Dean Baker's Blog, page 549

Do Companies Really Not Know What They Pay Their Workers?

The Post seems to think that this may be the case. In reference to a provision of the Dodd-Frank financial reform bill that requires companies to publish the ratio of top executive pay to the pay of an ordinary worker it reported that "businesses have argued that this proposal would be costly and impractical to implement."

This would only be true if businesses had no clue about either how much they pay their top executives or their ordinary workers. While it certainly seems to be the case...

The NYT Doesn't Know About Robert Rubin's Record

In the list of people most responsible for the economy's wreckage. Robert Rubin is the only person who can rival Alan Greenspan for the top spot. As Treasury Secretary he pushed the over-valued dollar policy which led to the massive U.S. trade deficits.

These trade deficits are the fundamental imbalance in the U.S. and world economy. A trade deficit implies that either or both the government or private sector has negative savings. In other words, because we have a large trade deficit we must ...

Short Sales and Market Manipulation

The NYT had a piece on the decision of four European countries to ban short selling. One of the rationales was that traders were spreading negative rumors about banks and profiting from them by shorting their stocks. Insofar as this is happening, this is a form of market manipulation which is a violation of security laws everywhere.

In principle, regulators should be able to track down and punish manipulators, however as a practical matter manipulation will often be difficult to detect. It...

Huffington Post Exaggerates the Size of the Stock Wealth Effect

A Huffington Post piece hugely overstated the size of the stock wealth effect. It told readers that:

"According to a research note from J.P. Morgan Chase earlier this year, every 100-point drop in the S&P 500 index translated to a $1 trillion loss in household wealth, and a 1.5 percent drop in consumption."

While this may accurately represent the research note (no link is provided), this is far out of line with the findings of a large literature on the stock wealth effect. With total...

How Big Is China? The Washington Post Doesn't Have a Clue

The Washington Post had a front page column that waxed philosophically on the meaning of the debt downgrade by S&P. It concluded by telling readers:

"The U.S. economy is still nearly three times the size of China's."

According to the IMF's projections, the United States economy is currently less than 40 percent larger than China's on a purchasing power parity basis. The IMF projects that China will surpass the United States as the world's largest economy by the end of the term of the...

The Chicago White Sox Sunday Defeat Sent Stock Market Tumbling: It Wasn't the Debt Downgrade

Time to beat up on really really bad news reporting. The stock market doesn't tell people why it does what it does. We have commentators who bloviate on what they think caused the market to rise or fall, but they don't really know and they could be completely wrong.

That is why it was incredibly irresponsible for NPR to tell listeners in its top of the hour news segment that the market plunged because Standard and Poor's downgrade of U.S. debt. NPR does not know this to be true and it...

The Difference Between China and Germany

The NYT has a good editorial outlining the weak U.S. growth prospects, although the double-dip discussion is silly, we're looking at too slow growth, not a double-dip. The pieces makes another serious error at the end when it argues that Germany, like China, should reduce its trade surplus.

China and Germany are in fundamentally different positions in the world economy. China is an extremely fast growing developing country. It would be expected that China would have a large trade deficit. By ...

The Financial Crisis Was Housing, not Subprime, and There Is Much More That the Fed Can Do

A front page piece in the NYT compared the current turmoil in financial markets with the situation in the fall of 2008. It referred to the 2008 crisis as being a subprime crisis. While subprime mortgages took the biggest hit, prime mortgages also defaulted at rates that were many times higher than expected.

The piece also said that the Federal Reserve Board is largely out of ammunition in terms of its ability to counter a crisis. This is not true. The Fed could take far more aggressive...

The New York Times Announces Thomas Friedman's Dismissal

In the spirit of Thomas Friedman's column today, we should not have confidence in the quality of the news and opinion writing we see in the NYT until we see the following press release from the New York Times.

 

"As of this date we have notified Thomas Friedman that the New York Times no longer has a place for his column. While we recognize that Mr. Friedman had a substantial following, his column had simply become too much of an embarrassment for the newspaper and its staff. Column after...

Why Would Liberals Be Happy About a Senator Who Wants to Cut Social Security and Medicare?

The Washington Post told readers that Senator John Kerry's appointment to the Supercommittee that is supposed to come up with $2.5 trillion in deficit reduction "could help appease liberals." Senator Kerry has repeatedly expressed his willingness to cut Social Security and Medicare, despite the fact that retirees and near retirees saw much of their wealth destroyed with the collapse of the housing bubble.

It is difficult to see why liberals would be appeased this selection, especially since t...