Dean Baker's Blog, page 232

Buying Houses at Bubble-Inflated Prices Hurt Minority Wealth More Than Bad Loans

The Post has an interesting piece on a St. Louis Federal Reserve Bank study which shows that African American and Hispanics with college degrees have far less wealth than their white counterparts. (Stay turned for CEPR study showing this story with wages.) The study also shows a large decline in wealth for African Americans and Hispanics with college degrees over the last two decades.

It attributes much of this decline to subprime mortgages pushed by lenders during the bubble years:

"But Afri...

If Natural Gas Use Reduces Greenhouse Gas Emissions, Why Would the Industry Oppose Regulations that Ensure It Reduces Greenhouse Gas Emissions?

It might have been worth a few sentences calling attention to the seeming irony in the industry's objections to proposed regulations that would limit emissions of methane gas. The NYT article noted that a large share of greenhouse gas comes from such methane emissions. At the same time, the industry has promoted fracking as a way of developing a bridge fuel, that emits less greenhouse gas than the coal it replaces, until renewable energy becomes cheaper.

If the net effect of fracking is to re...

The Problem is Not Globalization, It is Selective Protectionism

In an interesting piece on the decline of the political center, E.J. Dionne wrongly lists globalization as a villain. He tells readers:

"Globalization weakens the ability of moderate governments of both varieties to deliver on their promises. Capital can flee easily to more congenial climes, undercutting a nation’s tax base and its regulatory efforts."

Globalization should also have the effect of reducing inequality by making it easier to take advantage of lower cost professional services (e....

The Problem is not Globalization, It is Selective Protectionism

In an interesting piece on the decline of the political center, E.J. Dionne wrongly lists globalization as a villain. He tells readers:

"Globalization weakens the ability of moderate governments of both varieties to deliver on their promises. Capital can flee easily to more congenial climes, undercutting a nation’s tax base and its regulatory efforts."

Globalization should also have the effect of reducing inequality by making it easier to take advantage of lower cost professional services (e....

Washington Post Can't Get Access to Data on Japan or Find Experts Who Know Intro Economics

Yes, it can be hard getting access to information in the barren heart of the nation's capital. Therefore it is not surprising that the Washington Post seems completely unaware of the economic situation in Japan at present.

In an account of the economic problems facing the world the Washington Post told readers:

"Japan, meanwhile, has recorded years of slow growth, has alarming public debt levels and is perpetually on the brink of deflation."

Actually in terms of employment growth, w...

Manufacturing Jobs, Trade, and Productivity

Steve Rattner had a column in the NYT in which he derided Donald Trump's economics by minimizing the impact of trade on the labor market. While much of Trump's economics undoubtedly deserve derision, Rattner is wrong in minimizing the impact that trade has had on the plight of workers.

Rattner tells readers:

"In Mr. Trump’s mind (although not in the minds of serious economists), that’s why [the trade deficit] we’ve lost five million manufacturing jobs since 2000.

"The Chinese are certainly pro...

Currency Unions with Differential Labor Mobility

Paul Krugman had a nice blogpost outlining some of the key issues in the literature on optimal currency unions. The question is what happens in a currency union like the euro zone, which is not optimal for many reasons, if there is free mobility of labor.

Krugman points to the experience of Portugal and argues that mobility of labor actually makes the situation worse, not better. The story is that much of Portugal's prime age labor force is emigrating to other countries in the European Union,...

The $4 Trillion That No One Can See

Economists and people who write about the economy are not known for being especially astute when it comes to economic issues. After all, there were almost no people in this group who were able to see the $8 trillion housing bubble whose collapse sank the economy. More recently, we have a substantial clique running around yelling that the robots will take all the jobs. This is at the same time that we continue to have most of the Washington elite types fretting that the retirement of the baby...

Bringing Data and Intro Econ to Discussions of China's Currency Devaluation

The NYT went a couple of miles over the top with Peter Eavis' analysis of China's currency devaluation. It begins by telling readers;

"For years, China looked like the principled noncombatant. As other countries, seeking to secure an economic advantage, let the value of their currencies slide on international markets, China held firm on the value of its money."

"The principled noncombatant?" What are they smoking over there? China accumulated more than $4 trillion in reserves to keep its curr...

Because Oil Is Priced in Euros, China Will Buy Less Oil Now That the Value of the Yuan Has Fallen

Yes, I know, oil is priced in dollars, not euros, but it doesn't make one iota of difference. In an article on the meaning of the drop in the value of the yuan on people in the United States, USA Today told readers:

"China, the world's second largest economy, consumes a lot of oil, second only to the U.S. However, oil prices are denominated in dollars, so a gutted yuan means China's purchasing power is reduced, which could prompt the Chinese to spend less on oil-based products. That redu...