Steady as she goes!
Watch for cross winds!
Catch the rising tide!
Economic growth in the U.S. continued, the government reported Thursday, with output expanding by 3.5 percent in the third quarter ended September 30. That was not as strong as the 4.6 percent increase in GDP (Gross Domestic Product) posted for the second quarter, but enough of a healthy sign that regulators' stimulus efforts will ease.
On Wednesday, the Federal Reserve said it would stop its pump-priming efforts in a month, assuming things continue as they have been. However, the Fed also emphasized that it would watch carefully for danger signs, and reserved for itself the notion that it would resume.
That point was emphasized earlier in the week by Fed Vice Chairman Stanley Fischer. who reminded an IMF meeting in Washington that the Fed faces "special challenges" for itself as well as for "the global economy in an increasingly interconnected world."
"A central bank cannot ignore developments beyond its country's borders," Fischer said, "and the Fed is no exception," especially since U.S. Treasury securities are "the world's favorite safe asset."
For this and for many other reasons, the Fed will continue to monitor closely economic developments worldwide, Fischer said.
Thursday, October 30, 2014
A More Perfect Union
There are four elements to a full union of states (or nation-states, for the European Union). Broadly speaking, these elements are fiscal union, monetary union, political union and economic union.
The U.S. to a large extent has all four, despite some rough spots that can still cause friction. The Declaration of Independence in 1776 referred to the "free and independent states" of America, but the first form of government for the new nation, the Articles of Confederation, quickly proved unworkable, so a new Constitution was proposed and adopted with a stronger central government. Later, it took a Civil War to solidify the union politically, and another half-century until the federal government was able to exert its monetary authority over the banking system. And because the Constitution established the federal government as the regulator of interstate commerce, forbidding the individual states from enacting tariffs on goods from other states, economic union was strengthened. Fiscal union was also strengthened by the Constitution, enabling the central government to enact and collect tax revenue for its operations. Previously, the Articles of Confederation required the unanimous approval of the states before the federal government could impose a tax.
Much of this is covered in detail in a working paper from the International Monetary Fund titled "The Making of a Continental Financial System: Lessons for Europe from Early American History," prepared by Vitor Gaspar of the IMF Fiscal Affairs Department.
So while the U.S. has achieved "a more perfect union" through its Constitution of 1789, the 28 members of the European Union have yet to agree on enough of the four elements to fully realize the benefits of a continental union. And unless the EU does this -- centralize monetary policy and get a strong enough central government to dominate fiscal policy -- political union may not survive, especially if fiscal policy (government spending) is still largely set by individual member states.
Currently, Germany's insistence on austerity by other nations as the way to resolve economic problems will stall recovery and may well lead to collapse of the EU.
History details numerous attempts to establish by force a dominant central government. All have failed. One answer, then, has been to establish a more perfect union through economics, removing trade and personal movement barriers among members of the European Union as a first step, then establishing a single currency to facilitate trade.
However, only 18 of the 28 members of the EU have adopted the euro, and the European Central Bank does not yet seem to have sufficient authority to regulate the number of euros put into circulation by the various members, and thus their value.
The U.S. solved this problem early on, designating the federal government as the sole issuer of dollars. Previously, banks in each state could and did issue their own currency, and people in one state would not trust the validity of money from an adjacent state.
So the big question is this: Can Europe have economic union without fiscal, monetary and political union? Or will cultural and linguistic differences, along with historical distrust of neighbors, prevent a full union and bring a return to a fragmented continent and an attempt by one nation to dominate by force?
Many of these issues were resolved long ago in the U.S., even as regional, cultural and language differences remain. And despite the praise by some of America as a "Great Melting Pot," the reality is that it never was. The great strength of America is that it is a kaleidoscope of cultures, with its citizens (most of them, anyway) accepting the many differences of others.
The U.S. to a large extent has all four, despite some rough spots that can still cause friction. The Declaration of Independence in 1776 referred to the "free and independent states" of America, but the first form of government for the new nation, the Articles of Confederation, quickly proved unworkable, so a new Constitution was proposed and adopted with a stronger central government. Later, it took a Civil War to solidify the union politically, and another half-century until the federal government was able to exert its monetary authority over the banking system. And because the Constitution established the federal government as the regulator of interstate commerce, forbidding the individual states from enacting tariffs on goods from other states, economic union was strengthened. Fiscal union was also strengthened by the Constitution, enabling the central government to enact and collect tax revenue for its operations. Previously, the Articles of Confederation required the unanimous approval of the states before the federal government could impose a tax.
Much of this is covered in detail in a working paper from the International Monetary Fund titled "The Making of a Continental Financial System: Lessons for Europe from Early American History," prepared by Vitor Gaspar of the IMF Fiscal Affairs Department.
So while the U.S. has achieved "a more perfect union" through its Constitution of 1789, the 28 members of the European Union have yet to agree on enough of the four elements to fully realize the benefits of a continental union. And unless the EU does this -- centralize monetary policy and get a strong enough central government to dominate fiscal policy -- political union may not survive, especially if fiscal policy (government spending) is still largely set by individual member states.
Currently, Germany's insistence on austerity by other nations as the way to resolve economic problems will stall recovery and may well lead to collapse of the EU.
History details numerous attempts to establish by force a dominant central government. All have failed. One answer, then, has been to establish a more perfect union through economics, removing trade and personal movement barriers among members of the European Union as a first step, then establishing a single currency to facilitate trade.
However, only 18 of the 28 members of the EU have adopted the euro, and the European Central Bank does not yet seem to have sufficient authority to regulate the number of euros put into circulation by the various members, and thus their value.
The U.S. solved this problem early on, designating the federal government as the sole issuer of dollars. Previously, banks in each state could and did issue their own currency, and people in one state would not trust the validity of money from an adjacent state.
So the big question is this: Can Europe have economic union without fiscal, monetary and political union? Or will cultural and linguistic differences, along with historical distrust of neighbors, prevent a full union and bring a return to a fragmented continent and an attempt by one nation to dominate by force?
Many of these issues were resolved long ago in the U.S., even as regional, cultural and language differences remain. And despite the praise by some of America as a "Great Melting Pot," the reality is that it never was. The great strength of America is that it is a kaleidoscope of cultures, with its citizens (most of them, anyway) accepting the many differences of others.
Monday, October 20, 2014
Perspectives
Beware of Absolutes
If it sounds too good to be true, it probably is.
Among image marketers, politicians are especially fond of using terms like only, first, biggest, or "in living memory," without putting the term in any context. For example, there was a time when a senator was regularly referred to as "the only Democrat holding statewide elective office in New Jersey." (This from a reporter who later got a job as a party publicist.) The statement was true. The senator was in fact the only Dem holding statewide elective office. The problem was that there were only three such offices: Governor and two U.S. senators. Other states may also have a lieutenant governor and an elected attorney general, but that brings the total of statewide elective offices to just five.
A major literary magazine fell victim to image marketers when it wrote that "three of the past nine Presidents have come from Texas." Perhaps. But that partly depends on how one defines a Texan. Lyndon B. Johnson certainly qualifies, because he was born in Texas, raised in Texas, and until he became President, represented Texas in Congress. Dwight D. Eisenhower was born in Texas, but grew up in Kansas and left at age 20 for West Point and spent his career in the military. However, if simply being born in Texas is the main qualification, that eliminates George W. Bush, who was born in Connecticut, despite growing up in Texas and serving there as governor.
Moral to journalists: Be suspicious of all claims by political marketers.
Speaking of definitions, keep this in mind when covering the rants of climate change deniers. Climate and weather are not the same thing. Snowstorms almost never hit Miami and South Florida. Likewise, a December temperature of 100 degrees Fahrenheit is highly unlikely for Manitoba, Canada.
Fifty years ago, mockingbirds were rarely seen anywhere north of Virginia. Now, they are common in Northern New Jersey.
Sixty years ago, outdoor ice skating was routine in that same area. Now, ponds rarely freeze over long enough to support skaters.
One hundred years ago, skating on Central Park Lake in Manhattan was a popular winter pastime. You can't do it today.
Climate is the general range of conditions throughout the year. Weather deals with daily changes. The issue, then, is not whether climates are changing around the world, but how much people contribute to that trend.
Reporters and editors too often overplay a story, insisting that it "sizzle." That emphasis, however, neglects the steak. Example: The Y2K so-called "Millennium Bug," which supposedly would crash computer systems worldwide at the stroke of midnight as 1999 ended and the year 2000 began. This "danger" was based on the idea that computers only dated things with the final two digits of a year -- that is "00." Thus, the computer would not know whether the year would become 1900 or something new.
Computer programmers for mortgage and bond issuers noted the problem 30 years earlier, and soon computers were reprogrammed to account for the new year 2000.
That didn't stop the worry warts, however, especially those working for companies marketing software packages to prevent a problem that didn't really exist. Moreover, the doomsayers never did specify whether the Great Computer Crash would occur at midnight Eastern Standard Time, Greenwich Mean Time, or any of the 22 other time zones around the world.
PANIC PERSPECTIVE -- Ebola is a dangerous and deadly disease that has killed thousands in several West African countries, and certainly needs to be dealt with. However, panic in America is misplaced, partly due to excessive one-side media coverage for several weeks. Within the past few days, however, mass media have added this perspective: There has been one (1) fatality due to the disease and two (2) patients diagnosed with Ebola infections. All three cases were in Dallas. The one death was that of a man who contracted the disease in Liberia. The other two cases were nurses who helped to care for the victim before he died.
Population of the U.S. -- more than 300 million. Thousands of Americans die of influenza each year. Many more thousands die of smoking, alcohol, gunshots, obesity, and traffic accidents.
If it sounds too good to be true, it probably is.
Among image marketers, politicians are especially fond of using terms like only, first, biggest, or "in living memory," without putting the term in any context. For example, there was a time when a senator was regularly referred to as "the only Democrat holding statewide elective office in New Jersey." (This from a reporter who later got a job as a party publicist.) The statement was true. The senator was in fact the only Dem holding statewide elective office. The problem was that there were only three such offices: Governor and two U.S. senators. Other states may also have a lieutenant governor and an elected attorney general, but that brings the total of statewide elective offices to just five.
A major literary magazine fell victim to image marketers when it wrote that "three of the past nine Presidents have come from Texas." Perhaps. But that partly depends on how one defines a Texan. Lyndon B. Johnson certainly qualifies, because he was born in Texas, raised in Texas, and until he became President, represented Texas in Congress. Dwight D. Eisenhower was born in Texas, but grew up in Kansas and left at age 20 for West Point and spent his career in the military. However, if simply being born in Texas is the main qualification, that eliminates George W. Bush, who was born in Connecticut, despite growing up in Texas and serving there as governor.
Moral to journalists: Be suspicious of all claims by political marketers.
Speaking of definitions, keep this in mind when covering the rants of climate change deniers. Climate and weather are not the same thing. Snowstorms almost never hit Miami and South Florida. Likewise, a December temperature of 100 degrees Fahrenheit is highly unlikely for Manitoba, Canada.
Fifty years ago, mockingbirds were rarely seen anywhere north of Virginia. Now, they are common in Northern New Jersey.
Sixty years ago, outdoor ice skating was routine in that same area. Now, ponds rarely freeze over long enough to support skaters.
One hundred years ago, skating on Central Park Lake in Manhattan was a popular winter pastime. You can't do it today.
Climate is the general range of conditions throughout the year. Weather deals with daily changes. The issue, then, is not whether climates are changing around the world, but how much people contribute to that trend.
Reporters and editors too often overplay a story, insisting that it "sizzle." That emphasis, however, neglects the steak. Example: The Y2K so-called "Millennium Bug," which supposedly would crash computer systems worldwide at the stroke of midnight as 1999 ended and the year 2000 began. This "danger" was based on the idea that computers only dated things with the final two digits of a year -- that is "00." Thus, the computer would not know whether the year would become 1900 or something new.
Computer programmers for mortgage and bond issuers noted the problem 30 years earlier, and soon computers were reprogrammed to account for the new year 2000.
That didn't stop the worry warts, however, especially those working for companies marketing software packages to prevent a problem that didn't really exist. Moreover, the doomsayers never did specify whether the Great Computer Crash would occur at midnight Eastern Standard Time, Greenwich Mean Time, or any of the 22 other time zones around the world.
PANIC PERSPECTIVE -- Ebola is a dangerous and deadly disease that has killed thousands in several West African countries, and certainly needs to be dealt with. However, panic in America is misplaced, partly due to excessive one-side media coverage for several weeks. Within the past few days, however, mass media have added this perspective: There has been one (1) fatality due to the disease and two (2) patients diagnosed with Ebola infections. All three cases were in Dallas. The one death was that of a man who contracted the disease in Liberia. The other two cases were nurses who helped to care for the victim before he died.
Population of the U.S. -- more than 300 million. Thousands of Americans die of influenza each year. Many more thousands die of smoking, alcohol, gunshots, obesity, and traffic accidents.
Friday, October 17, 2014
Beige Blues
Once again, the U.S. Federal Reserve summarized the overall growth in the economy as "mild to moderate" in its Beige Book report. Meanwhile, other economic analyses keep pointing to troubling signs, both in the U.S. and around the world.
One gets suspicious when the same positive term is used so much. It could be true, of course, but it could also mean they're polishing the economic apple, emphasizing what good news they may have and burying the ungood deep in the report.
On the same day that the Fed summary was released, Wall Street posted a major drop in stock indexes, prompting a New York Times reporter to wonder whether investors know something the rest of us don't know. And in Europe, there's a growing revolt against German insistence on a policy of austerity to resolve economic problems. The International Monetary Fund has called for government stimulus via an "infrastructure push" to kickstart the economic engine.
For the moment, there are too many conflicting signals to make a clear call on a trend. All in all, however, the future does not look great. As for those who continue to believe that Wall Street is a barometer of the overall economy, it's important to remember that too many investors trade on fear. That is, an unreasoning fear that drives their buy or sell decisions.
Alan Greenspan a few years ago warned of "irrational exuberance" when the stock market bulls were running. It's also good to bear in mind that irrationality works both ways, and the exuberance may be just illusionary bull.
One gets suspicious when the same positive term is used so much. It could be true, of course, but it could also mean they're polishing the economic apple, emphasizing what good news they may have and burying the ungood deep in the report.
On the same day that the Fed summary was released, Wall Street posted a major drop in stock indexes, prompting a New York Times reporter to wonder whether investors know something the rest of us don't know. And in Europe, there's a growing revolt against German insistence on a policy of austerity to resolve economic problems. The International Monetary Fund has called for government stimulus via an "infrastructure push" to kickstart the economic engine.
For the moment, there are too many conflicting signals to make a clear call on a trend. All in all, however, the future does not look great. As for those who continue to believe that Wall Street is a barometer of the overall economy, it's important to remember that too many investors trade on fear. That is, an unreasoning fear that drives their buy or sell decisions.
Alan Greenspan a few years ago warned of "irrational exuberance" when the stock market bulls were running. It's also good to bear in mind that irrationality works both ways, and the exuberance may be just illusionary bull.
Tuesday, October 7, 2014
Global No Go-Go
"Is a puzzlement," said the king.
Economic growth worldwide is "weak and uneven," with some countries still struggling to pull up from a downturn, according to a report from the International Monetary Fund. Others, including the U.S., the UK and Canada, are doing reasonably well, but some in Europe are barely in a growth mode, the IMF said.
The IMF has urged further stimulus, but some government officials in Germany have challenged the suggestion that an "infrastructure push" will help stave off another downturn. And they continued their call for stiffer, conservative measures by other countries to balance their budgets. Even so, Chancellor Angela Merkel is reportedly looking for ways to stimulate growth without boosting government spending.
Meanwhile, China's booming growth rate of 7 percent yearly may be leveling off, the IMF report said, to a more sustainable rate.
Overall, however, the worldwide economic outlook has a tepid future. Global growth is likely to average 3.3 percent this year, the IMF said, unchanged from 2013. And "the legacies of the pre-crisis boom and the subsequent recession," the IMF analysis said, "still cast a shadow on the recovery." As a result, "global growth is still mediocre," the IMF said, with wide variations among countries.
According to the IMF report, the U.S. will finish this year with a GDP growth rate of 2.2 percent, the UK with 3.2 percent, and Canada with 2.3 percent.
Germany, however, will post an increase of 1.4 percent, while France will barely squeak forward at 0.4 percent. Spain will finally post a positive rate of 1.3 percent, but Italy will still be negative at -0.2 percent. The entire euro area is likely to post a GDP growth of 0.8 percent.
All together, the IMF said the global forecast is disappointing, and its World Economic Outlook report noted an "increase in downside risks."
Economic growth worldwide is "weak and uneven," with some countries still struggling to pull up from a downturn, according to a report from the International Monetary Fund. Others, including the U.S., the UK and Canada, are doing reasonably well, but some in Europe are barely in a growth mode, the IMF said.
The IMF has urged further stimulus, but some government officials in Germany have challenged the suggestion that an "infrastructure push" will help stave off another downturn. And they continued their call for stiffer, conservative measures by other countries to balance their budgets. Even so, Chancellor Angela Merkel is reportedly looking for ways to stimulate growth without boosting government spending.
Meanwhile, China's booming growth rate of 7 percent yearly may be leveling off, the IMF report said, to a more sustainable rate.
Overall, however, the worldwide economic outlook has a tepid future. Global growth is likely to average 3.3 percent this year, the IMF said, unchanged from 2013. And "the legacies of the pre-crisis boom and the subsequent recession," the IMF analysis said, "still cast a shadow on the recovery." As a result, "global growth is still mediocre," the IMF said, with wide variations among countries.
According to the IMF report, the U.S. will finish this year with a GDP growth rate of 2.2 percent, the UK with 3.2 percent, and Canada with 2.3 percent.
Germany, however, will post an increase of 1.4 percent, while France will barely squeak forward at 0.4 percent. Spain will finally post a positive rate of 1.3 percent, but Italy will still be negative at -0.2 percent. The entire euro area is likely to post a GDP growth of 0.8 percent.
All together, the IMF said the global forecast is disappointing, and its World Economic Outlook report noted an "increase in downside risks."
Monday, October 6, 2014
Miscellany
Just because you can doesn't mean you should.
Insult and mockery cannot substitute for intelligence and insight.
When someone says, "Don't you think that ...?" they're not asking for opinion, but for agreement.
Consider the phrase, "I was very fascinated by ..." There are no degrees of fascination, just as there are no degrees of unique, which means "one of a kind." Either you are fascinated or you're not. Either something is one of a kind, or it's not.
Talent is what you're born with. Skill is how you develop it. Luck is what happens to you along the way. Success is a blend of all three.
Propaganda often masquerades as marketing a message.
Typographical gimmickry is no substitute for readability. Grammatical shouting insults reader intelligence.
Consider a sentence with 160 words, 11 commas, 4 dashes and 2 sets of parentheses. It may be "correct" but it's unreadable. Or, when you have the time, count the number of words, commas, semicolons and colons in the opening sentence of John Milton's "Paradise Lost." Then remember why you found the work unreadable, if not boring.
Then there was the press release that put some words IN ALL CAPITAL letters, other words in Bold Face, still others in bold italic, yet others in BOLD ITALIC CAPS and still others BOLD FACE CAPS and underlined. When that strategy goes on for two full pages, it's no longer informational for a news reporter, but like a screeching used car commercial.
Just because you can, doesn't mean you should.
Insult and mockery cannot substitute for intelligence and insight.
When someone says, "Don't you think that ...?" they're not asking for opinion, but for agreement.
Consider the phrase, "I was very fascinated by ..." There are no degrees of fascination, just as there are no degrees of unique, which means "one of a kind." Either you are fascinated or you're not. Either something is one of a kind, or it's not.
Talent is what you're born with. Skill is how you develop it. Luck is what happens to you along the way. Success is a blend of all three.
Propaganda often masquerades as marketing a message.
Typographical gimmickry is no substitute for readability. Grammatical shouting insults reader intelligence.
Consider a sentence with 160 words, 11 commas, 4 dashes and 2 sets of parentheses. It may be "correct" but it's unreadable. Or, when you have the time, count the number of words, commas, semicolons and colons in the opening sentence of John Milton's "Paradise Lost." Then remember why you found the work unreadable, if not boring.
Then there was the press release that put some words IN ALL CAPITAL letters, other words in Bold Face, still others in bold italic, yet others in BOLD ITALIC CAPS and still others BOLD FACE CAPS and underlined. When that strategy goes on for two full pages, it's no longer informational for a news reporter, but like a screeching used car commercial.
Just because you can, doesn't mean you should.
Friday, October 3, 2014
Raising Keynes
If you can't say it in 500 words, you can't say it.
Say what you have to say, be done with it, finish and get out.
President Obama spoke for almost an hour on the economy yesterday afternoon, in what the White House had touted as a major speech, but after 30 minutes CNN cut away from live coverage. After 40 minutes, MSNBC dropped out. Bloomberg TV held on for another 10 minutes, but then they gave up hope that he would say anything new.
The talk was a recitation of the accomplishments of the past few years as the American economy began its recovery, but even so, most of the recitation was a list of things that happened in the private sector; little was said about any government efforts in reviving the economy from the Great Recession.
Moral: Take a hint from FDR's strategy of his occasional "Fireside Chats" via radio to the American public in the 1930s and 1940s. Do it when you have something to say, say it and be done with it. Prattle on too long or too often and you lose the audience as well as credibility.
That said, the crux of the speech was this: The economy's improving, but we're not yet where we could be. The President listed several "cornerstones" to help improve things for the middle class. These were 1/ energy and technology, 2/ education and training, 3/ health care reform, and 4/ finance reform.
All these programs are already in place. However, Obama asserted, "The gains of recovery are not shared enough, and growth could be faster with the help of Congress." Moreover, in a reference to growing inequality, he noted that a "shrinking few are doing very well," while a growing many still struggle.
"This is not a formula for sustained growth," Obama said.
So while the President was praising the status of economic recovery even as he said little about government efforts to support improvement, the International Monetary Fund released a report that said "the time is right for an infrastructure push" by government.
"Borrowing costs are low and demand is weak," the IMF report said, and there are infrastructure bottlenecks that need to be cleared. "Public infrastructure is an essential factor of production," the IMF added, and increasing public investment "raises output in the short and long term, particularly during periods of economic slack and when investment efficiency is high."
And if done correctly, the IMF stressed, "public infrastructure could pay for itself." Put another way, the more that Gilded Agers call for austerity and cuts in spending, the more urgent government action becomes.
Say what you have to say, be done with it, finish and get out.
President Obama spoke for almost an hour on the economy yesterday afternoon, in what the White House had touted as a major speech, but after 30 minutes CNN cut away from live coverage. After 40 minutes, MSNBC dropped out. Bloomberg TV held on for another 10 minutes, but then they gave up hope that he would say anything new.
The talk was a recitation of the accomplishments of the past few years as the American economy began its recovery, but even so, most of the recitation was a list of things that happened in the private sector; little was said about any government efforts in reviving the economy from the Great Recession.
Moral: Take a hint from FDR's strategy of his occasional "Fireside Chats" via radio to the American public in the 1930s and 1940s. Do it when you have something to say, say it and be done with it. Prattle on too long or too often and you lose the audience as well as credibility.
That said, the crux of the speech was this: The economy's improving, but we're not yet where we could be. The President listed several "cornerstones" to help improve things for the middle class. These were 1/ energy and technology, 2/ education and training, 3/ health care reform, and 4/ finance reform.
All these programs are already in place. However, Obama asserted, "The gains of recovery are not shared enough, and growth could be faster with the help of Congress." Moreover, in a reference to growing inequality, he noted that a "shrinking few are doing very well," while a growing many still struggle.
"This is not a formula for sustained growth," Obama said.
So while the President was praising the status of economic recovery even as he said little about government efforts to support improvement, the International Monetary Fund released a report that said "the time is right for an infrastructure push" by government.
"Borrowing costs are low and demand is weak," the IMF report said, and there are infrastructure bottlenecks that need to be cleared. "Public infrastructure is an essential factor of production," the IMF added, and increasing public investment "raises output in the short and long term, particularly during periods of economic slack and when investment efficiency is high."
And if done correctly, the IMF stressed, "public infrastructure could pay for itself." Put another way, the more that Gilded Agers call for austerity and cuts in spending, the more urgent government action becomes.
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