Tag Archives: economy

Inflationary Pressure Is Yet Again Right Around the Corner

by kandace39y Posted on November 17, 2016

Mother Jones

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Inflation! It’s always sneaking up on us:

U.S. consumer-price gains accelerated in October for the third-straight month largely due to rising energy costs, the latest sign inflation pressures in the economy are firming….The “report provided further confirmation of strong energy base effects boosting headline CPI,” said Barclays economist Blerina Uruçi. “Although core inflation rose less than expected, we still believe that domestic price pressures remain strong.”

Hold on to your britches. Here’s what the various measures of inflation look like through October:

Yes, you read that chart right. Headline CPI (the blue line) soared all the way to…1.6 percent. But of course, the Fed supposedly doesn’t care about that anyway. They care about core inflation (the red line). Core CPI is slightly above 2 percent, but has been flat all year. No acceleration there. But wait. The Fed doesn’t care about core CPI either. They rely on the PCE inflation index, which is…hovering around 1 percent (the green line). Data for October isn’t even available yet. And data for core PCE isn’t available either.

But what about future inflation? Well, the 10-year breakeven skyrocketed from 1.51 percent in September to 1.67 percent in October. In other words, expected inflation bumped upward slightly, but is still well below 2 percent and has been trending downward for the past two years:

And yet, inflation is always right around the corner. Here’s the very last paragraph of the Journal article:

Separately Thursday, data showed workers’ earnings were flat in October from September, when adjusting for inflation. Stronger inflation offset the increase hourly wages, and the average workweek was unchanged.

Yeah, inflationary pressure is really a big threat. The labor market is so tight that wages were completely flat. Sigh.

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Inflationary Pressure Is Yet Again Right Around the Corner

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The Bundy bros are back at it.

by NWRWalkerjhrkw Posted on November 2, 2016

The Republican candidate on Monday promoted his plan to purportedly save the government $100 billion over eight years. It involves cutting all federal spending on climate change programs, both domestic and international.

“We’re going to put America first,” Trump said at a Michigan rally. “That includes canceling billions in climate change spending for the United Nations, a number Hillary wants to increase, and instead use that money to provide for American infrastructure including clean water, clean air, and safety.”

As Bloomberg BNA reports, Trump didn’t give a precise tally for how he got to $100 billion:

[The] campaign press office said that the figure combined an estimate of what the Obama administration had spent on climate-related programs, the amount of U.S. contributions to an international climate fund that Trump would cancel, and a calculation of what Trump believes would be savings to the economy if Obama’s and Clinton’s climate policies were reversed.

That math, however, doesn’t work out: According to a 2014 report from the White House’s Council of Economic Advisers, a global temperature increase of just 3 degrees C would cost the United States 1 percent of GDP, or $150 billion a year, by damaging public health and infrastructure and battling sea-level rise, stronger storms, declining crop yields, and increased drought and wildfires.

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The Bundy bros are back at it.

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Brexit Threatens British Ice Cream Imports

by JeanK77hdeizk Posted on October 12, 2016

Mother Jones

Tyler Cowen points to the following tidbit in the Financial Times:

The plummeting pound is threatening UK households’ supplies of Ben & Jerry’s ice cream and Marmite spread, as Tesco, the country’s biggest supermarket, pulled dozens of products from sale online in a row over who should bear the cost of the weakening currency.

Unilever has demanded steep price increases to offset the higher cost of imported commodities, which are priced in euros and dollars, according to executives at multiple supermarket groups. But Tesco signalled it would fight the rises, removing Unilever products from its website and warning that some of the items could disappear from shelves if the dispute dragged on.

Um, what? Tesco thinks that if the pound falls, prices on imported items shouldn’t change? How do they figure that? Then again, maybe it’s nothing:

An executive at another consumer goods manufacturer said Unilever would probably regard Tesco’s action as a negotiating tactic rather than a serious threat.

Roger that. But in the long run, there’s no getting around this. A weak currency means cheaper exports and more expensive imports. You can try to jam a finger in the dike for a little while, but eventually you have to give in.

I don’t know what the long-term impact of Brexit will be. I suspect it will be moderately negative on several levels, and in particular, will probably hurt the blue-collar workers who were suckered into voting for it. Rage-based voting rarely does anyone any good. In the short-term, however, the impact will be unambiguously bad. Prices of imports will go up before the benefits of rising exports work their way through the economy, and uncertainty over Britain’s final status will paralyze lots of decisions from foreign firms about whether they should continue to invest there. This will all shake out in the end, but there will be some pain in the meantime.

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Brexit Threatens British Ice Cream Imports

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New Study Says Rising Inequality Is Killing the Economy

by RayIokkidgk Posted on September 29, 2016

Mother Jones

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Non-rich people tend to spend 100 percent of their income, or close to it. Rich people don’t. They spend, say, 50 percent of their income and save the rest. This difference is called the “marginal propensity to consume,” and it seems like it might be a problem if income inequality is rising. The problem is that as rich people get a larger share of total income, total consumption goes down. Here’s an example:

The question, of course, is how big the MPC effect is. Several years ago I investigated this and concluded that it really wasn’t very big. It seems like it should be, but it just wasn’t.

Today, however, Larry Summers directs our attention to a new IMF paper that suggests MPC actually does have a big impact. The authors look at two effects. First, as middle-income families fall into lower income groups, they spend less. Second, as a larger share of income goes to the rich, average MPC goes down. Both of these effects reduce total consumption, which in turn acts as a drag on the economy. Here’s the relevant chart:

MPC alone reduces consumption by nearly 2 percent, or roughly $200 billion per year. This is still not a gigantic effect, but it’s noticeable. And when you add in the direct spending effect of income polarization, it’s closer to $400 billion per year. That means we’re losing a lot of consumption—which we need—and gaining a lot of capital—which we don’t. The world is so awash in capital these days that you can (literally) hardly give it away.

Now, the authors use some novel estimating techniques in their paper, which is why they come up with a stronger effect than previous studies. The folks with PhDs will have to fight over whether they’ve done their sums correctly. But if they have, it means that increasing income inequality is a lot more than just a matter of unfairness. It’s also a real drag on economic growth.

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New Study Says Rising Inequality Is Killing the Economy

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Climate change got 82 seconds in the presidential debate

by SabrinaMiles Posted on September 27, 2016

One minute and 22 seconds were spent on climate change and other environmental issues in Monday’s presidential debate — and that was pretty much all Hillary Clinton talking. (Surprise, surprise.) How does that compare to debates in past years? We ran the numbers on the past five election cycles to find out.

The high point for attention to green issues came in 2000, when Al Gore and George W. Bush spent just over 14 minutes talking about the environment over the course of three debates. The low point came in 2012, when climate change and other environmental issues got no time at all during the presidential debates. Some years, climate change came up during the vice presidential debates as well.

2016 so far: 1 minute, 22 seconds in one presidential debate.

2012: 0 minutes.

2008: 5 minutes, 18 seconds in two presidential debates. An additional 5 minutes, 48 seconds in a vice presidential debate.

2004: 5 minutes, 14 seconds in a single presidential debate.

2000: 14 minutes, 3 seconds in three presidential debates. 5 minutes, 21 seconds in a vice presidential debate.

In total, over the five election seasons we looked at, climate change and the environment got 37 minutes and 6 seconds on the prime-time stage during the presidential and vice presidential debates. That’s out of more than 1,500 minutes of debate. Not an impressive showing.

A note about how we arrived at these times:

We parsed questions asked of candidates and searched the transcripts for keywords like “climate,” “environment,” “energy,” and “warming.” We cross-referenced the transcripts with video of the debates. Only the mentions that pertained to fighting climate change, cleaning up the environment, and reducing emissions counted. President Obama’s passing reference to clean energy jobs in 2012 didn’t count, nor did discussions of energy security, because they were in the context of the economy and not fighting climate change.

Election Guide ★ 2016Making America Green AgainOur experts weigh in on the real issues at stake in this election

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Climate change got 82 seconds in the presidential debate

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The Case for Calm

by VedaGLWCow Posted on September 20, 2016

Mother Jones

A couple of worried Democrats are coming over for dinner tomorrow. Since I’m the voice of calm, my job is to explain why they probably shouldn’t be panicking over polls showing that Hillary Clinton’s lead is shrinking. This is pretty easy to do, but first this year’s standard disclaimer:

This is the weirdest presidential campaign in my lifetime. Everything I know might be worthless. Caveat emptor.

OK, so why am I still feeling pretty calm? I could show you the pretty picture from Pollster, which really doesn’t show much change over the past year, but I’ve already done that—and anyway, haven’t I said that Sam Wang is my preferred pollster? Indeed I have. So here is Sam Wang:

Roughly speaking, Hillary Clinton has had a steady 3.5 percent lead over Trump all year. Then she got a boost from the Democratic convention and a few bad weeks for Trump. That wore off and she dropped back to a little below where she’s been all along. In the last few days, Clinton has started rising again, and my guess is that over the next few weeks she’ll meander back to her longtime lead of 3.5 percent. Pollwise, the single most remarkable thing about the Clinton vs. Trump race is how stable it’s been ever since the day Trump took his famous escalator ride down to the ground floor of Trump Tower to announce his candidacy.

To the extent that Democrats are panicking, I think it’s because a few weeks ago Clinton was ahead by 7 percent or so, and everyone was licking their chops and wondering if a landslide was possible. It was deflating when that turned out to be a mirage. I got caught up in that a bit too, and it was probably foolish. In reality, it was just a temporary bump and was never likely to last.

Still, even if Clinton has a fairly reliable 3.5 percent lead, isn’t that pretty disappointing? I mean, she’s running against a clown like Trump. This isn’t some normal Republican like John McCain or Mitt Romney. She should be ahead by 6 or 7 points. What the hell is wrong with America?

I’m not sure about that. But keep in mind that election fundamentals—Democrats have held the White House for eight years; the economy is in adequate but not great shape; Obama’s approval level has been only fair until very recently—suggest that this should be a Republican year. Alan Abromowitz, whose forecasting model has had reasonable success, figures that Trump should win the popular vote by 3 percent. If, instead, Clinton wins by 3-4 percent, it means she’s outperformed the fundamentals by 6-7 percent. That’s not bad.

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The Case for Calm

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Yes, Economic Anxiety Really Does Explain Some of Donald Trump’s Appeal

by rogalski_adam@o2.pl Posted on August 15, 2016

Mother Jones

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Matt Yglesias says it’s ridiculous to attribute Donald Trump’s support to economic anxiety:

While plenty of people, including plenty of Trump fans, certainly have concerns about the economy, it’s racial resentment that drives who does and doesn’t support Trump….Adding an economic anxiety factor to your account doesn’t actually help to explain anything. Trump’s supporters, for example, are considerably whiter and considerably older than the American population at large. If the economic problems of the past decade had been unusually hard on the white and the old, then an economics-focused explanation could be valuable. In reality, things have been rougher on nonwhites and rougher on younger cohorts.

Generally speaking, I agree. There’s been an endless amount of research, including endless splicing and dicing of poll internals, that tries to explain what’s different about Trump supporters. And every time, the answer is pretty clear: racial resentment. This is so clear that it’s become a joke on Twitter. Every time a Trump supporter (or Trump himself) does or says something racist, it will get linked with a snarky comment about the latest bit of “economic anxiety.”

And yet, I do think that genuine economic anxiety has something to do with Trump’s popularity. The chart on the right, which I posted a couple of weeks ago, tells the basic story. Over the past few decades, women’s incomes have made great strides. Blacks have improved their economic position a bit. Hispanics too. The only group that’s failed to make any progress at all is white men. Maybe it’s not right to call this “anxiety,” but it’s certainly something that helps explain why white men are angrier than most people about their economic position.

Nor do I really buy this:

By contrast, the idea that Donald Trump is going to usher in a new era of broadly shared prosperity based on a revival of coal mining and labor-intensive methods of steel production is patently ridiculous. Under guise of being respectful of Trump voters’ concerns, pundits attributing his appeal to his economic “policies” are in effect attributing a remarkable degree of foolishness to his supporters. The more parsimonious and simple explanation is that there is a basic divide over values and cultural identity.

One of the remarkable things about presidential elections is the extent to which voters simply believe whatever candidates tell them. It doesn’t matter if it’s impossible. It doesn’t matter if the candidate changed his mind about this the day before yesterday. It doesn’t matter if there’s no plausible policy behind the claim. If Trump says he’s going to build a wall, then he’s going to build a wall. If he says he’s going to renegotiate all our trade treaties, then that’s what he’s going to do. This is not something specific to Trump fans. It’s true of all voters.

Personally, I find it sort of remarkable. But then, I’m basically half-Vulcan. Most people aren’t.

Presidential campaigns are mostly just an exercise in finding someone whose heart is in the right place. The fancy term is “mood affiliation.” Most voters don’t really care if either Trump or Hillary Clinton can do what they say. They just want to know what they consider important. Trump has very loudly signaled that he considers the plight of blue-collar workers important, both economically and culturally—and that’s really all that matters.

Now, there’s a metric buttload of racial and sexist angst wrapped up in that word “culturally.” Yglesias is right about that. But there really is an economic component too.

POSTSCRIPT: Of course, this whole argument might be moot. There’s considerable evidence that blue-collar whites don’t actually support Trump any more strongly than they’ve supported any other Republican candidate for president. Some of them may be louder than usual this year, but Trump doesn’t actually seem to have moved the needle much in terms of raw numbers.

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Yes, Economic Anxiety Really Does Explain Some of Donald Trump’s Appeal

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Trump’s Economic Adviser Said the Economy Was Fine—Right Before It Imploded

by Ezekiel2332 Posted on August 5, 2016

Mother Jones

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Following a tumultuous week in which Donald Trump’s poll numbers tanked and reports of staff unrest dogged his campaign, the GOP nominee is trying to change the conversation by focusing on his economic vision. On Friday, ahead of a big economic policy speech Trump is expected to deliver next week, the Trump campaign released a list of his economic advisers. The roster of 13 men—all are men and five are named Steven or Stephen—includes a handful of billionaires and financial moguls, several of them longtime Trump friends. Also on Trump’s economic brain trust is an economist, David Malpass, who downplayed concerns about the economy shortly before his firm collapsed and the economy cratered.

Malpass is a former economic adviser to Ronald Reagan whom the Trump campaign touts as having “extensive private sector experience.” That experience includes serving for 15 years as the chief economist for Bear Stearns—the Wall Street firm that was deeply enmeshed in the subprime mortgage market—in the lead-up to the investment bank’s spectacular March 2008 collapse.

The fall of Bear Sterns lit the fuse on the economic crisis. And perhaps more so than its competitors, the 85-year-old investment bank came to exemplify the excesses and short-sighted economics that led to the financial meltdown. If Trump is counting on Malpass for economic advice, he had better hope it’s an improvement on the wisdom the economist dispensed as the financial system hurtled toward a cliff. Nine months before his company fell apart, Malpass wrote a column for the Wall Street Journal titled “Don’t Panic About Credit Markets.” He derided the “hyperventilation over the coming U.S. economic slowdown” and wrote:

The slowdown talk weighing on equities also reflects the Wall Street view that debt, mortgage and takeover businesses have replaced General Motors as the economy’s bellwether. According to the bears: As goes the credit market, so goes the economy. Fortunately, Main Street is not that fickle. Housing and debt markets are not that big a part of the U.S. economy, or of job creation. It’s more likely the economy is sturdy and will grow solidly in coming months, and perhaps years.

So, that was wrong.

Malpass did fine, though. He currently sits on the board of New Mountain Capital, a multi-billion-dollar private investment firm, and runs his own market research firm.

Malpass is not the only person on Trump’s list of economic advisers who played a controversial role during the economic crisis.

In July 2008, several months after Bear Sterns fell apart, the federal government was forced to take over Indy Mac, which was overwhelmed by the bad mortgages it had issued. The government was eager to get rid of the bank’s assets, and Steve Mnuchin, who serves as the Trump campaign’s finance co-chairman and is a member of his economic team, swooped in. Mnuchin, a former Goldman Sachs banker and hedge funder, made much of his current fortune by organizing a new bank, called OneWest, to buy IndyMac’s portfolio of mortgages. Part of the deal was that the federal government and taxpayers would cover any losses if more mortgages went bad, and OneWest would make the profits on anything that didn’t. Mnuchin’s bank would become infamous for its hardball tactics and willingness to foreclose on struggling homeowners.

Perhaps the biggest name on Trump’s economic team is John Paulson, a hedge fund manager whose firm foresaw the subprime mortgage meltdown and made billions betting against the big banks that were heavily invested in mortgage-backed securities. In 2010, Paulson’s fund made more than $5 billion, setting a record. Previously, Paulson was a major donor and fundraiser for Mitt Romney and the super-PAC backing his 2012 presidential run.

The defining characteristic of Trump’s team of economic advisers seems to be that they are friends of the GOP nominee, financial backers of his campaign, or both. That includes Tom Barrack, who has been friends with Trump for decades, ever since negotiating the sale of the Plaza Hotel in New York City to Trump. Barrack is well known in financial circles for getting involved with unorthodox deals—in one case, he arranged oil sales between Saudi princes and Haitian dictator Baby Doc Duvalier, giving the autocrat his watch to help smooth the deal.

It’s unclear how extensively Trump will be relying on the counsel of his brain trust. Last year, when asked whom he consults with on foreign policy matters, Trump remarked that his top adviser was himself.

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Trump’s Economic Adviser Said the Economy Was Fine—Right Before It Imploded

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The right now wants a “Clexit,” because Brexit went so well

by HongWhiteside Posted on August 4, 2016

Retreat!

The right now wants a “Clexit,” because Brexit went so well

By on Aug 4, 2016Share

Inspired by Brexit, Britain’s regrettable decision to leave the European Union, Australian climate-change denier Viv Forbes and pals like Marc Morano have a new project: Clexit. Get it? Like Brexit but with a C, and a new slogan: “Leading the great escape.”

The group’s mission, according to their founding statement, is to stop the landmark global climate treaty designed to slow carbon emissions.

“If the Paris climate accord is ratified, or enforced locally by compliant governments, it will strangle the leading economies of the world with pointless carbon taxes and costly climate and energy policies, all with no sound basis in evidence or science,” Clexit’s website states. “These destructive policies are already killing real industry while enriching the huge artificial and parasitical climate-change industry.”

If economics are their concern, the founders of Clexit may well remember that Brexit has been hardly good for the economy — UK leaders resigned, markets dived, bank lending fell, and British industries contracted.

Nixing the Paris accord would be even more costly in the long-run: Doing nothing about climate change could cost the global economy anywhere between $2.5 to $24 trillion.

Then again, reality was never a strong suit for Brexit campaigners and climate deniers. But, hey, at least the name is cute.

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The right now wants a “Clexit,” because Brexit went so well

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Economic Anxiety Really Is (Part of) the Reason White Men Are So Pissed Off

by GreggLlewelyn99 Posted on August 1, 2016

Mother Jones

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I don’t have any special news hook for this chart, but it’s been in the back of my mind for a while. Roughly speaking, it’s an answer to why white men are so angry about the economy even though they generally earn more than any other gender or ethnic group.

It’s all about progress. Women may earn 79 percent of what men earn, but over the past 40 years their incomes have increased rapidly. Black and Hispanic men haven’t done quite as well, but they’ve still made progress—and most people are relatively happy as long as things are getting better over time. The only group that has stagnated for four straight decades is white men. That’s plenty all by itself to make them angry, but it’s even worse when they watch literally everyone else doing better at the same time.

Don’t get me wrong: the “angry white guy” syndrome has plenty of sexist and racist overtones too. After all, white men used to be at the top of the gender/race heap, and now they aren’t. They don’t get to feel superior to women or blacks or Hispanics anymore, and their incomes have gone nowhere for four decades. Rightly or wrongly, you’d be mad too if this described you.

POSTSCRIPT: One reason I haven’t posted this before is because the data is hard to get. It’s easy for most groups—the Census data works fine—but for Hispanics the Census data is heavily skewed by the very low incomes of illegal immigrants, who have increased over time. As a proxy for income gains among Hispanic men who were born in America (to match the demographics of the other groups) I’ve used Pew’s estimate of the income difference between 1st and 2nd generation Hispanics. Obviously this is far from ideal, but I’m not aware of a clean source of comparable data for all this.

ALSO: Asian men and women have also seen substantial income gains over the past 40 years, but the Census figures for Asians don’t go back that far. That’s why they aren’t included in the chart.

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Economic Anxiety Really Is (Part of) the Reason White Men Are So Pissed Off

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