I want to try to bring together a few points about which I’ve posted previously. My motivation is to address an important article last week in the New York Times (January 1st) by Neil Irwin and Weiyi Cai. Perhaps its early for such a declaration, but the phenomenon they reveal might require a rethinking of Keynes’s celebrated “paradox of thrift.” The authors point out that much of the recent stock market boom can be attributed to an inordinate increase in …
GDP Growth: Seriously Flawed but Not Going Anywhere
December 31, 2020“Where do people earn the Per Capita Income? More than one starving soul would like to know.” (Eduardo Galeano) U.S. GDP plunged in the second quarter of 2020 at an annualized rate of 31.7 percent. From the standpoint of history, the report was shocking (although perhaps not surprising, given the abrupt policy response to the pandemic). Equally shocking (and unsurprising) was the news for the third quarter, which reported an unprecedented growth rate of 33.1 percent. Yet for most people …
Exchange Rates and the Dollar: The Short and Long View
December 23, 2020Last week the U.S. Treasury Department took the unusual step of labeling both Switzerland and Viet Nam currency manipulators. If the accusation stands, the two countries will then need to come to an agreement with the U.S. and the IMF or face possible retaliatory tariffs. The mainstream press has, as always, focused on reasons for, as well as the possible consequences of, the artificial currency deflation by the two countries. And as someone asked by many a puzzled student why …
The Great Divergence “on Drugs”
December 6, 2020Back in July I wrote about a “great divergence” that has been occurring between the stock market and the real economy. Yet today one might consider that recent developments put the lie to my claim. After all, while stock prices soar, the unemployment rate continues to fall. The November number was 6.7 percent, down from 6.9 percent in October. With imminent release of a new Covid-19 vaccine expected, all the major equity indices appear – almost irrationally – to have …
Could We Have Too Much Fiscal Policy?
December 3, 2020President-elect Biden’s formation of his economic “team” has been dominating the headlines. Unduly, I aver, because there are far more pressing issues than which Wall Street or otherwise pro-business cronies Biden ends up selecting. Most notably, of course, is the matter of another desperately needed stimulus package. Against all odds, it appears that moderate Senate Democrats and Republicans are working together on a compromise bill. Just yesterday the group, led by Senators Collins (R-Maine) and Warner (D-Virginia), proposed a $900 …
Inflation? Really?
November 25, 2020Last week my interest was aroused by an article written by Martin Wolf in the Financial Times (November 18th) in which he discusses a recent book by Charles Goodhart and Manoj Pradhan. In the article he provides a number of reasons why we might expect higher – possibly much higher – inflation in the coming years. And an article in today’s Wall Street Journal by David Harrison similarly suggests that, following successful introduction of a Covid-19 vaccine, widespread and pent-up …
Debt, More Debt, and Yes, Even More Debt
November 22, 2020In August of this year, Nobel laureate Joseph Stiglitz and Hamid Rashid warned that a global debt crisis was looming. And just last week, Zambia became the sixth country this year – after Argentina, Belize, Ecuador, Lebanon, and Suriname – to default on its sovereign debt when President Edgar Lungu’s government failed to make a $42.5 million interest payment that was due. Under normal circumstances one sovereign default is newsworthy; the latest announcement merely underscores what a strange year it has …
The Regional Comprehensive Economic Partnership: Why It Should Matter to Us
November 18, 2020Just two days ago, 15 Asia-Pacific nations agreed to what is arguably the most important trade deal in history. Known as the Regional Comprehensive Economic Partnership (RCEP), it will unite the 10 countries from the Association of Southeast Asian Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam – with Australia, China, Japan, New Zealand, and South Korea to create the largest trade bloc in the world. With its members accounting for about one-third …
Free Market Capitalism is a Pernicious Oxymoron
November 15, 2020Reading Neil Irwin’s article this morning in the New York Times really raised my hackles. It is one of those faux-centrist pieces that tries both to applaud and to censure capitalism for its response to the global pandemic. One statement in particular gets my goat. Here he is discussing the “advance purchase agreement” between Pfizer and the Federal government over Covid-19 vaccine research: But it [the above agreement] speaks to a deeper reality the pandemic has revealed — both what is amazing about …
The Lender of Last Resort
November 11, 2020There is a high stakes political fight looming over whether to extend the emergency loan programs put in place this past Spring by the Federal Reserve and the Treasury Department, in response to the economic fallout from the coronavirus pandemic. While it appears that the Fed might be amenable to continuing the lending programs beyond their December 31st deadline, Treasury Secretary Steven Mnuchin is feeling pressure from Republicans to allow the programs to expire. The interesting twist here is that …