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9 Out of 10 Economists Recommend Inflation
What the U.S. economy may need is a dose of good old-fashioned inflation.
So say economists including Gregory Mankiw, former White House adviser, and Kenneth Rogoff, who was chief economist at the International Monetary Fund. They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations. It might also help the economy by encouraging Americans to spend now rather than later when prices go up.
“I’m advocating 6 percent inflation for at least a couple of years,” says Rogoff, 56, who’s now a professor at Harvard University. “It would ameliorate the…
20May2009 | The Real Deal | 0 comments | ContinuedEconomic Schools of Thought
Two Schools of Thought
There are two ways of studying economic theory. One approach is mathematical, and has been much enhanced by the computing power available to the individual economist. The other is historical and relies on the accumulated understanding of economic theory and practice.
The events of 2007 and 2008 have shown the limitations of the mathematical method. The credit crunch was not foreseen by anyone that I read, but it came as a shock to the number crunchers — it took them completely by surprise.
It did not come as a shock to the economic historians, who happily settled down to…
18Jul2008 | Whiskey and Gunpowder | Comments Off | ContinuedLand of the Free
We’re in Charles de Gaulle airport, escorting Edward, 14, off to summer camp. A loud siren has gone off. We looked up. No one reacted to it. And then the siren came from another part of the airport. Still, no reaction. Occasionally, people look up from their papers…soldiers with automatic rifles continue their patrols.
Then, we heard a chant. This was not an airport alarm, this was a group of protestors…trying to disrupt the airport. Why? We never figured it out…
It is Independence Day…and Americans have never been more dependent on the kindness of strangers. The foreigners have some $4.8 trillion…
7Jul2008 | Daily Reckoning | Comments Off | ContinuedHouse of Cards
Economic theory tries to deal with a limited number of factors and the mechanisms by which they interact. The main factors are population, food, energy, property, and manufactures, all of which are physical realities capable of being counted. They are the beans that bean counters count with. There are four mechanisms of exchange: money, barter, markets, and allocation. These are the mechanisms by which the beans are exchanged.
Different economists have put emphasis on different factors. David Ricardo, the classical economist of the 19th century, was a banker who gave special attention to money; Thomas Malthus, another founder of 19th-century theoretical economics, paid…
14Jun2008 | Whiskey and Gunpowder | Comments Off | ContinuedNATIONAL POLITICAL BROWNOUT, PART II
As Mark Gongloff noted in a column for the Wall Street Journal, “…what the U.S. really needs, if it seeks a real fix to its energy consumption problem, is less demand, not more. Mr. Market says there’s a simple way to do that. Jack up the gas tax. Don’t lower it. Economists call it a ‘Pigovian Tax‘, in honor of the English economist Arthur Pigou, who early in the 20th century examined economic activity that hurts innocent bystanders. To stop behavior that’s not in the public good, you tax it more, not less.
“Of course, a higher tax would hurt working-class…
13Jun2008 | Daily Reckoning | Comments Off | ContinuedStimulus Checks Push Retail Sales Rally; Economy Still Facing Uphill Battle
Stimulus checks helped send retail sales up 1% in May, the Commerce Department said yesterday (Thursday), bolstering the dollar and lifted the mood on Wall Street.
But the effects may not last, as unemployment continues to rise and crude oil supplies tighten.
Record high gasoline prices padded the report, but purchases still increased in every other sector. Gasoline sales jumped 2.6% last month and have gained 13.8% in the past year. Excluding gasoline, sales still climbed 0.8%.
“Yes, we bought a lot more gasoline as prices skyrocketed,†said Joel Naroff, president and chief economist at Naroff Economics Inc. “But the sales gains…
13Jun2008 | Money Morning | Comments Off | ContinuedBetter Than Expected Economic Reports Signal the Economy Could Be Ready for a Fed on Pause
The U.S. economy shed 20,000 in April, the Department of Labor announced in its monthly employment summary, bringing total unemployment up to 5% from 5.1% last month.
“We are in a recession, this report doesn’t change that,” Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg News. Zentner had forecast a payrolls cut of 25,000. “What it does is support the idea that the downturn will be mild. Consumer spending isn’t going to tank.”
Compared to the 240,000 jobs the domestic labor market shed in the first three months of the year, 20,000 is a marked…
5May2008 | Money Morning | Comments Off | ContinuedWith a Rate Decision, GDP Report Due Today, the Fed Walks the High Wire Again
If U.S. Federal Reserve policymakers make the expected quarter-point rate cut at the end of their meeting today (Wednesday), the impact will be felt well beyond U.S. borders.
Indeed, the interest-rate reduction could set in motion a series of diverse global events that will impact such seemingly unrelated areas as European inflation, global food prices, the U.S. dollar, American exports, and the already chilly relationship between the European Central Bank (ECB) and the government of France.
For any of this to happen, however, the Fed first has to act. Most observers believe the U.S. central bank’s policymaking Federal Open Market Committee (FOMC) will…
30Apr2008 | Money Morning | Comments Off | Continued
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