Opinion

Ben Walsh

from Counterparties:

All consuming inflation

Ben Walsh
Oct 28, 2013 21:56 UTC

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Why, during the Great Recession, with a sputtering economy and increased unemployment, didn’t prices fall in the US? Instead, prices have risen, albeit much slower than normal. A new paper by economists Olivier Coibion and Yuriy Gorodnichenko puts that question in more precise, academic terms: why has the US had really low levels of inflation, when instead, they assert, economic theory says there should have been disinflation (falling prices)?

The reason prices didn’t fall in the Great Recession, the researchers find, is that businesses follow households’ lead on inflation expectations. And households have an unorthodox way of setting their inflation expectations: they pay a lot of attention to gas prices, which rose after the financial crisis. This is a marked difference from how academics and businesses gauge inflation: they intentionally exclude oil prices from their primary inflation metrics, in part because they are so volatile.

Coibion and Gorodnichenko’s findings suggest a new relationship between consumer inflation expectations and unemployment. Previously, both business and consumer inflation expectations and unemployment had been strongly correlated. But in the Great Recession, this relationship broke down. Unemployment increased dramatically, and inflation stayed higher than predicted.

James Hamilton writes that the researchers’ findings are a significant update to economic thinking on inflation. “For nearly a century, many economists have viewed variation in the unemployment rate as a key determinant of why inflation is higher in some years than in others,” he writes. Then the 1970s happened, and economists began to pay more attention to inflation expectations.

from Counterparties:

You can’t wish away QE

Ben Walsh
Oct 23, 2013 22:13 UTC

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Beyond being released on a Tuesday, there wasn’t much interesting about yesterday’s mildly disappointing report that showed the economy added 148,000 jobs in September. With the debt ceiling standoff in the past (or at least on hold until February), the focus was back on the taper.

Jon Hilsenrath thinks the weak jobs number “assures that the Fed won’t act at its October 29-30 policy meeting” and “this raises the bar to action in December”, because by then we will have better information about how the shutdown affected the economy. Hilsenrath argues that the Fed is in a bind because it has tied its policies to the unemployment rate:

Part time work in America

Ben Walsh
Oct 23, 2013 13:53 UTC

After the financial crisis, the number of Americans who want full time jobs but are stuck in part time jobs rose sharply. In recent months, however, America’s workforce has slowly moved away from part time work.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What’s behind the increase? America’s still-not-quite-there-yet recovery. Here’s the NYT’s Catherine Rampell:

When the recession began, 16.9 percent of those working usually worked part time. That share rose sharply in 2008 and 2009 and has not fallen much since then. Today the share of workers with part-time jobs is 19.2 percent. This would not be so troubling if people were electing to work fewer hours. But that is not the case. Basically all of the growth in part-time workers has been among people reluctantly working few hours because of either slack business conditions or an inability to find a full-time job.

from Counterparties:

Greenspan shrugged off

Ben Walsh
Oct 21, 2013 22:12 UTC

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Based on the reviews of his new book “The Map and The Territory”, Alan Greenspan’s stock has fallen precipitously since he left the Federal Reserve to widespread acclaim in 2006.

Bloomberg’s Daniel Akst calls the book infuriating, writing that the “plodding text oscillates maddeningly between equivocation and chutzpah”. Akst slams Greenspan for calling the financial crisis “almost universally unanticipated”, despite what Akst says were “a host of indicators that were pointing to trouble”. Akst is frustrated that despite the book’s subtitle (“Risk, Human Nature, and the Future of Forecasting”), and the author’s self-professed expertise in economic forecasting, how Greenspan could have not seen danger ahead is barely explored. Furthermore, Greenspan’s claimed concern for federal deficits is undercut, Akst writes, by his endorsement of both of President Bush’s rounds of tax cuts.

from Counterparties:

Twitter economics

Ben Walsh
Oct 16, 2013 21:57 UTC

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As its mid-November IPO approaches, Twitter is losing money at an accelerating pace. The company’s amended filings show that last quarter it approximately doubled revenues to $168.6 million compared to a year ago, while its net loss more than tripled to $64.6 million. Fortune’s Stephen Gandel digs into the new numbers, and how Twitter changed the way it's booking revenue:

Twitter derives most of its revenue from advertising. Most of the deals it strikes with advertisers are not fixed upfront... Twitter says that in most instances it only counts the revenue from a deal after the services have been delivered and the company knows how much it will get paid. But it says in some more complicated deals, it resorts to estimating what it might get paid.

from Counterparties:

Janet Yellen, in other people’s words

Ben Walsh
Oct 9, 2013 22:15 UTC

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Janet Yellen today accepted the President's nomination to be the next chair of the Federal Reserve. We're here to help you get up to speed:

"Yellen continued her tradition of standing in the cafeteria lunch line with the proletariat and eating with the staff." - Bloomberg Businessweek

from Counterparties:

Emerging slowdown

Ben Walsh
Oct 8, 2013 21:34 UTC

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The IMF’s latest projections on the fate of the world economy are out: if you’re interested in 249 pages of “Transitions and Tensions,” which is this year’s theme, read the full report. The shorter version is that the world economy, the IMF writes, is in “low-gear”. The US is engaging in “excessive fiscal consolidation” (read: the sequester and shutdown); Japan’s economy is growing, but fiscal policy should tighten next year; and the Euro area is “tepid.” The Economist breaks the report down in interactive chart form. As Reuters notes, this is the sixth straight time in less than two years that the IMF has cut its global growth forecasts.

Neil Irwin sums up the report in four words: “Not good at all.” The IMF’s global growth projection for 2013 was revised down to 2.9% from 3.2% in July. US growth was also revised down to 2.6% from 2.7%, and Euro growth was revised up the same amount to 1%. Things look even worse in emerging markets: India’s growth projections were slashed by 1.8%, Mexico’s was cut 1.7%, and Russia’s was down 1%. Yesterday, the World Bank also cut its growth forecast for China and East Asia.

from Counterparties:

Following Twitter’s #IPO

Ben Walsh
Oct 4, 2013 21:00 UTC

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Twitter has finally filed public IPO papers, giving the world a look at its financials for the first time. The news sent shares of Tweeter, a home sound system company, up 1,500% at one point simply because its ticker, TWTRQ, can be confused with TWTR, the symbol Twitter will use when it actually does go public. Dan Primack’s sources tell him that will happen on November 8.

The reaction to Twitter’s financial disclosures was a bit more muted. Kara Swisher has a good rundown of the numbers: The company lost $79 million in 2012 on revenue of $317 million, and lost $69 million on $254 million in the first half of this year. Peter Eavis writes that Twitter’s IPO could value the company at $12 billion. Even at Twitter’s August valuation of $9.7 billion, investors valued the company at 22 times revenue, which he says is high for a tech company. Facebook is currently trading at 12 times the revenue analysts project it will earn next year, Eavis adds. Cyrus Sanati argues that Twitter is lagging its rivals in the online ad space, and is simply not ready for Wall Street.

from Counterparties:

Getting highs (and lows) with Bitcoin

Ben Walsh
Oct 3, 2013 22:19 UTC

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The FBI has shut down Silk Road, a website where users could anonymously “buy any drug imaginable”. The site’s founder, Ross Ulbricht (screenname Dread Pirate Roberts), was indicted for narcotics trafficking, computer hacking, money laundering, and allegedly ordering the assassination of two online enemies.

This is all very bad news for the more than 900,000 registered Silk Road users looking to buy illegal goods. Gerry Smith writes that Silk Road copycats are already popping up to fill demand for drugs. But counterintuitively, it’s good news for Bitcoin, argues Kevin Roose:

from Counterparties:

A long home run

Ben Walsh
Sep 24, 2013 21:24 UTC

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It’s been a very, very good first seven months of the year for home prices. The WSJ’s Nick Timiraos notes that home prices rose in the first seven months of 2013 at the fastest rate since 2004, the approximate start of the housing bubble. “The year-to-date gains,” he adds, “are the most eye-opening”:

Prices in July stood 11.2% above the level of December 2012. By contrast, prices in the same period last year were up 5.8%. In 2004, prices rose by 11.3% year-to-date through July.

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