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Economics Headlines for the Week: 1/10/2011

January 10, 2011

Economics headlines from this week’s news, blogs, and op-eds.

To see the week’s economics headlines click here:

Blog: Morton and George: Thoughts on a crisis

Here is what I thought was a nice overview of the crisis. I added some of my analysis in the comment section of the blog, so head there if you’d like to hear about some economic theories related to the crisis and hear a bit of my analysis.

Blog: Gonzalo Lira: Is the Federal Reserve Really Purchasing Over 60% of FY2011’s Fiscal Deficit? In a Word, uh… Yeah

I have to warn you that what you’ll read in this blog is not 100% true. It is a commonplace occurrence I see from many non-economists, the jump from a simple basic economic statement to some false claim they believe. Here we see a rather interesting point… that the FED is buying roughly 60% of U.S. government bonds for FY 2011, lead into a discussion of hyperinflation.  While the author is correct regarding the size and nature of quantitative easing, this does not immediately imply that there will be hyper-inflationary effects. In fact the reason the FED is doing this is because they are worried about the economic recovery and deflation. I’ve included this article because it is true that this purchase means the FED  will have a large stake in the current U.S. bond market, and in general this should be a warning sign about the bond market, government spending, and the general economy… but I caution against the jumping from that to inflationary concerns (or other non-sequitur conclusions).

Bloomberg: Hedge Funds’ Inside Tips Are Like Paying for Sex

A piece on how hedge-funds routinely trade in insider information, paying informants by the hour. Basically confirming what everyone thinks of hedge-funds: that they’re sleazy operations that take whatever advantages they can to make a profit, irregardless of whether they’re loopholes or illegal ones.

Bloomberg:World Food Prices Jump to Record on Sugar, Oilseeds

I suspect that 2011 will be the year of soaring asset prices. Watch out for civil unrest, it happened in 2007-2008 and apparently this year it’s already leading to riots.

Blog: Credit Writedowns: Why did America Have a 90% Income Tax Under Eisenhower

The income tax rate used to be much much higher for the very rich, and zero for everyone else.  This is a very interesting interview with economist Michael Hudson, where he talks about the old approach to income taxes based on trying to combat those who receive market rents (subsidies and income from monopolistic markets).

Bloomberg: Bernanke Sees Slow Drop in Unemployment Amid Recovery

Bernanke is not optimistic about job growth in 2011, and neither am I. Personally, I think the economy will probably not grow fast enough this year in job creation to do much, other than keep up with population growth; further I think there is and will remain a lot of structural unemployment (when people can’t find jobs because of mismatched education/skill set).

Reuters: Beaten down euro in for another rough ride next week

With everyone babbling about hyperinflation in the U.S. economy, I wonder why no one ever mentions the Euro. I think that its headed for some serious trouble this year.

Reuters: Most Americans say tax rich to balance budget

The title is pretty clear. Basically as I’ve shown in my posts, the U.S. income distribution is pretty unbalanced… and the tax rate on the rich is only 10% higher than on the rest of us and clearly has stunted their income growth or economic incentives over the last decade.

Bloomberg: Employers add fewer jobs than expected in December

More bad news on the job front. This article is a good example of why one needs to be careful when reading business and economic news. They mention that the jobless has been falling, however according to other articles the only reason its been falling is because more people giving up on looking for work.

Blog: Seeking Alpha: The Bad News Behind a Falling Jobless Rate

Yes, things really are bad.

Bloomberg: Treasury Five-Year Notes Advance as Bernanke Predicts Slow Job Growth
Contrary to what many hyper-inflationary types believe the bond market might just be the only market doing well in America these days.

Yahoo News: Pittsburgh man latest to have home accidentally demolished

See… the housing market isn’t doing to well.

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