I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of “money.” And your definition of “printing.”
Intermediate Macro Exercise: How to Construct a Maximally Contractionary Budget Deficit Reduction
Consider an economy called Käseland, with gross output equal to approximately $475 billion, and unemployment rate of 7.5%, so considerable underemployment of factors of production exists; consistent with this interpretation, the general nonfarm wage rate has been relatively constant, growing at only 1.2% on a 12 month basis through 2010, and the price level has risen by about 1.5% from the second half of 2009 to second half of 2010.
Suppose there is a budget deficit, that you wish to close. How do you maximize the negative impact on output?
Progress report on QE2
We’re now 3 months into the Fed’s new asset purchase program that has been popularly described as a second round of quantitative easing, or QE2. I thought it would be useful to take a look at what has actually changed during the first 3 months of QE2.
The December Trade Release
The December trade figures were released today. The trade deficit widened a bit, largely in line with the Bloomberg consensus, but a little less than assumed by BEA statisticians. This outcome meant a likely revision upward to 2010Q4 GDP. From Lahart/WSJ RTE.
Dispatches
This caught my eye. From Chicago Tribune:
Walker says National Guard is prepared
MADISON, Wis. — Gov. Scott Walker says the Wisconsin National Guard is prepared to respond wherever is necessary in the wake of his announcement that he wants to take away nearly all collective bargaining rights from state employees.
Core, and More, Near Zero
David Leonhardt had an interesting post noting how low core inflation had been, in historical context. In fact, many measures of inflation are at very low levels, indeed close to zero.
Saudi oil reserves may be overstated by 40%
Stuart Staniford calls attention to this story from the Guardian:
The U.S. fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels– nearly 40%.
Stuart also notes that in his own independent forensic analysis conducted in May 2007 (to which we called the attention of Econbrowser readers at the time), he estimated that remaining reserves in Ghawar (by far the Saudis’ biggest and most important oil field) were overstated by 40%.
An Alternative Look at the Employment Situation
Two Competing Views on America’s Economic Future
Or, Palin and Eichengreen on Infrastructure Investment
In a recent speech, Sarah Palin, stated that:
… “The federal government is spending too much, borrowing too much, growing and controlling too much,” she said.
The employment news is good (I think)
The Bureau of Labor Statistics reported yesterday that the unemployment rate has fallen from 9.8% in November to 9.0% in January, as big a two-month drop as we’ve seen in the last 50 years (hooray!). But in the same report, BLS indicated that their seasonally adjusted estimate of the number of Americans employed on nonfarm payrolls increased in January by an anemic 36,000 (oh dear!). Reconciling the very contradictory claims is even harder than usual, but I’ll give it a try.