Jan 30, 2010
It was minus 23 celsius last night, my intake water pipe appears to have frozen and I am busy trying to unthaw it according to my city's engineer's instructions but it seems more appealing to spend a few minutes pondering the state of the global economy and the potential explanations for the crisis we are emerging from. The cure for the crisis so far has been rather Keynesian, a major but not massive injection of state funds into the economy designed to build infrastructure, reverse negative animal spirits and boost aggregate demand. This has been combined with action on the monetary front which most but not all monetarists support, very low interest rates and a good measure of quantitative easing , a policy which I developed in the late 1980s and early 1990s. I called it then temporary monetization of a greater portion of the public debt.
I had presented the idea and the research and articles I had published on the subject to my former L.S.E. supervisor, Meghnad Desai in 1993 in London as a plausible alternative to monetarist strictures on deficit finance but he had dismissed it at the time claiming wrongly that it was both impractical and even illegal and in any case would only spook the financial markets.As he put it to me then," Harold the financial houses all employ Ph.D. economists who will see this as automatically inflationary and act to counteract it. It won't work." Well Desai turned out to be wrong about this as did a number of other economists who had listened to my presentation of the idea at a major conference of business economists in Ottawa in 1994 where I shared a panel with the Canadian associate deputy minister of finance at the time, Don Drummond and who were similarly skeptical. This non inflationary turn around and recovery which has involved significant quantitative easing shows that they were all wrong and that my policy innovation had merit.
But rather than dwell on the difficulties of overcoming conventional wisdom lets explore for a moment the roots of the current crisis. It began in the housing market bubble which rather swiftly drew in the bulk of the financial industry and the major investment banks on Wall Street. If you are a Hayekian you would quickly seize on this and argue with some justification that this is precisely what Hayek predicts. Overinvestment occurs because the interest rate is reduced below the natural rate in a Wicksellian sense. this leads to a bubble which then bursts as the expected investment return does not materialize and the burst bubble creates a depression or deep recession. So far so good.
But , the problem with Hayek's rather intriguing theory of the cycle is that once the bubble has burst raising interest rates as Hayek appears to propose won't cure the problem. Nor will discouraging investment or consumption accomplish what we want.Furthermore, the low interest rates were introduced because of the legitimate fear of deflation after the crisis of 9/11. Still Hayek's ideas are worth exploring.
Hyman Minsky draws upon Keynes and his notion of uncertainty but also has Hayekian elements in his analysis of Ponzi or Madoff finance in his brilliant theorization of speculative bubbles that threaten the entire financial system.
Keynes' work argues that declining animal spirits wracked by uncertainty and a structural tendency toward underconsumptionism and disproportionality between savings intentions and investment intentions leading to inadequate aggregate demand are responsible for slumps. He also is a sharp and hands on experienced critic of the irrational speculations of the stock markets and unregulated free for all that they tended to become whenever manias affected them.
His cure of greater regulation of the investment process, a strong dose of deficit financed intervention to push an economy out of depression and a modest redistribution of wealth and income to ensure adequate aggregate demand still seems to be the best cure.
Marx was clearly an Hegelian romantic(although he expressly denies this) but nevertheless a powerful critic of the horrors of Dickensian nineteenth century capitalism. He has an analysis of the tendency of the rate of profit to fall because of the growth in the organic composition of capital(that is the ratio of machinery, plant and embodied technology to the wage portion of output)and the need to extract a higher rate of surplus value to counter that but all bound up with the very abstract labour theory of value. The transformation problem still bedevils his analysis. Bohm Bawerk wrote a trenchant critique of Marx's method which was first published in 1896.Marx drew his analysis of the labour theory of value directly from David Ricardo in his work the principles of Political Economy and Taxation. Ricardo ideas about free trade, the doctrine of comparative advantage and free competion came to dominate the economics profession. But his labour theory of value clearly articulated in the first chapter of his great work was eclipsed by neo classical marginal utility theory developed by Carl Menger, Alfred Marshall, Leon Walras and Stanley Jevons in the late 19th and early twentieth century. Ricardo put the matter boldly drawing from the work of Adam Smith before him:
"The real price of everything" says Adam Smith, "what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it...Labour was the first price-the original purchase money that was paid for all things....It is natural that what is usually the produce of two days' or two hour's labour should be worth double of what is usually the produce of one day's or one hour's labour." that this is really the foundation of the exchangeable value of all things,excepting those that cannot be increased by human industry is a doctrine of the utmost importance in political economy. ..if the quantity of labour realised in commodities regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is excercised and every diminuation must lower it." (pp6-7 The Principles of Political Economy and Taxation London, Everyman Library, 1965.)
Ladislaus Von Bortkiewicz sought to show the errors in Marx's treatment of the transformation problem in 1907.(See Bohm -Bawerk, Karl Marx and the close of his system and Bohm Bawerk's criticism of Marx, by Rudolf Hilferding with an appendix by Ladislaus von Bortkiewicz, On the correction of Marx's fundamental theoretical construction in the third volume of capital; edited by Paul Sweezy, 1975, the Merlin Press.) Bohm -Bawerk was an advocate along with Carl Menger of the then new subjective value theory based upon the concept of marginal utility. He was also Austrian finance minister in three different Austrian governments. He finished his career as a chaired professor in political economy at the University of Vienna.He was a founder of the Austrian school to which Hayek belonged.Von Bortkiewicz , on the other hand , was a statistician who spent much of his life working in Germany although he was from a Russified Polish family. He was appointed to the University of Berlin in 1901 and taught there until his death in 1931.
Thomas Sowell( ''Marx's Capital after 100 years'' Canadian Journal of Economics, vol.33, 1967,pp.50-74) and others have argued that Marx understood that capitalism functioned on the basis of exchange prices and not on the basis of value and that his intention was always to show that prices diverged from value and that in so doing periodic crises, disproportionalities and booms and busts and financial bubbles would characterize the system.As Sowell puts it:''When the inherent disproportionalities of capitalism reach sufficient magnitudes, price fluctuations become great enough to precipitate scrambles for liquidity in sectors threatened with bankruptcies; this in turn leads to general monetary contraction and depression. A growing capital:labour ratio in the economy means that the workers' share of gross output declines over time...''
Desai (Marx's Revenge, p.64)argues that Anwar Shaikh has demonstrated empirically that although values do not transform precisely into prices there is empirical evidence that suggests despite some discrepancies , if properly calculated for a representative list of products using an input output model there is a rough correlation between the two at least for Italy and the U.S. between 1947 and 1963. But clearly profits come not just from labour but from information technology and other innovations that greatly enhance labour productivity including managerial innovation including self -management.They may themselves have their origin in labour but they present themselves in a different identity in the contemporary production process. Still the issue is complex and subject to considerable debate.
However, Marx did fairly accurately predict globalized capitalism and as Desai points out in his work Marx's Revenge he rather welcomed it as eventually delivering both higher productivity and material wealth and with the appropriate societal changes a better form of civilization.
If over time globalized corporations under the pressure of requiring higher rates of profit continue to outsource their production to lower wage economies outside of the core countries and thereby undermine the Keynesian prescription which is , after all, based on increased aggregate demand and fuller employment in the core then some serious thought will have to be given to the questions raised by these different theoretical approaches.At the very least the regulatory framework and the design of tax benefits and tax breaks for corporate employers will need to have some employment conditions attached to them. Otherwise , the recovery will be a hollow one.
In the meantime the debate over the causes and solutions to the crisis will continue. It is a debate worth having.
Wednesday, October 27, 2010
DEC. 2009 U.S public sector debt data
The U.S. treasury publishes on a monthly basis the totals of marketable and non marketable public debt outstanding. It divides the debt between debt held by the public and debt held intragovernmentally by federal, state and local government agencies.The data is provided by the U.S. bureau of the public debt and examining the data can clear up some of the misconceptions that people commonly hold about the debt. For those that hold the debt it is an asset, not a liability.
Here is the data for December 2009, courtesy of the U.S. treasury.
All data is in millions of U.S. dollars
Marketable debt held by the public. 1. Intra governmental holdings 2.
1. 2.
bills 1,787,913 5567
notes 4,179,412 1696
bonds 714,672 3259
treasury inflation protected
securities 567,851 205
federal financing bank 0 11,921
total 7,249,848 22,465
grand total 7,272,498
marketable
bills 1,799,480
notes 4,181,108
bonds 717,931
treas.inflationprotected
securities 568,055
fed.financing bank 11,921
Total marketable 7,272,496
non marketable total
domestic series 29,995
foreign series 4386
REA series 1
state and local govt.series 214,199
U.S.sav.securities 191,298
govt. acct. series 4,597,132
Hope bonds 492
other 1411
Total non marketable 5,038,853
Total public debt
outstanding 12,311,350
The most important insight to draw from this data is that 40.9 % of the debt is not in the form of marketable debt . 4.5 trillion dollars or 36.6 % is held intragovernmentally by local, state and Federal agencies.Hence, the pressure on financial markets is smaller than what critics allege.
Here is the data for December 2009, courtesy of the U.S. treasury.
All data is in millions of U.S. dollars
Marketable debt held by the public. 1. Intra governmental holdings 2.
1. 2.
bills 1,787,913 5567
notes 4,179,412 1696
bonds 714,672 3259
treasury inflation protected
securities 567,851 205
federal financing bank 0 11,921
total 7,249,848 22,465
grand total 7,272,498
marketable
bills 1,799,480
notes 4,181,108
bonds 717,931
treas.inflationprotected
securities 568,055
fed.financing bank 11,921
Total marketable 7,272,496
non marketable total
domestic series 29,995
foreign series 4386
REA series 1
state and local govt.series 214,199
U.S.sav.securities 191,298
govt. acct. series 4,597,132
Hope bonds 492
other 1411
Total non marketable 5,038,853
Total public debt
outstanding 12,311,350
The most important insight to draw from this data is that 40.9 % of the debt is not in the form of marketable debt . 4.5 trillion dollars or 36.6 % is held intragovernmentally by local, state and Federal agencies.Hence, the pressure on financial markets is smaller than what critics allege.
Obama to announce deficit reduction cuts ?Bad idea
January 25, 2010 8:29 p.m.
According to CNN President Obama will announce spending restraint measures in an effort to appeal to Republicans, fiscal conservatives, blue dog Democrats and other fiscally conservative independent voters . He is doing so apparently in response to his political defeat in Massachusetts and growing pressure from fiscal conservatives in his inner circle. It is a bad idea and a slippery slope to the hell of cutbacks, slower recovery from the recession and red meat for reactionary political interests in the U.S. It is also not what he got elected to accomplish. There will be and there should be a strong negative reaction from mainstream liberal democrats, the trade unions and community activists who after all are largely responsible through their hard work on the ground for his election in 2008.
In addition in purely economic terms it will not help the recovery and withdraw stimulus from the economy. The amount initially is fairly symbolic rather than substantial but it is the thin edge of the wedge. You can be sure the amount will not appease the Republicans and demands for far greater cuts will quickly materialize.Fiscal conservatism is a bit like poison ivy once you get it it spreads rapidly.
The solution to deficit reduction is to reduce the unemployment rate as swiftly as possible and continue to keep interest rates as low as possible. low interest rates stimulate investment and reduce the burden of the interest payment on the debt.This leads over time to the shrinking of the debt to GDP ratio and a slow down in the rise in the deficit and its eventual shrinking.Remember also that the bulk of the debt, over 70 % of it, is financed domestically and represents a method of channeling domestic savings into domestic investment, a critical function during a slump.
The debt shrinks in relative terms because as the economy begins to grow again the ratio of the debt to GDP stabilizes and then falls.In arithmetic terms the denominator, the GDP, grows faster than the numerator , the mass of debt. This is because as job losses end and new jobs are created and rehiring begins, unemployment shrinks, and government expenditures to support the unemployed also falls and the newly employed formerly unemployed people now pay taxes to governments.Hence revenues rise, expenditures shrink and deficits fall.
There is no reason in this 10 % unemployment economy to focus on deficit reduction through budget cuts which can only slow the reduction in the unemployment rate. There is however every reason to focus on stimulus, employment generation and building entrepreneurial animal spirits to undertake new employment generating investments.Cutting government expenditures accomplishes none of this.
According to CNN President Obama will announce spending restraint measures in an effort to appeal to Republicans, fiscal conservatives, blue dog Democrats and other fiscally conservative independent voters . He is doing so apparently in response to his political defeat in Massachusetts and growing pressure from fiscal conservatives in his inner circle. It is a bad idea and a slippery slope to the hell of cutbacks, slower recovery from the recession and red meat for reactionary political interests in the U.S. It is also not what he got elected to accomplish. There will be and there should be a strong negative reaction from mainstream liberal democrats, the trade unions and community activists who after all are largely responsible through their hard work on the ground for his election in 2008.
In addition in purely economic terms it will not help the recovery and withdraw stimulus from the economy. The amount initially is fairly symbolic rather than substantial but it is the thin edge of the wedge. You can be sure the amount will not appease the Republicans and demands for far greater cuts will quickly materialize.Fiscal conservatism is a bit like poison ivy once you get it it spreads rapidly.
The solution to deficit reduction is to reduce the unemployment rate as swiftly as possible and continue to keep interest rates as low as possible. low interest rates stimulate investment and reduce the burden of the interest payment on the debt.This leads over time to the shrinking of the debt to GDP ratio and a slow down in the rise in the deficit and its eventual shrinking.Remember also that the bulk of the debt, over 70 % of it, is financed domestically and represents a method of channeling domestic savings into domestic investment, a critical function during a slump.
The debt shrinks in relative terms because as the economy begins to grow again the ratio of the debt to GDP stabilizes and then falls.In arithmetic terms the denominator, the GDP, grows faster than the numerator , the mass of debt. This is because as job losses end and new jobs are created and rehiring begins, unemployment shrinks, and government expenditures to support the unemployed also falls and the newly employed formerly unemployed people now pay taxes to governments.Hence revenues rise, expenditures shrink and deficits fall.
There is no reason in this 10 % unemployment economy to focus on deficit reduction through budget cuts which can only slow the reduction in the unemployment rate. There is however every reason to focus on stimulus, employment generation and building entrepreneurial animal spirits to undertake new employment generating investments.Cutting government expenditures accomplishes none of this.
U.S. state unemployment Dec. 09
Jan. 22, 2010
The U.S. bureau of Labour statistics has released data on unemployment for states and regions for Dec. 2009. The national rate remains at 10.0 % but a number of states continue to have unemployment rates well in excess of 10 %. This , of course, is the source of considerable hardship for Americans as it is for anyone . The rates are clearly far too high and need to be reduced as quickly as possible. Deficit reduction should not be the priority whatever the political popularity of this slogan. Deficits fall when unemployment falls. Growth and growth in employment is the key to deficit reduction. Over time as employment grows and unemployment rate falls toward more reasonable values ( 4-5 % or below) deficits shrink as tax revenues grow and the cynical politics of fiscal conservatism which seek to gain political advantage on the backs of the poor and the unemployed and the sick retreat.
Here courtesy of the excellent U.S. Bureau of Labour Statistics are some excerpts from their release.
U.S. REGIONAL AND STATE EMPLOYMENT AND UNEMPLOYMENT -- DECEMBER 2009
Regional and state unemployment rates were generally higher in
December. Forty-three states and the District of Columbia recorded
over-the-month unemployment rate increases, four states registered
rate decreases, and three states had no rate change, the U.S. Bureau
of Labor Statistics reported today. Over the year, jobless rates
increased in all 50 states and the District of Columbia. The national
unemployment rate was unchanged in December at 10.0 percent but was
2.6 percentage points higher than a year earlier.
In December, nonfarm payroll employment increased in 11 states and
the District of Columbia and decreased in 39 states. The largest over-
the-month increase in employment occurred in Virginia (+9,500), fol-
lowed by Oklahoma (+5,000), Oregon (+2,900), New Hampshire and Washington (+2,000 each). New Hampshire, Oklahoma, and Virginia experienced the largest over-the-month percentage increase in employment
(+0.3 percent each), followed by the District of Columbia, Hawaii,
and Oregon (+0.2 percent each). The largest over-the-month decrease
in employment occurred in California (-38,800), followed by Texas
(-23,900), Ohio (-16,700), Illinois (-16,300), Michigan (-15,700),
Wisconsin (-15,200), and Georgia (-15,100). Montana (-1.5 percent)
experienced the largest over-the-month percentage decrease in employ-
ment, followed by Nevada (-1.0 percent), Iowa and South Dakota
(-0.9 percent each), and Vermont (-0.8 percent). Over the year, non-
farm employment decreased in all 50 states but increased in the
District of Columbia. The largest over-the-year percentage decreases
occurred in Wyoming (-6.8 percent), Nevada (-6.6 percent), Michigan
(-5.1 percent), and Arizona (-4.8 percent).
Regional Unemployment (Seasonally Adjusted)
The West had the highest regional jobless rate in December, 10.7 per-
cent. The Northeast recorded the lowest rate, 9.2 percent. The North-
east had a statistically significant rate increase over the month
(+0.5 percentage point). The South had the only other significant re-
gional rate change (+0.3 percentage point). Over the year, all four
regions registered significant rate increases, the largest of which
was in the West (+3.3 percentage points). (See table 1.)
Among the nine geographic divisions, the Pacific continued to report
the highest jobless rate, 11.7 percent in December. The East North
Central recorded the next highest rate, 11.3 percent. The West North
Central registered the lowest December jobless rate, 7.3 percent,
followed by the West South Central, 8.0 percent. The South Atlantic
rate (10.3 percent) set a new series high. (All region, division, and
state series begin in 1976.) Five divisions experienced statistically
significant unemployment rate increases from a month earlier, the larg-
est of which were in East South Central and New England (+0.5 per-
centage point each). No division had a rate decrease. All nine divi-
sions reported significant over-the-year rate increases of at least
1.8 percentage points. The largest of these occurred in the East South
Central (+3.8 percentage points) and East North Central (+3.7 points).
State Unemployment (Seasonally Adjusted)
Michigan again recorded the highest unemployment rate among the
states, 14.6 percent in December. The states with the next highest
rates were Nevada, 13.0 percent; Rhode Island, 12.9 percent; and South
Carolina, 12.6 percent. North Dakota continued to register the lowest
jobless rate, 4.4 percent in December, followed by Nebraska and South
Dakota, 4.7 percent each. The rate in South Carolina set a new series
high, as did the rates in three other states: Delaware (9.0 percent),
Florida (11.8 percent), and North Carolina (11.2 percent). The rate in
the District of Columbia also set a new series high (12.1 percent).
In total, 27 states posted jobless rates significantly lower than the
U.S. figure of 10.0 percent, 10 states and the District of Columbia
had measurably higher rates, and 13 states had rates that were not ap-
preciably different from that of the nation. (See tables A and 3.)
Twenty-one states reported statistically significant over-the-month
unemployment rate increases in December. Louisiana and Mississippi
experienced the largest of these (+0.8 percentage point each). One
state, South Dakota, saw a statistically significant rate decrease
from November (-0.2 percentage point). The remaining 28 states and
the District of Columbia registered jobless rates that were not
appreciably different from those of a month earlier, though some
had changes that were at least as large numerically as the signifi-
cant changes. (See table B.)
All states and the District of Columbia recorded statistically sig-
nificant increases in their jobless rates from December 2008. The
largest of these increases were in Nevada and West Virginia (+4.6
percentage points each), closely followed by Alabama (+4.5 points)
and Michigan (+4.4 points). The smallest rate increases occurred in
Minnesota and Nebraska (+0.8 percentage point each). (See table C.)
Table A. States with unemployment rates significantly differ-
ent from that of the U.S., December 2009, seasonally adjusted
--------------------------------------------------------------
State | Rate(p)
--------------------------------------------------------------
United States (1) ...................| 10.0
|
Alaska ..............................| 8.8
Arkansas ............................| 7.7
California ..........................| 12.4
Colorado ............................| 7.5
Connecticut .........................| 8.9
Delaware ............................| 9.0
District of Columbia ................| 12.1
Florida .............................| 11.8
Hawaii ..............................| 6.9
Illinois ............................| 11.1
|
Iowa ................................| 6.6
Kansas ..............................| 6.6
Louisiana ...........................| 7.5
Maine ...............................| 8.3
Maryland ............................| 7.5
Michigan ............................| 14.6
Minnesota ...........................| 7.4
Montana .............................| 6.7
Nebraska ............................| 4.7
Nevada ..............................| 13.0
|
New Hampshire .......................| 7.0
New Mexico ..........................| 8.3
New York ............................| 9.0
North Carolina ......................| 11.2
North Dakota ........................| 4.4
Ohio ................................| 10.9
Oklahoma ............................| 6.6
Oregon ..............................| 11.0
Pennsylvania ........................| 8.9
Rhode Island ........................| 12.9
|
South Carolina ......................| 12.6
South Dakota ........................| 4.7
Texas ...............................| 8.3
Utah ................................| 6.7
Vermont .............................| 6.9
Virginia ............................| 6.9
Wisconsin ...........................| 8.7
Wyoming .............................| 7.5
--------------------------------------------------------------
1 Data are not preliminary.
p = preliminary.
The data clearly shows the very serious nature of this recession and its deep impact in major centre of population throughout the United States. stimulus money that is yet unspent and there are large sums involved here
need to be injected into the economy as soon as possible.
It would be extremely unwise to raise interest rates any time soon and it is imperative that business starts addressing its employment policies with the help of Government wherever necessary and possible to ensure more rapid rehiring and greater job retention in order to reverse the trend of the recessions trough.
It is also essential that the banking system unlocks its commercial loan programs and ensures that credit worthy businesses receive adequate loan support.
We should see in the coming months provided that policy remains supportive improved results on the critical employment front.
The U.S. bureau of Labour statistics has released data on unemployment for states and regions for Dec. 2009. The national rate remains at 10.0 % but a number of states continue to have unemployment rates well in excess of 10 %. This , of course, is the source of considerable hardship for Americans as it is for anyone . The rates are clearly far too high and need to be reduced as quickly as possible. Deficit reduction should not be the priority whatever the political popularity of this slogan. Deficits fall when unemployment falls. Growth and growth in employment is the key to deficit reduction. Over time as employment grows and unemployment rate falls toward more reasonable values ( 4-5 % or below) deficits shrink as tax revenues grow and the cynical politics of fiscal conservatism which seek to gain political advantage on the backs of the poor and the unemployed and the sick retreat.
Here courtesy of the excellent U.S. Bureau of Labour Statistics are some excerpts from their release.
U.S. REGIONAL AND STATE EMPLOYMENT AND UNEMPLOYMENT -- DECEMBER 2009
Regional and state unemployment rates were generally higher in
December. Forty-three states and the District of Columbia recorded
over-the-month unemployment rate increases, four states registered
rate decreases, and three states had no rate change, the U.S. Bureau
of Labor Statistics reported today. Over the year, jobless rates
increased in all 50 states and the District of Columbia. The national
unemployment rate was unchanged in December at 10.0 percent but was
2.6 percentage points higher than a year earlier.
In December, nonfarm payroll employment increased in 11 states and
the District of Columbia and decreased in 39 states. The largest over-
the-month increase in employment occurred in Virginia (+9,500), fol-
lowed by Oklahoma (+5,000), Oregon (+2,900), New Hampshire and Washington (+2,000 each). New Hampshire, Oklahoma, and Virginia experienced the largest over-the-month percentage increase in employment
(+0.3 percent each), followed by the District of Columbia, Hawaii,
and Oregon (+0.2 percent each). The largest over-the-month decrease
in employment occurred in California (-38,800), followed by Texas
(-23,900), Ohio (-16,700), Illinois (-16,300), Michigan (-15,700),
Wisconsin (-15,200), and Georgia (-15,100). Montana (-1.5 percent)
experienced the largest over-the-month percentage decrease in employ-
ment, followed by Nevada (-1.0 percent), Iowa and South Dakota
(-0.9 percent each), and Vermont (-0.8 percent). Over the year, non-
farm employment decreased in all 50 states but increased in the
District of Columbia. The largest over-the-year percentage decreases
occurred in Wyoming (-6.8 percent), Nevada (-6.6 percent), Michigan
(-5.1 percent), and Arizona (-4.8 percent).
Regional Unemployment (Seasonally Adjusted)
The West had the highest regional jobless rate in December, 10.7 per-
cent. The Northeast recorded the lowest rate, 9.2 percent. The North-
east had a statistically significant rate increase over the month
(+0.5 percentage point). The South had the only other significant re-
gional rate change (+0.3 percentage point). Over the year, all four
regions registered significant rate increases, the largest of which
was in the West (+3.3 percentage points). (See table 1.)
Among the nine geographic divisions, the Pacific continued to report
the highest jobless rate, 11.7 percent in December. The East North
Central recorded the next highest rate, 11.3 percent. The West North
Central registered the lowest December jobless rate, 7.3 percent,
followed by the West South Central, 8.0 percent. The South Atlantic
rate (10.3 percent) set a new series high. (All region, division, and
state series begin in 1976.) Five divisions experienced statistically
significant unemployment rate increases from a month earlier, the larg-
est of which were in East South Central and New England (+0.5 per-
centage point each). No division had a rate decrease. All nine divi-
sions reported significant over-the-year rate increases of at least
1.8 percentage points. The largest of these occurred in the East South
Central (+3.8 percentage points) and East North Central (+3.7 points).
State Unemployment (Seasonally Adjusted)
Michigan again recorded the highest unemployment rate among the
states, 14.6 percent in December. The states with the next highest
rates were Nevada, 13.0 percent; Rhode Island, 12.9 percent; and South
Carolina, 12.6 percent. North Dakota continued to register the lowest
jobless rate, 4.4 percent in December, followed by Nebraska and South
Dakota, 4.7 percent each. The rate in South Carolina set a new series
high, as did the rates in three other states: Delaware (9.0 percent),
Florida (11.8 percent), and North Carolina (11.2 percent). The rate in
the District of Columbia also set a new series high (12.1 percent).
In total, 27 states posted jobless rates significantly lower than the
U.S. figure of 10.0 percent, 10 states and the District of Columbia
had measurably higher rates, and 13 states had rates that were not ap-
preciably different from that of the nation. (See tables A and 3.)
Twenty-one states reported statistically significant over-the-month
unemployment rate increases in December. Louisiana and Mississippi
experienced the largest of these (+0.8 percentage point each). One
state, South Dakota, saw a statistically significant rate decrease
from November (-0.2 percentage point). The remaining 28 states and
the District of Columbia registered jobless rates that were not
appreciably different from those of a month earlier, though some
had changes that were at least as large numerically as the signifi-
cant changes. (See table B.)
All states and the District of Columbia recorded statistically sig-
nificant increases in their jobless rates from December 2008. The
largest of these increases were in Nevada and West Virginia (+4.6
percentage points each), closely followed by Alabama (+4.5 points)
and Michigan (+4.4 points). The smallest rate increases occurred in
Minnesota and Nebraska (+0.8 percentage point each). (See table C.)
Table A. States with unemployment rates significantly differ-
ent from that of the U.S., December 2009, seasonally adjusted
--------------------------------------------------------------
State | Rate(p)
--------------------------------------------------------------
United States (1) ...................| 10.0
|
Alaska ..............................| 8.8
Arkansas ............................| 7.7
California ..........................| 12.4
Colorado ............................| 7.5
Connecticut .........................| 8.9
Delaware ............................| 9.0
District of Columbia ................| 12.1
Florida .............................| 11.8
Hawaii ..............................| 6.9
Illinois ............................| 11.1
|
Iowa ................................| 6.6
Kansas ..............................| 6.6
Louisiana ...........................| 7.5
Maine ...............................| 8.3
Maryland ............................| 7.5
Michigan ............................| 14.6
Minnesota ...........................| 7.4
Montana .............................| 6.7
Nebraska ............................| 4.7
Nevada ..............................| 13.0
|
New Hampshire .......................| 7.0
New Mexico ..........................| 8.3
New York ............................| 9.0
North Carolina ......................| 11.2
North Dakota ........................| 4.4
Ohio ................................| 10.9
Oklahoma ............................| 6.6
Oregon ..............................| 11.0
Pennsylvania ........................| 8.9
Rhode Island ........................| 12.9
|
South Carolina ......................| 12.6
South Dakota ........................| 4.7
Texas ...............................| 8.3
Utah ................................| 6.7
Vermont .............................| 6.9
Virginia ............................| 6.9
Wisconsin ...........................| 8.7
Wyoming .............................| 7.5
--------------------------------------------------------------
1 Data are not preliminary.
p = preliminary.
The data clearly shows the very serious nature of this recession and its deep impact in major centre of population throughout the United States. stimulus money that is yet unspent and there are large sums involved here
need to be injected into the economy as soon as possible.
It would be extremely unwise to raise interest rates any time soon and it is imperative that business starts addressing its employment policies with the help of Government wherever necessary and possible to ensure more rapid rehiring and greater job retention in order to reverse the trend of the recessions trough.
It is also essential that the banking system unlocks its commercial loan programs and ensures that credit worthy businesses receive adequate loan support.
We should see in the coming months provided that policy remains supportive improved results on the critical employment front.
Taxing the banks& mythical debt burdens
January 18, 2010
The Haiti rescue operation continues to do its life saving work. We wish them well and urge you to help out with whatever cash donation you can manage.
On another front President Barack Obama has recently announced a tax on the banks to help recover some of the money that the American government gave to the banks during the height of the financial crisis. The money is to be
collected from the banks over the next ten years and will total close to 100 billion dollars. The move will prove to be politically popular because of the widespread resentment among the American public over the monies that the big banks received, the grotesque nature of their greed inspired bonuses and the fact that they have prospered all the while that the ordinary American has suffered high unemployment, depleted retirement accounts and low wages because of the economic crisis.
The bankers did not help their cause by the testimony of some of their leading CEOs before congress during which they sought to defend their bonus policy behaviour.
However, the danger in any tax of this sort is the capacity of the banks to pass on the tax to their clientele in the form of higher service charges and fees .The biggest banks to which these taxes will apply may well have the market share to ensure the partial shiftability of the tax. The President's economic team will have to monitor the evidence of this shifting over the coming months and years.
On another critical front, politicians in Canada and the U.S. continue to repeat false and misleading statements about the burden of the public debt on future generations.
This burden is largely a myth and reflects considerable confusion on the part of otherwise intelligent politicians about the nature of public debt and how it is financed.
Firstly, most of the debt is financed from domestic savers. It is financed by the sale of treasury bills, bonds and other paper instruments. The generation that buys them rightly sees them as assets. If they have not redeemed them at their death their heirs inherit them. So not only does the next generation inherit the debt but it also inherits the assets that go with the debt. There is no intergenerational burden.It is largely a fiction.
In addition not only does the next generation inherit the interest bearing assets alongside the debt but they inherit the infrastructure that is built and restored by the stimulus that has been financed by the debt as well as benefit from the care and education that their parents' generation spends on them , some of it financed by the stimulus itself.
So this burden is a myth.
The schools, colleges, hospitals , roads, ports and so on built by the stimulus will last and provide value for future generations for decades to come. There is no net burden but there is definitely a large net benefit.
Politicians ought to do their homework more carefully before speaking publicly about these issues.
If they do not find my words convincing enough(I have been saying and writing this sort of thing for the past three decades) simply have a look at an excellent book by Francis X.Cavanaugh,the truth about the National Debt:five myths and one reality, published by Harvard Business School press, 1996.
In particular read the first couple of chapters where he discusses the myth of the burden of public debt on future generations.
His credentials are impeccable. He was the first executive director and CEO of the Federal Retirement Thrift Investment Board. He was also an economist and senior career executive in the U.S. Treasury responsible for debt management policy advice. His book on the subject is one among many worth reading . His perspective coming as it does from a former senior official is particularly valuable.
The Haiti rescue operation continues to do its life saving work. We wish them well and urge you to help out with whatever cash donation you can manage.
On another front President Barack Obama has recently announced a tax on the banks to help recover some of the money that the American government gave to the banks during the height of the financial crisis. The money is to be
collected from the banks over the next ten years and will total close to 100 billion dollars. The move will prove to be politically popular because of the widespread resentment among the American public over the monies that the big banks received, the grotesque nature of their greed inspired bonuses and the fact that they have prospered all the while that the ordinary American has suffered high unemployment, depleted retirement accounts and low wages because of the economic crisis.
The bankers did not help their cause by the testimony of some of their leading CEOs before congress during which they sought to defend their bonus policy behaviour.
However, the danger in any tax of this sort is the capacity of the banks to pass on the tax to their clientele in the form of higher service charges and fees .The biggest banks to which these taxes will apply may well have the market share to ensure the partial shiftability of the tax. The President's economic team will have to monitor the evidence of this shifting over the coming months and years.
On another critical front, politicians in Canada and the U.S. continue to repeat false and misleading statements about the burden of the public debt on future generations.
This burden is largely a myth and reflects considerable confusion on the part of otherwise intelligent politicians about the nature of public debt and how it is financed.
Firstly, most of the debt is financed from domestic savers. It is financed by the sale of treasury bills, bonds and other paper instruments. The generation that buys them rightly sees them as assets. If they have not redeemed them at their death their heirs inherit them. So not only does the next generation inherit the debt but it also inherits the assets that go with the debt. There is no intergenerational burden.It is largely a fiction.
In addition not only does the next generation inherit the interest bearing assets alongside the debt but they inherit the infrastructure that is built and restored by the stimulus that has been financed by the debt as well as benefit from the care and education that their parents' generation spends on them , some of it financed by the stimulus itself.
So this burden is a myth.
The schools, colleges, hospitals , roads, ports and so on built by the stimulus will last and provide value for future generations for decades to come. There is no net burden but there is definitely a large net benefit.
Politicians ought to do their homework more carefully before speaking publicly about these issues.
If they do not find my words convincing enough(I have been saying and writing this sort of thing for the past three decades) simply have a look at an excellent book by Francis X.Cavanaugh,the truth about the National Debt:five myths and one reality, published by Harvard Business School press, 1996.
In particular read the first couple of chapters where he discusses the myth of the burden of public debt on future generations.
His credentials are impeccable. He was the first executive director and CEO of the Federal Retirement Thrift Investment Board. He was also an economist and senior career executive in the U.S. Treasury responsible for debt management policy advice. His book on the subject is one among many worth reading . His perspective coming as it does from a former senior official is particularly valuable.
Unemployment remains elevated in December.
January 9, 2010
Yesterday unemployment data was released by various bureaus of statistics in Canada, the U.S. and Europe. The results while not surprising were nevertheless somewhat disappointing. Instead of a small but significant rise in employment as befits the beginnings of a recovery results were less encouraging. In the U.S. there were a total of 85,000 more job losses . Unemployment remained stable at 10.0 % but only because some 661,000 left the job market and became discouraged workers who had given up looking for work. Had they remained the unemployment rate would have risen to 10.4 %. The broader definition of unemployment that includes discouraged workers and marginally attached workers now stands at 17. 3 % in December up from 17.2 % the month previous.The U.S has now lost 7.2 million jobs since the recession began. The rate of monthly job losses is now a small fraction of what it was at the height of the recession but the net total is still negative. This has to be reversed in the coming months if the recovery is to bear positive fruit for people.
It is time that employers began to hire more workers, that governments spend the stimulus monies that are available to them and that innovative employment generating programs including tax incentives for hiring and to avoid lay-offs are added to the mix of policy options. Combining employment insurance benefits with reduced working time to prevent layoffs is a good temporary idea that has worked well in the past in a number of countries.
In Canada results were also disappointing as the unemployment rate stalled at 8.5 % (8.4 % in Quebec, 9.3 % in Ontario and 6.7% in Alberta which incidentally has the highest labour participation rate in the country at 73.8 % versus only 67 % in Ontario and even less in Quebec. Total employment now stands 323,000 below its October 2008 peak. Any talk of the central bank raising interest rates should be put on the back burner until evidence is firmly established that unemployment rates are dropping below 6 %. and that inflation above 3 % is beginning to appear. We have a way to go before this occurs.
In Europe joblessness rose by 102,000 in the euro-zone countries to bring the total of jobs lost to about 4 million. Unemployment remained elevated, although Germany has recently experienced a small drop in its rate.The unemployment rate for the Euro zone 16 is 10 % for November while the European area 27 countries rate is 9.5 % up from 9.4 5 the previous month October 2009.there are now 15.7 million unemployed in the eurozone and 22.9 million unemployed in the European 27 countries area.Unemployment has risen by 4.97 million in the EA 27 since the start of the recession in 2008. Unemployment is 7.9 % in the U.K., 10 % in France and 7.6 % in Germany. It is 5.2 % in Japan.
So although I have not changed my view that a double dip recession is unlikely it is clear that now is not the time to withdraw stimulus or focus on deficit reduction. The global economy is still in a fragile if improving state.Governments should be certain to ensure that their stimulus programs are being implemented on the ground where it counts.Words are not enough.
Yesterday unemployment data was released by various bureaus of statistics in Canada, the U.S. and Europe. The results while not surprising were nevertheless somewhat disappointing. Instead of a small but significant rise in employment as befits the beginnings of a recovery results were less encouraging. In the U.S. there were a total of 85,000 more job losses . Unemployment remained stable at 10.0 % but only because some 661,000 left the job market and became discouraged workers who had given up looking for work. Had they remained the unemployment rate would have risen to 10.4 %. The broader definition of unemployment that includes discouraged workers and marginally attached workers now stands at 17. 3 % in December up from 17.2 % the month previous.The U.S has now lost 7.2 million jobs since the recession began. The rate of monthly job losses is now a small fraction of what it was at the height of the recession but the net total is still negative. This has to be reversed in the coming months if the recovery is to bear positive fruit for people.
It is time that employers began to hire more workers, that governments spend the stimulus monies that are available to them and that innovative employment generating programs including tax incentives for hiring and to avoid lay-offs are added to the mix of policy options. Combining employment insurance benefits with reduced working time to prevent layoffs is a good temporary idea that has worked well in the past in a number of countries.
In Canada results were also disappointing as the unemployment rate stalled at 8.5 % (8.4 % in Quebec, 9.3 % in Ontario and 6.7% in Alberta which incidentally has the highest labour participation rate in the country at 73.8 % versus only 67 % in Ontario and even less in Quebec. Total employment now stands 323,000 below its October 2008 peak. Any talk of the central bank raising interest rates should be put on the back burner until evidence is firmly established that unemployment rates are dropping below 6 %. and that inflation above 3 % is beginning to appear. We have a way to go before this occurs.
In Europe joblessness rose by 102,000 in the euro-zone countries to bring the total of jobs lost to about 4 million. Unemployment remained elevated, although Germany has recently experienced a small drop in its rate.The unemployment rate for the Euro zone 16 is 10 % for November while the European area 27 countries rate is 9.5 % up from 9.4 5 the previous month October 2009.there are now 15.7 million unemployed in the eurozone and 22.9 million unemployed in the European 27 countries area.Unemployment has risen by 4.97 million in the EA 27 since the start of the recession in 2008. Unemployment is 7.9 % in the U.K., 10 % in France and 7.6 % in Germany. It is 5.2 % in Japan.
So although I have not changed my view that a double dip recession is unlikely it is clear that now is not the time to withdraw stimulus or focus on deficit reduction. The global economy is still in a fragile if improving state.Governments should be certain to ensure that their stimulus programs are being implemented on the ground where it counts.Words are not enough.
Keynesian revival ends year on upturn
December 28, 2009
I have been digging myself out from under grading a mountain of exams and essays as well as some snow and also enjoying the holiday season. This most extraordinary year is now drawing to a close. On the economic front the near catastrophe that was unveiled in 2008 has now been stopped and the reversal back to economic growth and falling unemployment is now either underway or about to materialize in most of the global economy. Stock markets continue to rise overall although considerable nervousness remains. Job losses have slowed dramatically and retail sales show signs of improving. Tarp monies have substantially been repaid and some cautious optimism is returning.None of this would have been possible if governments world wide had not rediscovered the clear virtues of Keynesian economics. His return to prominence was long overdue.The global meltdown and panic that ensued created the right circumstances for the return of his ideas in a way that he would have found deeply gratifying after so many years of foolish neglect by most but not all of the economics profession.
Neo-con and neo-liberal politicians are now either silent or actively rooting for a continued slump to rescue their ideological baggage from the rubbbish heap to which the crash consigned them.Fiscal conservatives are still plentiful but their damaging advice on balanced budgets at all times is now less influential.
Of course, not all of these neo-con ideas were totally wrong. Bureaucracy and arbitrary rule are still problems . The state must be counterweighed by responsible market actors wherever possible. Entrepreneurship and innovation are important.Human rights and individual liberty are still important values. But the extreme ideology of laissez-faire has been correctly discarded for the balanced middle way that respects both markets and human dignity, security and stability as well as growth and prosperity.
We shall see what the new year brings but for the moment things are much better than they were 12 months ago. I expect them to continue to improve.
I have been digging myself out from under grading a mountain of exams and essays as well as some snow and also enjoying the holiday season. This most extraordinary year is now drawing to a close. On the economic front the near catastrophe that was unveiled in 2008 has now been stopped and the reversal back to economic growth and falling unemployment is now either underway or about to materialize in most of the global economy. Stock markets continue to rise overall although considerable nervousness remains. Job losses have slowed dramatically and retail sales show signs of improving. Tarp monies have substantially been repaid and some cautious optimism is returning.None of this would have been possible if governments world wide had not rediscovered the clear virtues of Keynesian economics. His return to prominence was long overdue.The global meltdown and panic that ensued created the right circumstances for the return of his ideas in a way that he would have found deeply gratifying after so many years of foolish neglect by most but not all of the economics profession.
Neo-con and neo-liberal politicians are now either silent or actively rooting for a continued slump to rescue their ideological baggage from the rubbbish heap to which the crash consigned them.Fiscal conservatives are still plentiful but their damaging advice on balanced budgets at all times is now less influential.
Of course, not all of these neo-con ideas were totally wrong. Bureaucracy and arbitrary rule are still problems . The state must be counterweighed by responsible market actors wherever possible. Entrepreneurship and innovation are important.Human rights and individual liberty are still important values. But the extreme ideology of laissez-faire has been correctly discarded for the balanced middle way that respects both markets and human dignity, security and stability as well as growth and prosperity.
We shall see what the new year brings but for the moment things are much better than they were 12 months ago. I expect them to continue to improve.
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