Lawsuit Loans & Lawsuit Funding. Finance Companies Making Moves Online. Obama boosts global collaboration to conquer US economic crisis. Artificial intelligence: Difference Engine: Luddite legacy. America’s Three Deficits - Laura Tyson. Exit from comment view mode.
Click to hide this space BERKELEY – This year began with a series of reports providing tantalizing evidence that economic recovery in the United States is strengthening. The pace of job creation has increased, indicators for manufacturing and services have improved, and consumption spending has been stronger than anticipated. But it is too early to celebrate. Output growth in the US remains anemic, and the economy continues to face three significant deficits: a jobs deficit, an investment deficit, and a long-run fiscal deficit, none of which is likely to be addressed in an election year.
Although output is now higher than it was in the fourth quarter of 2007, it remains far below what could be produced if labor and capacity were fully utilized. The output gap reflects a deficit of more than 12 million jobs – the number of jobs needed to return to the economy’s peak 2007 employment level and absorb the 125,000 people who enter the labor force each month. The Economy is Killing Las Vegas. "Democratic Inequality" by Raghuram Rajan. Exit from comment view mode.
Click to hide this space CHICAGO – Why did the household savings rate in the United States plummet before the Great Recession? Two of my colleagues at the University of Chicago, Marianne Bertrand and Adair Morse, offer an intriguing answer: growing income inequality. Bertrand and Morse find that in the years before the crisis, in areas (usually states) where consumption was high among households in the top fifth of the income distribution, household consumption was high at lower income levels as well. After ruling out a number of possible explanations, they concluded that poorer households imitated the consumption patterns of richer households in their area. This is one of the first detailed studies of the adverse effects of income inequality that I have seen. Equally interesting is the link that the study finds between income inequality and pre-crisis economic policy.
Representatives voted on behalf of their districts’ powerful interests. The Age of Double Standards. “But, Yossarian, suppose everyone felt that way.”
“Then,” said Yossarian, “I’d certainly be a damned fool to feel any other way, wouldn’t I?” —Joseph Heller, Catch-22 Last November 29, American Airlines declared bankruptcy under Chapter 11, the provision of the bankruptcy code that allows a corporation to stiff its creditors, break contracts, and keep operating under the supervision of a judge. This maneuver, politely termed a “reorganization,” ends with the corporation exiting bankruptcy cleansed of old debts. In opting for Chapter 11, American joined every other major airline, including Delta, Northwest, United, and US Airways, which has been in and out of Chapter 11 twice since 2002.
Bankruptcy is intended to give a fresh start to persons and enterprises overwhelmed by creditors. This national indulgence for corporate bankruptcy has a certain logic. However, what’s good for corporate capitalism is evidently too good for the rest of us. Advertisement See the complete issue Comments. Income Inequality Is Killing the Economy, Obama Says—Is He Wrong? - Derek Thompson - Business. The president wants to turn inequality into both a campaign banner and a grand unifying theory of the recovery.
But not all economists agree with him. Reuters "What drags down our entire economy is when there is an ultra-wide chasm between the ultra-wealthy and everyone else," President Obama said in a speech today, citing evidence that income inequality hurts economic growth. So, is he right? It's a big hard question with a long history of polar opposite answers.
A sweeping answer is helpful. So, does inequality hurt growth? "Inequality is harmful for growth. " The 3 ways inequality kills growth. Inequality can lead to recessions. "Little overall relation between income inequality and rates of growth and investment. " Marketization, not inequality, is what matters. Inequality doesn't lead to recessions. One thing we know about economic inequality is that the rich are getting richer all over the world, even if the process is on steroids in the United States. What explains this? The Poor Are Getting Poorer. Is It Time to Raise the Minimum Wage? - Jordan Weissmann - Business. One of the harshest realities of America's slow economic recovery -- and there are many -- is the fact in spite of modest job growth, pay for workers is falling.
Year over year, average inflation adjusted wages have dropped by 0.6 percent for all private sector employees. They're down a full 1 percent for non-supervisors -- your retail salespeople, your shop floor factory workers, your cashiers. In other words, even as the overall employment picture has improved in fits and starts, the working poor are getting poorer. Some believe this is a sign of the recovery's weakness, and today the National Employment Law Project used it as a rallying point to call for a higher minimum wage. According to their analysis, which is current through the beginning of 2011, while the bulk of job losses during the recession affected medium wage earners, such as paralegals and nurses, most of the hiring post-recession has been for low-paid service work. In short, the labor market got warped. Why America spends while the world saves. Editor's Note: The following is an edited transcript of my interview with Sheldon Garon, a professor of history and East Asian studies at Princeton University and author of the new book, Beyond Our Means: Why America Spends While the World Saves.
Why Americans don't save Amar C. Bakshi: U.S. household saving rates peaked in the 1980s at around 11 percent, and by 2005, they had plummeted to near zero. How did America go from a nation of savers to a nation of consumers? Sheldon Garon: Well, in fact, before World War II we weren’t a nation of great savers. But then in the two World Wars, and particularly in World War II, the federal government intervened to encourage ordinary people to save in ways the Europeans and Japanese were doing at the time. The U.S. government undertook two innovations. And the other way was the Federal Deposit Insurance Corporation, introduced in 1934, which guaranteed the deposits of small savers in most American banks.
Amar C. The composition of U.S. household debt. "The American Recovery" by Mohamed A El-Erian. Exit from comment view mode.
Click to hide this space NEWPORT BEACH – The United States has gone through an arduous period of intervention and rehabilitation since the global financial crisis in 2008 sent it to the economic equivalent of the emergency room. It moved from the intensive-care unit to the recovery room and, just recently, was discharged from the hospital. The question now is whether the US economy is ready not just to walk, but also to run and sprint. The answer will powerfully influence global economic prospects. It is easy to forget how critical things were back in the fourth quarter of 2008 and the first quarter of 2009. Economic activity collapsed and unemployment surged.
Parlous conditions required dramatic measures. As they intervened, American policymakers consulted closely with their counterparts around the world, urging them to take supportive steps. The problem is that the sense of relief now can – and probably will – be taken too far. Oil prices are not helping. A Nation of Spoiled Brats - Interview by David Rothkopf. Financial Times columnist Edward Luce has written a new book called Time to Start Thinking: America in the Age of Descent that has received well-deserved acclaim and recognition not only for its superb reporting of the on-ground reality of America's current economic crisis but also because it is an unflinchlingly brave book.
Luce does not shy away from conclusions that are hard for many Americans to hear, nor does he cop out and offer up the happy ending many in his audience may want to read. Rather, he offers what is most needed now: an objective, profoundly thoughtful look at the underpinnings of America's economic troubles, what makes the current crisis different from those of the past, and where we are likely headed from here. Luce recently sat down with Foreign Policy CEO and Editor-at-Large David Rothkopf. Here are some of the highlights of their conversation. Foreign Policy: The debate about whether the U.S. is declining is raging. EL: Absolutely. EL: It's a triple cocktail. "The Energy Deficit" by Michael Spence. Exit from comment view mode.
Click to hide this space MILAN – I have been surprised by the recent coverage in the American press of gasoline prices and politics. Political pundits agree that presidential approval ratings are highly correlated with gas prices: when prices go up, a president’s poll ratings go down. But, in view of America’s long history of neglect of energy security and resilience, the notion that Barack Obama’s administration is responsible for rising gas prices makes little sense. Four decades have passed since the oil-price shocks of the 1970’s. But, given time, people can and do respond by lowering their consumption of oil. On the supply side, there is a similar difference between short-term and longer-run effects. All of this takes time, but, as it occurs, it mitigates the negative impact: the demand and supply curves shift in response to higher prices (or to anticipation of higher prices).
In terms of policy, there was a promising effort in the late 1970’s. The Spectacular Rise and Fall of U.S. Whaling: An Innovation Story - Derek Thompson - Business. An extinct business offers surprisingly current lessons about the triumph of technology, the future of work, and the inevitable decline of industries that might not be worth saving "Some years ago -- never mind how long precisely -- having little or no money in my purse, and nothing particular to interest me on shore, I thought I would sail about a little and see the watery part of the world.
" -- Moby Dick One hundred and fifty years ago, around the time Herman Melville was completing Moby Dick, whaling was a booming worldwide business and the United States was the global behemoth. In 1846, we owned 640 whaling ships, more than the rest of the world put together and tripled. At its height, the whaling industry contributed $10 million (in 1880 dollars) to GDP, enough to make it the fifth largest sector of the economy. Whales contributed oil for illuminants, ambergris for perfumes, and baleen, a bonelike substance extracted from the jaw, for umbrellas.
Fat had never made a city so flush. Is the U.S. feeling pressure about the World Bank presidency? Robin Harding and John-Paul Rathbone insist that the United States is feeling pressure from the developing world over the World Bank leadership question. They also think the dynamic surrounding the Bank leadership race is quite different than it was in the case of the International Monetary Fund: In contrast to the recent battle to lead the International Monetary Fund, which was never in real doubt as French finance minister Christine Lagarde raced around the world to secure support, developing countries are organised to challenge a procession to the World Bank presidency.
"We as emerging markets and developing countries have been making a concerted effort to identify our most qualified and competent candidates," said Amar Bhattacharya, director of the G24 office in Washington. The G24 is an economic umbrella group for the largest developing countries, and the Brics group of Brazil, Russia, India and China has also been active in debating candidates. I don't see it. A qualified defense of national privilege. Owen Barder of the Center for Global Development is convinced that the World Bank selection process can be a genuine competition. With three official candidates in the running--Jim Young Kim of the United States, Colombia's Jose Antonio Ocampo, and Ngozi Okonjo-Iweala of Nigeria--Barder insists that the outcome is not foreordained: [F]or the first time ever there is a genuine contest. In previous years other shareholders were faced with the choice of accepting or rejecting the US nominee. This time round, with three serious candidates to choose from, it is not clear that the US nominee has to win.
The other shareholders should now take a moment to consult, and assess which candidate they think is best for the job; and it is very important that they should do so in an accountable way, for the sake of the integrity of this appointment and for the future of the governance of international institutions. That kind of European move is much less plausible than it sounds. What Export-Oriented America Means - Tyler Cowen. In his State of the Union address two years ago, President Obama promised to double American exports over the next five years. At the time critics called this an unrealistic political promise, one that voters would forget by the 2012 election. But America is currently on track to meet that goal.
As of early 2012, exports measure in at about $180 billion each month, whereas two years ago it was $140 billion per month. The growth rate of exports is about 16 percent per year, a trend that at least conceivably could get us to Obama’s target. Since the recession officially ended, exports have accounted for about half of the nation’s economic growth. Three Causes for Optimism et’s first take a step back and see where these new American exports will be coming from. First, artificial intelligence and computing power are the future, or even the present, for much of manufacturing. You’ll hear the word “insourcing” more, too, to join the far more familiar “outsourcing.” Jobs, Jobs, Jobs? United States' economy: Over-regulated America. Gray Nation: The Very Real Economic Dangers of an Aging America - Derek Thompson - Business. Two economists envision a scary -- and scarily realistic -- future where the working population expands slower and slower, and jobless recoveries are the only recoveries we know Reuters In the future, U.S. growth will be slower.
Recessions will be deeper. Recoveries will be weaker. And there's exactly one thing to blame. Demographics. That's the stark conclusion from James Stock and Mark Watson in this fascinating, and occasionally depressing, new paper. The authors blame two demographic demons for our uncertain future: (1) the plateau in the female labor force participation rate, and (2) the aging of the U.S. workforce. Demographic Demon #1WOMEN'S PARTICIPATION RATE In the first half of the 20th century, female employment wasn't exactly a high-priority concern for policy makers. The ascendance of women in the workforce was perhaps the singular cultural/economic triumph of the second half of the 20th century. Demographic Demon #2THE GRAYING OF AMERICA Let's take the long view.
The Two Issues That Can Bring Down the Economy. The term “crisis” is frequently overused in Washington, never more so than in budget debates. The problem is that a real crisis requires a hard deadline by which time something must happen or something terrible will happen. There are two hard deadlines approaching, the need to raise the debt limit and expiration of all expiring tax cuts at the end of the year. These two action-forcing events, when combined with more than the usual political uncertainty over control of Congress and the White House next year, mean that the long-awaited fiscal crisis is now here.
RELATED: Election 2012: Obama is Misplaying the Tax Card As we saw last year, Republicans are perfectly willing to risk default on the national debt to force action on their agenda. Eventually, Republicans agreed to a deal that would raise the debt limit in return for $1.2 trillion in automatic budget cuts, apportioned equally between domestic and defense spending. RELATED: Another Debt Ceiling Standoff? "Fed Policy and Inflation Risk" by Martin Feldstein. The Mobility Myth. Manufacturing Illusions) Can Radical Efficiency Revive U.S. Manufacturing?