• slow_4

    Lower Level

    Since 1947 real GDP growth has averaged 3.26%/year. Since 1/1/10 it’s averaged 2.3%. Economists think that some of the decline will persist for a while because of both slower productivity gains and population growth. Therefore, the neutral Federal Funds rate, the rate that’s neither expansionary nor … [Read More...]

  • TR007241

    Wonky Wages

    Seattle’s decision to boost its minimum wage to $15/hour, the highest anywhere, is bad policy. Unlike a rise in the federal minimum wage which affects all employers, this increase only applies inside the city. Thus, employers in low-wage industries in Seattle will be at a distinct financial … [Read More...]

  • The newspaper  GOOD NEWS  and coffee

    Nice News!

    On Monday we learned that existing home sales in May jumped 4.9% to a rate of 4.89 million/year, the best pace since last October. Better yet, yesterday we learned that new home sales jumped from a rate of 433,000/year in April to 504,000/year in May, the best activity level since 5/08 and that … [Read More...]

  • euro

    Mediocre Monetary Meddling

    Rather than using a cannon, last week the ECB used a popgun. By reducing the rate it charges banks on loans and by charging banks on deposits held at the central bank, the ECB hopes to spur lending. It won’t happen. Separately, it’s also finally injecting liquidity into the banking system. What … [Read More...]

  • percentage-dice

    Rotten Returns

    Why are rates so low? Let me count the reasons: flight to quality due to rising geopolitical risk, the Fed’s promise to keep short-term rates low for a long time, Japan’s massive monetary stimulus, the ECB’s decision to start printing money, weaker than expected US growth, no evidence of commodity … [Read More...]


Growing Growth


While Q4 GDP was revised down to 2.2% from just 2.6%, things are better than they appear. The revision was entirely due to slower inventory accumulation. Excluding inventories and trade gets at real domestic demand, and it grew at a solid 3.2% while household spending was revised down just 0.1% to a … [Read more...]


Net Neutrality


Net neutrality is a fight over who pays for Internet infrastructure. Now, large content providers (Netflix) help pay, but under the new FCC rules they won’t be allowed to. Thus, households will pay more. But as they are more price sensitive than content providers, usage will probably fall. As for … [Read more...]


Financial Fairy


The Friday File: The evidence that the economy is improving is now irrefutable as the tooth fairy left an average of $4.36/lost tooth in 2014, a whopping increase of 25% from 2013. As recently as 2011, the TF left a stingy $2.60. Teeth in the South were most valuable at $5.16 each but were worth … [Read more...]


Double-edged Deflation


The January CPI numbers came out today and Y-o-Y inflation was -0.2%, yes, prices actually fell one-fifth of one percent. Before rejoicing, note that deflation is a double-edged sword. On one hand, it boosts worker pay since any raise is now a real raise. But it harms monetary policy because banks … [Read more...]


Rotten Riyadh


By not reducing the supply of oil in the face of falling demand, Saudi Arabia has caused the price of oil to plummet. That has caused households to increase their real consumption of gasoline by 4%, boosted purchases of light trucks by about 10% and reduced sales of hybrids and electric cars by … [Read more...]


Monetary Mischief


The Taylor Rule, a formula proposed by Stanford Professor John Taylor, tells the Fed how to set short-term interest rates. They are to be determined based on three variables: the gap between the actual inflation rate and the desired inflation rate, the gap between actual GDP and potential GDP, and … [Read more...]


Incremental Improvement


Despite a generally strengthening economy, the combination of surprisingly cold weather in the Northeast and parts of the Midwest, declining capital expenditures (due primarily to falling oil prices) and weak exports (due a strengthening dollar) will reduce Q1 GDP growth to below 2.5% from earlier … [Read more...]


Happy Herd


The Friday File: The US cattle herd (including beef and dairy cattle) increased from 89 million in 2013, its lowest level since 1951, to 89.8 million in 2014. And the number of heifers being added to the beef-cattle breeding herd jumped 4% to 5.8 million. But because it takes one to two years for an … [Read more...]


Fretful Fed


Minutes from the last Fed meeting were released yesterday and the Fed is covering the bases. While some want to raise rates in June, most don’t as they see more downside than upside risk, including weakening exports and a worsening trade deficit despite cheaper gasoline. They also fret about both … [Read more...]


Incremental Improvement


Despite a generally strengthening economy, the combination of surprisingly cold weather in the Northeast and parts of the Midwest and declining capital expenditures (due primarily to falling oil prices and weak exports due a strengthening dollar) will reduce Q1 GDP growth to below 2.5% from earlier … [Read more...]