Dean Baker's Blog, page 487

Ignore Monthly Changes in Housing Data!

The main thing that careful observers know from watching housing data over the years is that the monthly data should be largely ignored when assessing the housing market. The point here is that random factors have a large impact on monthly sales and price numbers, so that the noise often overwhelms the actual information about the housing market in a single month's release.

To see the point, let's start with existing home sales. The Realtors reported a small drop in February from an upwardly ...

WSJ Lets Bernanke Play Fast and Loose in Lecturing About the Fed and the Economy

The Wall Street Journal let Federal Reserve Board Chairman Ben Bernanke get away with a bit of Three-card Monte in a lecture he gave to George Washington University about the Fed's role in the housing bubble. According to the WSJ Bernanke absolved the Fed of blame for the housing bubble because of its low interest rate policy. He noted that other countries, like the UK, had housing bubbles even though they had more restrictive monetary policy.

This international comparison is very neat in...

Good and Bad Reasons for Slower Economic Growth

An NYT Economix blognote discussed a new paper by two economists (James Stock and Mark Watson) that purports to give us the bad news that we are likely to see a permanent slowdown in growth. Stock and Watson attribute this slowdown to a slower rate of growth of the labor force.

Before anyone gets too upset about the prospect of slower growth, it is worth reflecting for a moment on the different possible causes of slower growth. There are essentially four:

1) slower productivity growth;

2...

February Existing Home Sales Should Not Have Disappointed

The Post headlined an article on the release of existing homes sales data for February, "housing report disappoints as existing home sales dip in February." It's not clear why anyone would have been disappointed. The 4.59 million annual sales rate reported for February was below the 4.63 million rate now reported for January, but above the 4.57 million rate that had been reported before the revision.

Also, these monthly numbers are highly erratic. The difference between January and February n...

February Existing Home Sales Should Not Have Dissappointed

The Post headlined an article on the release of existing homes sales data for February, "housing report disappoints as existing home sales dip in Feburary." It's not clear why anyone would have been disappointed. The 4.59 million annual sales rate reported for February was below the 4.63 million rate now reported for January, but above the 4.57 million rate that had been reported before the revision.

Also, these monthly numbers are highly erratic. The difference between January and February n...

China Policy: The 99 Percent Versus the 1 Percent

The NYT did a piece on Governor Mitt Romney's pledge to impose tariffs on China to pressure it to lower the value of the dollar relative to the yuan. At one point it noted that many business people are opposed to this position:

"business leaders, while pressing for China to open its markets and protect intellectual property, caution that labeling China a currency manipulator could backfire, harming those efforts."

It would have been worth a paragraph or two expanding on this point. There is a...

Housing Starts Fall in February, WAPO Talks About Permits

Okay, we should all be happy that the economy seems to be growing more rapidly that it was at this time last year, but can we try to be a little serious about this. The Census Bureau reported that housing starts fell by 1.1 percent in February. That's not a big deal, starts had been trending upward and the monthly numbers are always erratic, but nonetheless a fall in starts is a negative sign.

Apparently, the Post did not want to utter a discouraging word. Its business digest section only...

The Post Asks If the Fed Could Do More on Jobs

The piece discusses more aggressive actions that Bernanke could take, such as targeting a higher rate of inflation, a policy he advocated when he was still a professor at Princeton. This is a good article.

The Post Forgot to Mention that the Ryan Plan Would Eliminate the Government

The Post probably didn't have room in the piece for such small points, but when it told readers that the Ryan plan:

"calls for spending cuts and tax changes that would put the nation on course to wipe out deficits and balance the budget by 2040."

It would have been reasonable to point out that it gets to this balance by virtually eliminating the non-defense, non-Social Security, and non-health care portions of the budget. According to the Congressional Budget Office's analysis of the Ryan...

Representative Ryan Calls for Eliminating Park Service, FDA, Justice Department, and Just About Every Thing Else in Government and Media Don't Notice

House Budget Committee Chairman Paul Ryan is supposed to be a brave and serious thinker. That's how the Washington punditry treats him. Last year, the Peter Peterson gang gave Ryan a "Fiscy Award" for "leading the way in promoting fiscal responsibility and government accountability." Politico made Representative Ryan its "health care policymaker of the year." Ryan is a regular guest on the Sunday talk shows and he can always count on a warm reception from the very serious people.

For this...