How the Fed prints money without any ink - Fortune Finance. When people talk about "printing money," your first thought might be that they're referring to green pieces of paper with pictures of dead presidents on them. The graph below plots the growth rate for currency in circulation over the last decade. I've calculated the growth rate over 2-year rather than 1-year intervals to smooth a little the impact of the abrupt downturn in money growth in 2008. Another reason to use 2-year rates is that when we're thinking about money growth rates as a potential inflation indicator, both economic theory and the empirical evidence suggest that it's better to average growth rates over longer intervals.
Currency in circulation has increased by 5.2% per year over the last two years, a bit below the average for the last decade. Two year growth rate (quoted at annual percentage rate) of currency in circulation. Data source: FRED. But if the Fed didn't print any money as part of QE2 and earlier asset purchases, how did it pay for the stuff it bought? James D. The Achievement Test. This debate will be contentious, but I hope it’s not rude to mention that it will be largely beside the point. National destinies are not shaped by what percentage of G.D.P. federal spending consumes. They are shaped by the character and behavior of citizens. The crucial issue is not whether the federal government takes up 19 percent or 23 percent of national income. The crucial question is: How does government influence how people live? There have been cases when big government has encouraged virtuous behavior (in the U.S. during World War II), and cases when big government has encouraged self-indulgence and irresponsibility (modern Greece).
The size of government doesn’t tell you what you need to know; the social and moral content of government action does. The best way to measure government is not by volume, but by what you might call the Achievement Test. This hasn’t been a case of government corrupting capitalism or vice versa. How big will the resulting government be? Maybe the coolest thing ever. Economics Offers Tactics, Not Strategy. Edward L. Glaeser is an economics professor at Harvard. Last week, the two chairmen of President Obama’s bipartisan deficit reduction panel produced an eminently sensible preliminary report that was greeted with derision from both left and right.
On Sunday, The New York Times invited everyone to weigh in, posting a deficit puzzle that lets you play budget czar, making spending cuts and tax increases in an attempt to wipe out the deficit by 2040. Solving the puzzle is a great exercise in fiscal realism, forcing us to recognize that there is no way to balance the budget without significant tax increases or cuts to either entitlements or military spending. The puzzle’s author, David Leonhardt, asked the five outside economists who contribute each week to Economix if they would like to explain how they would solve the puzzle, noting that some readers had written to The Times to say there were interested in knowing what we thought. I first responded to Mr. Left, Right and Wrong on Taxes. The New Poor - The Economy Shifts, Leaving Some Behind - NYTimes. Lori Moffett for The New York Times Cynthia Norton, an administrative assistant in Jacksonville, Fla., has not found comparable work since being laid off. Pruned in a Paradigm Shift Articles in this series will examine the struggle to recover from the widespread strains of the Great Recession.
Previous Articles in the Series » Period. For the last two years, the weak economy has provided an opportunity for employers to do what they would have done anyway: dismiss millions of people — like file clerks, ticket agents and autoworkers — who were displaced by technological advances and international trade. The phasing out of these positions might have been accomplished through less painful means like attrition, buyouts or more incremental layoffs.
The tough environment has been especially disorienting for older and more experienced workers like Cynthia Norton, 52, an unemployed administrative assistant in Jacksonville. “I know I’m good at this,” says Ms. Administrative work has always been Ms. Ms. Jobs That Aren’t Coming Back - Economix Blog. I had an article today about structural unemployment — the idea that some people are out of work not only because demand is relatively weak, but because their skill sets don’t match what employers want (for example, they are highly specialized auto workers, but the only local job opening is for an oncologist). The typical causes of structural unemployment are the three T’s: trade, technology and changing tastes (e.g., consumers want more iPods and fewer C.D. players). We care about structural unemployment because it means many of the jobs lost during the Great Recession may not come back in the recovery.
And that has important implications for public policy, and how the government can or should be helping the jobless. We’ve seen this phenomenon in previous recessions, and this paper by Erica Groshen and Simon Potter does a nice job of laying out a few reasons why structural unemployment may help explain the “jobless recoveries” following the last two recessions.
Comment / Opinion - How to rebuild a shamed subject. Who Creates the Wealth in Society? - Economix Blog. Uwe E. Reinhardt is an economics professor at Princeton. This is the third post in my trilogy on the creation of a nation’s wealth. In the first I explored what is meant by wealth. The second looked at companies as creators of wealth, with a digression on the social and economic purpose of business corporations. In this concluding post in the trilogy, I explore who are society’s main creators of wealth. In so doing, I shall draw heavily on a lecture entitled “What Is the Wealth of a Nation?” The lecture was inspired by the cover of a well-known business magazine that celebrated “America’s Great Wealth Creators,” with photos of dot-com heroes of the day and Jack Welch, the chief executive of General Electric until 2001. The point of my lecture was not that businesses and their leaders do not contribute to creating the nation’s wealth.
YahooGeneral Electric stock performance over time, compared with major indexes. Finally, what about government? High and Low Finance - The Naked Truth on Credit-Default Swaps - In the , Wall Street won one this week when the Senate voted down a proposal to bar the so-called naked buying of . If that were the law, you could not use swaps to bet a company would fail. The exception would be if you already had a stake in the company succeeding, such as owning a bond issued by the company. On the other side of the Atlantic, Germany announced new rules to bar just such betting — but only if the creditors were euro area governments.
None of this argument would be taking place if regulators had done their jobs years ago and classified credit-default swaps as insurance. As it happened, however, clever people on Wall Street followed the prescription laid down by Humpty Dumpty in ’s “Through the Looking Glass:” “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.” When Alice protested, Humpty Dumpty replied that the issue was “which is to be master — that’s all.” The word here is “swap.” R40173_20100409.pdf (application/pdf Object) Made in the USA. IN ECONOMICS as in apparel, most fashions come and go. But like the navy blazer or the little black dress, bewailing the decline of American manufacturing never seems to go out of style. “They’re closing down the textile mill across the railroad tracks Foreman says these jobs are going boys and they ain’t coming back.’’
So sang Bruce Springsteen in “My Hometown,’’ a hit song from his 1984 album, “Born in the U.S.A.’’ More than a quarter-century later, that sentiment (if not the song) is as popular as ever. “You know, we don’t manufacture anything anymore in this country,’’ says Donald Trump in an interview with CNNMoney. The Donald has his idiosyncrasies, but on this issue he is squarely in the mainstream. A recent Heartland Monitor survey finds “clear anxiety about the decades-long employment shift away from manufacturing to service jobs,’’ National Journal’s Ron Brownstein reported in December.
There’s just one problem with all the gloom and doom about American manufacturing.