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Professor Mark J. Perry's Blog for Economics and Finance
WALL STREET JOURNAL -- Last Tuesday, the Senate health committee voted 12-11 in favor of a two-page amendment courtesy of Republican Tom Coburn that would require all Members and their staffs to enroll in any new government-run health plan. Yet all Democrats -- with the exceptions of acting chairman Chris Dodd, Barbara Mikulski and Ted Kennedy via proxy -- voted nay.
The single most damaging error of the modern age is the misperception of government as an agency of compassion. As a replacement for the "divine right of kings," this misperception has, for those in power, been an astonishing success. For the rest of mankind, it has frequently been a disaster beyond imagining.
1. WALL STREET JOURNAL -- On present trends, most of Europe will soon have lower income tax rates than most of America. And now the European Union is stealing another competitive march on Washington, this time on a free trade deal with the world's 13th largest economy, fast-growing South Korea. Last week Brussels and Seoul finished the outline of a new trade agreement, and the two sides will now write up the technical language to codify it. As for the pending U.S.-Korea trade agreement, Congress has done . . . nothing.
A few weeks ago, the New York Fed just released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through June 2009, and the Fed's recession probability forecast through June 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.54% spread in June, the highest since May 2004) to calculate the probability of a recession in the United States twelve months ahead.
Here's the window of an old house in South Minneapolis at dawn in January 2009 when it was 35 degrees below zero:
In that case, both the number of Americans officially below the poverty level and the percent of Americans living in poverty (see graph below) are overstated, since the official poverty thresholds apparently do not take into account the significant increases over time in food affordability.
Perhaps we have won the "War on Poverty," but not through massive government spending on welfare programs, but through technological improvements and increases in farm productivity leading to lower food prices?
The University of Oregon (UO), where I study journalism, invested millions annually in a diversity program that explicitly included "political affiliation" as a component. Yet, out of the 111 registered Oregon voters in the departments of journalism, law, political science, economics, and sociology, there were only two registered Republicans.
LONDON DAILY MAIL -- Watching Meg suffer was too much for her mother. Helen decided to find out as much as she could about brain tumours on the internet.
The chart above (click to enlarge) shows the increasing energy efficiency of the U.S. economy, using data from the Energy Information Administration, updated recently through 2008. As recently as 1970, it required 18,000 BTUs of energy for each real dollar of GDP produced, and by 2008 the energy required per dollar of real GDP has been reduced by more than 50%, to only 8,520 BTUs per real dollar of GDP. So the U.S. economy has more than doubled its overall energy efficiency in only 38 years.
The recession has ended. In light of the spike in jobless claims AND in light of the recent upward turn in the Ratio of the Coincident to Lagging Indicators, we are making this statement as clearly and as unequivocally as we are able to make one. The recession is over. The worst of the economic news shall all soon be behind us.
From today's Census Bureau report on New Residential Construction:
Chicago needs new jobs. Wal-Mart wants to provide jobs to Chicago. Alderman Howard Brookins wants Wal-Mart in his 21st Ward. Yet the company and the alderman face huge resistance from the City Council to a proposal for a Wal-Mart Supercenter on the South Side, at 83rd Street and Stewart Avenue just west of the Dan Ryan.
CHRONICLE OF HIGHER EDUCATION -- At a time of night when many people are hitting the sack, a number of Bunker Hill Community College students will be hitting the classroom this fall. To accommodate working adults and open more class times for its growing student population, the Massachusetts college will offer two courses that run from 11:45 p.m. to 2:30 a.m.: “Principles of Psychology,” on Tuesdays, and “College Writing I,” on Thursdays. Both are three-credit courses.
The chart above is based on data from the USDA showing "Food expenditures by families and individuals as a share of disposable personal income," from 1929 to 2008 (total spending for both "food at home" and "food away from home").
WASHINGTON POST -- The arrival of the world's largest retailer in one of the world's largest marketplaces has brought more praise than protest. In recent weeks, crowds have swarmed the store, located on the Grand Trunk Road, the ancient and fabled trade route that stretches across India and into Pakistan.
In this season of doubt, I'm prepared to declare that the recession is really, most probably over.
FT.COM -- The number of US workers claiming unemployment benefits fell to the lowest level since January last week, as the pace of job cuts eased and car companies shifted the timing of their layoffs. New jobless claims fell by 47,000 to 522,000 in the week ending July 11, according to the Department of Labor. The less volatile four-week average of new claims also declined last week, falling by 22,500 to 584,500 (see chart above).
Interesting Wal-Mart Facts
President Barack Obama has declared that his administration aims to make college affordable to everyone by greatly expanding government aid to middle class families. The Washington Post says that Obama's higher education proposals, which include creating a brand new Pell Grant entitlement, "could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats concede is controversial." But what if President Obama has it backwards? What if America is sending too many people to college?
The problem with trying to equalize is that you can usually only equalize downward.
What would happen if we had universal car care? Find out in this video.
More and more companies are putting health care clinics in the workplace. That can mean big savings. Some studies show businesses can cut health care costs by up to 30%.
LOS ANGELES — Michael Moore's latest documentary now has a title - and a theme that resonates with recession-weary audiences. Moore's look at the consequences of big business will be called "Capitalism: A Love Story." The documentary is due in theaters Oct. 2. Distributor Overture Films said "Capitalism" examines the disastrous effects of corporate profiteering.
The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That's the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.
From Visual Economics, a graphical representation appears above (click to enlarge) of Consumer Expenditures in 2007, using data from the Bureau of Labor Statistics.
July 10 (Bloomberg) -- Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin (pictured above) of a “united future world currency.” “Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”
Update on this CD post, from today's Star Tribune article "A Few Good Signs for Housing" (print edition headline):
It's sure looking like the real estate market in the Twin Cities reached bottom earlier this year and is in a period of solid recovery, according to the June report from the Minneapolis Area Association of Realtors. Consider the following:
1. After falling pretty consistently for months during the last two years, the median home price in the Twin Cities area has increased by almost 17% since February, and by $25,000 in dollar terms (see chart above, click to enlarge). From April to June this year the median price increased by $20,500 compared to only a $500 increase last year from April-June.
2. Pending sales in June are up by 33.7% from the same month last year.
3. Closed sales in June are 20% higher than June 2008.
4. The average sales price in the Twin Cities area increased by $23,275 from April to June this year, compared to a $1,419 increase during the same period last year.
5. The current 7.3 months supply of inventory is more than 3 months lower than last year at this time (10.6 months).
6. The current Supply-Demand Ratio (SDR) of 4.90 homes for sale per buyer is 32.6% lower than last year's SDR of 7.27 homes per buyer. (Note: The SDR is calculated by comparing the number of homes for sale at the beginning of each month with the number of total pending sales for the month. The higher the SDR, the more supply there is relative to demand.)