Trending


  • 1
    object(stdClass)#14653 (59) {
      ["id"]=>
      string(4) "6170"
      ["title"]=>
      string(55) "Sabotaging the Competition: A Home Construction Example"
      ["alias"]=>
      string(54) "sabotaging-the-competition-a-home-construction-example"
      ["introtext"]=>
      string(305) "

    Why are monopolies bad? In a standard intro-econ textbook, the problem of monopolies is that because of the lack of competition, they can reduce output from what it would otherwise be, jack up prices, and thus earn higher profits.

    " ["fulltext"]=> string(14057) "

    Some books also mention that monopolies may have less incentive for quality or innovation--again, because of a lack of competition.

    James A. Schmitz, Jr.  at the Federal Reserve Bank of Minneapolis refers to this standard intro-econ model as a "toothless" monopoly, because in that model, all the monopoly firm can do is raise prices. He argues that it doesn't capture what bothers most people about monopoly. There's also also a concern that monopolies take actions to take action to sabotage and even destroy their rivals--especially the rivals who might have provide low-cost competition. Moreover, monopolies may form concentrations of power with other monopolies or with with political allies to accomplish this goal, and in this way corrupt institutions of law and politics as well. 

    Schmitz is in the middle of a substantial research project that encompasses both the intellectual history of these two views of monopoly and also a set of concrete examples. As a work-in-progress, he has posted "Monopolies Inflict Great Harm on Low- and Middle-Income Americans"(Federal Reserve Bank of Minneapolis, Staff Report No. 601, May 2020), which is nearly 400 pages long but described as the "first essay" in a collection of essays to be produced in the next year or two. It can usefully be  read as a preliminary overview of an ongoing research project. 

    However, it's worth noting that Schmitz doesn't focus on the conventional everyday meaning of "monopoly"--that is, a super-big company that dominates sales within its market. Instead, he referring to "monopoly power" in a way that refers to when a group (not just a single large firm) acts restrict competition. Thus, his main examples are where existing producers have exerted political power to sabotage lower-cost competitors, including residential construction, credit cards, legal services, repair services, dentistry, hearing aids, eye care, and others.  

    Here, I'll just focus on sketching his discussion of residential construction. Schmitz writes: "The most extensively used technology, by far, is often called the stick-built technology because sticks (two by fours) visually dominate the construction sites. This technology has been used for centuries. Homes are built outside, with a highly labor-intensive technology. It also requires highly-skilled-labor. The other technology is factory-production of homes. This technology substitutes capital for labor and also semi-skilled workers for highly skilled workers."

    There has been a battle going back about a century between stick-built technology and factory technology for residential construction.  Schmitz traces the early legal conflicts back to the late 1910s. Here's a summary comment from Thurman Arnold, who was Assistant Attorney General for Antitrust in the 1930s, in a 1947 article. 

    When Arnold left the DOJ, he did not stop challenging monopolies in traditional construction. He did not stop trying to protect producers of factory-built homes. In “Why We Have a Housing Mess,” Arnold (1947) began with a picture of a homeless Pacific War veteran, with his wife and five children, sitting on the street with their belongings (see Figure 2). The caption said: “This Pacific War veteran and his family are homeless because we have let rackets, chiseling and labor feather-bedding block the production of low-cost houses.” Arnold began his text this way: “Why can’t we have houses like Fords [i.e., automobiles]? For a long time, we have been hearing about mass production of marvelously efficient postwar dream houses, all manufactured in one place and distributed like Fords. Yet nothing is happening. The low-cost mass production house has bogged down. Why? The answer is this: When Henry Ford went into the automobile business, he had only one organization to fight [an organization with a patent] . . . But when a Henry Ford of housing tries to get into the market with a dream house for the future, he doesn’t find just one organization blocking him. Lined up against him are a staggering series of restraints and private protective tariffs."

     
    Sabotaging the Competition

    Essentially, Arnold and other (including a substantial multi-author research project at the University of Chicago in the late 1940s) claimed that while no one explicitly passed rules to make factory-built housing illegal, building codes were carefully written in a way which had that effect. 

    Some standard issues were that local building codes were different everywhere, which was fine for local stick-built construction firms, but posed a problem for a factory producer hoping to ship everywhere. There was often a distinction in building codes about living in "trailers" or in permanent structures, in which a "double-wide" home brought to the site in two parts was treated as a "trailer," even when it was installed permanently on-site and looked much the same as a stick-built home of similar size. 

    In the 1960s, economic pressure had gathered for factory-built homes, which are typically much cheaper on a per-foot basis. But in the 1970s, regulators pushed back hard, with the the newly-created US Department of Housing and Urban Development playing a big role. Here are some snippets from how Schmitz tells the story. 

    Many housing industry observers noted that stick-builders were facing such threats from factory-built home producers in the 1960s. Though they did not have direct measures of productivity, they compared the costs and prices of new, site-built homes to the costs and prices of other consumer durables. Alexander Pike (1967), an architect, compared the prices of new homes and the prices of new cars from the 1920s. Though he did not have productivity statistics, his point was clear: the productivity of construction badly lagged that of the car industry. At roughly the same time, the research department of Morgan Guaranty Trust Company (1969) wrote about this productivity divergence when discussing the potential for industrialized housing ... in “Factory-Built Houses: Solution for the Shelter Shortage?” They noted the serious problems facing the stick built industry as its productivity lagged. They showed that, over the period 1948-68, the prices of consumer durables rose roughly 22 percent, while residential construction costs rose roughly 100 percent.

    Modular construction for single-family homes took off in the 1960s. Schmitz cites statistics that they "increased from roughly 100,000 units to 600,000 units" annually. "The share of factory production of single-family residential homes began growing in the mid 1950s, rising from about 10 percent of home production to nearly 60 percent of home production by the beginning of the 1970s (where total home production equals stick-built production plus factory production)."

    But the stick-built industry, assisted by local and federal regulators, pushed back: 

    While the sabotage of factory housing has been going on for 100 years, there was a dramatic surge in the ferocity of this sabotage in the middle 1970s. During this period, laws were passed, and regulations implemented, that sent the factory-built housing industry into a tailspin. These regulations, and additional harmful ones introduced since the 1970s, remain on the books and mean the industry is a shell of its former self. When this new sabotage was unleashed in the middle 1970s, the producers of factory homes were well aware of it, of course. They fought the HUD and NAHB monopolies to reverse the sabotage but lost the fight. Today the members of the factory-built housing industry are unaware of this history.

    As Schmitz documents, the pushback came in many forms, including regulations and subsidies. As one  example: Who knows how high the factory share would have risen if new sabotage of factory production would not have commenced in 1968. At that time, a national subsidy program was started

    for households buying stick-built homes (see below). Under these programs, households purchased 430,000 stick-built homes (per year) in the early 1970s." There have been court battles, and the "is it a trailer, is it a house" battle has been refought many times. For example, there is often a rule that a manufactured home must be built on a permanent and unremovable chassis--like a trailer--even though that's not what many customers would want. 

    For those with at taste for irony, there were also complaints from stick-built construction firms that manufactured housing was "unfair competition" because it could be built so much less expensively. Schmitz cites estimates from the US Census Bureau in 2007 that manufactured homes are one-third the price per square foot. One suspects that if manufactured housing was encouraged and allowed to flourish, the cost advantage from economies of scale would only increase. 

    The US economy is widely acknowledged to have a shortage of affordable housing. It has also for a century has monopolizing, competition-reducing forces that have favored more expensive stick-built housing and sabotaged the economic prospects of manufactured housing. As Schmitz points out, whatever defense one wishes to offer for these kinds of competition-restricting rules, the unavoidable fact is that the costs of the rule are carried by those of low and middle income levels, who would benefit most from lower prices. 

    For readers who are interested in antitrust discussions as they apply to the FAGA companies (Facebook, Amazon, Google, and Apple), here are a couple of earlier posts that offer a starting point. 

    A version of this article first appeared on Conversable Economist

    " ["checked_out"]=> string(1) "0" ["checked_out_time"]=> string(19) "0000-00-00 00:00:00" ["catid"]=> string(3) "103" ["created"]=> string(19) "2020-06-01 14:00:52" ["created_by"]=> string(3) "552" ["created_by_alias"]=> string(0) "" ["state"]=> string(1) "1" ["modified"]=> string(19) "2020-06-01 16:27:25" ["modified_by"]=> string(3) "333" ["modified_by_name"]=> string(13) "Badr Berrada " ["publish_up"]=> string(19) "2020-06-01 14:00:54" ["publish_down"]=> string(19) "0000-00-00 00:00:00" ["images"]=> string(379) "{"image_intro":"images\/articles\/society\/Construction_USA.jpeg","float_intro":"","image_intro_alt":"Sabotaging the Competition: A Home Construction Example","image_intro_caption":"","image_fulltext":"images\/articles\/society\/Construction_USA.jpeg","float_fulltext":"","image_fulltext_alt":"Sabotaging the Competition: A Home Construction Example","image_fulltext_caption":""}" ["urls"]=> string(121) "{"urla":false,"urlatext":"","targeta":"","urlb":false,"urlbtext":"","targetb":"","urlc":false,"urlctext":"","targetc":""}" ["attribs"]=> string(667) "{"article_layout":"","show_title":"","link_titles":"","show_tags":"","show_intro":"","info_block_position":"","info_block_show_title":"","show_category":"","link_category":"","show_parent_category":"","link_parent_category":"","show_associations":"","show_author":"","link_author":"","show_create_date":"","show_modify_date":"","show_publish_date":"","show_item_navigation":"","show_icons":"","show_print_icon":"","show_email_icon":"","show_vote":"","show_hits":"","show_noauth":"","urls_position":"","alternative_readmore":"","article_page_title":"","show_publishing_options":"","show_article_options":"","show_urls_images_backend":"","show_urls_images_frontend":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(17) "home construction" ["metadesc"]=> string(230) "Why are monopolies bad? In a standard intro-econ textbook, the problem of monopolies is that because of the lack of competition, they can reduce output from what it would otherwise be, jack up prices, and thus earn higher profits." ["access"]=> string(1) "1" ["hits"]=> string(3) "275" ["xreference"]=> string(0) "" ["featured"]=> string(1) "1" ["language"]=> string(5) "en-GB" ["readmore"]=> string(5) "14057" ["ordering"]=> string(1) "4" ["category_title"]=> string(14) "Global Economy" ["category_route"]=> string(14) "global-economy" ["category_access"]=> string(1) "1" ["category_alias"]=> string(14) "global-economy" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(3) "135" ["author"]=> string(14) "Timothy Taylor" ["author_email"]=> string(30) "conversableeconomist@gmail.com" ["parent_title"]=> string(4) "ROOT" ["parent_id"]=> string(1) "1" ["parent_route"]=> string(0) "" ["parent_alias"]=> string(4) "root" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#14661 (3) { ["data":protected]=> object(stdClass)#14666 (97) { ["article_layout"]=> string(9) "_:default" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "1" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "0" ["show_publish_date"]=> string(1) "0" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "1" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "0" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "1" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(4) "left" ["float_fulltext"]=> string(4) "left" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "1" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "1" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "1" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(1) "0" ["num_intro_articles"]=> string(2) "10" ["num_columns"]=> string(1) "1" ["num_links"]=> string(1) "5" ["multi_column_order"]=> string(1) "1" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(9) "published" ["date_format"]=> string(5) "Y-Y-Y" ["list_show_hits"]=> string(1) "1" ["list_show_author"]=> string(1) "1" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(5) "order" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "1" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "hide" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "1" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> int(0) ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(14) "Global Economy" ["pageclass_sfx"]=> string(24) " full-blog page-category" ["menu-meta_description"]=> string(115) "BBN Times provides the latest trends in the global economy reported by leading economists and government officials." ["secure"]=> int(0) ["page_description"]=> string(126) "BBN Times provides the latest insights from experts in technology, healthcare, leadership, entrepreneurship and global economy" ["page_rights"]=> NULL ["robots"]=> NULL ["page_heading"]=> string(14) "Global Economy" ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(0) "" ["slug"]=> string(59) "6170:sabotaging-the-competition-a-home-construction-example" ["catslug"]=> string(18) "103:global-economy" ["link"]=> string(70) "/global-economy/sabotaging-the-competition-a-home-construction-example" ["active"]=> string(0) "" ["displayCategoryLink"]=> string(15) "/global-economy" ["displayCategoryTitle"]=> string(0) "" ["displayHits"]=> string(0) "" ["displayAuthorName"]=> string(14) "Timothy Taylor" ["displayIntrotext"]=> string(0) "" ["displayReadmore"]=> NULL }
    Sabotaging the Competition: A Home Construction Example

    Timothy Taylor
  • 2
    object(stdClass)#14652 (59) {
      ["id"]=>
      string(4) "6145"
      ["title"]=>
      string(40) "Fiscal Federalism: An International View"
      ["alias"]=>
      string(39) "fiscal-federalism-an-international-view"
      ["introtext"]=>
      string(243) "

    What is the appropriate balance of taxes and spending between the central government of a country and the subcentral governments--in the US, state and local government?

    " ["fulltext"]=> string(10210) "

    Countries vary, and there's no one-size-fits-all mode. But Kass Forman, Sean Dougherty, and Hansjörg Blöchliger provide an overview of how countries differ and some standard tradeoffs to consider in "Synthesising Good Practices in Fiscal Federalism Key recommendations from 15 years of country surveys" (OECD Economic Policy Paper #28, April 2020).   

    Here are a couple of figures to give some background on the underlying issues. On this figure, the horizontal axis is the share of spending done by subcentral governments, while the vertical axis is the share of taxes collected by subcentral governments. Being on the 45-degree line line would mean that these were the same. However, every country falls below the 45-degree line, which means that for every country, some of the revenues spent by subcentral governments are collected by the central government. 

     

    Its interesting to note the different models of fiscal federalism that prevail in various countries. At the far right, Canada is clearly an outlier, with nearly 70% of all government spending happening at the subnational level, and half of all taxes collected at the subnational level. Other countries where about half or more of government spending happens at the subnational level include the US, Sweden, Switzerland (CHE) and Denmark. 

    Mexico is an interesting case where 40% of government spending happens at the subnational level, but tax revenues collected at that level are very low. Germany (DEU) and Israel are countries with a substantial level of subnational spending that is also nearly matched by the level of subnational taxes--and thus a relatively low redistribution of revenue from central to subcentral governments. Many countries huddled in the bottom left of the figure are low both subnational spending and subnational taxes. 

    Here's a figure showing the change in these patterns across countries from 1995-2017. 

     

    The crossing point of the horizontal and the vertical lines means relatively little change: for example, the US had a small rise in the share of spending happening at the subnational level and a small drop in the share of revenues raised at the subnational level. 

    Some countries with a big rise in the share of spending happening at the subnational level include Spain (ESP), Belgium, and Sweden. Some countries with a big rise in the share of subnational taxes collected include Spain, Belgium, and Italy. Clearly, Spain stands out as a country that has been decentralizing both government revenue and spending. Conversely, Denmark (DNK) stands out as a country that has been decentralizing government spending, but centralizing the collection of tax revenue. Hungary and Netherlands stand out as countries that have moved toward centralizing their spending, and Hungary in particular seems to be both increasing subnational taxes while decreasing subnational spending. 

    What are the key tradeoffs here?  Forman, Dougherty, and Blöchliger write (citations omitted): 

    Fiscal federalism refers to the distribution of taxation and spending powers across levels of government. Through decentralisation, governments can bring public services closer to households and firms, allowing better adaptation to local preferences. However, decentralisation can also make intergovernmental fiscal frameworks more complex and risk reinforcing interregional inequality unless properly designed. Accordingly, several important trade-offs emerge from the devolution of tax and spending powers. ... 

    For example:  

    [D]ecentralised fiscal frameworks allow for catering to local preferences and needs, while more centralised frameworks help reap the benefits of scale. Another key trade-off derives from the effect of decentralisation on the cost of information to different levels of government. While greater decentralisation implies that sub-national governments can access more information about the needs of a constituency at lower cost, it simultaneously increases the informational distance between central and sub-national government. In turn, this may make information more costly from the perspective of the central government, impeding its co-ordination and monitoring functions.

    Decentralisation could also engender a costly misalignment of incentives. For example, a “common pool” problem may arise when decentralisation narrows the sub-national revenue base and raises the vertical fiscal gap. In this case, the necessary reliance on revenue sharing with central government to ensure SCG [subcentral government] fiscal capacity may also distort the cost/benefit analysis of sub-national governments—particularly in situations where an SCG realises a payoff without bearing the entirety of the associated cost. Rigid arrangements that entrench fiscal dependence on the central government may drive SCGs to manipulate tax-sharing agreements in order to increase their share while undermining their motivation to cultivate the local tax base. Therefore, the possible efficiency and equity gains from decentralisation are closely linked to mitigating the pitfalls of poorly designed revenue sharing.

    What does this mean in practical terms? Their survey of the cross-country research has a number of intriguing findings: 

    OECD research has found a broadly positive relationship between revenue decentralisation and growth, with spending decentralisation demonstrating a weaker effect ...

    [D]ecentralisation appears to reduce the gap between high and middle-income households but may leave low incomes behind, especially where jurisdictions have large tax autonomy ...

    In healthcare, research suggests costs fall and life expectancy rises with moderate decentralisation, but the opposite effects hold once decentralisation becomes excessive (Dougherty et al., 2019[11]). With respect to educational attainment, Lastra-Anadón and Mukherjee (2019[27]) find that a 10 percentage point increase in the sub-national revenue share improves PISA scores by 6 percentage points ...

    Decentralisation has also been linked to greater public investment, with a 10% point increase in decentralisation (as measured by both SCG spending and revenue share of government total) “lifting the share of public investment in total government spending from around 3% to more than 4% on average”. The investment driven by decentralisation appears to accrue principally to soft infrastructure, that is human capital as measured by education.

    In the US version of fiscal federalism, states and local governments face constraints on their borrowing, while the federal government does not. In the case of disruptions from a national recession or pandemic, when a surge of government borrowing is needed, as in the case of a pandemic, it will thus be natural for subnational governments to turn to the US federal government for support. However, it's worth remembering that in more normal times, having state and local governments bear a substantial responsibility for their there own tax and sending levels can have real benefits for accountability and government services. 

    A version of this article first appeared on Conversable Economist.  

    " ["checked_out"]=> string(1) "0" ["checked_out_time"]=> string(19) "0000-00-00 00:00:00" ["catid"]=> string(3) "103" ["created"]=> string(19) "2020-05-28 06:42:33" ["created_by"]=> string(3) "552" ["created_by_alias"]=> string(0) "" ["state"]=> string(1) "1" ["modified"]=> string(19) "2020-05-28 06:45:26" ["modified_by"]=> string(1) "0" ["modified_by_name"]=> NULL ["publish_up"]=> string(19) "2020-05-28 06:42:33" ["publish_down"]=> string(19) "0000-00-00 00:00:00" ["images"]=> string(355) "{"image_intro":"images\/articles\/global-economy\/FED_USA_2020.jpeg","float_intro":"","image_intro_alt":"Fiscal Federalism: An International View","image_intro_caption":"","image_fulltext":"images\/articles\/global-economy\/FED_USA_2020.jpeg","float_fulltext":"","image_fulltext_alt":"Fiscal Federalism: An International View","image_fulltext_caption":""}" ["urls"]=> string(121) "{"urla":false,"urlatext":"","targeta":"","urlb":false,"urlbtext":"","targetb":"","urlc":false,"urlctext":"","targetc":""}" ["attribs"]=> string(667) "{"article_layout":"","show_title":"","link_titles":"","show_tags":"","show_intro":"","info_block_position":"","info_block_show_title":"","show_category":"","link_category":"","show_parent_category":"","link_parent_category":"","show_associations":"","show_author":"","link_author":"","show_create_date":"","show_modify_date":"","show_publish_date":"","show_item_navigation":"","show_icons":"","show_print_icon":"","show_email_icon":"","show_vote":"","show_hits":"","show_noauth":"","urls_position":"","alternative_readmore":"","article_page_title":"","show_publishing_options":"","show_article_options":"","show_urls_images_backend":"","show_urls_images_frontend":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(0) "" ["metadesc"]=> string(168) "What is the appropriate balance of taxes and spending between the central government of a country and the subcentral governments--in the US, state and local government?" ["access"]=> string(1) "1" ["hits"]=> string(3) "702" ["xreference"]=> string(0) "" ["featured"]=> string(1) "1" ["language"]=> string(5) "en-GB" ["readmore"]=> string(5) "10210" ["ordering"]=> string(1) "6" ["category_title"]=> string(14) "Global Economy" ["category_route"]=> string(14) "global-economy" ["category_access"]=> string(1) "1" ["category_alias"]=> string(14) "global-economy" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(3) "135" ["author"]=> string(14) "Timothy Taylor" ["author_email"]=> string(30) "conversableeconomist@gmail.com" ["parent_title"]=> string(4) "ROOT" ["parent_id"]=> string(1) "1" ["parent_route"]=> string(0) "" ["parent_alias"]=> string(4) "root" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#14663 (3) { ["data":protected]=> object(stdClass)#14664 (97) { ["article_layout"]=> string(9) "_:default" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "1" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "0" ["show_publish_date"]=> string(1) "0" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "1" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "0" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "1" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(4) "left" ["float_fulltext"]=> string(4) "left" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "1" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "1" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "1" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(1) "0" ["num_intro_articles"]=> string(2) "10" ["num_columns"]=> string(1) "1" ["num_links"]=> string(1) "5" ["multi_column_order"]=> string(1) "1" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(9) "published" ["date_format"]=> string(5) "Y-Y-Y" ["list_show_hits"]=> string(1) "1" ["list_show_author"]=> string(1) "1" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(5) "order" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "1" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "hide" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "1" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> int(0) ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(14) "Global Economy" ["pageclass_sfx"]=> string(24) " full-blog page-category" ["menu-meta_description"]=> string(115) "BBN Times provides the latest trends in the global economy reported by leading economists and government officials." ["secure"]=> int(0) ["page_description"]=> string(126) "BBN Times provides the latest insights from experts in technology, healthcare, leadership, entrepreneurship and global economy" ["page_rights"]=> NULL ["robots"]=> NULL ["page_heading"]=> string(14) "Global Economy" ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(0) "" ["slug"]=> string(44) "6145:fiscal-federalism-an-international-view" ["catslug"]=> string(18) "103:global-economy" ["link"]=> string(55) "/global-economy/fiscal-federalism-an-international-view" ["active"]=> string(0) "" ["displayCategoryLink"]=> string(15) "/global-economy" ["displayCategoryTitle"]=> string(0) "" ["displayHits"]=> string(0) "" ["displayAuthorName"]=> string(14) "Timothy Taylor" ["displayIntrotext"]=> string(0) "" ["displayReadmore"]=> NULL }
    Fiscal Federalism: An International View

    Timothy Taylor
  • 3
    object(stdClass)#14655 (59) {
      ["id"]=>
      string(4) "6132"
      ["title"]=>
      string(61) "Interview with Larry Summers: China, Debt, Pandemic, and More"
      ["alias"]=>
      string(57) "interview-with-larry-summers-china-debt-pandemic-and-more"
      ["introtext"]=>
      string(264) "

    Irwin Stelzer and Jeffrey Gedmin have a wide-ranging interview with Lawrence Summers in The American Interest (May 22, 2020, "How to Fix Globalization—for Detroit, Not Davos").

    " ["fulltext"]=> string(7828) "

    As always, Summers is his habitually and incorrigibly interesting and provocative self. Here re a few of many quotable remarks. 

    China

    In general, economic thinking has privileged efficiency over resilience, and it has been insufficiently concerned with the big downsides of efficiency. Going forward we will need more emphasis on “just in case” even at some cost in terms of “just in time.” More broadly our economic strategy will need to put less emphasis on short-term commercial advantage and pay more attention to long-run strategic advantage. ...

    At the broadest level, we need to craft a relationship with China from the principles of mutual respect and strategic reassurance, with rather less of the feigned affection that there has been in the past. We are not partners. We are not really friends. We are entities that find ourselves on the same small lifeboat in turbulent waters a long way from shore. We need to be pulling in unison if things are to work for either of us. If we can respect each other’s roles, respect our very substantial differences, confine our spheres of negotiation to those areas that are most important for cooperation, and represent the most fundamental interests of our societies, we can have a more successful co-evolution that we have had in recent years. ...

    Attitudes on Globalization

    Someone put it to me this way: First, we said that you are going to lose your job, but it was okay because when you got your new one, you were going to have higher wages thanks to lower prices because of international trade. Then we said that your company was going to move your job overseas, but it was really necessary because if we didn’t do that, then your company was going to be less competitive. Now we’re saying that we have to cut the taxes on those companies and cut the calculus class from your kid’s high school, because otherwise we won’t be able to attract companies to the United States, and you have to pay higher taxes and live with fewer services. At a certain point, people say, “This whole global thing doesn’t work for me,” and they have a point.

    So we need a global agenda that is about broad popular interests rather than about corporate freedom—that is, cooperation to assure that government purposes can be served and that global threats can be met. If we have an agenda like that, we can rebuild a constituency for global dialogue.

    Government Debt

    The deepest truth about debt is that you can’t evaluate borrowing without knowing what it’s going to be used for. Borrowing to invest in ways that earn a higher return than the cost of borrowing, and provide the wherewithal for debt service with an excess leftover, is generally a good and sustainable thing. Borrowing to finance consumption, leaving no return to cover debt service, is generally an unsustainable and problematic thing. ...

    I think we need to be very careful, with respect to the expectation that we now seem to be setting of having government cover all the losses associated with the COVID period. For the life of me, I cannot understand why grants should have been made to airlines to enable them to continue to function, rather than allowing their share values to be further depressed, and allowing those who would earn substantial premiums by taking risk on airline bonds to do so, accepting the consequences of an investment gone wrong.

    Looking towards an economy that is going to be very different than the one we had before COVID, we cannot aspire to maintain every job or every enterprise with a compensation program indefinitely. So as I look at the 30 percent of GDP deficit that we are running in Quarters Three and Four of Fiscal 2020, I don’t think that can be sustained over a multi-year period.

    Enforcing Existing Tax Laws for Those With High Incomes

    We could raise well over a trillion dollars over the next decade by simply enforcing the tax law that we have against people with high incomes. Natasha Sarin and I made this case and generated a revenue estimate some time ago. If we just restored the IRS to its previous size, judged relatively to the economy; if we moved past the massive injustice represented by the fact that you’re more likely to get audited if you receive the earned income tax credit (EITC) than if you earn $300,000 a year or more; if we made plausible use of information technology and the IRS got to where the credit card companies were 20 years ago, in terms of information technology-matching; and if we required of those who make shelter investments the kind of regular reporting that we require of cleaning women, we would raise, by my estimate, over a trillion dollars [over ten years]. Former IRS Commissioner Charles Rossotti, who knows more about it than I do, thinks the figure is closer to $2 trillion. That’s where we should start.

    Coronavirus Priorities

    The real crime is not that we miscalibrated on some economic versus public health trade-off. The real crime is that we have not succeeded in generating far greater quantities of testing, far greater mechanisms for those 40 million unemployed people to do contract tracing, far more availability of well-fitting, comfortable, and safe masks, and that we’re under-investing in the development of new therapeutics and vaccines.

    When something costs $10 to $15 billion a day, you need to make decisions in new ways. We should not be waiting to see which of two tests works best. We should be producing both of them. We should not wait for vaccines to be proven before we start producing them. We should be producing all the plausible candidates. Remember, one week earlier in moving through this is worth a hundred billion dollars: two months’ worth of the annual defense budget.

    A version of this article first appeared on Conversable Economist.

    " ["checked_out"]=> string(1) "0" ["checked_out_time"]=> string(19) "0000-00-00 00:00:00" ["catid"]=> string(3) "103" ["created"]=> string(19) "2020-05-26 07:28:07" ["created_by"]=> string(3) "552" ["created_by_alias"]=> string(0) "" ["state"]=> string(1) "1" ["modified"]=> string(19) "2020-05-26 07:29:48" ["modified_by"]=> string(1) "0" ["modified_by_name"]=> NULL ["publish_up"]=> string(19) "2020-05-26 07:28:07" ["publish_down"]=> string(19) "0000-00-00 00:00:00" ["images"]=> string(489) "{"image_intro":"images\/articles\/global-economy\/Interview_with_Larry_Summers-_China_Debt_Pandemic_and_More.jpeg","float_intro":"","image_intro_alt":"Interview with Larry Summers: China, Debt, Pandemic, and More","image_intro_caption":"","image_fulltext":"images\/articles\/global-economy\/Interview_with_Larry_Summers-_China_Debt_Pandemic_and_More.jpeg","float_fulltext":"","image_fulltext_alt":"Interview with Larry Summers: China, Debt, Pandemic, and More","image_fulltext_caption":""}" ["urls"]=> string(121) "{"urla":false,"urlatext":"","targeta":"","urlb":false,"urlbtext":"","targetb":"","urlc":false,"urlctext":"","targetc":""}" ["attribs"]=> string(667) "{"article_layout":"","show_title":"","link_titles":"","show_tags":"","show_intro":"","info_block_position":"","info_block_show_title":"","show_category":"","link_category":"","show_parent_category":"","link_parent_category":"","show_associations":"","show_author":"","link_author":"","show_create_date":"","show_modify_date":"","show_publish_date":"","show_item_navigation":"","show_icons":"","show_print_icon":"","show_email_icon":"","show_vote":"","show_hits":"","show_noauth":"","urls_position":"","alternative_readmore":"","article_page_title":"","show_publishing_options":"","show_article_options":"","show_urls_images_backend":"","show_urls_images_frontend":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(13) "Larry Summers" ["metadesc"]=> string(180) "Irwin Stelzer and Jeffrey Gedmin have a wide-ranging interview with Lawrence Summers in The American Interest (May 22, 2020, "How to Fix Globalization—for Detroit, Not Davos")." ["access"]=> string(1) "1" ["hits"]=> string(3) "482" ["xreference"]=> string(0) "" ["featured"]=> string(1) "1" ["language"]=> string(5) "en-GB" ["readmore"]=> string(4) "7828" ["ordering"]=> string(1) "8" ["category_title"]=> string(14) "Global Economy" ["category_route"]=> string(14) "global-economy" ["category_access"]=> string(1) "1" ["category_alias"]=> string(14) "global-economy" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(3) "135" ["author"]=> string(14) "Timothy Taylor" ["author_email"]=> string(30) "conversableeconomist@gmail.com" ["parent_title"]=> string(4) "ROOT" ["parent_id"]=> string(1) "1" ["parent_route"]=> string(0) "" ["parent_alias"]=> string(4) "root" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#14665 (3) { ["data":protected]=> object(stdClass)#14668 (97) { ["article_layout"]=> string(9) "_:default" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "1" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "0" ["show_publish_date"]=> string(1) "0" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "1" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "0" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "1" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(4) "left" ["float_fulltext"]=> string(4) "left" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "1" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "1" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "1" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(1) "0" ["num_intro_articles"]=> string(2) "10" ["num_columns"]=> string(1) "1" ["num_links"]=> string(1) "5" ["multi_column_order"]=> string(1) "1" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(9) "published" ["date_format"]=> string(5) "Y-Y-Y" ["list_show_hits"]=> string(1) "1" ["list_show_author"]=> string(1) "1" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(5) "order" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "1" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "hide" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "1" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> int(0) ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(14) "Global Economy" ["pageclass_sfx"]=> string(24) " full-blog page-category" ["menu-meta_description"]=> string(115) "BBN Times provides the latest trends in the global economy reported by leading economists and government officials." ["secure"]=> int(0) ["page_description"]=> string(126) "BBN Times provides the latest insights from experts in technology, healthcare, leadership, entrepreneurship and global economy" ["page_rights"]=> NULL ["robots"]=> NULL ["page_heading"]=> string(14) "Global Economy" ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(0) "" ["slug"]=> string(62) "6132:interview-with-larry-summers-china-debt-pandemic-and-more" ["catslug"]=> string(18) "103:global-economy" ["link"]=> string(73) "/global-economy/interview-with-larry-summers-china-debt-pandemic-and-more" ["active"]=> string(0) "" ["displayCategoryLink"]=> string(15) "/global-economy" ["displayCategoryTitle"]=> string(0) "" ["displayHits"]=> string(0) "" ["displayAuthorName"]=> string(14) "Timothy Taylor" ["displayIntrotext"]=> string(0) "" ["displayReadmore"]=> NULL }
    Interview with Larry Summers: China, Debt, Pandemic, and More

    Timothy Taylor
  • 4
    object(stdClass)#14660 (59) {
      ["id"]=>
      string(4) "3563"
      ["title"]=>
      string(69) "Interview with Deidre McCloskey on Economic Growth and Liberal Values"
      ["alias"]=>
      string(69) "interview-with-deidre-mccloskey-on-economic-growth-and-liberal-values"
      ["introtext"]=>
      string(569) "

    Eric Wallach offers "An Interview with Deidre McCloskey, Distinguished Professor Emerita of Economics and of History, UIC" in The Politic, Yale's undergraduate journal of politics and culture (February 10, 2019). McCloskey is characteristically thought-provoking and quotable. Here are a few comments of her many comments that caught my eye:

    " ["fulltext"]=> string(6514) "

    "Liberty is liberty, and is meaningless by parts."

    The central misconception is to think that one can claim the honorable title of “liberal” if one approves of one form of liberty, such as mutual consent in sexual partners or the ability to drill for oil where you wish, but excludes the other form. Liberty is liberty, and is meaningless by parts. You are still a slave if only on odd days of the month.

    In Latin America, for example, the word “liberal,” once meaningful there, has long been appropriated by conservatives who like to drill for oil where they wish, but hate gays. In the United States, it has been appropriated by sweet, or not so sweet, slow socialists, who celebrate diversity, but regard economic liberty as not worthy of much consideration. ...

    I used to think freedom was freedom of speech, freedom of the press, freedom of conscience. Here is what it amounts to: you have to have the right to show what you wish to, to make shoes or coats, to bake into bread the flour ground from the grain you have sown, and to sell it or not sell it as you wish; for the lathe-operator, the steelworker, and the artist it’s a matter of being able to live as you wish and work as you wish and not as they order you.

    "Put me down for 10 percent slavery to government." 

    It’s unwise to turn the issue of helping the poor into an on/off, none/perfect, exist/not question. We need to be seriously quantitative about such matters. On/off doesn’t answer the important question, which is always more/less. People think they are making a clever remark against liberalism by saying, “Well, we need some government.” Yes, certainly. But how much? (Will Rogers in the 1920s used to say, “Just be glad you don’t get the government you pay for.”) ...

    So here’s what a Liberalism 2.0 favors. It favors a social safety net, which is to say a clean transfer of money from you and me to the very poor in distress, a hand up so they can take care of their families. It favors financing pre- and post-natal care and nursery schools for poor kids, which would do more to raise health and educational standards than almost anything we can do later. It favors compulsory measles vaccination, to prevent the big spillover of contagion that is happening now in Clark County, Washington. It favors compulsory school attendance, financed by you and me, though not the socialized provision of public schools. The Swedes have since the 1990s had a national voucher system, liberal-style. It favors a small army/coast-guard to protect as against the imminent threat of invasion by Canada and Mexico, and a pile of nuclear weapons and delivery systems to prevent the Russians or Chinese or North Koreans from extorting us. All this is good, and would result in the government at all levels taking and regulating perhaps 10 percent of the nation’s production. Put me down for 10 percent slavery to government. Not the 30 to 55 percent at present that rich countries enslave.

    "The Nordics ... are not thoroughly socialist, and in fact they are reasonably close to the U.S., and in some ways more anti-socialist." 

    Americans of good will have long been persuaded, on the basis of breathless articles in the Sunday New York Times Magazine, that the Nordics are thoroughly “socialist” ...  No, they are not thoroughly socialist, and in fact they are reasonably close to the U.S., and in some ways more anti-socialist. They are in fact highly liberal in their economies (and their fastest rates of growth since 1850 were in fact when they were even more liberal). Almost all prices in Sweden and the rest, for example, are determined by supply and demand, and are nothing like the disastrous socialist interventions by way of price controls in, say, Venezuela. Setting up a business is not hard. Inherited wealth in Scandinavia and Finland is not honored. Innovation is (for example Svenska Kullagerfabriken, SKF, a pioneer in ball bearings, out of which in the 1920s rolled Volvo [Latin for “I roll”]).

    And government ownership of the means of production is trivial in all the Nordic countries. When Saab Motors went bankrupt, it came to the Swedish government hat in hand, and the government said, “Get lost.” When Volvo recently became a Chinese company, the government said, “So what?” You don’t have to exercise much imagination about what the American government would do if General Motors was so threatened: “Here are billions of tax dollars, and so the Federal Government owns part of you.” The American government in 2008 of course did precisely that.

    "Give this gentleman sixteen cents. That’s his share of the wealth." 

    [Andrew] Carnegie himself is said to have made the same point in another way. A socialist came to his office and argued to him that the wealthy should redistribute their wealth to the poor of the earth. Carnegie asked an assistant to go get him a rough estimate of his current wealth and of the population of the earth. The assistant returned shortly with the figures, and according to the anecdote Carnegie performed a calculation, then turned to the assistant and said, “Give this gentleman sixteen cents. That’s his share of the wealth.” And then he gave every dime of his wealth away, in accord with his Gospel of Wealth. Another businesslike Scot, Adam Smith, by the way, also gave away his considerable fortune, though, unlike Carnegie, he did not sound a trumpet before him when he did his alms.

    A version of this article first appeared on Conversable Economist

    " ["checked_out"]=> string(1) "0" ["checked_out_time"]=> string(19) "0000-00-00 00:00:00" ["catid"]=> string(3) "103" ["created"]=> string(19) "2019-02-16 01:00:26" ["created_by"]=> string(3) "552" ["created_by_alias"]=> string(0) "" ["state"]=> string(1) "1" ["modified"]=> string(19) "2019-02-16 01:56:52" ["modified_by"]=> string(3) "333" ["modified_by_name"]=> string(13) "Badr Berrada " ["publish_up"]=> string(19) "2019-02-16 01:00:19" ["publish_down"]=> string(19) "0000-00-00 00:00:00" ["images"]=> string(263) "{"image_intro":"images\/articles\/global-economy\/Deidree.png","float_intro":"","image_intro_alt":"","image_intro_caption":"","image_fulltext":"images\/articles\/global-economy\/Deidree.png","float_fulltext":"","image_fulltext_alt":"","image_fulltext_caption":""}" ["urls"]=> string(121) "{"urla":false,"urlatext":"","targeta":"","urlb":false,"urlbtext":"","targetb":"","urlc":false,"urlctext":"","targetc":""}" ["attribs"]=> string(667) "{"article_layout":"","show_title":"","link_titles":"","show_tags":"","show_intro":"","info_block_position":"","info_block_show_title":"","show_category":"","link_category":"","show_parent_category":"","link_parent_category":"","show_associations":"","show_author":"","link_author":"","show_create_date":"","show_modify_date":"","show_publish_date":"","show_item_navigation":"","show_icons":"","show_print_icon":"","show_email_icon":"","show_vote":"","show_hits":"","show_noauth":"","urls_position":"","alternative_readmore":"","article_page_title":"","show_publishing_options":"","show_article_options":"","show_urls_images_backend":"","show_urls_images_frontend":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(0) "" ["metadesc"]=> string(215) "Eric Wallach offers "An Interview with Deidre McCloskey, Distinguished Professor Emerita of Economics and of History, UIC" in The Politic, Yale's undergraduate journal of politics and culture (February 10, 2019). " ["access"]=> string(1) "1" ["hits"]=> string(4) "1600" ["xreference"]=> string(0) "" ["featured"]=> string(1) "1" ["language"]=> string(5) "en-GB" ["readmore"]=> string(4) "6514" ["ordering"]=> string(3) "301" ["category_title"]=> string(14) "Global Economy" ["category_route"]=> string(14) "global-economy" ["category_access"]=> string(1) "1" ["category_alias"]=> string(14) "global-economy" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(3) "135" ["author"]=> string(14) "Timothy Taylor" ["author_email"]=> string(30) "conversableeconomist@gmail.com" ["parent_title"]=> string(4) "ROOT" ["parent_id"]=> string(1) "1" ["parent_route"]=> string(0) "" ["parent_alias"]=> string(4) "root" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#14669 (3) { ["data":protected]=> object(stdClass)#14672 (97) { ["article_layout"]=> string(9) "_:default" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "1" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "0" ["show_publish_date"]=> string(1) "0" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "1" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "0" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "1" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(4) "left" ["float_fulltext"]=> string(4) "left" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "1" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "1" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "1" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(1) "0" ["num_intro_articles"]=> string(2) "10" ["num_columns"]=> string(1) "1" ["num_links"]=> string(1) "5" ["multi_column_order"]=> string(1) "1" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(9) "published" ["date_format"]=> string(5) "Y-Y-Y" ["list_show_hits"]=> string(1) "1" ["list_show_author"]=> string(1) "1" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(5) "order" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "1" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "hide" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "1" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> int(0) ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(14) "Global Economy" ["pageclass_sfx"]=> string(24) " full-blog page-category" ["menu-meta_description"]=> string(115) "BBN Times provides the latest trends in the global economy reported by leading economists and government officials." ["secure"]=> int(0) ["page_description"]=> string(126) "BBN Times provides the latest insights from experts in technology, healthcare, leadership, entrepreneurship and global economy" ["page_rights"]=> NULL ["robots"]=> NULL ["page_heading"]=> string(14) "Global Economy" ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(0) "" ["slug"]=> string(74) "3563:interview-with-deidre-mccloskey-on-economic-growth-and-liberal-values" ["catslug"]=> string(18) "103:global-economy" ["link"]=> string(85) "/global-economy/interview-with-deidre-mccloskey-on-economic-growth-and-liberal-values" ["active"]=> string(0) "" ["displayCategoryLink"]=> string(15) "/global-economy" ["displayCategoryTitle"]=> string(0) "" ["displayHits"]=> string(0) "" ["displayAuthorName"]=> string(14) "Timothy Taylor" ["displayIntrotext"]=> string(0) "" ["displayReadmore"]=> NULL }
    Interview with Deidre McCloskey on Economic Growth and Liberal Values

    Timothy Taylor
  • 5
    object(stdClass)#14659 (59) {
      ["id"]=>
      string(4) "3562"
      ["title"]=>
      string(69) "Central Bank Balance Sheet Reductions – Will Anyone Follow the Fed?"
      ["alias"]=>
      string(64) "central-bank-balance-sheet-reductions-will-anyone-follow-the-fed"
      ["introtext"]=>
      string(444) "

    The next wave of quantitative easing (QE) will be different, credit spreads will be controlled. The Federal Reserve (FED) may continue to tighten but few other central banks can follow. The European Central Bank (ECB) balance sheet reduction might occur if a crisis does not arrive first. Interest rates are likely to remain structurally lower than before 2008.

    " ["fulltext"]=> string(12011) "

    The Federal Reserve’s response to the great financial recession of 2008/2009 was swift by comparison with that of the ECB; the BoJ was reticent, too, due to its already extended balance sheet. Now that the other developed economy central banks have fallen into line, the question which dominates markets is, will other central banks have room to reverse QE?

    Last month saw the publication of a working paper from the BIS - Risk endogeneity at the lender/investor-of-last-resort – in which the authors investigate the effect of ECB liquidity provision, during the Euro crisis of 2010/2012. They also speculate about the challenge balance sheet reduction poses to systemic risk. Here is an extract from the non-technical summary (the emphasis is mine): 

    The Eurosystem’s actions as a large-scale lender- and investor-of-last-resort during the euro area sovereign debt crisis had a first-order impact on the size, composition, and, ultimately, the credit riskiness of its balance sheet. At the time, its policies raised concerns about the central bank taking excessive risks. Particular concern emerged about the materialization of credit risk and its effect on the central bank’s reputation, credibility, independence, and ultimately its ability to steer inflation towards its target of close to but below 2% over the medium term. 

    Against this background, we ask: Can central bank liquidity provision or asset purchases during a liquidity crisis reduce risk in net terms? This could happen if risk taking in one part of the balance sheet (e.g., more asset purchases) de-risks other balance sheet positions (e.g., the collateralized lending portfolio) by a commensurate or even larger amount. How economically important can such risk spillovers be across policy operations? Were the Eurosystem’s financial buffers at all times sufficiently high to match its portfolio tail risks? Finally, did past operations differ in terms of impact per unit of risk?...

    We focus on three main findings. First, we find that (Lender of last resort) LOLR- and (Investor of last resort) IOLR-implied credit risks are usually negatively related in our sample. Taking risk in one part of the central bank’s balance sheet (e.g., the announcement of asset purchases within the Securities Market Programme - SMP) tended to de-risk other positions (e.g., collateralized lending from previous longer-term refinancing operations LTROs). Vice versa, the allotment of two large-scale (very long-term refinancing operations) VLTRO credit operations each decreased the one-year-ahead expected shortfall of the SMP asset portfolio. This negative relationship implies that central bank risks can be nonlinear in exposures. In bad times, increasing size increases risk less than proportionally. Conversely, reducing balance sheet size may not reduce total risk by as much as one would expect by linear scaling. Arguably, the documented risk spillovers call for a measured approach towards reducing balance sheet size after a financial crisis.

    Second, some unconventional policy operations did not add risk to the Eurosystem’s balance sheet in net terms. For example, we find that the initial OMT announcement de-risked the Eurosystem’s balance sheet by e41.4 bn in 99% expected shortfall (ES). As another example, we estimate that the allotment of the first VLTRO increased the overall 99% ES, but only marginally so, by e0.8 bn. Total expected loss decreased, by e1.4 bn. We conclude that, in extreme situations, a central bank can de-risk its balance sheet by doing more, in line with Bagehot’s well-known assertion that occasionally “only the brave plan is the safe plan.” Such risk reductions are not guaranteed, however, and counterexamples exist when risk reductions did not occur.

    Third, our risk estimates allow us to study past unconventional monetary policies in terms of their ex-post ‘risk efficiency’. Risk efficiency is the notion that a certain amount of expected policy impact should be achieved with a minimum level of additional balance sheet risk. We find that the ECB’s Outright Monetary Transactions - OMT program was particularly risk efficient ex-post since its announcement shifted long-term inflation expectations from deflationary tendencies toward the ECB’s target of close to but below two percent, decreased sovereign benchmark bond yields for stressed euro area countries, while lowering the risk inherent in the central bank’s balance sheet. The first allotment of VLTRO funds appears to have been somewhat more risk-efficient than the second allotment. The SMP, despite its benefits documented elsewhere, does not appear to have been a particularly risk-efficient policy measure.

    This BIS research is an important assessment of the effectiveness of ECB QE. Among other things, the authors find that the ‘shock and awe’ effectiveness of the first ‘quantitative treatment’ soon diminished. Liquidity is the methadone of the market, for QE to work in future, a larger and more targeted dose of monetary alchemy will be required.

    The paper provides several interesting findings, for example, the Federal Reserve ‘taper-tantrum’ of 2013 and the Swiss National Bank decision to unpeg the Swiss Franc in 2015, did not appear to influence markets inside the Eurozone, once ECB president, Mario Draghi, had made its intensions plain. Nonetheless, the BIS conclude that (emphasis, once again, is mine): -

    …collateralized credit operations imply substantially less credit risks (by at least one order of magnitude in our crisis sample) than outright sovereign bond holdings per e1 bn of liquidity owing to a double recourse in the collateralized lending case. Implementing monetary policy via credit operations rather than asset holdings, whenever possible, therefore appears preferable from a risk efficiency perspective. Second, expanding the set of eligible assets during a liquidity crisis could help mitigate the procyclicality inherent in some central bank’s risk protection frameworks.

    In other words, rather than exacerbate the widening of credit spreads by purchasing sovereign debt, it is preferable for central banks to lean against the ‘flight to quality’ tendency of market participants during times of stress.

    The authors go on to look at recent literature on the stress-testing of central bank balance sheets, mainly focussing on analysis of the US Federal Reserve. Then they review ‘market-risk’ methods as a solution to the ‘credit-risk’ problem, employing non-Gaussian methods - a prescient approach after the unforeseen events of 2008. 

    Bagehot thou shouldst be living at this hour (with apologies to Wordsworth)

    The BIS authors refer on several occasions to Bagehot. I wonder what he would make of the current state of central banking? Please indulge me in this aside.

    Walter Bagehot (1826 to 1877) was appointed by Richard Cobden as the first editor of the Economist. He is also the author of perhaps the best known book on the function of the 19th century money markets, Lombard Street (published in 1873). He is famed for inventing the dictum that a central bank should ‘lend freely, at a penalty rate, against good collateral.’ In fact he never actually uttered these words, they have been implied. Even the concept of a ‘lender of last resort’, to which he refers, was not coined by him, it was first described by Henry Thornton in his 1802 treatise - An Enquiry into the Nature and Effects of the Paper Credit of Great Britain.

    To understand what Bagehot was really saying in Lombard Street, this essay by Peter Conti-Brown - Misreading Walter Bagehot: What Lombard Street Really Means for Central Banking – provides an elegant insight: 

    Lombard Street was not his effort to argue what the Bank of England should do during liquidity crises, as almost all people assume; it was an argument about what the Bank of England should openly acknowledge that it had already done.

    Bagehot was a classical liberal, an advocate of the gold standard; I doubt he would approve of the nature of central banks today. He would, I believe, have thrown his lot in with the likes of George Selgin and other proponents of Free Banking

    Conclusion and Investment Opportunities

    Given the weakness of European economies it seems unlikely that the ECB will be able to follow the lead of the Federal Reserve and raise interest rates in any meaningful way. The unwinding of, at least a portion of, QE might be easier, since many of these refinancing operations will naturally mature. For arguments both for and against CB balance sheet reduction this paper by Charles Goodhart - A Central Bank’s optimal balance sheet size? is well worth reviewing. A picture, however, is worth a thousand words, although I think the expected balance sheet reduction may be overly optimistic: -

    Source: IMF, Haver Analytics, Fulcrum Asset Management

    Come the next crisis, I expect the ECB to broaden the range of eligible securities and instruments that it is prepared to purchase. The ‘Draghi Put’ will gain greater credence as it encompasses a wider array of credits. The ‘Flight to Quality’ effect, driven by swathes of investors forsaking equities and corporate bonds, in favour of ‘risk-free’ government securities, will be shorter-lived and less extreme. The ‘Convergence Trade’ between the yields of European government bonds will regain pre-eminence; I can conceive the 10yr BTP/Bund spread testing zero. 

    None of this race to zero will happen in a straight line, but it is important not to lose sight of the combined power of qualitative and quantitative easing. The eventual ‘socialisation’ of common stock is already taking place in Japan. Make no mistake, it is already being contemplated by a central bank near you, right now.

    " ["checked_out"]=> string(1) "0" ["checked_out_time"]=> string(19) "0000-00-00 00:00:00" ["catid"]=> string(3) "103" ["created"]=> string(19) "2019-02-15 17:38:06" ["created_by"]=> string(3) "355" ["created_by_alias"]=> string(0) "" ["state"]=> string(1) "1" ["modified"]=> string(19) "2019-02-15 17:49:03" ["modified_by"]=> string(3) "333" ["modified_by_name"]=> string(13) "Badr Berrada " ["publish_up"]=> string(19) "2019-02-15 17:38:02" ["publish_down"]=> string(19) "0000-00-00 00:00:00" ["images"]=> string(273) "{"image_intro":"images\/articles\/companies\/Central_Bank_FED.jpeg","float_intro":"","image_intro_alt":"","image_intro_caption":"","image_fulltext":"images\/articles\/companies\/Central_Bank_FED.jpeg","float_fulltext":"","image_fulltext_alt":"","image_fulltext_caption":""}" ["urls"]=> string(121) "{"urla":false,"urlatext":"","targeta":"","urlb":false,"urlbtext":"","targetb":"","urlc":false,"urlctext":"","targetc":""}" ["attribs"]=> string(667) "{"article_layout":"","show_title":"","link_titles":"","show_tags":"","show_intro":"","info_block_position":"","info_block_show_title":"","show_category":"","link_category":"","show_parent_category":"","link_parent_category":"","show_associations":"","show_author":"","link_author":"","show_create_date":"","show_modify_date":"","show_publish_date":"","show_item_navigation":"","show_icons":"","show_print_icon":"","show_email_icon":"","show_vote":"","show_hits":"","show_noauth":"","urls_position":"","alternative_readmore":"","article_page_title":"","show_publishing_options":"","show_article_options":"","show_urls_images_backend":"","show_urls_images_frontend":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(0) "" ["metadesc"]=> string(301) "The next wave of QE will be different, credit spreads will be controlled. The Federal Reserve may continue to tighten but few other CB’s can follow. ECB balance sheet reduction might occur if a crisis does not arrive first. Interest rates are likely to remain structurally lower than before 2008." ["access"]=> string(1) "1" ["hits"]=> string(4) "1285" ["xreference"]=> string(0) "" ["featured"]=> string(1) "1" ["language"]=> string(5) "en-GB" ["readmore"]=> string(5) "12011" ["ordering"]=> string(3) "302" ["category_title"]=> string(14) "Global Economy" ["category_route"]=> string(14) "global-economy" ["category_access"]=> string(1) "1" ["category_alias"]=> string(14) "global-economy" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(3) "135" ["author"]=> string(11) "Colin lloyd" ["author_email"]=> string(24) "cdlloyd@blueyonder.co.uk" ["parent_title"]=> string(4) "ROOT" ["parent_id"]=> string(1) "1" ["parent_route"]=> string(0) "" ["parent_alias"]=> string(4) "root" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#14667 (3) { ["data":protected]=> object(stdClass)#14670 (97) { ["article_layout"]=> string(9) "_:default" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "1" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "0" ["show_publish_date"]=> string(1) "0" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "1" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "0" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "1" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(4) "left" ["float_fulltext"]=> string(4) "left" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "1" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "1" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "1" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(1) "0" ["num_intro_articles"]=> string(2) "10" ["num_columns"]=> string(1) "1" ["num_links"]=> string(1) "5" ["multi_column_order"]=> string(1) "1" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(9) "published" ["date_format"]=> string(5) "Y-Y-Y" ["list_show_hits"]=> string(1) "1" ["list_show_author"]=> string(1) "1" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(5) "order" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "1" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "hide" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "1" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> int(0) ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(14) "Global Economy" ["pageclass_sfx"]=> string(24) " full-blog page-category" ["menu-meta_description"]=> string(115) "BBN Times provides the latest trends in the global economy reported by leading economists and government officials." ["secure"]=> int(0) ["page_description"]=> string(126) "BBN Times provides the latest insights from experts in technology, healthcare, leadership, entrepreneurship and global economy" ["page_rights"]=> NULL ["robots"]=> NULL ["page_heading"]=> string(14) "Global Economy" ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(0) "" ["slug"]=> string(69) "3562:central-bank-balance-sheet-reductions-will-anyone-follow-the-fed" ["catslug"]=> string(18) "103:global-economy" ["link"]=> string(80) "/global-economy/central-bank-balance-sheet-reductions-will-anyone-follow-the-fed" ["active"]=> string(0) "" ["displayCategoryLink"]=> string(15) "/global-economy" ["displayCategoryTitle"]=> string(0) "" ["displayHits"]=> string(0) "" ["displayAuthorName"]=> string(11) "Colin lloyd" ["displayIntrotext"]=> string(0) "" ["displayReadmore"]=> NULL }
    Central Bank Balance Sheet Reductions – Will Anyone Follow the Fed?

    Colin lloyd

Search

More in Global Economy


1 year

Demography Rebalances Asia

Demographic shifts are about more than economics. Think about an array of social institutions: schools, parks, libraries, building and housing codes, public transportation, health care, the size of the volunteer sector. All of these, and many others, take on differing importance and shape when an economy has a relatively high number of children, or working-age people, or retirees. Deloitte has published the third edition of Voice of Asia (September 2017), with a focus on "Demographics fuelling Asia’s shifting balance of power." Here are some thoughts from the report.

1 year

The ECB’s Quantitative Easing Failure

The main reason why the ECB quantitative easing program has failed is that it started from a wrong diagnosis of the eurozone’s problem. That the European problem was a demand and liquidity issue, not due to years of excess.

1 year

The Man who Despairs When Others Hope... is Admired as a Sage

It's easy to think of reasons why humans might be hard-wired to pay more attention to bad news and downside risks than to good news and encouraging signs. Bad news may require quick reactions in the name of self-preservation; good news may be more likely to arrive in gradual small doses, and doesn't require any reaction at all. But whatever the underlying reason, the doomsayers and the naysayers often attract an audience, even if the worst of their predictions don't happen on time or with the predicted force. Meanwhile, extreme optimists seem naive. And those who predict middle-of-the-road scenarios, whether leaning toward optimism or pessimism, just seem boring.  

1 year

Is Loneliness Rising?

During this holiday season, as families and friends seize and make opportunities to gather, one wonders about those who do not feel that they have such a community. It's easy to find claims that loneliness is rising (for example, here's a recent Wall Street Journal article on that theme). But last summer the Social Capital Project run by the Joint Economic Committee of the US Congress published "All the Lonely Americans?" (August 22, 2018) and found little evidence of such an increase. The report cites a broad array of claims and evidence, which you can check out for yourself. But here's a quick overview of some main points (with citations omitted for readability):

1 year

To be Happy at Home is the Ultimate Result of All Ambition

Around the hustle and bustle of the end-of-year holidays, I sometimes reflect on  how many of us put considerable time and energy into thinking about where to live and furnishing our home--but then rush off and travel to other place to vacation, celebrate, and meet with friends.

1 year

China Stimulus Is Not A Catalyst

China presents many similarities in its economic model with the central-planned economies of the 70s: Massive debt, overcapacity and central planned growth targets.

1 year

Should The Fed Change Its Policy?

Years of low rates reduced capital expenditure and fueled a dangerous bubble. Now, real investment is back. Gross fixed capital formation is up 8 percent this year after years of stagnation, and capital repatriation exceeds $300 billion.