Re: Final exam question
The reduction in the work day is to be introduced gradually at a time when the french economy is experiencing an expansion, that is under relatively high growth rates. --- Tom Walker [EMAIL PROTECTED] wrote: Here's a question (and answer) from the final exam for Professor Lutz Hendricks' Economics 503 course at Arizona State University: Essay Questions (30 points each). Answer 4 questions. Question 1. Unemployment and the Work Week A recent French law intends to shorten the working week from 39 to 35 hours without loss of pay for workers. It is hoped that the plan could provide an extra 1.4 million jobs. What are the likely consequences of this law for employment, unemployment, real GDP, and government revenues? Would the law create new jobs, if pay was reduced in proportion to hours, so as to hold hourly wages constant? Explain your reasoning. Answer Sketches: Essay Questions Case 1: Hold hourly wages constant. Roughly nothing should happen to unemployment. If this is true, then real GDP should fall in proportion to hours (product per hour staying the same). Government revenues would accordingly fall. Employment might also fall because the relative attractiveness of unemployment rises. Why does unemployment stay the same? Essentially because aggregate demand is reduced by exactly the same amount as the reduction in earnings. The hope that new jobs might be created is the infamous lump of labor fallacy which ignores this reduction in demand. Case 2: No loss of pay. This case is similar, except that we now add a wage hike, which further reduces employment and GDP. __ Do You Yahoo!? Get email at your own domain with Yahoo! Mail. http://personal.mail.yahoo.com/
Re: Quotes of the day
I don't know. Please tell. BTW, there's an interesting old quote from Daniel Bell (the famous sociologist) in which he likens the receipt of corporate profits to the collection of taxes. (However, I think the conditions that led him to that conclusion -- those of the early 1960s in the US -- have gone away.) [Who said this?] "In providing for its own future through the device of retained earnings, the corporation serves the social function of ensuring a rate of capital accumulation adequate to permit capitalism to continue to deliver the goods. "Corporations may in fact control the rate of saving, but, on the other hand, we may - like it or not - have reached such a level of social disintegration that even outcomes crucial to the future of our society have got beyond social control, and are influenced, if not completely determined, by the results of haphazard aggregation!" - This message was sent using Panda Mail. Check your regular email account away from home free! http://bstar.net/panda/
Re: Final exam question
Sorry, I thought I had beaten this dead horse so much that people would pick up on the intended irony. The key phrase is "the infamous lump of labor fallacy" the Arizona State U professor cites as the basis for the hope that reducing the work week will create jobs. Infamous indeed! There is no such thing. It is a hoax, a canard, a phony, a counterfeit, a figment of the imagination, a relic of textbook lore. Students in Professor Hendricks' class are eligible to get "30 points" for regurgitating baseless nonsense or possibly zero for a thoughtful answer. But since you asked . . . I'll plug my chapter on "The 'lump of labor' case against work-sharing: populist fallacy or marginalist throwback" in _Working Time: International trends, theory and policy perspectives_, published by Routledge. In that chapter I examined the scholarly credentials (or lack of them) of the alleged lump and show (to my own satisfaction and my editors', at least) how this phony doctrine actually contradicts orthodox marginalist theory on the hours of labour. Admittedly the lump of labor fallacy is itself a piece of trivia, but lurking behind it is an important issue. The eclipsed theory of the hours of labour (Sir Sydney Chapman's) is radically inconvenient to the standard economic assumptions of rationality and market tendency to equilibrium, yet it strictly adheres to the axiom of wages equal to marginal productivity. This inconvenient aspect of the theory meant that its implications had to be assumed away "for the sake of argument" in the 1930s by, e.g., J.R. Hicks and Lionel Robbins and eventually the acknowledgement that the argument rested on a counter-factual assumption had to be quietly set aside for the sake of ideological respectability. We might thus say that the standard analysis -- the "answer" in the final exam -- now rests on a lump of contradictory assumptions fallacy. Marxist economists should also take note of this odd episode because, as Chris Nyland argued about 12 years ago, Chapman's theory of the hours of labour substantially confirmed, from a radically different theoretical standpoint, Marx's position regarding the *historical* as well as immediate relationship between the intensity and duration of the expenditure of labour power. The lump of labor fallacy is, in effect, the bushy tail peeking out from behind Grandma's nightgown that should alert Red Riding Hood to the possibility that the canine-toothed creature in Grandma's bed is not Grandma. Carrol Cox wrote, I don't understand the point. Is this an attack on or defense of the exam questions? It needs more explanation for the non-economists on the list. Tom Walker Bowen Island, BC 604 947 2213
bad news/good news
the bad news: the UCLA guys predict a "mild" recession in the US during the next year or so. the good news: it won't hit Southern California that hard. (As if we need more!) -- Jim Devine Thursday, April 5, 2001 | L.A. TIMES. S. California Foreseen Escaping U.S. Recession By STUART SILVERSTEIN, Times Staff Writer A long-term economic shift that has begun spurring more saving and fewer big-ticket purchases is almost certain to tip the national economy into recession soon, but Southern California largely will be spared, UCLA forecasters said Wednesday. Economists with the UCLA Anderson Business Forecast, in their closely watched quarterly report, foresee a 90% chance of a brief, mild U.S. recession later this year or early next year. They predicted the Bay Area also will succumb to recession, but said the state overall, mostly because of Southern California's relative stability, probably will suffer only a slowdown. The UCLA forecast group recently has been one of the gloomiest prognosticators of the U.S. and California economies. Even though this year started off better in some respects than UCLA analysts forecast in their last official report in December, their updated outlook for the rest of 2001 and 2002 is slightly more downbeat than before. What's more, there is a significant new theme in the latest forecast: an assessment that the national economy is shifting into a long-term pattern of slower growth. Edward E. Leamer, director of the UCLA forecast group, said he recently has come to regard the current U.S. slowdown as an episode in a profound economic transition. He said the new pattern will be characterized by lower corporate spending on information technology and software, along with less capital from overseas investors. Leamer said the technology spending boom from 1996 through last year was driven by an "Internet rush" mentality, highlighted by companies scrambling to establish corporate Web sites. Now that the Internet blitz is over, he said, businesses will invest in new technology more conservatively. Likewise, consumers will start spending less on cars and other costly consumer goods and instead will devote more money to savings, Leamer predicted. He said that a weak stock market will probably spur consumers to put aside more money for their retirement instead of counting on rising share prices to do the work. The current national slowdown and anticipated recession, Leamer said, "isn't just a time-out period. . . . We're in the midst of a transition in our economic lifestyles." All told, the UCLA forecasters predict the nation's key gauge of economic growth--gross domestic product--will be up only 0.7% this year and 1.3% next year. During the four previous years, GDP growth, after discounting the effect of inflation, averaged 4.5%. Leamer predicted that after the economy completes its current transition in a few years, growth rates will pick up only moderately, hovering around 3% to 4%. UCLA forecasters said the pattern of slower growth and weaker technology spending will hit the Bay Area hard, largely because of the region's heavy concentration of computer and software companies. In addition, the area's torrid residential and commercial real estate markets are seen as cooling off, producing damaging ripple effects through the region's economy. The UCLA forecasters predict Southern California will slow down too, particularly if Hollywood is shut down by strikes this year. Even so, the slowdown in Southern California is expected to be much less dramatic than in the Bay Area, helping the state economy continue expanding, albeit slowly. UCLA's forecast calls for California's nonfarm job total, probably the most widely watched measure of the state's economic performance, to grow 2.4% this year and 1.6% next year. That is down from a growth pace of 3.8% in 2000, the highest percentage increase in 12 years. California's unemployment rate, which averaged 4.9% last year, is projected to rise to 5% this year and to move up to 5.7% in 2002. Still, UCLA is forecasting that 2002 will be the first year in more than a decade that the state's jobless rate is lower than the nation's. The school's analysts are calling for the U.S. unemployment rate to climb from 4% last year to 4.8% this year and to rise to 6.1% in 2002. The UCLA analysts said there would be a silver lining to the state's emerging slowdown: It will curb demand for electricity, helping the state get through a power crunch expected to last at least the next couple of years. Over the longer term, the forecast downplayed the effect of the power squeeze, saying it would reduce the state's economic output by less than 3% annually--provided solutions eventually are found to the energy crisis. "California has always been an expensive place to do business, yet businesses still come," wrote Christopher F.
Even engineering grads hit by cooling economy
Even engineering grads hit by cooling economy Downturn dims high-tech hopes Charles V. Tines / The Detroit News 4/6/01 Kettering students Lance Kornoelje, 22, and Trent Nobach, 22, are finding the job market isn't what they expected. By Mike Hudson / The Detroit News FLINT -- It's a strange, new world for engineering students at Kettering University, a school with deep historical ties to the cyclical auto industry -- they actually are having to look for jobs. After years of being hounded by eager recruiters and fielding multiple job offers upon graduation -- along with lucrative signing bonuses for many -- the automotive slowdown is bringing some students down to earth. During the past three months, more than 50 -- roughly 2 percent of the student body -- have been laid off from work-study positions at companies such as Johnson Controls and Cisco Systems while the manufacturing and technology sectors navigate through sharp contractions. "There are decreasing options for me," said Lance Kornoelje, 22, an electrical engineering senior who will graduate in June. "If I would have known things would tighten up like this, I would have secured a job before." Such worries echo around the small campus of 2,500 students, nestled upon two city blocks near a residential district of Flint. In this close-knit environment, everyone seems to know someone who has been put out of a job or is having trouble finding one. "We talk about it nonstop," said Trent Nobach, 22, also an electrical engineering senior. "Things are getting tight for companies right now." Part of Kettering's unique degree program requires co-op work experience. Every student must spend half of each school year at a job related to their major. Many spend all five years at the same firm and then glide into full-time positions upon graduation. But some seniors are being let go in their final term, and campus counselors are scurrying to find other companies for students to complete their work requirements. "The layoffs have come one or two a week across the term," said Garth Motschenbacher, director of corporate relations for the school. "Fortunately, our big employers (General Motors Corp. and Delphi Automotive Systems) are honoring their commitments." Hiring prospects are certainly more grim as the economic slowdown takes its toll on the auto sector. Chrysler Group, the U.S. arm of DaimlerChrylser AG, just eliminated 10 percent of its engineering staff as part of a broad restructuring that cut 26,000 jobs. Chrysler officials said students shouldn't hold out much hope for being hired there. "We cut our engineering staff less than the overall staff, because we realize how important they are to development," said Megan Giles, spokeswoman for DaimlerChrysler. "But unless they have a skill that is critical to us and not present in house, we do not think we'll be (hiring) in the short term." It's a far different climate for graduates than five years ago, when the class of 2001 first enrolled at Kettering, formerly General Motors Institute. Tough times have pinched many of the school's 600 sponsor companies, who had been grabbing graduates as quickly as the school could produce them for several years. Kettering graduates had become accustomed to picking a job from a number of offers, securing employment months before leaving college and often collecting large signing bonuses. In 1999, nearly 30 percent of graduating engineers got signing bonuses that averaged $3,400 for accepting a new job. Those heady days are gone for now. "See that, that's all the students who want me to find them jobs," said James Gover, pointing to a full screen of e-mail on his computer. As chairman of the Department of Electrical and Computer Engineering, Gover has seen a shift in the demand for graduates, often receiving notes of regret from recruiters who can't hire due to corporate belt tightening. "Some companies are hurting and the students are feeling it," Gover said. Still school officials -- many of whom weathered the automotive dog days in the 1970s and 1980s -- say these are hardly tough times for the auto industry and Kettering graduates. The auto industry is still selling cars and trucks at historically high levels. Kettering still expects to find jobs for most of its engineering graduates. And starting salaries still average well over $40,000 a year. Robin Buckson / The Detroit News Kathi Barker finishes an interview with Romeo Public Schools during an Education Job Fair. "There is still a war for talent out there," said Priscilla A. King, director of talent acquisition for GM. Some of Gover's top students have been deluged with offers from companies who don't normally get a crack at the cream of the crop. He's even working on securing jobs for two prospective students who haven't even graduated high school yet. But there has
Re: Final exam question
Why is the result the same if hours are reduced with no reduction in pay? CB [EMAIL PROTECTED] 04/05/01 11:53PM Here's a question (and answer) from the final exam for Professor Lutz Hendricks' Economics 503 course at Arizona State University: Essay Questions (30 points each). Answer 4 questions. Question 1. Unemployment and the Work Week A recent French law intends to shorten the working week from 39 to 35 hours without loss of pay for workers. It is hoped that the plan could provide an extra 1.4 million jobs. What are the likely consequences of this law for employment, unemployment, real GDP, and government revenues? Would the law create new jobs, if pay was reduced in proportion to hours, so as to hold hourly wages constant? Explain your reasoning. Answer Sketches: Essay Questions Case 1: Hold hourly wages constant. Roughly nothing should happen to unemployment. If this is true, then real GDP should fall in proportion to hours (product per hour staying the same). Government revenues would accordingly fall. Employment might also fall because the relative attractiveness of unemployment rises. Why does unemployment stay the same? Essentially because aggregate demand is reduced by exactly the same amount as the reduction in earnings. The hope that new jobs might be created is the infamous lump of labor fallacy which ignores this reduction in demand. Case 2: No loss of pay. This case is similar, except that we now add a wage hike, which further reduces employment and GDP.
Re: Final exam question: Op-ed
Come to think of it, why don't I just recycle the op-ed piece I wrote this week for Straight Goods "Canada's independent - reader-supported - on-line source of news you can use http://www.straightgoods.com. . .": Remembrance of Work Time Standards Lost Twenty-five years ago, two-thirds of the Canadian work force worked a standard 35 to 40 hour a week. And they received a full-time pay cheque with holiday and vacation pay for doing so. By 1995, the proportion of the work-force working standard hours had declined to a bare majority. Many of the rest of us have migrated to part-time jobs with substandard pay and benefits or to long hours of work often without compensation for overtime. About a third of the people working part-time say they would rather have a full-time job but can't find one and many of the people working long hours would gladly forgo income for more time off. So what happens when unions or social activists suggest that perhaps we could solve both dilemmas and reduce unemployment in the bargain by redistributing the hours of work -- perhaps even try something like the 35-hour work week brought in recently by the French government? What happens is we're scolded by financial commentators and think-tank experts like Michael Walker of the Fraser Institute that to even consider such a thing is proof of "economic ignorance". According to National Post columnist Peter Foster, for example, the French 35-hour policy is based on a "fundamental economic misunderstanding known as the 'lump-of-labor fallacy'." What the heck is a "lump of labor" and why did I spend the last two years studying and writing about it? The simple answer is that the lump of labor is a "theory" that isn't a theory; it is an "economic fallacy" that is not an economic fallacy. Like the chemically-aged skull of a modern man and jawbone of an orangutan dug up at Piltdown, England in 1911, the lump-of-labor fallacy is a scientific hoax. Unlike the counterfeit missing link, however, the lump-of-labor fallacy may be making our work lives miserable -- eroding our job security, piling up our workload, gobbling our pay cheques and spoiling our weekends. You don't need to know exactly what the lump-of-labor fallacy is or says. It's a relic of sheer nonsense that has been reverently handed down from generation to generation of mainstream economists. If you insist on learning the details, you can read my chapter debunking the lump-of-labor claim in a recent scholarly volume on working time. What you DO need to know is that mainstream economists have completely blown the issue of working time. There once was an economic theory of the hours of labor, a very good theory indeed presented by Sir Sydney Chapman -- an esteemed and excruciatingly orthodox Cambridge economist -- in Winnipeg in 1909. Economics, as it is taught at universities, has managed to "lose" its own theory, though. It's in the library, but few economists bother to look for it there. Instead they look in their textbooks, where the theory isn't. During the 1950s and 1960s the most widely-used introductory textbook in first year economics courses across North America was a book affectionately known as "Samuelson". Its official title was Economics: An Introduction by Paul Samuelson. Edition after revised edition of that ubiquitous textbook carried a breezy discussion of why union demands or policy proposals for shorter hours of work -- though admittedly well-intentioned -- are hare-brained panaceas not worth considering seriously. Why? Because they are based on the venerable lump-of-labor fallacy. The claim makes about as much sense as saying that caring about nutrition is based on a lump-of-food fallacy or that personal hygiene is based on a lump-of-soap fallacy. That hasn't prevented financial page editorialists and business lobbyists from banging the fallacy gong any time a shorter work time proposal makes it onto the agenda of public debate. I first read the phrase in a column written by Jock Finlayson, vice president for research of the B.C. Business Council, who invoked it several times in the mid-1990s to ward off the grim spectre of Jeremy Rifkin's The End of Work. The bottom line is North America is choking from overwork, underemployment and just plain misallocation of working time. Governments are loath to do anything about it, because they're afraid that if they do, corporate lobbyists and financial page editorialists will humiliate them with mocking cries of "fallacy" and "panacea". As I mentioned earlier, you don't need to know what the lump-of-labor fallacy is. All you need to know is that something is profoundly wrong with the way that the hours of work are being regulated -- subtly and unofficially being de-regulated, really -- in North America and that the arguments against doing something about it are utterly groundless. Isn't it about time we called the bluff of the textbook-thumping experts who seem to think that a toxic cocktail of
Re: Re: Adios to the T-Bill?
[EMAIL PROTECTED] wrote: So what? I'm sure that capitalism can adapt to not having a T-bill market. It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? It was said back in the '80s that Japan's role as a major financial center, and the yen's role as a major reserve currency, were severely crimped by the lack of a T-bill market. Doug
Moldova returns to communism
Moldova returns to communism April 4, 2001 CHISINAU, Moldova -- Moldova has become the first former Soviet state to elect a communist as its leader. The eastern European nation's parliament elected Communist Party leader Vladimir Voronin as the new president on Wednesday. The result was widely expected after Moldova's communists swept to power in general elections in February. Moldova's economy has declined by two-thirds since independence in 1991 and over 80 percent of its 4.3 million population survive on less than one dollar a day. Voronin, 59, a former baker and police general, captured 71 of the 89 votes cast by members of parliament. He beat two other candidates. His Communist Party holds 71 of the 101 seats in parliament, the largest of the three parties in the chamber. One party abstained from voting. Another Communist candidate, Valerian Christea, won three votes while former prime minister Dumitru Bragish got 15 votes. "I call on all the parties in parliament and outside to reconcile and take the country out of the crisis," Voronin said after the vote. He said his priority was to reach a settlement with eastern Moldova's Slavic separatists, who broke away in 1992 after a war that claimed 1,500 lives. Voronin pledged to continue relations with the World Bank and the International Monetary Fund. He also promised to have good relations with neighbouring Ukraine and Romania. He replaces centrist President Petru Lucinschi, who dissolved parliament in December after it failed four times to elect a new president. Voronin immediately pledged to abolish the "bourgeois" post of president as running counter to the egalitarian principles of the Communist Party. After a long-running power struggle between the deputies and the president, Moldova's parliament last year abolished direct nationwide presidential elections and made it easier to impeach the president. Voronin said he would hold referendums on making Russian the second language after Moldovan, which is similar to Romanian, and on joining a Russian-Belarussian Union -- a project which Moscow and Minsk have long discussed. Voronin urged all political forces to unite to resolve the country's problems and pledged to end a long-running feud between different branches of power. "On February 25 (the parliamentary election) authorities in corrupt and poor Moldova received the thumbs down from voters: they want changes," said Voronin. "There is no 'them and us' -- there are only Moldovan citizens who deserve a better life." The former Soviet republic is one of the poorest countries in Europe, with an average wage of $33 per month.
THE RETURN OF THE REAGAN TAX CUT -- CCDS Statement
THE RETURN OF THE REAGAN TAX CUT -- CCDS Statement a statement of the Committees of Correspondence for Democracy and Socialism (CCDS) Before addressing the Bush tax cut proposal, we want to place this issue in its larger context. We, the Committees of Correspondence for Democracy and Socialism, are not opposed to taxes, nor do we want to suggest that there should never be cuts in any taxes. Rather, the overarching goal must be a commitment to a federal budget that is designed to meet the real needs of the people of this country. As we examine the Bush proposal we have to ask how our tax dollars are used, how budget priorities are set and where the money for the federal budget comes from. And, in no small way, all of this is tied to who owns and controls the wealth of this nation. By now it is clear that President Bush is trying a "Reagan". He wants to cut taxes for the rich by so much that the public sector will face years of austerity. The forecast of huge surpluses over the coming decade is widely understood to be problematic, the incidence of the benefits of the cuts widely recognized as unfair, but the substantial damage of his Reaganesque strategy go less commented upon. George W. says "we can do it all." The surplus is so big that we can pay down the national debt, build a Star Wars missile system, fund at least partial privatization of Social Security, abolish the "death" tax and do all manner of things. The reason to rush the tax cut part through first and fast is that the numbers say no such thing. His tax cuts are now being costed out by nonpartisan experts at not $1.6 trillion but more than $2.6 trillion. Having it all does not include continuing government spending at current rates. His budget assumes an actual drop in spending per citizen and since he has targeted some areas for increases this means serious cuts elsewhere. Mr. Bush's proposes cuts in ten federal agencies. Eight of fifteen cabinet level departments would see their budgets cut. Without a budget debate the tax cut will preempt expenditures. About two-thirds of the projected $5.6 trillion in surplus is expected to occur in the second half of the decade, and guesstimates that far out are undependable. Three years ago these same forecasters saw deficits for "as far as the eye can see." In early 1997 the Congressional Budget Office estimated the federal deficit would be $147 billion for fiscal 2000. Instead there was a surplus of $236 billion, an error of well over a third of a trillion dollars on a three year forecast. Is it unreasonable to think the ten year forecast could be off by more than the amount of the projected surplus? The President's misleading claim that people with the smallest income will get the highest percentage reductions is a classic how-to-lie-with-statistics argument. Because some low income people who pay a small amount in income taxes will now pay no federal income tax, the percentage decline can look impressive. The amount in dollars is not. Most low income workers get nothing because they pay no federal income taxes. They do however pay an increasingly heavy burden of regressive payroll taxes and the best tax reduction for them would be an immediate cut in this burden. Eighty percent of working Americans pay more in payroll taxes than they do in income taxes. Cut payroll taxes, benefit this eighty percent. The President is exploiting a fear of recession and sees "a warning light flashing on the dashboard of the economy". A payroll tax cut is the way to put money into the economy more quickly and to increase spending now. Most African-American and Latino kids live in families which will receive nothing from Bush's proposal which is, he says, "for everyone." Under the Bush plan, the wealthiest 1 percent of families receive over 40 percent of the money. The president continues to say that the average taxpayer would save $1,600 a year. Nine out of ten taxpayers, it turns out, are not "average" since they would receive less than that. Folks around the $50,000 a year income mark would get enough for a new muffler for their used car as Senate minority leader Daschle suggests, versus enough for a new Lexus for the over $300,000 set. The reason the polls show a consistent lack of general interest in an income tax cut is that most Americans in taxable 2000 will pay less than ten percent of their income in federal income taxes. The CBO estimates that the wealthiest 20 percent of families paid more, but only 16.1 percent of their income in federal income taxes in 1999, about the same as in the late 1970s, hardly the "overpayment" of which the President misspeaks. The Treasury Department estimates a four person family with a median income of $54,900 paid 7.46 percent in 1999, the lowest rate since 1965. Social Security and Medicare taxes now equal 9 percent of income on average, but more from lower income people and far less from the affluent. This is of course why the President doesn't talk about the
JOBS BYTE by Dean Baker, 4/6/01
Jobs Byte By Dean Baker Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report. For more information or to subscribe by fax or email contact the Center for Economic and Policy Research at 202 293-5380 ext. 206 or [EMAIL PROTECTED] Unemployment Creeps Higher as Economy Sheds Jobs The March employment report showed a surprisingly large drop of 86,000 jobs. Though most of the job loss was attributable to the loss of 81,000 manufacturing jobs, retail and wholesale trade reported job losses as well in a report that showed little evidence of strength anywhere. Consistent with the weak job picture in the establishment survey, the household survey showed unemployment edging higher to 4.3 percent The job decline in March, which was the largest since a drop of 94,000 in November of 1991, was probably even larger than indicated by this report, since the BLS adds 120,000 jobs for new firms not included in the survey. This figure, which is derived from the economy's rapid growth rate of early last year, is almost certainly a large overstatement of the jobs now being created by new firms. While the continuing manufacturing job loss is the most striking feature of this report (318,000 in the last four months), the pervasiveness of the weakness is at least as noteworthy. In addition to the job losses in the retail sector and the fourth consecutive month of job losses in wholesale trade, the huge personal and business services sector added just 11,000 jobs. In February this sector added just 29,000 jobs. By comparison, it added 115,000 a month in the first half of last year. Sharp job declines in the temporary help industry, a good indicator of current labor market tightness, is a main factor in this weak growth. This sector lost 83,000 jobs in March and is now down 273,000 jobs from its September level. Since many of the imputed jobs appear in this sector, the actual job decline is probably somewhat larger than is being reported. The government sector also lost jobs in March, due to a small drop in federal employment and stagnant state and local employment. State and local employment had unusually large increases the prior two months, so the slow job growth is probably just a matter of timing, but tight budgets are likely to dampen employment growth in this sector. Finance and construction sectors are the two that still appear relatively healthy, with low mortgage interest rates being a key factor. However even here the picture may not be too bright. The construction sector reported a gain of 12,000 jobs, but this follows a downward revision of 10,000 from the number originally reported for February. The employment diffusion indexes, which show the percentage of industries that intend to add workers, showed a bleak picture going forward. The overall three-month index is at 46.7, the lowest level since February of 1992. The three-month manufacturing index is at 20.1, a reading that is lower than at any point in the last recession. The inching up of the unemployment rate, along with other signs of weakness in the household survey, is consistent with the weak job picture shown in the establishment data. African-American men experienced the largest rise in unemployment, with their rate going from 6.6 to 8.5 percent. The unemployment rate for African-Americans rose by 1.1 percent overall to 8.6 percent, a typical pattern in a downturn. It is worth noting that the unemployment rate for college-educated workers showed a rise for the first time, going from 1.6 to 2.0 percent. This could be the result of large-scale layoffs in the tech sector. Increases in the average and median duration of unemployment spells and another drop in the percentage of unemployment attributable to workers voluntarily leaving their jobs were all consistent with the picture of a gradually worsening labor market. Average hourly pay continues to move ahead at almost exactly the same nominal rate as it has in the last few years. Over the last quarter nominal pay has risen at a 4.3 percent annual rate, the same as its rate of increase over the last year. Nominal wage growth has remained close to 4.0 percent since 1996, but with the recent upturn in inflation due to higher energy prices, real wage growth has fallen sharply. This employment report shows the most of evidence of weakness in the labor market of any since the last recession. Manufacturing is clearly the hardest hit sector, but the weakness has clearly spread throughout the economy. Unless there is some serious source of stimulus soon, the unemployment rate will rise significantly in coming months.
Re: Re: Re: Adios to the T-Bill?
I wrote:So what? I'm sure that capitalism can adapt to not having a T-bill market. Asks Doug: It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? how about the interest rate on money? - This message was sent using Panda Mail. Check your regular email account away from home free! http://bstar.net/panda/
Reuters: Turks' anger mounts, PM says government won't quit
Turks' anger mounts, PM says government won't quit By Joseph Logan ISTANBUL, April 6 (Reuters) - Angry Turkish demonstrators demanded on Friday that their leaders resign for their handling of the country's economic crisis, but Prime Minister Bulent Ecevit vowed the government would not quit. Police in Ankara used water cannon to break up demonstrations by tradesmen and arrested dozens. Hundreds of demonstrators in Istanbul shouted "The government must resign!" and waved placards reading "You're sucking our blood" and "You're a disgrace to the country." A senior World Bank official said after talks with Ecevit in Ankara that the bank was not likely to provide Turkey with more than the five billion dollars in aid agreed over the past year. Ecevit, whose government has faced a rising chorus of calls to resign this week over the crisis that has slashed the value of the lira by more than 40 percent and depressed wage earners' living standards, said it could withstand the storm. "Right now there's no possibility of another government. We are committed to a responsible evaluation of our position," he told reporters in Ankara after meeting the World Bank vice president for Europe and Central Asia, Johannes Linn. The crisis was triggered by a row in February between Ecevit and President Ahmet Necdet Sezer that sparked instability fears and panic in the markets, leading Turkey to abandon the currency peg at the heart of its $11.5 billion reform plan. Turkish officials are now scrambling to craft a new economic policy that they hope will win the confidence of international lenders and investors alike. Linn said that although the World Bank was not likely to provide more funds than have been agreed in the past year, the timing of the payments could be arranged to help support whatever economic plan emerges. "At this point we do not believe it is necessary to go beyond the five billion (dollars) that has been agreed in the past," he said. "At this point I do not want to go into more details of the exact amount but I can assure you that we are intensifying our assistance, accelerating our financial support, compared to what we had in mind previously." WORKING CLASS UNREST GROWS Ecevit said the World Bank aid, together with resources from within the country, would allow the government to focus on the plight of workers hit hard by the free-fall of the currency. "Tradesmen definitely have some problems. After the programme is prepared, after next week, we'll be looking at the question of domestic resources in particular," Ecevit said. "Once the problem of domestic resources is solved, we'll be able to focus more effectively on the problems of tradesmen and craftsmen, workers and public employees." Turks have flooded the streets of cities across the country over the last week to slam the government, one distraught small businessman flinging a cash register near Ecevit as he left his office early this week. Union leaders, who have organised some of the demonstrations, said they were sure to grow in the days to come, as more working people began to feel the pinch, but that Ecevit's government had turned a deaf ear to their protests. "We're trying to put the brakes on some of the demonstrations," Bendevi Palandoken, vice-president of the Tradesmen and Craftsmen Syndicate of Turkey, told Reuters. "We're in touch constantly with the heads of craft and trades groups in 81 provinces...and we still want a meeting with the government. We want to give some kind of good news to bring down the social tension, but we can't get an answer." Turkey's gutted IMF plan pegged many pay rises to inflation targets, putting pressure on wage earners while slashing annual inflation from about 70 to 26 percent in just over a year. NEW PRICE RISES ANGER MANY A new round of price rises on Friday covering alcohol, tobacco and sugar was likely to intensify popular anger. Ecevit said his government had not decided whether civil servants would in the future get monthly pay rises, but would discuss it in the days to come. Economy Minister Kemal Dervis late on Friday expressed sympathy for hard-hit wage earners and promised "good news from abroad" in connection with the arrival of an IMF delegation on Sunday, but warned relief will not be immediate. "There are no miracles in the economy. You can't give someone a resource that doesn't exist," he told reporters after meeting Ecevit. The lira has recovered slightly after Dervis said he thought a rate of 1.l million lira to the dollar would be a reasonable end-month level. It firmed slightly on Friday. __ Do You Yahoo!? Get email at your own domain with Yahoo! Mail. http://personal.mail.yahoo.com/
Re: Adios to the T-Bill?
If you think about systems of markets in financial assets, they all seem to pivot on a riskless asset, whose very high level of liquidity and support by a strong state are parts of its risklessness. T-bills, as well as longer Treasury bonds, play that role globally. This has long been a feature of international financial systems -- there's a financial center which generates the globally-preferred riskless, liquid asset. This has a variety of effects on the financial structures of other countries. Part of the problem facing any Japanese efforts in the 1980's to develop their own equivalent of a T-bill mkt might have been that its structural role was already filled. I doubt current U.S. fiscal surpluses will last -- what's the point of electing a Republican president, if not to cut taxes and raise spending? And even at current levels it would take a long time for the stock of debt to dry up. That "capitalism" in some broad sense could adapt to changes in the institutional structure of financial mkts is obvious. What's interesting, as Doug suggests, is that financial structure has real effects. The rapid growth of Fannie Mae et al. in recent years is one example -- they have stepped into the breach left by a declining stock of long Treasury bonds, issuing securities that foreigners regard as implicitly supported by the U.S. gov't. This has had the effect of intermediating foreign savings into U.S. consumer debt, increasing U.S. financial fragility. See Jane D'Arista's funds flow analyses at http://www.fmcenter.org/front.asp See also yesterday's WSJ on the growing power of these parastatal agencies. Best, Colin PS And what benefits would restricting share trading hours provide, Jim? Jim D So what? I'm sure that capitalism can adapt to not having a T-bill market. It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? It was said back in the '80s that Japan's role as a major financial center, and the yen's role as a major reserve currency, were severely crimped by the lack of a T-bill market. Doug
Re: Moldova returns to communism
At 13:44 06/04/01 -0400, you wrote: Moldova returns to communism April 4, 2001 CHISINAU, Moldova -- Moldova has become the first former Soviet state to elect a communist as its leader. How much will the new regime be radical democratic, socialistic, or communistic? Chris Burford London
BLS Daily Report
BLS DAILY REPORT, FRIDAY, APRIL 6, 2001: RELEASED TODAY: Nonfarm employment fell in March, while the unemployment rate was little changed at 4.3 percent, BLS reported. A decline in nonfarm payroll employment of 86,000 reflected losses in manufacturing, help supply services, and retail trade. Employment rose in most services industries. Average hourly earnings rose by 6 cents over the month. Top officials from two major federal data agencies tell Congress that spending increases proposed in fiscal 2002 budgets are crucial to updating government figures on electronic commerce and other aspects of the new economy. Key economic reports still lack coverage in services industries and some price adjustments, officials say. Prominent private economists urge lawmakers to boost funding at a time when accurate and timely reports are crucial to forecasters and policymakers alike. Rep. Miller (R-Fla.), chair of the House Government Reform Subcommittee on the Census, says the approval of this year's increased funding level for the agencies shows that lawmakers recognize the need for sound statistics. Richard Berner, the president of the National Association for Business Economics and chief U.S. economist for Morgan Stanley Dean Witter said: "Budgets for statistical agencies, especially the Bureau of Economic Analysis, barely cover mandated wage escalations. Funds for research and development are sorely need to expand the scope and improve the quality of our statistics so they remain relevant in a rapidly changing economy" (Daily Labor Report, page A-10). New claims filed with state agencies for unemployment insurance benefits climbed 18,000 to a total of 383,000 during the week ended March 31, the highest level since July 1998, the Employment and Training Administration of the Department of Labor said (Daily Labor Report, page D-1; The Wall Street Journal, page A2; USA Today, page 1B). Announced job cuts rose to a record high of 162,867 in March, a 60 percent gain over the previous month and nearly three times the number one year ago, Challenger Gray Christmas says. Challenger said that although the number of job cut announcements has risen, the nation's unemployment rate has remained low because of the exceptional number of job opportunities being generated through advances in technology and productivity improvement. Although the massive increase in job cut announcements has not had an immediate impact on the U.S. jobless rate, some of the effects of the cuts are beginning to show in the weekly unemployment insurance claims data. Mass layoff data from the Bureau of Labor Statistics also is reflecting some of the increase in workforce reductions. BLS said mass layoff events in February rose to 1,501, putting 172,908 people out of work during the survey period. The agency said those numbers were the highest for the month of February since it began compiling data for the series in 1995 (Daily Labor Report, page A-1; The Washington Post, page E2). Job cuts announced by U.S. companies soared in March to almost triple the level a year earlier, the fourth consecutive month that the total has exceeded 100,000, a research group said yesterday. A government report issued yesterday said that the number of Americans signing up for first-time jobless benefits rose last week to its highest level in more than 2 years, while the number who have already claimed a week of benefits stands at levels not seen in 3 years. The report came ahead of today's jobs report for March, which is expected to show an increase in the unemployment rate to 4.3 percent from 4.2 percent in February, according to economists' forecasts. Wall Street analysts and Federal Reserve policy makers have noted a frequent disparity between announcements of job losses and actual cuts in payrolls. Companies may announce significantly more job cuts than they actually put into practice, and there is usually a lag time after announcements are made (The New York Times, page C3). The outlook for spring retailing is growing more uncertain, as two major retailers -- Neiman Marcus and Nordstrom -- said today that March sales fell below expectations. Neiman Marcus Group, citing a "challenging retail environment" and "volatile financial markets," said it expects its fiscal third-quarter profit to fall well below Wall Street estimates as a result of disappointing sales this spring. Nordstrom, Inc. said sales at stores open at least a year, known as same-store sales, were down 1.1 percent, which was slightly below what analysts expected. Several other major merchants said in their weekly recorded messages earlier this week that same-store sales are trailing their expectations. Most retailers will report their March same-store sales -- one of the best indicators of a retailer's health--next Thursday (The Washington Post, page E10). application/ms-tnef
Re: Re: Re: Re: Adios to the T-Bill?
[EMAIL PROTECTED] wrote: I wrote:So what? I'm sure that capitalism can adapt to not having a T-bill market. Asks Doug: It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? how about the interest rate on money? Like what, commercial paper? Fed funds? These aren't purely riskless assets, unlike T-bills. Even the bluest-chip bank or corporation lacks taxing power and nuclear weapons. Doug
Re: Re: Re: Adios to the T-Bill?
Doug is right! It would be a major blow to much of mathematical finance as it relies heavily on the existence of a riskless rate. Would be nice for the finance professors though: they would have to rework most of their fomulas and get more papers published. Wouldn't it be great to see yet another paper in the Journal of Finance with a title like "Pricing of path dependent credit derivatives in a risky world: Facts and Fantasies" or something like that? How about this one? "A new theory of term structure without any maturities." Sabri --- Doug Henwood [EMAIL PROTECTED] wrote: [EMAIL PROTECTED] wrote: So what? I'm sure that capitalism can adapt to not having a T-bill market. It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? It was said back in the '80s that Japan's role as a major financial center, and the yen's role as a major reserve currency, were severely crimped by the lack of a T-bill market. Doug __ Do You Yahoo!? Get email at your own domain with Yahoo! Mail. http://personal.mail.yahoo.com/
Re: Re: Re: Re: Re: Adios to the T-Bill?
I wrote:So what? I'm sure that capitalism can adapt to not having a T-bill market. Asked Doug: It can adapt, but happily? Where else you going to park your cash balances in a riskless instrument? What will the Fed use for open market operations? Where will central banks keep their reserve dollars? What are you going to use as your riskless interest rate in a CAPM formula? answered yours truly:how about the interest rate on money? asks Doug: Like what, commercial paper? Fed funds? These aren't purely riskless assets, unlike T-bills. Even the bluest-chip bank or corporation lacks taxing power and nuclear weapons. I was being somewhat flippant (and unclear). I literally meant money, i.e., currency, which has a (nominal) interest rate of zero. To be totally serious, I'd guess we'd have to say that the existence of the government debt subsidizes the financial sector in the ways that Doug suggested. Getting rid of the government debt would end this subsidy. The financiers would be more on their own. (Sink or swim, guys!) Of course, these subsidies seem pretty minor in the scheme of things. - This message was sent using Panda Mail. Check your regular email account away from home free! http://bstar.net/panda/
Re: Re: Quotes of the day
I don't know. Please tell. BTW, there's an interesting old quote from Daniel Bell (the famous sociologist) in which he likens the receipt of corporate profits to the collection of taxes. (However, I think the conditions that led him to that conclusion -- those of the early 1960s in the US -- have gone away.) [Who said this?] "In providing for its own future through the device of retained earnings, the corporation serves the social function of ensuring a rate of capital accumulation adequate to permit capitalism to continue to deliver the goods. "Corporations may in fact control the rate of saving, but, on the other hand, we may - like it or not - have reached such a level of social disintegration that even outcomes crucial to the future of our society have got beyond social control, and are influenced, if not completely determined, by the results of haphazard aggregation!" ** Stephen Marglin, "Growth, Distribution and Prices" [p. 457] Ian
Re: Moldova returns to communism
Moldova returns to communism April 4, 2001 CHISINAU, Moldova -- Moldova has become the first former Soviet state to elect a communist as its leader. The eastern European nation's parliament elected Communist Party leader Vladimir Voronin as the new president on Wednesday. wouldn't "Moldova elects Communist government" be a more accurate headline? Also, the story suggests that the Communists who were elected are politically very different from the ones who ruled before 1989. I would guess that they are like what we used to call "social democrats." -- Jim Devine - This message was sent using Panda Mail. Check your regular email account away from home free! http://bstar.net/panda/
RE: Adios to the T-Bill?
Warren Mosler, who is in the biz, saw the article this morning and sent this to the NYT: To the Editor: Not to worry about no more treasury bills, bonds, or notes. If we don't restore deficit spending by tax cuts and/or spending increases the market will do it for us, just like 1990, through rising unemployment compensation and falling income tax collections as we slip into recession. As a matter of accounting, a federal surplus removes an equal amount of income and savings, forcing individuals and business to borrow to spend and fall into a recession when we can borrow no more. Deficit spending adds to our savings, providing the equity base to grow. The combination of Reagan era tax cuts and spending hikes resulted in the mid '80's deficits that spurred growth. The late '80's tax increases led to the recession of '90. With recession the deficit went up to nearly $300 billion (5% of GDP) by '92, providing the equity base for the latest expansion. With the recent record surplus, savings has gone record negative and consumer debt record positive. This coming recession should again push the deficit up to 5% of GDP ($500 billion) and flood the market with fresh Treasury debt. Warren Mosler
Re: Re: Re: Re: Re: Adios to the T-Bill?
Jim writes: To be totally serious, I'd guess we'd have to say that the existence of the government debt subsidizes the financial sector in the ways that Doug suggested. Doug did not say this. Subsidy is not a very useful way of thinking about the relationship between gov't and finance. Getting rid of the government debt would end this subsidy. The financiers would be more on their own. (Sink or swim, guys!) Of course, these subsidies seem pretty minor in the scheme of things. Gov't plays an essential role in *structuring* the financial sector. The two are hard to separate completely. And the financial sector structures the real sector. Look at present-day Japan! If you doubt the importance of gov't debt over the long term look at the problems afflicting Hapsburg finance in the 16th and 17th centuries. The obvious comparison is with the English in later centuries; Braudel makes a pretty good case that establishing a large, reliably serviced debt was critical to British imperial expansion. Best, Colin
Re: Adios to the T-Bill?
I wrote: I don't understand why the whole issue of the T-Bills disappearing is worth being serious about. Doug writes: Well, they've been the keystone or foundation of the credit market for decades, so it's hard to say what life will be like without them. I guess we should look back to the 19th century and the early 20th century, back before the T-bill market became so developed and T-bills themselves became so liquid. How did the US financial markets work then? BTW, Colin distinguishes between my phrase -- that the government's debt subsidizes the private financial system --and his own -- i.e., that the debt structures the private financial system. In practice, does the latter mean that getting rid of the T-bill market would destabilize private finance? -- Jim Devine - This message was sent using Panda Mail. Check your regular email account away from home free! http://bstar.net/panda/
Murray Dobbin on Quebec Protest
April 2, 2001 The slow march to authoritarianism Murray Dobbin The Financial Post Where is everybody? That is, where are all those from the Canadian political elite who, in better times, might be expected to publicly condemn the draconian "security" preparations going on for the Summit of the Americas in Quebec City? Is it just the young people, unionists, and others from civil society groups who will be affected, who have the courage to express outrage at this casual denial of civil liberties? So far, the only government leader who seems disturbed by the picture unfolding in Quebec City is the enlightened mayor of the city himself, Jean-Paul L'Allier, who has bucked the elite consensus and is encouraging people to "express themselves democratically." The police operation in Quebec City is unprecedented and widely reported. A huge no-go zone will be established, featuring four kilometres of ten-foot-high chain-link fence, the largest and most expensive (at $35-million) police mobilization in Canadian history, special ID for residents of the security zone, the clearing out of 600 prisoners from a local jail to make way for the citizens the police intend to arrest, and the intimidating threat of plastic bullets and other police weapons. This isn't security. It's decontamination. It's the political equivalent of ethnic cleansing, sweeping away anyone who dares to criticize the complicity of governments in corporate globalization. Thus we have escalating police operations to respond to escalating public demands for transparency in FTAA trade negotiations -- negotiations which themselves threaten democracy. The Canadian political and economic elite is united with respect to the minimalist role of government. The yearly EKOS poll demonstrates an enormous gulf between "ordinary" Canadian citizens and the plutocrats who run the country. The secession of the successful has now spread into the arena of civil liberties. If nation building is pass, why bother with democracy? Quebec City is just one more installment in the increasing crisis of legitimacy of all Western governments, a crisis reflected not only in demonstrations against organizations and forums that undermine national sovereignty. It is revealed, too, in governments' contempt for citizens' wishes for enhanced social programs -- reflected in massive tax cuts they haven't asked for -- and in the dramatic decline in voter turnout in Canada. The governing elites were not always so homogeneous. Even ten years ago there would have been a widespread outcry over the casual brutality of strip searches of young women, the routine use of pepper spray at close range, the charging of demonstrators by police on horseback, and the expansion of what constitutes a "threat" to include holding up a sign hundreds of feet from a motorcade of leaders. And let's be clear, this not the police getting "out of control." The problem is precisely that they are in control, as was demonstrated by the direct involvement of the Prime Minister's Office in the police brutality at APEC. To expect the little guy from Shawinigan to respond in any other way to this crisis in legitimacy would be naive. And there's no use appealing to the once robustly democratic Parti Qubcois. It is too accustomed to indulging in its narrow nationalism. It cannot even see the irony of collaborating with Ottawa to unleash riot squads on thousands of people fighting for the principle of national sovereignty. Do we have no statesmen amongst our former politicians who are alarmed at the picture of the Summit emerging from press reports? And surely APEC should have been the wake-up call, with the Canadian government's repugnant kowtowing to the murderous dictator Suharto. Maybe I missed them, but where are Bob Rae, Roy Romanow, Peter Lougheed, Ed Broadbent, and John Turner who, partisan politics aside, surely can grasp the importance of civil liberties? Warren Allmand has spoken out with appropriate alarm on behalf of his human rights centre. The federal NDP has taken a stand. Alan Borovoy of the Canadian Civil Liberties Association (CCLA) has at least written to the responsible federal and provincial ministers. But it's nowhere near enough. I know that Allan Blakeney, a member of the CCLA board, is concerned. And I expect that so, too, are board members Pierre Burton and June Callwood. There are many more voices that we need to hear -- and would hope to hear. Where are the other human rights organizations? And Daphne Dumont, president of the Canadian Bar Association? Is she not concerned about the criminalization of democratic dissent? Is a ten-foot-high fence around Old Quebec now seen as normal? Have the various bar associations asked themselves by what constitutional authority these unprecedented measures are being taken? How many steps are there from developed world democracy to Third World authoritarianism? From APEC to Windsor, to Calgary, to the attack on the poor at Queen's Park, and
Re: Adios to the T-Bill?
Jim: I guess we should look back to the 19th century and the early 20th century, back before the T-bill market became so developed and T-bills themselves became so liquid. How did the US financial markets work then? The predecessor was the call-loan market, which was vulnerable to crises. Note that in this period London was the center of the international money market. You can see the same kinds of problems affecting New York in the late 1800s that afflict Brazil now -- tightened credit in the metropole can cause acute liquidity troubles in the periphery. Colin distinguishes between my phrase -- that the government's debt subsidizes the private financial system --and his own -- i.e., that the debt structures the private financial system. I take "subsidy" to imply considerable analytical separation -- Airbus is subsidized, but one can easily imagine an aircraft maker operating without a subsidy. A subsidy can in principle be pinned down to a single number. States in one way or another almost always (a) provide a national money, (b) impose tax liabilities in that money, (c) regulate private financial institutions whose liabilities may be used as national money, (d) issue debt of their own in various maturities, (e) carry out monetary policy by buying and selling that debt, and more generally serve as a market-maker in those instruments; sometimes (f) they make markets in other assets. They often (g) similarly make markets in foreign exchange, (h) have implicit agreements to underwrite the value of other assets in periods of crisis, (i) regulate private financial institutions in many other ways, formally and informally, and (j) operate state and parastatal financial intermediaries. If you think about how the structure of a financial system hinges around liquidity -- considered quite broadly as an institutional process -- and add in all the other explicit and implicit underpinnings, then yes the state determines in critical dimensions the way the financial system works. To put it another way the institutional nature of contemporary finance is thoroughly intertwined with and determined by states, nationally and internationally. Just think about Japan, Russia, Argentina... getting rid of the T-bill market would destabilize private finance? Right now it plays a pivotal role nationally and internationally. Any plausible series of events that resulted in its disappearance would imply enormous changes in other areas, exceeding my feeble powers of imagination at this time of the day. Best, Colin
