Listen to anybody on Capitol Hill, and they’ll tell you that the debt ceiling debate is turning into a complete disaster, with the Republican rank and file such an inchoate mess that it increasingly seems as though no deal will get done at all. Look at the Treasury market, however, where the 10-year bond currently yields something less than 3%, and it looks decidedly sanguine; short-term debt maturing shortly after the drop-dead date of August 2 is similarly unaffected by the news from Washington.
It’s incredibly difficult to work out what is the most depressing part of today’s truly gruesome jobs report. The shrinking number of people in the labor force? The rise in U-6, broad underemployment, to 16.2%? The sharp spike in the newly unemployed? The downward revisions to April and May? The downtick in total hours worked? Maybe it’s the way that people leaving government jobs, for whatever reason, are finding it impossible to find new jobs in the private sector.
I moderated a panel on financial innovation yesterday, about which more when I get the video. But there was a lot of talk of leverage, which is the hidden turbo-charger in a lot of financial innovations, from credit default swaps to structured investment vehicles. And there was a general consensus that if you want to create prosperity and jobs, then leverage is in principle a good thing: more debt means more growth which means more prosperity. For a prime example, see this post from Gregory White, who reckons that whenever household debt is going down rather than up, “the economy will stink.”
Is this jobless recovery a peculiarly American phenomenon? This chart, from a new paper seeking to unentangle cyclical from structural unemployment, would suggest that it possibly is:
What happens if, instead of measuring GDP by adding up all the money spent in the country, you measure it by adding up all the money earned in the country? Theoretically, the two measures are identical, but in practice, there can be differences. Justin Wolfers has this chart:
18 months ago, Groupon didn’t exist. Today, it has over 70 million users in 500-odd different markets, is making more than a billion dollars a year, has dozens if not hundreds of copycat rivals, and is said to be worth as much as $25 billion. What’s going on here? There’s obviously something clever and innovative behind Groupon — but what is it? Given that customers with Groupons are saving lots of money on goods and services, how can this possibly be good for merchants? Is there a catch somewhere? Is TPG’s David Bonderman right when he says that “Groupon doesn’t do anything that four of us with a phone couldn’t do”? Or is there actually something very special about the company?
Have you seen what’s happened to the dollar of late? It’s hitting all-time lows on a trade-weighted index. Must be Ben Bernanke’s fault: him and his QE2. Except it really isn’t. And Mark Dow, today, does a great job of explaining not only why the monetary-policy theory is wrong, but also what the real reasons for dollar weakness are.