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Chris Mier

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  • Puerto Rico: Prudent Policies Won't Solve Competitiveness Deficit [View article]
    The export-import activity is an important aspect of the US-Puerto Rico relationship, and one that is important to monitor. It is not strong enough, though, to prevent Puerto Rico's economic performance to stay in sync with the vastly superior US performance.

    Excellent article!
    Nov 29, 2013. 10:15 AM | Likes Like |Link to Comment
  • The Best Trade On Puerto Rico May Have Already Been Done! [View article]
    I agree. It will be an interesting development that could improve price transparency.
    Nov 14, 2013. 01:44 AM | Likes Like |Link to Comment
  • Fed Tapering Issue Begs Question: What Happened To Discounting? [View article]
    It is always difficult to disaggregate what portion of the movement in bond yields are due to the tenor of the economic data and what portion of the movement relates to technical factors. Two tools I use to try to unravel this are a proprietary economic diffusion index and the Aruobo-Diebold-Scotti (ADS) Index. The diffusion index measures the difference between what is expected for an economic release and what actually occurs. If the actual data is stronger than the expectation, the Index will rise and so will Treasury yields if fundamentals are driving bond market movements. The Index is comprised of the economic indicators known to have the most impact on interest rates.
    The second tool, the ADS Index, is a "real-time" indicator produced by the Philadelphia Fed. It is updated as each component of the Index is released. The Index is graphed against the trend rate of growth.

    From May to September--when taper talk started and ended--two things occurred with respect to these two indices. The diffusion index was flat, indicating that the market was correctly anticipating the data and that there was no data surprises impacting the bond market. Meanwhile the ADS Index oscillated very closely around the trend growth line, indicating that the economic releases were describing an economy that was performing at a pace not typically associated with rapidly rising or falling rates.

    Combining my read of these two indices, the bond market during the peak "taper time" of May to September reflected an accurate reading of data that was characteristic of growth not typically known for causing rising or falling rates. Thus, there is little basis for suggesting that the data, or surprises in the data, were driving the rising yields that occurred during that time period. Rather, in my view, it was the taper talk that caused interest rates to rise.
    Nov 11, 2013. 10:46 PM | 1 Like Like |Link to Comment
  • Puerto Rico: Severe Economic Trends Cloud Fiscal Solution [View article]
    Thanks for your comment. I agree, population and productivity growth as the basic drivers of long-run real GDP growth is almost a forgotten concept. And yet it is so important. Failing to understand this point leads to the conclusion that there are many more policy levers available to drive long-term growth than there really are. If the goal is to get back to the "old normal', find a way to boost population growth from 0.7% per year back 1.2%. That's an extra half a percent of GPG growth per year and the "new normal" is dead and gone. In the 1950s the growth rate was 2%!

    Productivity, of course, can be influenced to a degree, however, the levers there are pretty crude. You can't create scientific genius on command. Technological breakthroughs don't respond in any immediate sense to tax policy or regulatory burden. All you can do is create the environment that is conducive to scientific discovery and technological breakthroughs and hope that it happens.
    Nov 3, 2013. 07:16 PM | Likes Like |Link to Comment
  • The Federal Shutdown - How Big Of A Deal? [View article]
    If we had a "free market" system, and a shortage of teachers, the market would find a new equilibrium at a higher price and quantity, and the size of the market would be larger in both money terms and quantity terms. This outcome does not seem to be a lot different than the cries for more money by "the government and its supporters" who also have to reallocate dollars from some other form of consumption. Granted, they are reallocating from consumption by you the taxpayer, to consumption by the government on behalf of the taxpayer, but one person's reallocation is another person's investment in human capital. Rothbard may have been more sympathetic if he had had to attend a public school of any kind (ever).
    Oct 22, 2013. 02:23 AM | Likes Like |Link to Comment
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