Thursday, September 2, 2010

Economic Events of the Week

Thursday – Pending Home Sales
Friday – Employment Situation

e21 Reaction & Commentary
e21 Commentary: The Misguided Arguments Against Social Security Reform, Part II

Washington Update
Christina Romer Farewell Speech (National Press Club)
Fuld Criticises Fed for Letting Lehman Fail (Financial Times)

Market Talk
Changing Our 2H U.S. Growth Outlook (Morgan Stanley)
Fisher: Improved Fiscal, Regulatory Policies Should Activate U.S. Economy (Real Time Economics)

Editorials & Opinions
Summer of Economic Discontent (Micahel Boskin in Wall Street Journal)
Economic Insecurity Update (Karlyn Bowman in AEI)
The Real Say on Pay (New York Times Editorial)

e21 Reaction & Commentary

e21 Commentary: The Misguided Arguments Against Social Security Reform, Part II

e21’s last editorial on Social Security reviewed some analytical mistakes commonly committed by opponents of Social Security reform. Such mistakes include both implausible hopes that Social Security’s shortfall might disappear by itself, as well as a failure to appreciate the harm done by further delays in its correction. Our last piece addressed both of these areas of confusion in significant detail. No sooner had we assembled this information, however, than a new argument against reform began to receive additional attention: expressed in various ways by different voices, it is essentially this: instead of arguing that Social Security’s imbalance might not materialize, the program’s financing shortfall shouldn’t be corrected even if it is in fact real.

Washington Update

Christina Romer Farewell Speech (National Press Club)

The current recession has been fundamentally different from other postwar recessions. Rather than being caused by deliberate monetary policy actions, it began with interest rates at low levels. It is a recession born of regulatory failures and unsound practices that contributed to a housing bubble and eventually a full-fledged financial crisis. Precisely what has made it so terrifying and so difficult to cure is that we have been in largely uncharted territory. An all-out financial meltdown in the world’s largest economy and the center of the world’s financial system is something the world has experienced only once in the past century -- in the 1930s.

Fuld Criticises Fed for Letting Lehman Fail (Financial Times)

Dick Fuld, the former chief executive of Lehman Brothers, squared off against Federal Reserve officials and his former peers on Thursday as he argued that his investment bank could and should have been saved. Almost two years since the collapse of Lehman roiled markets, Mr Fuld mounted his most robust defence yet, accusing regulators in testimony to the Financial Crisis Inquiry Commission of pushing the bank into bankruptcy and failing to get a grip on the crisis early in 2008. 

Market Talk

Changing Our 2H U.S. Growth Outlook (Morgan Stanley)

We are downgrading our outlook for 2H US real growth to 2-2.5% from 3-3.5% previously. This downgrade from above-trend to below-trend 2H growth has important implications for forecasts of the unemployment rate, inflation and monetary policy. If policy does respond to this near-term weakness, the outlook in 2011 could be better than our current 3% baseline.

Fisher: Improved Fiscal, Regulatory Policies Should Activate U.S. Economy (Real Time Economics)

Federal Reserve Bank of Dallas President Richard Fisher said Wednesday the recovery of the U.S. economy “will take quite some time,” and that improved regulatory and fiscal policies are needed in order to help the process. Fisher, who isn’t a voting member of the interest-rate-setting Federal Open Market Committee this year but will be a voting member in 2011, said that an improved regulatory and fiscal environment should help to activate the economy. Business owners will accept policies they are not “happy” with because at least they will be more certain about the rules, he said.

Editorials & Opinions

Summer of Economic Discontent (Micahel Boskin in Wall Street Journal)

The administration's 'summer of recovery' has fizzled in almost every way imaginable. The growth rate is less than half what it was at this stage after the 1974-75 and 1981-82 recessions. How bad is it? In the data for the last few weeks and months, real personal disposable income was flat; core capital goods orders, a precursor of business capital spending, declined 8%; new home sales fell 12.4%, existing sales 27%, despite record low mortgage rates; single-family housing starts declined 4.2%; building permits, foreshadowing future construction, fell 1.2%; and initial jobless claims spiked to over 500,000

Economic Insecurity Update (Karlyn Bowman in AEI)

In this AEI Public Opinion Study, we bring together existing trend questions from many pollsters about the subjects described in the title above to get a sense of how anxious or economically insecure Americans feel. We look here at what people say about their own lives and those of their friends and family, and not at what people say about "most Americans" or "Americans in general." We give substantial weight to what people say about their own situations, which we feel they know best.

The Real Say on Pay (New York Times Editorial)

e21: Economic Policies for the 21st Century is a nonprofit, nonpartisan organization dedicated to economic research and innovative public policies for the 21st century. Drawing on the expertise of practitioners, policymakers, and academics, we aim to advance free enterprise, fiscal discipline, economic growth, and the rule of law.

2010, e21: Economic Policies for the 21st Centurys