The US economy is showing signs of a potentially rapid deceleration. In particular, there is accumulating evidence that the housing sector slowdown may be becoming a meltdown. In many areas house prices are falling, house sales are down nationally, and mortgage delinquencies and foreclosures are rising – especially in the sub-prime market. This has caused tremors in broader financial markets. The only good news is employment and wages continue growing, but labor markets conditions are also widely viewed as a lagging indicator. Read the rest of this entry »
Memo to Fed: Cut Rates, then Reform Policy
March 20th, 2007Abandoning America: Corporate Foreign Direct Investment
March 13th, 2007In recent years outward foreign direct investment (FDI) by US corporations to other countries has been increasing rapidly, while inward FDI by foreign corporations into the US has been trending down. Since investment in the US is critical for future economic prosperity, these patterns are troubling and provide evidence of how globalization and flawed policy are encouraging corporations to abandon America. Read the rest of this entry »
Third Way, Wrong Direction
February 21st, 2007In anticipation of 2008, a potentially historic debate is shaping up within the Democratic Party. On one side are progressive Democrats whose lineage reaches back to FDR and the New Deal. On the other side are new Democrats, who emerged in the 1980s and embraced Ronald Reagan’s critique of big government. Read the rest of this entry »
Expand Sarbox, Not Shrink It
February 16th, 2007There is a growing business chorus calling for shrinking the Sarbanes – Oxley Act (Sarbox) regulating U.S. capital markets. Recently, a self-appointed “blue ribbon†committee financed by Wall Street interests called for making shareholder class action suits more difficult to bring, lowering the legal liability of auditors and directors, and easing accounting certification requirements. In response, the Securities and Exchange Commission (SEC) appears to be moving to implement some of this wish list. Read the rest of this entry »
In Defense Of Sarbox
February 7th, 2007The economics of regulation teaches that regulation only matters if it is binding and compels people to change their behavior. It also teaches that because binding regulation compels change, those subject to it oppose it. After all, they preferred doing what they were doing before the regulation was passed. That carries an important political lesson: those subject to binding regulation will want it repealed. Read the rest of this entry »
Monetarism: Ideology Masquerading as Theory
January 29th, 2007January 29, 2007 has been declared Milton Friedman day. To add balance to the day, I am posting the following article on Monetarism. It draws on an earlier article, “Milton Friedman: The Great Conservative Partisanâ€, which provides a fuller survey of Friedman’s work. Readers may also want to visit www.Maxspeak.com that has an e- colloquium on Friedman. Read the rest of this entry »
Manipulating the Oil Reserve
January 26th, 20072006 was the year that oil prices came close to breaching eighty dollars per barrel. This was despite the fact that there were no significant supply interruptions and oil demand actually fell in industrialized countries. That raises the question of what caused the spike. Read the rest of this entry »
Deep Thinking and Economic Policy: Why It Matters
January 22nd, 2007Deep thinking involves going to the root of ideas, analyzing core assumptions and the logic upon which arguments are built. In a sense it is analogous to the Research component of R&D. Research represents deep thinking, while Development takes the product of that thinking and turns it into something that can be marketed profitably. In like vein, physicists distinguish between pure and applied physics, while economists distinguish between theory and policy. Read the rest of this entry »
Zombie Economics: The Myth of the Twin Deficits
January 15th, 2007It’s baaaaaack! After briefly disappearing in the late 1990s, economists have again revived the twin deficit hypothesis that asserts government budget deficits are the primary cause of trade deficits. Worse than that, some new Democrats and liberal commentators have also signed on to the “budget deficits cause trade deficits†argument, especially regarding the trade deficit with China. Take Nicholas Kristof in the New York Times (April 23, 2006): Read the rest of this entry »
Economics for Contenders
January 8th, 2007MEMO
TO: Progressive Presidential Candidates:
RE: Framing a Winning Economic Policy
FROM: Thomas I. Palley
The unbalanced U.S. boom that has followed the 2001 recession provides a real window of opportunity for progressive Democrats to reverse the laissez-faire extremism of the last 30 years. This window may open still wider if the economy suffers a recession in the next two years (The Next Recession ). If progressives are to take full advantage of this opportunity, they will need a new economic policy frame. Here’s a suggested road map. Read the rest of this entry »