● Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity
By Glenn Hubbard and Peter Navarro
Interview with co-author (Hubbard) via Reuters
In their must-read policy manifesto, “Seeds of Destruction,” Glenn Hubbard and Peter Navarro outline the biggest economic problems facing America and what can be done about them. Hubbard is the former head of the Council of Economic Advisers under George W. Bush and is now dean of Columbia Business School. Navarro, a Democrat, is a business professor at the University of California, Irvine and author of The Coming China Wars
IS IT REALLY THAT EASY?
Will eliminating “financing constraints” create 850,000 jobs? Perhaps, or so a new study advises. “According to our estimates, eliminating financial constraints of small firms could add up to 850,000 jobs to the economy,” asserts a recent paper from the Boston Fed: “Financing Constraints and Unemployment: Evidence from the Great Recession.” This much is clear: the longer the labor market struggles to mint new jobs on a net basis, the stronger the incentive to try almost anything to boost employment creation. Surely there are no silver bullets, but maybe there’s an array of bronze buckshots that add up to something more than a rounding error. Maybe. If so, that suggests that policy makers look for possible solutions in the usual and not-so-usual places. As such, the new Boston Fed research is food for thought.
TALKING ABOUT GOLD…
American Public Media’s “Marketplace” radio show called today to discuss my article on gold in the November issue of The Atlantic. I’m told that my spot airs today, this evening, although the exact time varies based on the local station affiliate. In the New York City region, for instance, the show runs from 6:30-7:00pm tonight on WNYC (FM 93.9/AM 820). When and where will the show air in your neck of the woods? As terrestrial radio folk have advised from time immemorial: Please check your local listings.
UPDATE: The full 30-minute show is archived as a podcast and is transcribed as well. If you’re listening, my spot begins at roughly 19 minutes in.
THE PACE OF CONSUMER PRICE INFLATION IS STILL SLIPPING
Today’s update on September consumer price inflation suggests that the worries about deflation in recent months weren’t misguided. Although consumer prices overall are still rising, the increase is slight. More worrisome is the trend. The annual pace of consumer inflation continues to fade. It’s not a rapid decline, although it’s fairly persistent. Given the macroeconomic backdrop these days (lots of debt and sluggish growth hobbling the economy and labor market), the disinflation trend can’t be dismissed. Until and unless it’s stopped, we know how this movie ends, and it’s not going to be pretty. Fortunately, the central bank still has the power to alter the outcome, but the clock is ticking.
READING ROUNDUP FOR FRIDAY: 10.15.2010
►Emerging-Market Currencies Soar
David Wessel/Wall Street Journal
Currency markets, seeing few signs global financial officials made progress in defusing tensions in last weekend’s talks in Washington, Thursday resumed their seemingly relentless determination to push down the U.S. dollar, particularly against currencies of emerging markets.
►Dollar Weakens Near 15-Year Low Against Yen Before Bernanke Policy Speech
Keith Jenkins and Candice Zachariahs/Bloomberg
The dollar traded near its weakest level in 15 years against the yen before a speech by Federal Reserve Chairman Ben S. Bernanke that may indicate whether the central bank will ease monetary policy further…Bernanke will speak later today at the Boston Fed conference.
ETF FUND OF FUNDS: CHOOSE CAREFULLY
The explosion in ETFs enhances investment strategy options on a number of levels. One is that ETFs that hold a mix of other ETFs is now a growth industry. Indeed, as the population of strategy-specific ETFs rises, so too do the possibilties with ETF fund of funds. But as with any other ETF decision, picking a fund of fund ETF requires attention to detail. There’s already quite a few of these products trading, and more are coming. The strategies range from the exotic to the simple. Predictably, some are worthwhile, some aren’t. The first question for all of these funds: Is there any possibility for value-added management alpha? If the answer is “yes,” then the second question: Is the fee reasonable?
THE GREAT EXPERIMENT ROLLS ON
The Treasury market’s inflation expectations have bounced higher since the end of August, reversing the summer downturn that was driven by worries that deflationary pressures were on the march. Given the precarious nature of the economic rebound, it’s premature to declare the deflationary scare over. But the evidence is certainly looking stronger (or less discouraging) for arguing that the Federal Reserve is ahead of the curve these days rather than behind it.
WHAT’S UP WITH AMERICA’S GOLD?
Inquiring minds want to know. Gold is certainly topical these days. A roaring bull market tends to have that effect. What does the Federal government plan on doing with its stash? Official U.S. reserves are by far the world’s largest. The combination of record prices and a massive 8,000-ton national nest egg inspire a number of questions, some of which I explore in a new article published in the November issue of The Atlantic magazine. Here’s the online version of Uncle Sam’s Mysterious Hoard.
THE NOBEL PRIZE IN ECONOMICS & A FED NOMINEE
It’s not often that an economist is nominated to the Fed, with Senate confirmation still up in the air, and the nominee becomes the co-recipient of the Nobel Prize for Economics. In fact, it’s never happened. It remains to be seen whether winning the Nobel helps or hurts in terms of joining the Fed. But there it is: MIT professor Peter Diamond is awaiting the Senate’s yea or nay. While he’s wondering if the government will be his next employer, he’s picked up what would appear to be a career-boosting prize. Diamond, along with Dale Mortensen (Northwestern University) and Christopher Pissarides (London School of Economics), yesterday were awarded the Nobel in economics for their research on the labor market.
Yesterday’s New York Times story about a huge Minneapolis Ponzi scheme involving currency trading provides some familiar lessons about investing and the finer points of protecting yourself against scams: