Dean Baker's Blog, page 249

Did the White House Really Claim that the Fed Trades in Currency to Control the Rate of Economic Growth?

That is what readers of the NYT must be wondering. According to the NYT, the White House strongly objected to a bill that would be attached to fast-track authority which would require the government to impose tariffs to offset the effect of currency management by other countries. (If a country deliberately reduces the value of their currency against the dollar by 10 percent, it has the same impact as imposing a tariff of the same size and providing a 10 percent subsidy on its exports.)

The ar...

Niall Ferguson Displays His Ignorance of Economics

You have to admire Niall Ferguson. There aren't many people who are willing to write lengthy diatribes on topics on which they seem to know next to nothing, but some would say that is the definition of a Harvard professor.

Anyhow, he apparently believes that the victory of the Conservative Party in the U.K. election last week showed that he was correct to endorse their austerity policy and that Paul Krugman was wrong to criticize it. If he was familiar at all with the literature on the impact...

What's This "We" Jazz, Robert Samuelson?

Robert Samuelson apparently doesn't understand much about the economy and economics. That's fine, many people don't. Unfortunately, Mr. Samuelson has an economics column in a major national newspaper and he wants to attribute his ignorance to the rest of us.

In his column today bemoaning the seeming end of a trade-off between inequality and efficiency (we could buy ourselves some more equality at the price of a loss of efficiency) he tells readers:

"We do not know enough to manipulate economi...

NYT Pushes for Trans-Pacific Partnership In News Article

The NYT appeared to be pushing for approval of the Trans-Pacific Partnership (TPP) in a news article that massively misrepresented the pact's importance as a mechanism for reducing trade barriers and completely ignored the ways in which it would increase trade barriers. It also failed to mention the issue of currency rules or the extra-judicial system of investor-state dispute settlement mechanisms, both of which are main reasons given for opposition to the TPP.

The first paragraph describes...

In Arguing for TPP President Obama Gets Carried Away in Resting on His Credentials As a Foe of Wall Street

In an interview with Matt Bai, a political columnist with Yahoo, President Obama took issue with Senator Elizabeth Warren's claim that the Trans-Pacific Partnership (TPP) and other trade deals that could be allowed special rules under fast-track status, could unravel financial regulation put in place by Dodd-Frank.

"'Think about the logic of that, right?' he went on. 'The notion that I had this massive fight with Wall Street to make sure that we don’t repeat what happened in 2007, 2008. And t...

The Problem of Protectionism In the Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) is often referred to in the media as a "free-trade" agreement. This is not true. Most of the pact is about putting in place a business-friendly regulatory structure, not reducing trade barriers. Perhaps more importantly, the deal will explicitly increase protectionist barriers in the form of stronger and longer copyright and patent-related protections.

These forms of protection impose the same sort of costs as any other form of protection. Markets are not s...

President Obama Is Badly Confused About the Trans-Pacific Partnership

That was the main takeaway from a NYT article on his trip to Nike. According to the article, he made many claims about the Trans-Pacific Partnership (TPP) and opponents of the deal which are clearly wrong.

For example, the article tells readers:

"he [President Obama] scorned critics who say it would undermine American laws and regulations on food safety, worker rights and even financial regulations, an implicit pushback against Ms. Warren. 'They’re making this stuff up,' he said. 'This is jus...

NBC Discovers that Social Security Trustees, Like Most Economists, Missed the Stock and Housing Bubbles

Wow, the Social Security trustees have no better grasp of the economy than Alan Greenspan and the clowns at the Fed, the Congressional Budget Office, and other economic forecasting outfits! That is the implicit punch line of an article NBC ran with the headline, "Social Security may be in worse shape than we thought: study."

The gist of the piece is that the Trustees projections have been overly optimistic since 2000. This is true. The trustees failed to recognize that the stock market bubble...

The Price of Credit Default Swaps on U.S. Treasury Bonds

A post by Paul Krugman on the price of credit default swaps (CDS) on bonds issued by the United Kingdom reminds me of the dark days of the financial crisis when otherwise serious people used the price of CDS on U.S. Treasury bonds as a measure of the risk of a default by the U.S. government. With the price of the CDS rising, we had some of these people getting very concerned about the prospect of a default.

As the more calm among us tried to explain, it's not clear that the price of a CDS on...

The Washington Post Likes The Trans-Pacific Partnership: Edward Alden Edition

Most Post readers know that the paper is prepared to say pretty much anything to push the Trans-Pacific Partnership (TPP) and other trade deals that are likely to have the effect of redistributing income upward. Therefore it is not surprising to see a column by Edward Alden, a senior fellow at the Council on Foreign Relations, lecturing the labor movement that they should support President Obama's trade deals.

Alden's basic point is that rather than oppose a trade deal that would likely furth...