Commentaries
Now raising intellectual capital
from Rolfe Winkler:
Lunchtime Links 1-8
Bank regulators issue interest rate advisory (FFIEC) This may sound boring, but it's rather important. The FFIEC -- a collection of bank regulators including FDIC, OCC, the Fed, OTS and NCUA -- hasn't issued such a warning since 1996. It wants banks to make sure they can handle rising interest rates....which seems to me a HUGE disincentive to lend. 5% mortgages originated today will lose mucho value as rates go back up. This is a huge reason banks "aren't lending," because up is the only direction for rates to go!
Employers unexpectedly cut jobs in December (Mutikani, Reuters) The jobs report is an important catalyst for the dollar and gold. If the employment situation improves, it will be easier for the Fed to tighten (good for dollar, bad for gold). If unemployment stays high, the Fed will keep rates low indefinitely and likely keep printing money to buy assets (bad for dollar, good for gold).
U.S. now renter's market (Timiraos, WSJ) Hooray for deflation! As I'm fond of reminding folks, rents midtown west neighborhood of Manhattan crashed over 20% last year. That's oodles of spending power freed up to pay for other things. Yes, it's probablematic for landlords and the banks to which they owe money. But it's good for the economy overall. Letting house prices fall will have a similar stimulative impact.
Why does it feel worse than reported? (EconomPic Data) Comparing Gross Domestic Product with Gross Domestic Purchases demonstrates how we lived beyond our means for so long and why getting back to equilibrium feels so painful.
Free-trade advocates need to get real
President Barack Obama’s decision to impose safeguard tariffs on imported tyres from China has drawn predictable howls of outrage from economists, think tank staff and editorial writers — none of whom has seen their job exported to China. It would be more constructive if they devoted the same effort to devising ways to compensate losers from globalisation in order to shore up waning public support for trade liberalisation.
Between 2000 and 2008, almost 4 million jobs were lost in U.S. manufacturing (22 percent of the total), many as the result of offshoring and increasing competition from lower-cost manufacturers in China and elsewhere in Asia.
Over the same period, the federal government provided just $1 billion per year in extended unemployment benefits and retraining under the Trade Adjustment Assistance (TAA) programme. In the fiscal year ending September 2008, TAA helped fewer than 100,000 workers who had lost jobs as a result of changing trade patterns.
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The Wall
