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Financial Power and Leverage
Sermons won't work. Grant demonstrates that throughout our history, it has been the titans of finance who have delivered the sermons on day one, only to get caught up in the finance fad of the moment on day two. On day 3 they are wondering what hit them while they struggle to rescue their failing institution. On day 4 they are fired. Repeat cycle with a new CEO.
We don't need sermons. We DO need to come up with new institutional arrangements that provide clearly understood incentives and/or penalties that can break the cycle. One simple example might be to give both the stockholders and the bondholders exactly $0.00 for any institution has to be rescued by either the Fed or the FDIC.
Time Warner Cable Chokes Its Customers
Finance, Credit Cards, and the Fed
And at the bottom of the cycle we have always had hand-wringing about the need for the judgment and leadership on the part of the CEOs of the financial industry from one group and the need for more regulation from another.
Tell us something new.
When Will American Realize the World Has Changed?
It is entirely the fault of the American voter. For the past 30 years, our oil dependence has never been a priority for anyone except a few lonely visionaries (Jimmy Carter comes to mind). The Republicans, the Democrats, the Congress, and our Presidents have done exactly what the American voter wanted: NOTHING!
On Stimulus Checks and Encouraging Financial Irresponsibility
Q1: Why does it matter exactly what products are bought with the stimulus? Spending is spending.
Q2: From a stimulus perspective, why does it matter if folks pay down debt rather than spend? Data from past stimulus pkgs have shown that folks who choose to pay down debt today will often just buy more on the card in the following months and often have the same amount of debt withing a few months of the stimulus as before.
Q3: On what basis do you claim that we don't have a financially healthy middle class? 40% of U.S. households have no credit card debt. The debt problems seem to be concentrated in the lower and lower middle classes and even there, it is a minority of households which have large problems, typically a result of a lost job, health care emergency, or a divorce. You can't make meaningful claims about the health of the U.S. household based on average credit card debt. You need to look at medians and the distribution of the debt.
In Praise of Headline Inflation
Oil Bubble: How Speculation May Contribute to Recent Moves in Oil Prices
Now we just need to add monopolistic/oligopoli... supply theory to the mix since the Saudis and other large suppliers can affect prices and, IIRC, have an incentive to prevent the price from rising too rapidly in order to reduce incentives for technology changes that would ultimately reduce demand. I wonder if the Saudis are worried that demands to stop global warming will finally provide the incentives for alternative technologies and have decided that keeping the price low is no longer in their long term interest.
A Conversation with Nobel Laureate William F. Sharpe
The Credit Card Time Bomb Is Ticking
www.stlouisfed.org/pub...
40% or so of U.S. households have no credit card debt. The data seems to show that the problems are concentrated among lower and lower-middlle income households.
1990 All Over Again?
Good point. That is why it pays to read the footnotes:
Please note breaks in data: Data prior to 2003-01-01 include adjustment, extended, and seasonal credit. Data from 2003-01-01 to 2007-11-01 include primary, secondary, and seasonal credit. Data from 2007-12-01 to 2008-02-01 include primary, secondary, seasonal, and term auction credit. Data from 2008-03-01 forward include primary, secondary, seasonal credit, primary dealer credit facility, other credit extensions, and term auction credit.
This is a graph that has apples up until it has apples and oranges.
Inflation Falls for Fourth Straight Month
Contrary to popular conspiracy theory, food and energy are indeed included in the CPI used to calculate the COLA allowances for SS and other programs. Core CPI, which excludes food and energy, is used by the Fed as its preferred measure of inflation for rate decisions because food and energy are often too volatile from month-to-month to tell how long-term inflation is behaving.
An article that is worth reading:
www.nytimes.com/2008/0...
The interactive graphic is fun, too:
www.nytimes.com/intera...
Consumer Price Index: More Detached from Reality Each Day
www.nytimes.com/2008/0...
Be sure and look at the interactive graphic...
www.nytimes.com/intera...
Consumer Price Index: More Detached from Reality Each Day
Yes, they do. For real increases in the cost of living. Not imaginary increases due to improved quality of the goods available in the economy.
Were you aware that SS was indexed in the 1960s under LBJ to take account not just of the increased cost of living, but of the increase in real average hourly pay rates as well? That means that SS became no longer a retirement benefit, but a requirement that younger generations were going to have to fork over part of their pay increases due to improved productivity to the previous generation. That change did, in fact, make part of SS a welfare payment from the young to the old instead of just a retirement plan.
TANSTAAFL
The Case For Further Inflation
You have failed to account for the reduced demand caused by the increase in the price of oil. You simply can't take a linear extrapolation of a non-linear phenomena and expect to get anything close to a meaningful result.
Consumer Price Index: More Detached from Reality Each Day
"mandated costs that reduce consumer choice should be fully measured."
This is a valid point.
"it would take a disproportiotely large price increase to force such changes in consumer behavior."
Er, no. This depends on the good in question. Substitution effects between, say, beef and chicken as relative prices change are well documented. Gas use has measurably declined in recent months.
"my issue with the CPI is that it is a "black box" that is easily subject to manipulation"
The CPI is in no way a black box. See www.bls.gov/CPI The amount of research done every year on the CPI and consumer demand for products such as food, gas, autos, and housing by gov't, academia, and private enterprise is prodigious and usually available for anyone to review.
Mike Stathis --
"But ask yourself how many TVs, cars or consumer electronics you buy every year. Yet, this is where most of the deflationary effect of hedonics arises."
CPI is an aggregate measure, and in aggregate, people buy an awful lot of TVs every year.
"Ironically, the consumers who have the best feel for inflation are unfortunately the ones who are struggling the most since even the smallest of price increases are felt immediately."
The CPI has to measure everyone's consumption costs, not just the poor. It must include the middle class and the rich as well. In fact, the BLS does provide sub indexes for different groups of consumers.