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Ed Dolan

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  • Federal Budget Deficit Declines By Almost One Third [View article]
    "two beneficial (sic) trends are continuing: revenues for the past 12 months are up 10.3% relative to a year ago, and spending is up only 0.1%. Revenues have been rising steadily for the past years, while spending has grown hardly at all. . . And it also means that spending restraint is not necessarily bad for economic growth."

    Uh--OK, fiscal drag is now good for economic growth? Like the 0.1 percent growth in Q4, before the main drag from the cliff deal and the sequester even begin to bite? Give me a break.
    Mar 14 01:53 PM | 1 Like Like |Link to Comment
  • Are Banks Safe Enough? Risk Weighting, Regulatory Arbitrage, And Other Issues [View article]
    To its credit, Basel III does acknowledge the importance of off-balance-sheet risks, and it tries to adjust capital requirements accordingly. However, Basel III is just a guideline, the real responsibility is up to national regulators to uncover the specifics and take action. I am not too confident about that.
    Mar 11 10:41 AM | 1 Like Like |Link to Comment
  • What May Be Good About The Sequester [View article]
    Check out the chart in this post that shows that government spending has been making a negative contribution to GDP growth in almost every quarter for the past three years. It looks to me like the sequester is an increase in the rate at which government spending is shrinking rather than a decrease in the rate it is growing.

    http://seekingalpha.co...
    Mar 5 01:00 PM | Likes Like |Link to Comment
  • What May Be Good About The Sequester [View article]
    Right on the mark about the Stockholm syndrome
    Mar 5 12:53 PM | Likes Like |Link to Comment
  • U.S. GDP Barely Grows In Q4 2012 - Recovery On Life Support [View article]
    Of course you are right to point out that the national debt is unlikely to fall as long as growth is slow and the economy remains below its potential output level. The question is whether euro-style austerity in the form of immediate budget cuts is the best way to accelerate growth. The experience of the UK, Spain, Greece, etc. is not encouraging in this regard.
    Mar 1 01:54 PM | Likes Like |Link to Comment
  • U.S. Inflation Remains Near Zero As Sequester Looms [View article]
    Yes, the worry about debt puts you in the school of those that worry about asset bubbles, which are typically debt- and leverage-fueled. I am not denying that asset bubbles are real; they just don't usually heat up when the economy is as far below potential as it is now. We will see if they survive the contractionary fiscal shock of the sequester.
    Feb 25 09:52 AM | Likes Like |Link to Comment
  • U.S. Inflation Remains Near Zero As Sequester Looms [View article]
    You say "BTW in spite of the sequester, all government programs, including defense, continue to grow. Remember a "cut" in Washington speak is only a minor slowdown in the rate of spending."

    Here are the data (constant dollars):

    Federal defense expenditures peaked in Q3 2010 at $709 billion and had fallen to $655 billion by Q4 2012, a decrease of 8 percent

    Federal nondefense spending peaked in Q2 2010 at $655 billion and had fallen to $349 billion by Q4 2012, a decrease of 4 percent

    Data available here: http://1.usa.gov/124byWE
    Feb 24 02:03 PM | 2 Likes Like |Link to Comment
  • U.S. Inflation Remains Near Zero As Sequester Looms [View article]
    You are fighting a battle that has been lost long ago. Today 99% of economists use "inflation" in the "new engineered way" that means a sustained increase in the price level, rather than the long-ago way that meant an increase in the quantity of money in circulation.

    I do admire the courage of the steadfast 1% who continue to fight on against hopeless linguistic odds.
    Feb 24 01:46 PM | 1 Like Like |Link to Comment
  • U.S. Inflation Remains Near Zero As Sequester Looms [View article]
    This is a common question about the CPI. Here is the answer that the BLS gives:

    "Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States, to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. . . . During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of ten when they previously were sold by the dozen) of the good or service since the last time prices were collected, the economic assistant selects a new item or records the quality change in the current item. . . . The recorded information is sent to the national office of BLS, where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments, which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item's features or quality. http://1.usa.gov/136fSEu

    The bottom line: Contrary to popular belief, the CPI is adjusted so that a change in package size is fully recognized in reporting any increase or decrease in the price per egg, per ounce, etc.
    Feb 24 01:42 PM | 2 Likes Like |Link to Comment
  • Growth And Quality Of Life: What Can We Learn From Japan? [View article]
    Do you have any evidence that the poor accounting system biases the numbers toward greater inequality? I would be very interested to see some research or commentary on that issue if you have a link.
    Feb 17 10:21 AM | Likes Like |Link to Comment
  • Growth And Quality Of Life: What Can We Learn From Japan? [View article]
    Good point. The World Bank reports a Gini index of 38, around the middle of the world scale. It is more equal than Russia (40) the US (45) China (47) or Brazil (54), but less equal than Scandinavian countries, Germany, and several East European countries that have Gini's under 30.
    Feb 16 10:33 AM | 3 Likes Like |Link to Comment
  • Strong Job Growth And Upward Revisions Contrast Sharply With Reported GDP Decrease [View article]
    You're right about retirement. You might be interested to check out this two-part series on why it is getting harder to retire and what to do about it http://tiny.cc/tim9qw
    Feb 2 11:18 AM | Likes Like |Link to Comment
  • Strong Job Growth And Upward Revisions Contrast Sharply With Reported GDP Decrease [View article]
    They should be adjusted not by total population but by working-age population. Increasing share of seniors in population is pulling down all stats like employment ratio, labor force participation, etc. Still, as I said, we are still a long way from full recovery.
    Feb 2 09:51 AM | Likes Like |Link to Comment
  • CPI Unchanged In December, 5-Year Inflation Rate Hits 45-Year Low [View article]
    You need to read this discussion of the difference between perceived and measured inflation:
    Jan 19 07:49 PM | 1 Like Like |Link to Comment
  • CPI Unchanged In December, 5-Year Inflation Rate Hits 45-Year Low [View article]
    Of course, the 5-year averages are free of seasonal adjustment.

    Seasonal adjustments to paychecks are, in fact, used by some employers, perhaps less in the US than in other countries. Holiday bonuses are an example. In some countries they are formalized as a "13th month" paid at the end of the year.

    Notice, by the way, that the BLS always reports the CPI data in both seasonally adjusted and unadjusted versions. They are useful for different purposes.

    As your comment implies, yes, the seasonal adjustments are misleading as regards the short-term impact of price changes on your own cost of living. Use the unadjusted numbers for that purpose. If you can get your employer to adjust your paycheck to reflect seasonal variations in prices, that would probably be a good thing, at least if you, like may people, live literally from paycheck to paycheck.

    On the other hand, seasonally adjusted numbers are more useful for policy. You wouldn't want the Fed to panic and slam on the policy brakes every year in June just because the price of gasoline and hotel rooms rises, because they go up every year in June and it has nothing to do with the effects of policy. They go back down in the fall.
    Jan 17 03:34 PM | Likes Like |Link to Comment
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