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Noted for Your Morning Procrastination for July 18, 2014

Over at Equitable Growth--The Equitablog




  1. Carter Price: Marriage Won't Cure Poverty: Single Mother Emphasis Obscures Issue: "Conservative policy researchers have recently been pushing marriage as the solution to low economic mobility, high poverty, and even domestic violence.... The first red flag for the single-mothers-cause-poverty claim should come from the fact that the variation in levels of mobility apply to all children in the community, not just for the children from single-parent households... other factors ... like inequality, growth, and unemployment... segregation by race and income..."

  2. Joshua Brown: A quick lesson on market tops: "This stock market recovery has now just about lapped the one that followed the 2000-2002 recession, 190% vs 101%.... Although we are currently selling at the same PE ratio as we were at the market’s top in 2007, there is one very important difference--we’re at about half the yield on the 10-year treasury versus back then.... We’re nowhere near the PE ratio the S&P 500 printed at the height of the dot com boom. I would also remind you that--forget the S&P--at the top of the market in 2000 it was really the Nasdaq that was the focal point for stock investors, and that motherf*cker was trading at 96 times earnings.... You can remind the next bubble-screamer you come across of the following three takeaways: a) US stocks are nowhere near as overvalued now on an absolute basis as they were in 2000. b) US stocks are nowhere near as overvalued now on a relative basis (think bond yields) as they were in 2007. Plus, we’re actually getting more in today’s dividend yield versus back then. c) during the prior two tops, stocks got cut in half from both absurd valuation levels (2000) and from reasonable valuation levels (2007)--so valuation levels alone are not ever going to be your tell."

  3. Henry Aaron: The Deficit Isn't a Big Problem Right Now: "There is no particular reason to worry about one year’s budget deficit.... But if the government runs consistently high deficits, even when the economy is strong, there are two very real dangers.... One is financial.... If debt is growing faster than the economy as a whole... the government will have to raise taxes, cut spending, or borrow still more just to cover the interest. The other danger is that deficits can slow economic growth... [by] mak[ing] it harder for companies and individuals to finance new investments.... Interest rates are abnormally low just now, which means that borrowing is unusually inexpensive. When interest rates are low is the best time to undertake long-lived investments. Carrying out those repairs and improvements would put people to work now and improve productive capacity in the future. So would increased support for scientific research and increased spending to support post-high-school education of those who cannot now afford it. These measures would promote economic recovery right now and boost U.S. productivity in the future. Steps to lower future deficits could also be undertaken now.... Closing the anticipated gaps in Social Security and Medicare would effectively prevent debt from growing faster than GDP..."

Should Be Aware of:


  1. Shane Ferro: The Abenomics arrows: "Bloomberg has just put out a new report on the state of Japanese prime minister Shinzo Abe’s project to revive his country’s economy and concludes that 'the record is mixed'. 'Inflation is up, though import prices rather than wages account for the bulk of the increase. A skeptical public remains unconvinced that long-term prospects are brighter'. Japan is a little over 18 months into Abenomics, and two of the three “arrows” — fiscal stimulus and monetary easing — have been deployed. Barry Ritholz thinks they’ve already been pretty successful so far: 'deflation is being replaced by inflation; profits and investments are both increasing for Japanese companies; and the Nikkei 225 is up considerably'. However, there’s plenty to be worried about..."

  2. Paul Krugman: Understanding the Crank Epidemic: "James Pethokoukis and Ramesh Ponnuru are frustrated. They’ve been trying to convert Republicans to market monetarism, but the right’s favorite intellectuals keep turning to cranks peddling conspiracy theories about inflation. Three years ago it was Niall Ferguson... here comes Amity Shlaes, making the same argument and citing the same source.... Why this lack of progress? The answer is that inflation paranoia isn’t a simple misunderstanding that can be corrected by pointing to evidence. It’s deeply embedded in the modern conservative psyche. Government action must, by definition, have disastrous results; and whatever market monetarists may try to say, their political comrades will continue to lump monetary policy in with fiscal stimulus and Obamacare. And fiat money can’t work--Francisco D’Anconia said so, and it must be true. So it’s always the 70s, if not Weimar, and if the numbers say otherwise, they must be cooked. Evidence has a well-known liberal bias..."

  3. Daniel Kuehn: Hayek and the Lykourgan Dictator: "Perhaps the biggest problem with libertarianism (and I'm talking about the more extreme minarchist and anarchist range of the spectrum, not Greg Mankiw saying he's largely a libertarian) is that it is a political philosophy which probably more than any other fails to engage its own unintended consequences and robustness. When problems do emerge the true Scotsmen close ranks.... Andrew Farrant & Edward McPhail: 'Commenting on the Pinochet regime, Friedrich Hayek famously claimed in 1981 that he would prefer a "liberal" dictator to "democratic government lacking liberalism". Hayek's defense of a transitional dictatorship in Chile was not an impromptu response. In late 1960, in a little known BBC radio broadcast, Hayek suggested that a dictatorial regime may be able to facilitate a transition to stable limited democracy. While Hayek's comments about Pinochet have generated much controversy, this paper neither provides a blanket condemnation of his views (he did not advocate dictatorship as a first-best ‘state of the world’) nor tries to excuse his failure to condemn the Pinochet junta's human rights abuses, but instead provides a critical assessment of Hayek's implicit model of transitional dictatorship...'"

Already-Noted Must-Reads:

  1. Paul Krugman: Debt Shall Have No Dominion: "Nick Bunker notes an important point about the CBO.... The budget office has marked down its estimate of long-term interest rates, reflecting the growing evidence for a secular downshift in the 'natural' rate... [and] declared an end to the debt spiral.... Change in debt/GDP = (debt/GDP)*(interest rate – nominal growth rate of GDP) – primary surplus/GDP.... We turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all.... I don’t want to say that debt doesn’t matter at all. But it clearly matters a lot less than the fearmongers tried to tell us..."

  2. Middle class Americans Not so wealthy by global standards Jun 11 2014Tahmi Lubby: America's Middle Class: Poorer than You Think: "Americans' average wealth tops $301,000 per adult, enough to rank us fourth on the latest Credit Suisse Global Wealth report. But... Americans' median wealth is a mere $44,900 per adult... only good enough for 19th place, below Japan, Canada, Australia and much of Western Europe. 'Americans tend to think of their middle class as being the richest in the world, but it turns out, in terms of wealth, they rank fairly low among major industrialized countries," said Edward Wolff.... Super-rich Americans skew average wealth upwards. The U.S. has... 49% of those with more than $50 million in assets.... This schism secures us the top rank in one net worth measure--wealth inequality.... Americans... are having trouble building wealth because wages have stagnated for more than a decade. Median household income was $51,017 in 2012, compared to $56,080 in 1999.... There are many reasons why middle class incomes are suffering, including the decline of unions' power, the shift of jobs overseas and the increasing use of technology in the workplace, said Kenneth Thomas, professor of political science at University of Missouri, St. Louis. Also, Americans have to pay more out of pocket for basics..." Citing: Giles Keating et al. (2013): Credit Suisse Global Wealth Report 2013