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Posts Tagged ‘Mark Thoma’

What is the Role of the State?

What is the Role of the State?

Courtesy of Mark Thoma at Economist’s View

When I teach the History of Economic Thought, one thing we focus on is how views on the role of the state have changed over time. It has a natural cycle to it, with eras such as the highly interventionist Mercantilist years followed by Physiocratic and Classical views stressing minimal government intervention. This is followed by a rebound in the other direction, and so it goes with a Keynes followed by a Friedman in the 50s, a rebound back to Keynes in the 60s, to classical ideas following the experience of the 70s, and so on, and so on. We are involved in the same debate, and a smaller version of the grand historical lurches in each direction, yet again today:

What is the role of the state?, by Martin Wolf: It is … a good time to ask … the biggest question in political economy: what is the role of the state? This question has concerned western thinkers at least since Plato (5th-4th century BCE). It has also concerned thinkers in other cultural traditions… The perspective here is that of the contemporary democratic west.

The core purpose of the state is protection. This view would be shared by everybody, except anarchists… Contemporary Somalia shows the horrors that can befall a stateless society. Yet horrors can also befall a society with an over-mighty state. …

Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.

In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice … and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.

This, then, is a brief background to … the problem, which is defining what a democratic state … is entitled to


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Is the Unemployment Problem Cyclical or Structural?

Is the Unemployment Problem Cyclical or Structural?

Courtesy of Mark Thoma, writing at CBS MoneyWatch

a young man lying on a sofa holding a glass of wine

As I noted in a previous post, economists define three types of unemployment: frictional, structural, and cyclical:

Frictional unemployment is defined as the unemployment that occurs because of people moving or changing occupations. Demographic change can also play a role in this type of unemployment since young or first-time workers tend to have higher-than-normal turnover rates as they settle into a long-term occupation. An important distinguishing feature of this type of unemployment, unlike the two that follow it, is that it is voluntary on the part of the worker.

Structural unemployment is defined as unemployment arising from technical change such as automation, or from changes in the composition of output due to variations in the types of products people demand. For example, a decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry.

Cyclical unemployment is defined as workers losing their jobs due to business cycle fluctuations in output, i.e. the normal up and down movements in the economy as it cycles through booms and recessions over time.

In a recession, frictional unemployment tends to drop since people become afraid of quitting the job they have due to the poor chances of finding another one. People that already have another job lined up will still be willing to change jobs, though there will be fewer of them since new jobs are harder to find. However, they aren’t counted as part of the unemployed. Thus, the fall in frictional unemployment is mainly due to a fall in people quitting voluntarily before they have another job lined up.

But the drop in frictional unemployment is relatively small and more than offset by increases in cyclical and structural unemployment. One of the big questions right now is whether the US economy is suffering, for the most part, from structural or cyclical unemployment. If it’s cyclical, then there’s a good chance that government intervention can help. If it’s structural, i.e. a decline in automobile production and manufacturing more generally, a decline in home construction, and a decline in the financial industry all of which free workers that need to be absorbed elsewhere in the economy, there’s less that can be done and some do not think that government can do much at all about this type of problem (though as I…
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Never Let the Threat of a Manufactured Crisis Go to Waste

Never Let the Threat of a Manufactured Crisis Go to Waste

Courtesy of Mark Thoma, Economist’s View 

There’s been a lot of speculation about the motives of the Austerians — those who want to begin balancing budgets now because they believe that’s what markets want. For example, Paul Krugman attributes it, in part, to

moralizing and posturing. Germans tend to think of running deficits as being morally wrong, while balancing budgets is considered virtuous, never mind the … economic logic. “The last few hours were a singular show of strength,” declared Angela Merkel … after a special cabinet meeting agreed on the austerity plan. And showing strength — or what is perceived as strength — is what it’s all about.

But there is another argument based upon the notion of "never let a crisis — or the manufactured threat of one — go to waste." This is an opportunity to "starve the European Beast" in the eyes of many European conservatives, and there are those who are using the "that’s what markets want" argument as cover for an ideological agenda:

The spectre of laissez-faire stalks Britain, by Jeremy Seabrook, CIF: The relish with which David Cameron announced that our whole way of life would be affected for years by impending cuts, and no one in the land would be exempt from the asperities about to be inflicted, suggested to many that he and his fellow cabinet-millionaires will probably weather the coming storm better than the rest of us.

His parade of Margaret Thatcher, who resembled nothing so much as a faded kabuki performer, outside 10 Downing Street, was also highly symbolic. It was a redemptive moment, the "ultimate" triumph of policies she advocated (but did not entirely follow) 30 years ago. It exhibited the qualities of purification ritual, reversion to a more severe form of capitalism; and in the process a transformation of nanny state into stepmother state.

Nick Clegg’s pious assertion that cuts would be fair and compassionate was at odds with Cameron’s gusto, which is familiar enough in Conservative rhetoric: Cameron confronting an overweening state, which will be shrunk so the private sector might flourish once more. When he said the effects of his policies would be felt for decades to come, he meant something more than a mere diminution of the structural deficit. He admitted as much… 

While cutting back big government may appear a


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On kleptocracy and the sense that we have a one-party system

On kleptocracy and the sense that we have a one-party system

Matt TaibbiCourtesy Edward Harrison at Credit Writedowns

As a writer, Matt Taibbi is a lot more vitriolic than I am. He curses, makes some pretty over-the-top personal attacks, and divines a policymaker’s intent where I don’t think he can. But, this goes mostly to style.  Substantively speaking, he has a lot to say and we should take notice. 

I wanted to highlight a piece he wrote yesterday called Fannie, Freddie, and the New Red and Blue. The crux of his argument is this: The partisan rhetoric is on full display in the dust-up over the unlimited liabilities coming from Fannie and Freddie thrust upon taxpayers on Christmas Eve. This rhetoric is not just beside the point, it is specifically designed to obscure the point, namely that both Democrats and Republicans, private industry and the government are culpable in the shambles our economic system has become.

Taibbi says:

Over the Christmas holiday a nasty thing happened: Tim Geithner’s Treasury Department decided to lift the cap on aid to the Government-Sponsored Entities, Fannie Mae and Freddie Mac, apparently in response to Obama administration fears that the two agencies would become insolvent. The cap was raised from $200 billion on each and government backstopping of the mortgage market will apparently now extend into infinity for at least three years, through 2012.

The move has already inspired a mini-firestorm, with several outlets delving deeply into the recent history of the GSEs and uncovering some disturbing new facts…

Sometimes I’m amazed at the speed with which highly provocative information like this GSE business can be converted into distracting propaganda in this country…

What worries me is that we’re… starting to see fault lines develop, where one side blames the government while another side blames Wall Street for the messes of the last two decades…

Everyone was involved in the mortgage scam. At the lender level the deceptions were myriad; liar’s loans, fraudulent income documentation, negative amortization loans, HELOCs, etc. The rush to get as many loans written as possible and then get those hot potatoes moved to the next sucker in the line was furious and extended from coast to coast, sinking one lender after another in Ponzoid debt and indictments….

Everyone had a hand in the bubble,


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Mark Thoma: Libertarians and populists are against Bernanke

Mark Thoma: Libertarians and populists are against Bernanke

Courtesy of Edward Harrison at Credit Writedowns

Mark is right that time is not on Chairman Bernanke’s side. If you saw the Ron Paul video earlier today, you can see what’s happening. I don’t have a strong view, although I believe most of the other bloggers are against.

Reminder: This is what Mark wrote about the Chairman’s being re-appointed in June.

Bernanke, Summers, or Yellen? None of the Above?

I’d reappoint him. If forced to choose between Yellen and Summers, I’d choose Yellen.

Question: are these still the alternatives if Bernanke is not confirmed?

(video embedded above)

See also Bernanke’s nomination approved by Senate banking panel from the BBC

 


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Chart School

Getting Technical: Weekend Update

Courtesy of Doug Short.

Here's the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.

The S&P 500 resurfaced inside a previous sideways trading range (inside an uptrend), on above-average volume (adjusted for the short week) and on strong momentum.


Click for a sharper image

 

...

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Zero Hedge

De-Escalation Off: US Deploys Troops To Poland

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

So what part of "All sides must refrain from any violence, intimidation or provocative actions," did the US not understand when they decided that deploying troops to Poland was in keeping with the four-party deal? As WaPo reports, Poland and the United States will announce next week the deployment of U.S. ground forces to Poland as part of an expansion of NATO presence in Central and Eastern Europe in response to events in Ukraine.

 

Polish mi...



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Phil's Favorites

Are You Ready For The Price Of Food To More Than Double By The End Of This Decade?

Are You Ready For The Price Of Food To More Than Double By The End Of This Decade?

Courtesy of Michael Snyder

If current trends continue, many of the most common food items that Americans buy will cost more than twice as much by the end of this decade. Global demand for food continues to rise steadily as crippling droughts ravage key agricultural regions all over the planet. You see, it isn't just the multi-year California drought that is affecting food prices. Down in Brazil (one of the leading exporters of food in...



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Insider Scoop

Rovi Announces Sale of MainConcept Businesses

Courtesy of Benzinga.

Related ROVI U.S. Court Of Appeals Sides With Amazon In Rovi Lawsuit Market Wrap For April 8: Markets Bounce Higher As Earnings Season Begins

Rovi Corporation (NASDAQ: ROVI), a global leader in entertainment discovery, announced it has entered into a definitive agreement to sell its DivX and MainConcept businesses. Rovi had previously announced its intent to sell the DivX and MainConcept businesses by the end of the second qua...



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Market Shadows

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

Two guest authors, David Stockman and long-time contributor John Rubino, write about the current state of Abenomics. 

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

By  

This one matters a lot. Abenomics was predicated on a lunatic notion—namely, that the economic ills from Japan’s massive debt overhang could be cured by a central bank bond buying spree that was designed to be nearly 3X larger relative to its GDP than that of the Fed. Yet anyone with a modicum of common sense and market...



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Option Review

Wild Ride For Chipotle

Shares in Chipotle Mexican Grill Inc. (Ticker: CMG) opened higher on Thursday morning, rising more than 6.0% to $589.00, after the restaurant operator reported better than expected first-quarter sales ahead of the opening bell. But, the stock began to falter just before lunchtime on concerns the burrito-maker will increase menu prices for the first time in three years. The price of Chipotle’s shares have since fallen into negative territory and currently trade down 3.5% on the session at $532.89 as of 1:50 p.m. ET.

Chart – Shares in Chipotle cool by lunchtime

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Sabrient

What the Market Wants: Positive News and Stocks at Bargain Prices

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%.  Large-caps faired the best, losing only 2.7%.  That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine. 

But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%.  While autos led, sales were up solidly overall.  Business inventories were about as expected with a positive tone.  Citigroup (C) handily beat estimates to add to the morning’s surprises.  As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%.  NASDAQ had a less...



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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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OpTrader

Swing trading portfolio - week of April 14th 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here is the new Stock World Weekly. Please sign in with your user name and password, or sign up for a free trial to Stock World Weekly. Click here. 

Chart by Paul Price.

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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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