Dean Baker's Blog, page 316

Vacation Time

I am out of here. I'll be back on Thursday, May 22. Remember, until then don't believe anything you read in the newspaper.

More Nonsense on Deflation

In a mostly useful article on the problems facing the euro zone economy, Neil Irwin again raises the prospect that a shock could turn the inflation rate negative.

"The lowflation, as people have taken to calling it, is particularly dangerous in that it could easily turn into outright deflation, or falling prices, should one nasty shock come along. For example, if tension between Ukraine and Russia boils over into a full-scale war, it could easily tip the European economy back into recess...

Privatizing Fannie and Freddie Shifts Profits to Wall Street, not Risk From the Government

A frong page Washington Post article fundamentally misrepresented the main impact of the Johnson-Crapo bill that would privatize Fannie Mae and Freddie Mac. The article told readers that the bill:

"would dismantle the companies in a bid to shift the risks of mortgage lending from the taxpayers to the private sector."

Actually, the government would still be on the hook for 90 percent of the value of privately issued mortgage backed securities (MBS). As a result of the perverse incentives creat...

Stuart E. Eizenstat: Director Watch Director of the Day

Directorships: 3

Total director compensation, 2008-2012: $1,974,211

Average annual director compensation: $394,842

Average compensation per full year of service as director: $151,448

Stuart E. Eizenstat, a graduate of Harvard Law School, currently leads the international practice of the law firm Covington & Burling. He spent much of his career in the Carter and Clinton administrations. From 1977 to 1981 he was Chief Domestic Policy Advisor to President Carter. He later served as Ambassa...

People Are Getting Insurance: A Factor the Post's Polling Experts Never Considered In Their Assessment of Attitudes Towards Obamacare

There are 8 million people who are getting health insurance through the exchanges now. This number will continue to grow throughout the year as people experience "life events" that allow them to sign up for the exchanges after the end of the open enrollment period. (Life events include losing insurance due to job loss, a death in the family, and divorce. Job loss is the most common item in this group with close to 4 million workers changing jobs every month.)

The fact that the exchanges are n...

Is the Fed Committed to Keeping Inflation Below 2.0 Percent?

In its coverage of Fed Chair Janet Yellen's testimony before the Joint Economic Committee, the NYT told readers:

"Ms. Yellen, in a similar exchange with Representative Richard Hanna, a New York Republican, strongly defended the Fed’s commitment to control inflation. She said the high inflation of the 1970s had been a formative experience for the entirety of the Fed’s leadership, and they were determined to keep inflation below the 2 percent annual pace the Fed has described as its target."

Th...

Thomas Friedman's Big Deal on Fracking and Global Warming

Thomas Friedman wants to "go big, get crazy" when it comes to energy policy in order to both deal with Vladimir Putin and global warming. The idea is that if the United States can drastically reduce its demand for foreign oil it would put downward pressure on world prices and thereby hurt Russia's economy. His way of reducing demand for foreign oil is a combination of promoting clean energy and allowing increased oil drilling and fracking, "but only at the highest environmental standards." He...

Back in the Old Days, Rich Countries Were Supposed to Run Trade Surpluses

Paul Krugman outlines his story of secular stagnation in a blogpost this morning. The odd part of the story is that the trade deficit is nowhere in sight. The punchline is that a slower rate of labor force growth should lead to a reduction in demand. The simple arithmetic is that if the rate of labor force growth slows  by 1.0 percentage point, then this would be expected to reduce investment by 3.0 percentage points of GDP.

This is a story of a demand gap that could be hard to fill, but...

Do Republican Politicians Really "Fear" Efforts to Slow Global Warming Will Cost the Jobs of Miners and Hurt the Economy?

In an article on the release of a report that documents the impact to date of climate change on the United States, the NYT told readers:

"Other Republicans concede that climate change caused by human activity is real, but nonetheless fear — as do some Democrats — that the president’s policies will destroy jobs for miners and hurt the broader economy."

While politicians obviously say they are concerned about job loss for miners and damage to the economy, does the NYT know that they really "fea...

Robert Shiller's Data Say the Last Two Times Have Been Different

David Leonhardt presents a somewhat confused warning about stock valuations in his Upshot piece today. Looking at the recent run-up in stock prices the piece tells readers that it's "time to worry about stock bubbles." Actually, it's not. The stock market is high relative to its long-term trend, but there is little basis for fearing a plunge in prices as the piece suggests.

Leonhardt's basic story is that price to earnings ratios are substantially above their long-term average. He uses Robert...