Dean Baker's Blog, page 361

If the Dollar Stopped Being the Preeminent Reserve Currency It Would Mean More Jobs and Growth

There's a lot of silliness going around about how the dollar may lose its status as the world's reserve currency if we default. The ordinarily astute Floyd Norris contributed to this confusion in a column last week implying that we may no longer be able to borrow internationally in dollars if this happened.

In reality, it is unlikely that we do risk being the world's preeminent currency in any plausible scenario. (This is also Norris' conclusion.) Furthermore, the immediate result of this los...

If China Moves Away from Holding Dollars Then It Will be Doing What Bush-Obama Requested

The Washington Post had an article reporting on a commentary from a Chinese government owned news outlet that implied the country might move away from holding dollars. The article should have pointed out that such a move would be consistent with the publicly stated demand of both the Bush and Obama administrations that China stop "manipulating" its currency.

The way that China would "manipulate" its currency (keep its price down against the dollar) is by buying up huge amounts of dollars. If...

Italy Is Involved in "Trade" Talks, Not "Free-Trade" Talks

Since reporters always complain that they didn't have enough space to include one or another item in their articles, why do they so often feel the need to add the word "free" to a reference to trade. That is exactly what the NYT did in an article on Italian Prime Minister Enrico Letta complaining about populism in Europe.

The reference to free-trade talks presumably meant the negotiations of a European Union-U.S. trade pact. Since formal trade barriers are already very low these negotiations...

It's Monday Morning and Robert Samuelson is Confused About the Economy

Today's topic is how we are stuck in a slow growth path and therefore will have to take the ax to programs like Social Security and Medicare. Of course Samuelson always wants to take an ax to programs like Social Security and Medicare, this is just a new reason for cutting back programs that working people depend upon.

Most of his problem stems from the fact that he seems to have forgotten that we are still in a downturn, with the economy operating at a level of output that is more than $1 tr...

Panic About U.S. Debt Might Cause Interest Rates on U.S. Government Bonds to Fall or the People Who Say Such Things Might Just be Confused

When people worry about the security of an asset the price usually plummets, as was the case with mortgage backed securities when the housing bubble burst. It is pretty hard to envision the opposite scenario: that because people get concerned about the security of an asset its price rises.

However this is what Ezra Klein tells us in a column today. The story is that worries over the possibility that the U.S. government is becoming dysfunctional could actually result in the price of U.S. gover...

Fact Checking the Post's Fact Checker on the Debt Ceiling

Glenn Kessler has a useful column assessing Senator Rand Paul's claims about how default could be avoided if we reached the debt ceiling, however he does get one important item wrong. The piece implies that it would be possible to save money to pay debt service or other top priority items by not making Social Security payments.

This is not true. The money held by the Social Security trust fund is part of the debt subject to debt ceiling. If money is not paid out to Social Security beneficiar...

Andrew Puzder Gives Alternative Reality on Obamacare at Wall Street Journal

The Wall Street Journal continues to lead the path in the post-truth world, with columnist Andrew Puzder misrepresenting numbers to show that ObamaCare has led to a "part-time economy." Pudzer's whole story rests on the growth in part-time employment from January to July as measured by the Bureau of Labor Statistics household survey. He tells readers:

"The health-care law's actual consequences unequivocally appear in the jobs data for this period. Between Jan. 1 and June 30, according to the...

Be Skeptical, Be Very Very Skeptical in Reading NYT Budget Reporting

That's what the NYT told readers at the very beginning of its piece on negotiations over the reopening the government and the debt ceiling. Okay, that line probably was not intended to refer to the NYT's budget reporting, but it certainly is appropriate in that context.

This stuff is getting to be a really bad joke. At one point this piece tells readers:

"That suggests a less ambitious outcome for any deficit-reduction talks that would spring from the current impasse. In the past, the general...

Government Granted Monopolies Make Asthma Drugs Expensive, not the Market

The New York Times has an excellent piece on the high cost of asthma medicines in the United States. However there is one major error in the piece. It attributes the high prices to the market. In fact the whole piece points to the opposite. It details how government granted monopolies allow drug companies to charge prices that are close to ten times as high as the price in other countries.

Without government intervention the market would lead to much lower prices. The United States is unique...

Glenn Hubbard Refuses to Consider the Economists' Solution to Groupthink

Glenn Hubbard and Justin Muzinich had an interesting piece in the Post today discussing whether the Fed's mandate should be explicitly broadened to include preserving financial stability. While I am inclined to agree with Fed governor Jeremy Stein, that attacking bubbles is already implicit in the Fed's goal of maintaining full employment, the more interesting issue is Hubbard and Muzinch's shyness in dealing with the problem of groupthink at the Fed and among other economic policymakers.

The...