Blog Archives - Economic Presence

The IMF says empirical evidence suggests redistribution does not harm economic growth

2/28/2014

Via Economist View (My thanks to Brent, who has supported my efforts on this blog more than anyone else)

"Understandably, economists have been trying to understand better the links between rising inequality and the fragility of economic growth. Recent narratives include how inequality intensified the leverage and financial cycle, sowing the seeds of crisis; or how political-economy factors, especially the influence of the rich, allowed financial excess to balloon ahead of the crisis.But what is the role of policy, and in particular fiscal redistribution to bring about greater equality? Conventional wisdom would seem to suggest that redistribution would in itself be bad for growth but, conceivably, by engendering greater equality, might help growth. Looking at past experience, we find scant evidence that typical efforts to redistribute have on average had an adverse effect on growth. And faster and more durable growth seems to have followed the associated reduction in inequality.

...To put it simply, we find little evidence of a “big tradeoff” between redistribution and growth. Inaction in the face of high inequality thus seems unlikely to be warranted in many cases."

I don't need anymore bromides about the mobility of capital...

2/25/2014

from The Economist (or anyone else), when the rich continue to flaunt the existing (inadequate) levels of taxation and regulation constantly. Why does my profession pretend that these events are not pervasive?

Via Zerohedge

"Credit Suisse made false claims in US visa applications, conducted business with clients in secret elevators and shredded documents to help more than 22,000 American customers avoid US taxes, according to a scathing report by a US congressional committee.

4 signs of economic slowdown in China

2/23/2014

Via Sober Look

1. For the first time China's "insiders" are calling for weaker growth:

WSJ: - China’s state media have long accused foreign analysts of being too bearish on the Chinese economy. Those analysts looking in from the outside are often said to be too eager to be “chanting decline”—chang shuai—when it comes to the economy’s prospects.

This time around, China’s own economists seem to be chanting a pessimistic tune about growth prospects. Perhaps they are not quite as negative as those pesky foreign counterparts—who according to at least one report China’s state media are being told to avoid—but they are increasingly outspoken about slowing growth and rising financial risk.

“We are now in a painful stage,” economist Wang Luolin told a seminar this week. “Let’s not try to dress things up,” said the consultant to the Chinese Academy of Social Sciences, a government think tank.

Yu Bin, a senior researcher at the influential Development Research Center under the State Council, took a similarly pessimistic view.

“The fact is, China’s economic growth is facing substantial downward pressure,” he said. “I don’t think we should get our hopes up for this year’s growth.”

2. The nation's central bank has once again halted the currency appreciation

3. Australian coal prices have been under some pressure

4. Perhaps the most significant indicator of slowing growth in China is the decline in longer term interest rates combined with an inverted yield curve.

The contradictory opinions on the health of US manufacturing

2/22/2014

Via Conversable Economist. My thanks again to Brent. Brent sums up a key graph as follows:

"Presented that way (as share of total employment), there's an evident steady trend in U.S. manufacturing employment.
Alternatively, one could present something like annual percentage job loss in the U.S. manufacturing sector and see an accelerating trend."

High food prices are driving social unrest the world over

2/22/2014

Via Motherboard. My thanks to Brent. Here is an excerpt.

"It's happening in Ukraine, Venezuela, Thailand, Bosnia, Syria, and beyond. Revolutions, unrest, and riots are sweeping the globe. The near-simultaneous eruption of violent protest can seem random and chaotic; inevitable symptoms of an unstable world. But there's at least one common thread between the disparate nations, cultures, and people in conflict, one element that has demonstrably proven to make these uprisings more likely: high global food prices.

Just over a year ago, complex systems theorists at the New England Complex Systems Institute warned us that if food prices continued to climb, so too would the likelihood that there would be riots across the globe. Sure enough, we're seeing them now. The paper's author, Yaneer Bar-Yam, charted the rise in the FAO food price index—a measure the UN uses to map the cost of food over time—and found that whenever it rose above 210, riots broke out worldwide. It happened in 2008 after the economic collapse, and again in 2011, when a Tunisian street vendor who could no longer feed his family set himself on fire in protest. "

Here is another link from Conversable Economist discussing the possibility that staples are Giffen Goods to the poor.

I first talked about these issues in the third post of my blog when I predicted more riots and cited research between the link between growing inequality and revolution (Although my predictions were that we would have more "revolution" in developed countries and that hasn't yet materialized on the scale I might of imagined).

I often wonder when most people look at Argentina, do they draw the wrong conclusions? Its rising inequality in the face of discredited market reforms that causes knee jerk populism. Inclusive market reforms that limit inequality are what is needed to put Argentina, Venezuela, etc on a stable economic growth path. Knee jerk populism is worse than crony capitalism but the poor often don't see it that way.

I didn't think I would ever be saying this

2/20/2014

But the Canadian women's hockey have just delivered one of the greatest ever moments in Canadian sport.

Canada was down by 2 goals with under 4 minutes left. An injured Marie Poulin ties the game with 30 seconds left and scores the winner in OT. Great goaltending saved the game for Canada in the first minute of OT.

Watching SCORE afterwards, one of the broadcasters related the following story:

He and Craig Button were watching the Canadian women skate at 2 PM, in 2009 in Calgary at the Olympic Trials. The men were scheduled to skate at 3:30. The men start to come into the rink and some make dismissive comments about women's hockey. Vincent Lecavalier notices Poulin and ask Button who she is .... Lecavalier lingers for 5 minutes just watching the 18 year old Poulin. He turns to leave and says to them "that fellas is a hockey player". Back to back OT gold medal winning goals. Vinnie was right!

Congratulations Women's Hockey Team you just created a heritage moment and unified a country . Well played......

Checking in with Brazil

2/20/2014

Brazil Bubble:

According to a recent article on Estado de SP, for the first time in almost ten years the lease prices of commercial offices in São Paulo ended the year (2013) in negative territory, a clear indication of a much-needed correction.

Seems like the early signs of a bubble deflation.

“Prices have already reached the maximum limit so we’ll hardly see upward price adjustments above inflation,” said Fernanda Rosalem, Director of of real estate firm Cushman & Wakefield.

The firm’s research shows that the average asking price in São Paulo dropped about 15% in 2013. In addition, vacancy rates increased from 14.6 % in late 2012 to 17.2 % in December 2013.

Checking in with China

2/20/2014

Key points

Flash China Manufacturing PMI™ at 48.3 in February (49.5 in January) Seven-month low.
Flash China Manufacturing Output Index at 49.2 in February (50.8 in January) Seven-month low.

A string of suicides in the financial sector

2/18/2014

I have no insight - just observing. Via Zerohedge.

Has the quantum computer arrived?

2/17/2014

Charlie Rose interviews Time Magazine's Lev Grossman. D-Wave, a Canadian firm, claims to make the first commercial product, that sells for $10,000,000, and is cooled at near absolute zero. Applications for machine learning.