John Tamny, RealClearPolitics & Forbes, and author of The End of Work and Who Needs the Fed? explains that the Fed is not a rate-setter, it's a rate-follower. It can't create an economy. Investors have known for a year or to that [rate increases] were coming. Draghi’s gloomy remark about the federal budget. The Fed is “large and powerful” —and relevant—because the US economy is the largest in the world. Mexico and Yemen and Nigeria have central banks, which we don’t talk about. Yemen is a war-torn, failed economy; it cannot be rescued by central bankers with unlimited spending. Banks lend to each other with overnight rates. . . . Why did we ever take the Fed so seriously?
How Does Economics Help Us Make Better Policy? Here Are Four Examples
quoting Thomas Sowell via Forbes
Economics: it’s the study of human action and its unintended consequences, and I think it teaches us a lot about wise Christian stewardship and compassionate, prudent public policy. Here are four examples I recently shared with students in a colleague’s class at Samford University.
The Robust Economy Has Hidden The Next Crisis
quoting Raghuram Rajan via The Washington Post
In the United States, recovery from the financial crisis a decade ago has continued on as one of the longest economic expansions in American history. Unemployment is at a 50-year low. Fueled by this momentum, while ignoring the intense political disruptions of the past two years, the stock market soared to new heights — until the big plunge this week following an earlier slide in February.
EXAMINING THE SELF-MADE MAN: BEZOS, TRUMP & AEI ECONOMISTS EXAMINE WAGE GROWTH, LABOR MARKETS AND MORE
Facts and falsehoods about the US labor market: A long-read Q&A
James Pethokoukis | AEIdeas
Moody’s Analytics economist Adam Ozimek joins James Pethokoukis to talk unemployment, wage growth, and all things economic policy.
THE ATTRIBUTES OF A SUSTAINABLE, GLOBAL ORDER IN MACRO FINANCE & US ECONOMY HAS MORE ROOM TO GROW PAST 4% GDP
The Fed’s monetary policy: Just follow the yellow brick road?
Paul H. Kupiec | AEIdeas
Tight labor markets, low real interest rates, and large federal budget deficits are a textbook recipe for inflation, and yet inflationary expectations remain contained. What makes Chairman Jerome Powell think he can sustain the current expansion while maintaining historically low unemployment and a low and stable inflation rate? Join AEI on Friday when a panel of experts will discuss these and other issues related to Federal Reserve monetary policy.
What Worries Me About The U.S. Economy
by Raghuram Rajan via The Washington Post
The U.S. economy certainly appears as if it is in an ideal place: unemployment is at its lowest in nearly half a century, and the number of people voluntarily leaving jobs to find new ones, an indicator of their confidence in the economy, is at a 20-year high. Economic growth this year is likely to be around 3 percent, more than what most economists think the economy is capable of in the medium term. Inflation is moderate.
Fed Is On To A 'New Kind Of Policy,' Stanford's John Taylor Says
interview with John B. Taylor via Bloomberg
Hoover Institution fellow John Taylor talks about Federal Reserve policy including the raising of interest rates.
How Fed Rate Increases Affect the Economy
Mickey Levy, E21
My colleagues and I recently analyzed every Federal Reserve interest rate increase episode between 1983 and 2015 and found several patterns emerge: bond yields rose, the yield curve flattened, the U.S. stock market either chopped sideways or rose, the U.S. dollar fell as frequently as it appreciated, and as the Fed raised rates from accommodative to a neutral monetary policy, the economy continued to grow, largely unaffected by the rate increases and removal of monetary accommodation. Read more here....
Continually Mistaken, Chronically Admired
The work of Nobel Prize-winning economist Joseph Stiglitz is a study in elite myopia.
How the Sun Foreshadowed the Trump Era
By IRA STOLL, Special to the Sun | September 25, 2018
Don't blame business for slow wage growth
Michael R. Strain | Bloomberg Opinion
Are wages determined by market forces, or do businesses get to decide what pay they offer to workers? Michael Strain believes that determining why wage growth has been sluggish for years is at the heart of the debate about the economy. Despite several other important factors, Strain argues that worker productivity remains the dominant force in setting wages. Mobility costs are much stronger in the near term than over longer periods of time, and intuitively there is a limit to how far an employer can push its wages below the market wage. The strength of market forces can be dispiriting for those who want wages to grow faster; after all it is much harder for government policy to spur productivity growth than to clamp down on anticompetitive corporate practices.
The economics and emotions behind slow wage growth
Michael R. Strain | Bloomberg Opinion
Unemployment continues to fall, and the number of jobs is increasing, yet wages are failing to rise. Michael Strain asks why this is happening and proposes several explanations for why wage growth is slower than we'd expect. Strain proposes that there might be “hidden slack" in the labor market and that the rate of employment for people in their prime working years is still below its prerecession peak, showing that the official jobless rate isn't giving the full picture. Another possibility he proposes is that the composition of the workforce is changing in ways that affect pay. Strain concludes that some combination of several factors is likely the culprit, making him hopeful that a healthy rate of wage growth is likely in the future.
Who Really Creates Value in an Economy?
Mariana Mazzucato takes aim at neoliberalism and its academic cousin, "public choice" theory.
The Makings of a 2020 Recession and Financial Crisis
Nouriel Roubini and Brunello Rosa list ten factors all pointing toward an economic downturn that will be more severe than the last.
The crisis next time
Carmen M. Reinhart and Vincent R. Reinhart | Foreign Affairs
At the turn of this century, most economists in the developed world believed that major economic disasters were a thing of the past or at least relegated to volatile emerging markets. Financial systems in rich countries were too sophisticated to collapse, and recessions would remain short, shallow, and rare. There remains a central warning of 2008: Countries should never grow complacent about the risk of financial disaster. The next crisis will come, and the more the world forgets the lessons of the last one, the greater the damage will be.
Nine Lessons from the Financial Crisis – Mohamed El-Erian, Bloomberg
A Manifesto for Renewing Liberalism
From The Economist: “In all sorts of ways, the liberal meritocracy is closed and self-sustaining.
Conference on the 10th anniversary of the 2008 financial crisis
Peter J. Wallison | AEI event
Today at AEI, expert panelists will outline the principal reasons that have been advanced as causes of the financial 2008 crisis. They will discuss how conceptions about the causes of the crisis influenced the reforms that were ultimately adopted and whether these reforms have been or will be effective. Tune in for a special lunchtime discussion with House Committee on Financial Services Chairman Jeb Hensarling (R-TX).
Public opinion 10 years after the financial crash
Karlyn Bowman | American Enterprise Institute
Using survey data collected before the 2008 financial crisis, Karlyn Bowman shows that Americans have long had doubts about Wall Street, banks, and financial institutions. The 2008 crash profoundly affected people’s views of Wall Street, the economy, and their family’s prospects. For example, in a November 2009 Gallup poll, the view that it was a good time to find a quality job dropped to its lowest level ever, 8 percent. There has been a small recovery in the major confidence-in-institutions indicators, and most Americans do not feel the economic system is more secure today than it was before the financial crisis.
Government ignorance is no excuse for another dreadful financial crisis
Peter J. Wallison | The Hill
In light of the 10-year anniversary of the 2008 financial crash, Peter Wallison assesses the current state of the economy. He argues that without a halt in current government housing policies, there is likely to be another financial crisis, again caused by a government-dominated housing finance system. The system is functioning in substantially the way it functioned before the crisis. Wallison identifies rising housing prices and notes that of particular concern is that the highest rate of increase is occurring for the lowest price homes, exactly the opposite of what a sensible housing policy would produce.
Lessons Not Learnt From The Global Financial Meltdown
quoting Raghuram Rajan via The Navhind Times
Ten years ago, on September 15, 2008, Lehman Brothers filed for chapter 11 bankruptcy. The mayhem that followed led to the worst global financial crisis after the Great Depression. Like the latter, the 2008 financial crisis has been a matter of much discussion – from Congressional testimonies to saucy Hollywood productions leave alone the academic garbage that it generated.
The Case for Monetary Policy Rules
Peter Ireland, E21
Speaking at last month’s economic policy symposium in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell described vividly the challenges that central bankers face in a world of constant change and uncertainty. These challenges make it impossible for the Fed to perfectly fine-tune the economy. Chair Powell’s preferred, gradual approach to raising interest rates is therefore justified. The Fed could meet these challenges even more effectively, however, by adopting and following a monetary policy rule. Read more here....
GREGORY COPLEY, THE FIGHT OF THE CENTURY: SOVEREIGNTY VS. GLOBALISM, THE NATIONALISTS IN AMERICA ARE WINNING
Why We Don’t Prepare for the Future
Robert Samuelson, Washington Post
The Failures of Globalism
By Molly Dinneen, Strategy Bridge: “Globally, unemployment insecurities develop in parallel with technological improvements fostered by globalism that are expected to lead to factory workers losing their jobs to machines or because they lack the necessary technical education.”
Analysis: How Do Developed Economies Maintain Their Low Interest Rates?
quoting John B. Taylor via Hurriyet Daily News
How do developed economies maintain their low interest rates? The Taylor rule is a mathematical formula developed by American economist John Taylor to help central banks set short-term interest rates based on economic conditions and inflation. Its aim is to help central bankers make rational monetary policy decisions. In this sense, it acts as an objective benchmark by setting the optimal rate that balances inflation and growth targets.
'Excessively High' Equity Prices Are Biggest Risk, Economist Martin Feldstein Says
interview with Martin Feldstein via Bloomberg
Hoover Institution fellow Martin Feldstein discusses the outlook for Federal Reserve monetary policy.
Here's Why Stocks Are Focused Almost Exclusively On Trade, In One Chart
quoting Steven J. Davis via MarketWatch
It’s no secret that trade policy has been a primary driver of activity in U.S. markets in 2018, responsible for both gains and losses in stocks and the dollar as investors assess the impact of tariffs or the likelihood of the situation escalating into a full-blown trade war.
George Will Is Wrong about the Economy
David Bahnsen, National Review
PROJECT SYNDICATE: The Zero-Sum Economy
Adair Turner explains why distributive activities are growing at the expense of creative activities.
Stagnating wages don’t tell the whole story
Ramesh Ponnuru | Bloomberg Opinion
The Myth of Secular Stagnation
Joseph Stiglitz argues that the concept was always merely a fig leaf for bad politics and flawed economic policies.
Stiglitz, Summers, Secular Stagnation, And The Supply Side
by John B. Taylor mentioning John F. Cogan via Economics One
Joe Stiglitz recently published an attack, “The Myth of Secular Stagnation,” on Larry Summers’ hypothesis of secular stagnation, a revival of a term used by Alvin Hansen decades ago. Larry first presented his secular stagnation hypothesis at a conference jointly hosted by the Brookings Institution and the Hoover Institution on October 1, 2013, during the fifth anniversary of the financial crisis. It has gone viral since then.
The Market Is “Banning the Box”
Aaron Renn, City Journal
The American economic expansion is finally accomplishing one of the country’s most needed social improvements: getting the long-term unemployed reattached to the labor market. Income inequality gets much of the press today, but as Harvard economist and Manhattan Institute senior fellow Ed Glaeser points out, long-term joblessness is the more serious problem. The unemployed face a heightened risk of serious ills ranging from physical maladies and mental health problems to divorce. Read more here....
Ten Years After the Recession
Frank Rich, Sheila Bair, et al., New York Magazine
New Release: Monetary Policy In An Uncertain World
quoting Kevin Warsh via Cato Institute
Ten years after the 2008 financial crisis we are again facing the possibility of economic turmoil as the Fed and other central banks exit their unconventional monetary policies by raising interest rates and shrinking their balance sheets.
An authority on Civil-Military Relations; Southwest Asian Political Economy, and Pentagon Acquisition Reform .
KEYNES VS. HAYEK RAP
KEYNES VS. HAYEK RAP ROUND 2