Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Aggressive Doves

Ben Walsh
Dec 12, 2012 22:54 UTC

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For the first time, the Fed has explicitly tied its interest rate policy to specific levels of unemployment and inflation. Short-term rates will stay at essentially zero as long as unemployment is above 6.5% and inflation is under 2.5%, the Fed announced today. WaPo’s Neil Irwin says Fed policymakers “unveiled a huge surprise”.

If you’ve been following Chicago Fed president Charles Evans, this policy -- a version of which is known as the “Evans Rule” -- is familiar. The surprise is that Bernanke delivered almost exactly what Evans advocated: monetary policy that is tied to economic conditions, rather than the Gregorian calendar. Jon Hilsenrath and Brian Blackstone point out that the move comes in the context of increasingly coordinated and unprecedented actions by central bankers around the world; this is certainly the latter, if not the former.

Why the historic shift? Because the economy isn’t growing fast enough, and because unemployment is still too high. As Reuters’ Pedro da Costa and Alister Bull note, the Fed cut its growth expectations for next year, and business investment remains weak. Look at Tim Duy’s bleak picture of the American consumer and you can see why the concern is justified. Rates have been at zero since December 2008, which means that one of the few remaining tools the Fed has is setting expectations.

Mark Thoma points out that after decades of rhetoric aimed at controlling inflation by raising rates, the Fed “has too much credibility on inflation” (and, presumably, not enough on unemployment). Pedro da Costa reports that Jan Hatzius, Goldman Sachs’ chief economist, thinks the Fed’s target is “problematic...because the unemployment rate... is an imperfect measure of progress.” Bernanke’s insistence in his press conference that 6.5% unemployment is a guidepost, “not a target” indicates that he knows the headline unemployment rate doesn’t always tell the full story.

from Felix Salmon:

Counterparties: 43 words you can’t say on Facebook

Ben Walsh
Dec 7, 2012 22:59 UTC

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Facebook is unlikely to become your go-to source for corporate announcements any time soon. In July, Netflix CEO Reed Hastings said on his Facebook page that viewers had watched over one billion hours of video using his company’s service in June. Now, the SEC may bring a civil suit against the company for improperly disclosing that information.

As the NYT’s Michael de la Merced reports, the regulator is “concerned that the post violated the Regulation Fair Disclosure rule...which requires a company to announce information that is material to its business to all investors at the same time”.

from Felix Salmon:

Counterparties: Return of the Mac

Ben Walsh
Dec 6, 2012 23:27 UTC

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American manufacturing has gained boosters recently, with politicians from President Obama to Rick Santorum championing its merits. The Atlantic’s current cover proclaims “Comeback”. Even Apple -- the epitome of the Made-in-China multinational -- is bringing a mini portion of its manufacturing back to the US: CEO Tim Cook says that “next year, we will do one of our existing Mac lines in the United States”.

Cook’s announcement, which came in the form of an interview with Businessweek, is a savvy move by a company that has faced questions about its reliance on an overseas suppply chain. Still, it’s not much of a homecoming. The FT’s Tim Bradshaw, looking at the $100 million that Cook says he will invest in US manufacturing, notes that it pales in comparison to the billions Apple has invested in Asian manufacturing in the last year alone.

from Felix Salmon:

Counterparties: A series of unfortunate repositioning actions

Ben Walsh
Dec 5, 2012 23:27 UTC

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Citigroup will fire 11,000 employees as part of a “series of repositioning actions”. The full press release is a meticulously assembled monument to business-speak. If only its first paragraph, appropriately skewered by Derek Thompson, could be laughed off as parody instead of pink slips for 4% of the company’s workers:

Citigroup today announced a series of repositioning actions that will further reduce expenses and improve efficiency across the company while maintaining Citi's unique capabilities to serve clients, especially in the emerging markets. These actions will result in increased business efficiency, streamlined operations and an optimized consumer footprint across geographies.

from Felix Salmon:

Counterparties

Ben Walsh
Dec 4, 2012 23:25 UTC

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President Obama said in an interview with Bloomberg today that to reach a deal on the fiscal cliff, “we’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it”. The President pushed back against a proposal from Speaker Boehner, saying an insistence on tax increases is “not me being stubborn; it's not me being partisan. It's just a matter of math”.

Josh Barro was not impressed by Obama’s comments:

The President’s frame on what the fiscal cliff is is completely wrong. The fiscal cliff is an austerity crisis...we are going to have tax increases and spending cuts that are going to drag down the economy in 2013 if they are not reversed. [The President’s] top priority going forward is a tax increase...but raising taxes has nothing to do with relieving austerity. And then what he talks about giving in exchange for that is entitlement cuts.

from Felix Salmon:

Counterparties: Greece’s latest bond deal

Ben Walsh
Dec 3, 2012 23:36 UTC

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Greece is buying back €10 billion of bonds it issued earlier this year, at between 30% and 40% of face value. As Landon Thomas notes, the expected average price of 32-34 cents on the euro represents a “premium of 4 cents above the level where the bonds traded at the end of last week”.

The program is part of the agreement Greece reached on November 27 to decrease its debt burden to 124% of GDP by 2020. That agreement allowed Greece to remain on track to receive more than €40 billion in vitally needed aid.

from Felix Salmon:

Counterparties: Why your house is getting more valuable

Ben Walsh
Nov 30, 2012 22:38 UTC

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Two things you don’t expect to see together are the nation’s highest foreclosure rate and a housing shortage. Yet as Bloomberg’s John Gittelsohn and Prashant Gopal report, that’s exactly what Stockton, California is experiencing right now. While there are lots of foreclosures, they’re not happening at heavily-discounted prices. “People see a foreclosed home for sale in this area and they’re going to jump on it”, said one longtime Stockton realtor.

There’s also evidence that Obama administration’s much-maligned foreclosure relief program is now picking up pace. Susan Wachter, a Wharton professor, was particularly impressed:

from Felix Salmon:

Counterparties: Inflate your turkeys

Ben Walsh
Nov 21, 2012 22:14 UTC

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Thanksgiving is getting more expensive. The WSJ’s Ian Berry reports that wholesale turkey prices are up 26%, on the East Coast, compared to last year. That’s far above the modest increases in other food prices.

As Ben Bernanke noted in his speech at the New York Economic Club yesterday, for most consumers, short-term commodity price spikes don’t translate into higher grocery bills. Despite “the increase in farm prices brought on by this summer's drought”, he said consumer price increases have averaged “almost exactly 2%”. Turkey is an exception, Berry says, thanks to the peculiarities of a seasonal, capital-intensive industry loathe to expand production in the aftermath of the 2008 recession.

from Felix Salmon:

Counterparties: We know what the fiscal deal will look like

Ben Walsh
Nov 19, 2012 22:57 UTC

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The fiscal cliff has already found at least one victim, the WSJ reports: “half of the nation's 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next”.

Investors and small business owners, the NYT reports, are worried about about things like higher capital gains taxes -- one lawyer says he’s never seen such a “flood of desire and action to transfer a business and cash out”. For big companies, meanwhile, there’s $150 billion worth of corporate tax breaks to fret about.

from Felix Salmon:

Counterparties: When climate change gets fiscal

Ben Walsh
Nov 15, 2012 22:43 UTC

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Neither candidate paid much attention to climate change during the presidential election: it wasn’t so much as mentioned in any of the three debates. Then came Superstorm Sandy, Mayor Bloomberg’s climate-motivated endorsement of President Obama, and Businesweek’s mince-no-words cover. There’s also the fiscal cliff (or austerity bomb, if you prefer). What better time to start taxing carbon?

The logic is simple: a carbon tax could raise $1.25 trillion over a decade, and according to Treasury officials, the President could be on board. Even anti-tax crusader Grover Norquist, famous for his pledge to never raise taxes, was open to the idea of a “carbon tax swap” -- until the denialist Koch brothers intervened and Norquist hastily reversed his position.

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