● Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly
By John Quiggin
Summary via publisher (Princeton U. Press)
Since 1946, Henry Hazlitt’s bestselling Economics in One Lesson has popularized the belief that economics can be boiled down to one simple lesson: market prices represent the true cost of everything. But one-lesson economics tells only half the story. It can explain why markets often work so well, but it can’t explain why they often fail so badly—or what we should do when they stumble. As Nobel Prize–winning economist Paul Samuelson quipped, “When someone preaches ‘Economics in one lesson,’ I advise: Go back for the second lesson.” In Economics in Two Lessons, John Quiggin teaches both lessons, offering a masterful introduction to the key ideas behind the successes—and failures—of free markets.
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Economic activity increased in the first three months of this at a substantially stronger pace than expected. Most models and analysts underestimated the 3.2% advance in output in Q1, which marks a strong improvement over the 2.2% rise in last year’s Q4. Today’s update effectively puts to rest the fear that recession risk for the US economy was rising in the early months of 2019.
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Bloomberg’s Nir Kaissar is no fan of high-yield bonds. He warns that this slice of fixed income “is likely to be a drag on growth” for the risk portion of portfolios “while including them in non-risk undermines safety. Neither option is appealing.” Even worse, junk bonds don’t offer much diversification “because they’re highly correlated with stocks,” he charges.
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US growth expected to post solid gain in today’s Q1 GDP report: WSJ
Survey of economists: Fed on hold through 2020, no rate cut: Bloomberg
China’s president outlines plans for nat’l economic reform: CNBC
N. Korea’s Kim Jong Un: US acted in ‘bad faith’ at Hanoi summit: CNBC
Mfg activity slows in Fed’s 10th district in April: KC Fed
US jobless claims rose sharply last week but trend still healthy: CNBC
Final GDPNow estimate for Q1 GDP ticks down to +2.7%: Atlanta Fed
Core US durable goods orders for March accelerated to 5.3% 1yr increase:

The US economy continues to show signs of stabilizing at a slower pace of growth, based on a broad set of economic and financial indicators. Although the possibility of a recession can’t be ruled out in the second half of 2019 and beyond, the risk of economic contraction remains low at the moment and for the immediate future.
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Trump vows to fight ‘all the subpoenas’ issued by the House: The Hill
N. Korea’s Kim and Russia’s Putin discuss nuclear stalemate: ABC
Measles cases in US rise to highest since 2000: CNN
Former VP Joe Biden plans to launch run for White House today: Reuters
World’s major insurance firms see US recession by 2020 or 2021: FN
Survey: gov’t and immigration are biggest US challenges: Gallup
Effective Fed funds rate holds at 11yr high of 2.44% for third day: Fed Reserve

The Federal Reserve’s decision in early 2019 to pause on interest rate hikes is widely credited as a key factor in the stock market’s U-turn this year following the sharp correction in equities in late-2018. But the recent uptick in the Effective Federal Funds rate (EFF) suggests that the central bank is still tightening monetary policy and perhaps laying the groundwork for another rate hike.
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Will the Supreme Court’s decision on the Census alter elections? NY Times
ISIS claims responsibility for Sri Lanka bombings: New Yorker
N. Korea’s Kim Jong-un visits Russia for summit with Putin: BBC
Fed’s key interest rate continues to rise: CNBC
UK will reportedly block China’s Huawei from core 5G network: Reuters
New US home sales rose to 1-1/2 year high in March: CNBC
US home prices rose 4.9% year-over-year in February: HousingWire
Fed’s Fifth District mfg activity moderated in April: Richmond Fed
S&P 500 and Nasdaq close at record highs: WSJ

This week’s initial report on US gross domestic product for the first quarter is expected to post a mild slowdown, according to the median nowcast for a set of estimates compiled by The Capital Spectator. Several of the nowcasts foresee a slight pickup in growth and so it’s premature to rule out a degree of firming for Q1. But with some of the estimates calling for the slowdown to continue, it’s safe to say that there’s enough variability in the numbers to keep the crowd guessing until the end of the week, when the Bureau of Economic Analysis publishes its “advance” GDP report on Friday, April 26.
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Social Security’s trust funds projected to nearly run dry in 2035: CNN
Dem presidential candidates divided on question of Trump impeachment: Reuters
Fed may be inclined to tolerate bubble risk to keep expansion alive: Bloomberg
Oil prices rise to 6-month high as Trump Ends waivers for Iran’s crude: WSJ
Herman Cain withdraws from consideration for a seat on Fed board: USA Today
US growth continued to slow in March: Chicago Fed Nat’l Activity Index (3-mo avg):