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November 22, 2011

Latest Posts from Economist's View

Latest Posts from Economist's View

"Germany's Finances Not as Sound as Believed"

Posted: 22 Nov 2011 12:36 AM PST

There may be politics behind this I'm unaware of (or not), but this is an interesting claim from Spiegel:

Germany's Finances Not as Sound as Believed, by Ralf Neukirch and Christian Reiermann, Spiegel: The German government likes to pride itself on its solid finances and claim the country is a safe haven for investors. But Germany's budget management is not nearly as exemplary as it would have people believe, and the national debt is way over the EU's limit. In some respects, Italy's finances are in much better shape.

When it comes to fiscal stability, frugality and responsible economic management, German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble have only one role model: themselves.

The chancellor praises herself and her team for having "a clear compass for reducing debt," and insists: "Getting our finances in order is good for our country." ...

But it is debatable how much longer Germany can be seen as a refuge of stability and security. In reality, German government finances are not nearly in as good shape as the chancellor and the finance minister would have us believe. ...

Links for 2011-11-22

Posted: 22 Nov 2011 12:06 AM PST

"The Easy Question in Financial Regulation"

Posted: 21 Nov 2011 05:04 PM PST

Jeff Frankel:

The Easy Question in Financial Regulation, by Jeff Frankel: Many questions in the field of financial regulation are hard to answer: Would the separation of commercial banking and investment banking help prevent crises? To what extent should individual consumers be protected against foolishly borrowing too much? Should Credit Default Swaps be regulated out of existence? What should regulators do about patterns of high executive compensation that is evidently not a reward for performance? I have views on these questions, just as other observers do. But in these cases I see the arguments on both sides.
The question of funding the U.S. financial regulators, the Securities and Exchange Commission or the Commodity Futures Trading Commission, is easy to answer, however. I do not see the argument for cutting funding of the SEC and CFTC or for the other ways that Republicans in Congress are finding to make it difficult for these agencies to do their jobs. They are also deliberately impeding two new agencies set up in response to the 2008 financial crisis — the Consumer Financial Protection Bureau, lodged at the Fed, and the Office of Financial Research at the Treasury — from doing their respective jobs.
Bernard Madoff was the most obviously venal of the figures in the financial crisis of the fall of 2008. ... The SEC had been warned over and over again in the years before 2008. Why did it do nothing? In large part because it had been given a mandate in effect to regulate as little as possible.
I realize that in the United States, as in every country, we have some regulations that are excessive or undesirable. But how anyone can think that regulation by the SEC was excessive during 2001-08 and that this contributed to the financial crisis?
That is the irrationality on the Right. There is an equally irrational point of view on the Left. It goes like this: because the head of the CFTC is a former investment banker from Goldman Sachs, it must necessarily be that he is serving the interests of the financial community. It happens that Gary Gensler is doing a great job, against great odds. He has been trying to force derivatives trading into clearinghouses with lower counterparty risk, as required by the Dodd-Frank bill, to try to avoid repeats of September 2008. I can see, when an investment banker is appointed to such a position, asking questions that one would not ask otherwise. But he has been in office for 2 ½ years, pursuing regulation of derivatives with sufficient vigor to make most of Wall Street angry. Reading the words "Goldman Sachs" on someone's resume should not be a substitute for all other thought processes.

Where’s the Super Committee for Job Creation?

Posted: 21 Nov 2011 09:54 AM PST

I have a new column:

Where's the Super Committee for Job Creation?

I am not happy with the Democrats.

"A Hollowing Out of the Middle"

Posted: 21 Nov 2011 09:45 AM PST

I expected the numbers to be even worse:

Job Polarization in the United States: A Widening Gap and Shrinking Middle, by Jaison R. Abel and Richard Deitz, Liberty Street Economics: ... A Hollowing Out of the Middle Not surprisingly, these patterns have shifted the distribution of jobs among these groups. The chart below indicates the share of workers in each of the wage groups in 1980 and in 2009. In 1980, three-quarters of all workers were employed in mid-skill occupations. Among the occupations included in this group, Machine Operators accounted for 10 percent of the U.S. workforce, and Administrative Support accounted for 18 percent. By 2009, the share of jobs in the mid-skill category had shrunk to two-thirds, with Machine Operators accounting for just 4 percent of all jobs and Administrative Support for 14 percent. Over this same period, there was an increase in the share of jobs in the high and low skill groups. High skill jobs increased their share from 12 percent to 15 percent, while low skill jobs grew from 13 percent to 17 percent. As a result, the share of jobs at the upper end and lower end of the distribution increased between 1980 and 2009, while the share of jobs in the middle group fell.


Clearly, the U.S. workforce has undergone a significant occupational restructuring since the 1980s. Along with an increase in the share of high skill jobs and low skill jobs, there has been a growing wage gap between workers in jobs that pay the most and those that pay the least. With a rising share of jobs at the upper and lower ends of the wage distribution and a wider gap in wages among occupations, jobs have become more polarized in the United States over the past three decades.

This looks like a supercritical pitchfork bifurcation (a potential path to chaos).

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