Good morning, all. It's a holiday-shortened week in the U.S., but that doesn't mean you can take a break from your daily morning reads. Here are a few recommendations, along with my take.
What's in a name?
A lot, it turns out. The Obama administration was so afraid of being accused of redistributing income that the president passed over a nominee to head the Council of Economic Advisers because she had publicly advocated such policies, according to the New York Times' John Harwood. The Affordable Care Act was just a "semantic sidestep" from the name that cannot be spoken. The only way to provide healthcare for those who can't afford it is to tax those who can. Cost shifting, not a reduction in costs, is the best way to describe Obamacare, so income redistribution by another name. After all the other misrepresentations -- such as, if you like your healthcare plan, you can keep it -- who's keeping track?
Assessing the labor market
Harvard's Greg Mankiw walks us through various measures to assess the true state of the labor market. The employment-to-population ratio, even for prime working-age adults, is well below pre-recession levels. Long-term unemployment is still elevated and well above levels that preceded the last recession. Both those measures suggest a fair amount of slack in the U.S. economy. At the same time, the job vacancy rate and average hourly earnings are showing signs of improvement. Mankiw says it will be up to Janet Yellen, who is expected to be confirmed as Fed chairman, to figure out which data series are telling the truth.
Forward rates: the good, the bad and the ugly
UCLA economist James Hamilton looks at forward rates, then and now, to see if the bond market is buying the Fed's assurances that there will be no rate increases for the next couple of years. And yes, the market has heard the Fed loud and clear. "The forward curve implies overnight rates that remain below 25 basis points through the end of 2014, and only rise very slowly after that, with the rate still below 2.5 percent until the end of 2017," Hamilton writes on his blog. This is either a sign the Fed's communication policy is succeeding, or a vote of no-confidence on the prospects for a return to robust economic growth anytime soon. Either/or. Take your pick.
The problem with GDP
I'm not talking conspiracy theory here or silly assertions that government statisticians are cooking the numbers. Rather, economist David Henderson of Econlog explains why GDP is a bad measure of well-being. He takes the hypothetical example of the U.S. Postal Service which, after privatization, cuts costs in half. Businesses and consumers are better off spending half as much on mail as they did before, leaving them with an equal amount to spend on something else. But in terms of GDP, there is no net change in economic well-being. Just something to think about.
Banks threaten tit for tat
Some U.S. bank executives have threatened to charge businesses and consumers for deposits if the Fed lowers the interest rate it pays banks on their excess reserves, according to the Financial Times. Lowering IOER is just one strategy the Fed is exploring to give the economy some much-needed oomph. Making a loan becomes that much more attractive when the spread between lending rates and interest earned on deposits parked at the Fed widens. Every policy maker who takes to the podium these days seems to have a different idea on how to provide more stimulus. I wouldn't hold my breath on the implementation of a new plan just yet, though, especially with a changing of the guard in January.
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