productive sectors to more productive sectors. Firms that cannot afford to pay the market wage go out of business.

At the end of the article, the NYT notes that China may revalue the yuan as one mechanism for offsetting the inflation caused by the rise in wages. It then cites Jing Ulrich, the chairwoman of China equities and commodities at J. P. Morgan: "Letting wages rise benefits workers, ... letting the currency rise benefits currency speculators."

Fannie Mae's Loss is the Bankers' Gain

Fannie Mae and its sister institution Freddie Mac buy mortgages from banks. That is what they do. This means that when Fannie and Freddie lose money, they paid banks too much money for the mortgages.

This point should be so simple that even an economist could understand it. This is why it is disturbing when news articles on Fannie's newly announced loss of $15 billion in the last quarter don't point out that this is money given to banks.

Existing Home Sales Fall and the Post Finds Yet More Surprised Economists

It seems that being surprised by the economy is a requirement for an economist to be a source for the Washington Post. The first sentence of a Post article on January existing home sales and GDP revisions told readers that: "Sales of previously owned houses unexpectedly slumped in January." The main surprised economist featured in the article was Lawrence Yun, the chief economist of the National Association of Realtors.

Washington Post Spreads Misinformation About Climate Change Regulations

It is not the job of reporters to just report what partisans to debates say about events. The vast majority of readers do not have the time and background to assess competing claims. When one party says something that is not true, the news is that this person is lying, not their lie.

NPR Gives Nonsense on Financial Markets

NPR gave us classic financial markets as sports event reporting this morning, pointing out how the markets moved on the words spoken by Federal Reserve Board chairman Ben Bernanke. The correct response to these moment by moment movements should be: "who gives a damn?"

There are a small number of rich speculators who stand to make or lose large amounts of money on these movements, just as people at racing tracks stand to make or lose money depending on the outcome of horse races. For the vast majority of people in the country (including the vast majority of NPR's relatively affluent listeners), the hour to hour or even day to day movement of the financial markets have no consequence.

High Unemployment Claims: More Surprised Economists

The number of unemployment claims filed last week jumped by 22,000 from the prior week. USA Today told readers that analysts expected that claims would fall by 19,000. It is hard to understand why anyone who analyzes economic data for a living would have expected unemployment claims to fall from the prior week.

Washington Post Finds More "Surprised" Economists

The headline of a Washington Post article told readers: "Economists surprised as new-home sales fall to lowest level in nearly 50 years." The first sentence explained: "sales of newly built homes unexpectedly plummeted in January to their lowest level in nearly five decades, providing more evidence of the housing market's fragility."

Inventing Job Creation Numbers

The WSJ told readers that Democratic senators claimed that the employment tax credit in a job bill passed by the Senate would create 1.3 million jobs. It then added: "but some independent economists said they expected it would have less impact than that."

The Government Pays More Money to Peter Peterson and Other Rich Investment Bankers than to Poor Chidren

The NYT had another blogpost complaining that the government pays more money to rich investment bankers like Peter Peterson than it does to poor children. Actually, the column didn't mention how much money rich investment bankers get from the government in the form of interest payments on the government bonds that most of them hold, instead it complained about the money that retirees collect in the form of Social Security and Medicare payments.

Is President Obama's Commission Our Only Protection Against Fiscal Calamity?

Some folks at the NYT seem to think so. The paper published a blogpost telling readers:

"Mr. Obama has directed the commission to recommend by Dec. 1 how to balance the budget by the fiscal year 2015, not counting interest payments on the debt, as well as to propose long-term changes in revenues and entitlement programs to avert fiscal calamity."

Bank Loan Program Is Another Subsidy to Banks

The Obama administration has proposed a new program that would give $30 billion to banks at below market interest rates. The Post briefly discusses the merits of this program, noting that many businesses are not borrowing because they don't have demand for their product, however the article does not include the views of anyone who makes the obvious point: this is another subsidy to the banking industry.

While the beneficiaries of this subsidy will be relatively smaller banks (assets of less than $10 billion), many voters may be troubled by the prospect of giving yet more subsidies to the financial industry.

--Dean Baker

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