Dean Baker's Blog, page 518

The U.K Has Its Own Central Bank

This important fact should have been noted in an article on a public sector strike in the U.K. against plans to cut workers' wages and benefits. The article includes some discussion of the effectiveness of the U.K. austerity plan and notes that interest rates on U.K. debt are now lower in Germany. An important difference between the U.K. and Germany is that the U.K. has a bank that can buy its debt in a crisis. The European Central Bank insists that it will not play this role for Germany and ...

The U.K Has It's Own Central Bank

This important fact should have been noted in an article on a public sector strike in the U.K. against plans to cut workers' wages and benefits. The article includes some discussion of the effectiveness of the U.K. austerity plan and notes that interest rates on U.K. debt are now lower in Germany. An important difference between the U.K. and Germany is that the U.K. has a bank that can buy its debt in a crisis. The European Central Bank insists that it will not play this role for Germany and ...

House Prices Are Not Depressed

 

A NYT article on President Obama's latest program to help underwater homeowners included the assertion:

"an increasing number of economists worry that depressed housing prices and underwater borrowers are holding back a broader recovery."

Actually, the United States does not have depressed housing prices. According to the Case Schiller national house price index, inflation adjusted house prices are still more than 9 percent above their 1996 level. The problem was that the country had a...

Housing Arithmetic for the New York Times

Okay boys and girls, today's lesson is in arithmetic. Arithmetic is very important if we want to do economics. If we don't know arithmetic, then we won't be able to notice $10 trillion stock bubbles or $8 trillion housing bubbles. That could lead to really bad mistakes in economic policy.

Today's lesson in arithmetic is necessary because the NYT told us in an article on President Obama's latest program to help underwater homeowners:

"Mr. Ballew [the chief economist at Nationwide Insurance...

Post Gets Loans and Gifts Confused with Big Banks

The Post ran an article [sorry, it won't allow linking] with the headline: "big banks got $13 billion in undisclosed Fed loans." Actually, the article refers to a Bloomberg investigative piece by Bob Ivry and colleagues that found that Fed loans at below market interest rates amounted to a subsidy of $13 billion to the country's largest banks. This $13 billion was effectively a gift from the taxpayers to J.P. Morgan, Goldman Sachs, and other large banks. It was not a loan as the Post headline...

Senator Kyl Claims that Businesses Don't Hire When Demand Increases

Economists and people who believe in gravity think that firms hire when they see an increase in demand. The alternative is to turn away customers because a business does not have the necessary staff. Companies trying to make profits generally do not like to turn away customers.

Nonetheless, Republican Senator Jon Kyl said that the payroll tax cut did not lead businesses to hire workers. It is clear that workers did spend much of this tax cut. The savings rate in the last quarter was under...

Robert Samuelson Gets it RIGHT!

As we like say here at Beat the Press, the long-term deficit problem is primarily health care, health care, and health care. Robert Samuelson gets this one 100 percent right in his column today.

He concludes that the way to contain costs is some sort of voucher system or a single-payer type universal Medicare program. Its questionable whether a voucher system will actually contain costs, as opposed to reduce the quality of care (unless it involves buy-ins to other countries' systems), but...

Germany Insists that Euro Zone Countries Move Aggressively to Slow Growth and Raise Unemployment

The euro zone economies continue to operate well below their potential GDP, with large amounts of excess capacity and huge numbers of unemployed workers. In this context, the main impact of the austerity being demanded by Germany of countries across the euro zone will be a further reduction in growth and increase in unemployment. Slower growth will worsen budget deficits across the region.

This point should have been mentioned in a Washington Post article on the pursuit of austerity in euro z...

Bill Keller Missed the Housing Bubble

NYT columnist Bill Keller decries a political process in which the consensus of mainstream economists is not according the respect it deserves. He failed to note one obvious reason why these experts' views might be according much respect: almost none of the experts noticed the huge housing bubbles whose collapse led to severe recessions in the United States and Europe.

In this case, the process of credentialing ensured that evidence would be ignored rather than examined. Those who raised...

Is David Gregory a Vegetable? Senator Schumer and the Budget Deficit

Thirty years ago, the Reagan administration told us that ketchup is vegetable. More recently Fox News told us that pepper spray is essentially a food product. So inevitably people must asking whether David Gregory is a vegetable.

Gregory, who is the host of Meet the Press, had Senator Chuck Schumer on the show speaking about the failure of the supercommittee to come up with a deficit reduction plan. Schumer listed the causes of the deficit as the Bush tax cuts, the increase in military...