Dean Baker's Blog, page 363

The Post Doesn't Scare Me

The Washington Post told readers that a chart showing a spike in the interest rate on Treasury bills coming due on October 31 should scare us. The rate on short term notes has gone from near zero to around 0.29 percent. This is a huge hike in own percent, but it is still a pretty damn low interest rate.

The story here is pretty simple. These short term bills get much of their value from the fact that they are hugely liquid. Because of concerns over the debt ceiling they are no longer hugely l...

Niall Ferguson and What Passes for Intellectual Argument at Harvard and the Wall Street Journal

I am not quite sure why, but apparently some people do take Niall Ferguson's pronouncements on economics seriously. I usually ignore his comments, since I can't imagine not having something better to do with my time. Nonetheless, I did note Paul Krugman and Brad DeLong beating up Ferguson for his failure to understand the Congressional Budget Office's projections for the long-term budget deficit.

But rather than having the decency to find some rock behind which to hide, Harvard Professor Nial...

Washington Post Makes Debt Default Sound Attractive

According to the Washington Post, a debt default would have some clearly positive outcomes. Specifically it told readers that it would weaken the United States position as a financial safe haven for the rest of the world.

This would have two beneficial effects. If less money flowed from elsewhere in the world to the United States this would reduce the value of the dollar relative to other currencies. This has in fact been a stated goal of both the Bush and Obama administration, which both cl...

Sixty Minutes Disability Piece: Two More Items

There are a couple of other points worth making on the Sixty Minutes piece beyond what I said earlier. First, the numbers involved should be put in some context. The Sixty Minutes folks were warning us that if the Disability fund runs dry, "it's your money and our money." So we should know how much of our money is at stake.

According to the Social Security Trustees Report, spending on the disability program in 2013 will be $144.8 billion. If we go to CEPR's incredibly spiffy responsible budge...

Is It Time to Short HSBC Stock?

That's what readers of an NYT column by Stephen D. King, the chief economist at HSBC, must be wondering. The piece, perversely titled "When Wealth Disappears," tries to construct a story of gloom and doom out of King's own confusion about economics.

The basic point seems to be that we have to adjust to a period of slower growth based on his claim that the growth of the period from the end of World War II until the end of the last century was an anomaly. To start with, the period of strong gro...

Is Robert Samuelson an Ideologue?

That's the question that readers will inevitably ask after reading his column complaining that ideology is responsible for the government shutdown. Samuelson tells readers:

"A crucial difference between interest-group and ideological politics is what motivates people to join. For interest-group politics, the reason is simple — self-interest. People enjoy directly the fruits of their political involvement. Farmers get subsidies; Social Security recipients, checks. By contrast, the foot soldier...

CBS News 60 Minutes Joins the Disability Bashing Bandwagon

It looks like CBS News can no longer afford to do their own news reporting so they are picking up material from other sources. There seems no other way to explain the piece it ran last night on the Social Security disability program on Sixty Minutes which is best described as a spinoff of an earlier This American Life piece. 

The remarkable aspect of this story is that it completely ignored all the comments from experts in the field in response to the This American Life piece pointing ou...

Getting the Scams of the 1 Percent Straight

Catherine Rampell has a piece in the NYT Magazine about how the 1 percent made out like bandits in the wake of the collapse of the housing bubble (wrongly described as the financial crisis). Several of the claims or implications of the piece are not quite right. For example, the piece claims:

"Rents have risen at twice the pace of the overall cost-of-living index, partly because middle-class families can’t get the credit they need to buy."

This is not true. There has been little difference in...

Potbelly's Stock Doubles on Day of IPO, Redistribution to the 1 Percent?

The Washington Post told readers that the stock of Potbelly, a fast food restaurant chain, rose by 120 percent on the day of its initital public offering (IPO). This rise raises several interesting questions that the piece does not mention.

First, if the extraordinary rise in price is in fact justified by the fundamentals of the market, then the underwriters badly muffed their job. They set a price for the stock that was far too low, costing the company large amounts of money. They should hav...

Does Hank Paulson Really Think China's Economy Grew at an 18.7 Annual Rate from 2002 to 2012?

That's what he told readers in an NYT column today. Paulson wrote:

"China’s economic output expanded nearly sixfold between 2002 and 2012, from $1.5 trillion to $8.3 trillion."

It appears that Paulson took China's GDP in nominal dollars. This distorts its actual growth both because more inflation in the United States would imply more rapid growth in China by this measure and also because much of the rise was simply an increase in the value of the yuan against the dollar.

The more standard mea...