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from Edward Hadas:
Keynes, fertility, and growth
“Keynes was a homosexual and had no intention of having children. We are NOT dead in the long run … our children are our progeny.” This tirade came from Niall Ferguson, the financial historian, Harvard professor and pundit, speaking in the third capacity at an investor conference two weeks ago. Though largely misguided, part of that comment is interesting. The idea that fertility has something to do with economics is due for a revival.
The sexual slur, for which Ferguson apologised, is tedious, as is the wilful misunderstanding of John Maynard Keynes’s quip: “in the long run we are all dead”. That was a complaint about the glib willingness of rival economists to endorse temporary suffering, which Keynes thought was largely unnecessary, for the sake of some distant good, which he thought was far from certain to arrive.
But Ferguson’s comment assumes, correctly, that our economic activity cannot be separated from an almost biological desire to create a good society which will endure into the future. In other words, there is a valid analogy between our biological drives to survive and reproduce and the economic desires to satisfy our needs and to thrive, now and in the future. Economists have captured the close ties of biology and society with two different images: growth and fertility.
Start with growth. We desire healthy and fast growth for the economy, just as we do for our progeny. The analogy is helpful and apt when economies are still in some sense young. Much as a child becomes more capable as well as larger as he or she follows their own version of the path to adulthood, an economy produces more and better goods and services as it catches up with more developed economies.
from Breakingviews:
Three-digit yen no longer a one-way bet
By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The yen is no longer a one-way bet. The Japanese currency has slumped to 100 against the dollar for the first time in four years. That’s a 16 percent slide since Shinzo Abe’s landslide election victory in December. At the time, Breakingviews predicted his victory would herald a three-digit yen. But there are good reasons to be sceptical about a further decline.
from Edward Hadas:
Rana Plaza and union labels
The 1911 Triangle Shirtwaist Factory was a turning point in the history of American labour relations. It led directly to a slew of new laws on safety and labour practices in New York State, and indirectly to a less exploitative approach to industrial labourers throughout the country. Last month’s Rana Plaza disaster in Bangladesh, where the collapse of a clothing factory killed more than 700 people, demonstrates that the lessons need to be learned again, this time on a global scale.
It is not a coincidence that both these accidents involved the garment trade. This is an industry of mostly small, poorly capitalised companies, which jostle against each other in a long and rapidly shifting supply chain. Retailers shop around aggressively, suppliers sub-contract freely and the price pressure is relentless. No one takes responsibility, and it can seem like almost everyone involved is irresponsible.
from Breakingviews:
Record aircraft orders point to global growth bump
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
The aviation industry’s incurable optimism is like a seatbelt sign for investors. That’s the conclusion of a Breakingviews study of global airline orders and economic growth. Aggressive aircraft orders have an inverse relationship with expansion in global GDP a year later. If that affiliation holds, big orders by Asian airlines point to rising risks of economic turbulence next year.
from Felix Salmon:
Understanding the painfully slow jobs recovery
Today's jobs report was a solid one, and shows that the recovery, while not exactly strong, is at least not slowing down: Neil Irwin calls it "amazingly consistent". Whether you look at the past 1 month, 12 months, 24 months, or 36 months, you'll see the same thing: average payrolls growth of roughly 170,000 jobs per month. That's not enough to bring unemployment down very quickly, given the natural growth in the workforce. But unemployment is coming down slowly. And at the rate we're going, at some point in the second half of 2014 we should see total payrolls reach their pre-crisis levels, and the headline unemployment rate hit the key 6.5% level.
There's a real human cost to the fact that unemployment is coming down so slowly, but there are lots of reasons why it's very hard to bring it down more quickly. First and foremost, of course, is the fact that US GDP growth is mediocre, coming in at less than 2% per year over the past few years. That's not the kind of V-shaped recovery which creates jobs. Calculated Risk's justly-famous jobs chart shows just how bad the recession was for employment, and just how painfully slowly we're scratching our way back: we're more than five years into this jobs recession, and we're still at the worst levels seen in the wake of the dot-com bust.
from Felix Salmon:
The systemic plight of labor
It's May Day, and Henry Blodget is celebrating -- if that's the right word -- with three charts, of which the most germane is the one above. It shows total US wages as a proportion of total US GDP -- a number which continues to hit all-time lows. Blodget also puts up the converse chart -- corporate profits as a percentage of GDP. That line, you won't be surprised to hear, is hitting new all-time highs. He's clear about how destructive these trends are:
Low employee wages are one reason the economy is so weak: Those "wages" are represent spending power for consumers. And consumer spending is "revenue" for other companies. So the short-term corporate profit obsession is actually starving the rest of the economy of revenue growth.
from Edward Hadas:
In favour of much less trading
It was front page news in the Wall Street Journal. For three long hours last week, there was no trading on the Chicago Board Options Exchange, the home of S&P 500 stock index options and the Vix volatility index. The Journal quoted a trader: “It was very, very unnerving”. Risks went unhedged. Experts worried about the effect of a more grievous software fault on an even more important exchange. What would happen then?
Almost nothing. Imagine a worst case scenario: a hacker closes down all the exchanges for a full month. All portfolios of stocks, bonds, options, futures, currencies and commodities are exactly the same on June 1 as on May 1.
from Edward Hadas:
Debt debate in need of upgrade
In retrospect, last week's debunking of one of the key conclusions of Kenneth Rogoff and Carmen Reinhart about government debt looks inevitable. The whole story, from the initial lavish praise for the Harvard professors to the current harsh criticism, is a sad reminder of the power of ideology in the angry debate over economic policy.
In 2011, the two eminent professors claimed to show a tipping point for government borrowing. If the debt amounted to more than 90 percent of GDP, the GDP growth rate was typically much slower than in more fiscally prudent countries. When Thomas Herndon, a mere graduate student at the University of Massachusetts, redid the maths this year, he also found a correlation between higher government debt and slower growth. But there was nothing remotely like a tipping point.
from Breakingviews:
Return to glory days may elude Japan’s automakers
By Antony Currie
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
The weakening yen is good news for Japan’s automakers. The more than 20 percent drop in the currency’s value against the dollar since early October will boost profit from overseas sales - and probably market share, too. A return to the glory days of 2006, though, is likely to prove elusive.
from Breakingviews:
Japanese workers need to go back to the 1980s
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Japanese workers are hoping for a 1980s revival. If the Bank of Japan’s 2 percent inflation goal appears daunting, meeting it in two years - as promised by new chief Haruhiko Kuroda - is even more of a challenge. For the central bank to succeed, wages will have to grow faster than they have in the past two decades.
