Dean Baker's Blog, page 231

All Trade With China Is Not Equal: The Difference Between Imports and Exports

The NYT had an interesting map showing the extent to which countries trade with China as a way of illustrating its importance to the world economy. The main measure of the importance of trade with China is a circle showing the sum of imports and exports.

This is not really accurate, since the impact of a slowdown in China's economy will be very different in its impact on imports and exports. If China's economy's slows sharply then the amount it imports from other countries will likely fall or...

What Evidence Did the Fed Have That the Economy is Picking Up?

The NYT told readers:

"The Federal Reserve has said that it expects to raise interest rates sometime soon, given evidence over the last year that economic growth is picking up."

This undoubtedly had people wondering what the paper could have in mind. GDP growth has averaged less than 1.7 percent over the last three quarters. While employment growth has remained strong, the pace has slowed in recent months. Wages are barely keeping pace with inflation, with no sign of acceleration. Housing sta...

Rogoff on China: Was Mr. 90 Percent Right Again?

Andrew Ross Sorkin seems prepared to pronounce Ken Rogoff to be prescient once again with his prediction that China would run into a debt crisis. Rogoff's past claims to prescience might be viewed as somewhat questionable. He, along with co-author Carmen Reinhardt, famously argued that countries face a severe slowdown in growth when their debt to GDP ratios exceed 90 percent. It turned out that this claim was driven by an error in an Excel spreadsheet, nonetheless it was used to justify auste...

Quick Thoughts on the Stock Market and the Economy

We are seeing the usual hysteria over the sharp drop in the markets in Asia, Europe, and perhaps the U.S. (Wall Street seems to be rallying as I write.) There are a few items worth noting as we enjoy the panic.

First and most importantly, the stock market is not the economy. The stock market has fluctuations all the time that have nothing to do with the real economy. The most famous was the 1987 crash which did not correspond to any real world bad event that anyone could identify.

Even over l...

If Japan's Workforce Is Struggling to Support a Growing Elderly Population, Why Are They Working Fewer Hours?

If folks can take a break from worrying about how robots are going to take all the jobs, they may want to look at a NYT piece on Japan's excess supply of housing. The basic story is that because of Japan's declining population there are now hundreds of thousands of homes across the country that are sitting empty because no one wants them.

While this is an interesting and important story, the piece also includes the standard nonsense about the demographics of an aging population devastating Ja...

Jeff Bezos, Amazon, and the Lack of Profits

Joe Nocera rightly takes Jeff Bezos to task for making Amazon an undesirable place to work. (Sorry, I have more sympathy for the warehouse staff in overheated warehouses than the overachievers who are treated poorly at headquarters.) However he gets one part of the story wrong.

He tells readers:

"Practically from the moment Amazon went public in 1997, Wall Street has pleaded with Bezos to generate more profits. He has ignored those pleas, and has plowed potential profits back into the company...

The Real Unemployment Rate: Not Everything Donald Trump Says is Wrong

In his two months as a candidate for the Republican presidential nomination Donald Trump has said many things that were racist, sexist, or otherwise offensive, but that doesn't mean that everything he says is off the mark. The Wall Street Journal took Trump to task yesterday for dismissing the relatively low official unemployment rate and instead focusing on the large number of people who are not working. 

While the WSJ is right that the vast majority of people who are not working are pe...

Carter, Reagan, Krugman and the Mis-Measured Consumer Price Index

In a blogpost Paul Krugman picked up on a discussion by Rex Nutting of the Carter presidency. Nutting points to many of the positive accomplishments of the Carter years, including the fact that, by many measures, the economy actually performed quite well.

Krugman picks up on this theme and uses a chart of median family income to show that the typical family was actually better off in 1981 when Carter left the White House than they had been in 1977 when he took office. Krugman argues that the...

Mitch Daniels and the Tin Foil Hat Crowd at the Washington Post

Mitch Daniels did a big pitch for making student loans more complex and more profitable for the financial industry in a Washington Post column today. The basic story is that he is pushing "income-share agreements" where students contract with lenders to pay them a fixed share of their income for a number of years after they graduate college in exchange for a student loan.

My bet is that good students will be able to figure out ways to get much of their income after the end date on the ISAs, b...

Jeb Bush and the New York Times: Can You Call Someone Who Thinks He Can Get 4.0 Percent GDP Growth "Wonky?"

That's what millions of people are asking after reading a NYT article contrasting the "bombastic" Donald Trump to Jeb Bush who is described as "the wonky son of a president." Bush has repeatedly said that he can generate 4.0 percent GDP growth during a Bush presidency.

The baseline projection for the years 2017 though 2025 from the Congressional Budget Office is 2.1 percent. Raising this to 3.0 percent would be a remarkable accomplishment. There is no remotely plausible story that would raise...