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Economics Headlines for the Week: 4/4/2011

April 5, 2011

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

To see the week’s economics headlines click here:

Los Angeles Times: Critics’ review unexpectedly supports scientific consensus on global warming

This just in… news flash… scientists who study climate change for a living know more about it than you and FOX News. Preliminary results from a UC Berkeley global warming skeptic confirms the scientific consensus that global warming exists. Perhaps the real story behind all this, because sane people who have faith in academic research should by this point believe in global warming (although we can all pretend we know something about climate and bicker over how significant all this is), is that the research was funded by the Liberals’ favorite menaces to democracy: Mr. Charles and David Koch.

The Berkeley project’s biggest private backer, at $150,000, is the Charles G. Koch Charitable Foundation. Oil billionaires Charles and David Koch are the nation’s most prominent funders of efforts to prevent curbs on the burning of fossil fuels, the largest contributor to planet-warming greenhouse gases.

This is akin to cigarette companies funding research that disputes cigarettes as the leading cause of lung cancer, or giving out cigars at a cancer benefit. The fact that the lead researcher, Mr. Richard Muller, still has a job is a testament to how corrupt and immoral academic research has become. And this result, ironically may be all that is needed to undermine the public’s faith in academic research and  global climate science.

Los Angeles Times: Foreign currency trading is easy — an easy way to lose money

Do you know what traders on Wall-Street call all those private individuals who are managing their retirement accounts? They call you “dumb money”. Now, here is the proof :

Gain ended up making an average of $2,913 from every active trader it had last year, even though the average customer account contained only $3,000, according to the company’s financial data.

FXCM made $2,641 for every active trader, while the average customer had $3,658.

The reason trading in foreign currencies is worse than buying individual stocks and bonds is because foreign currencies are a zero sum game. Stock values can go up for everyone, but currency trading is based on a fixed relationship between two goods. This means that between the two players in the game, someone always looses.  And chances are, it’s going to be you the individual trader who looses, and not the broker who is running the table.

Get Ready for a Stiglitz Mini-Section… Yay!

Blog: EconomistsView: Stiglitz -Why I Didn’t Sign the Deficit Letter

Deficit reduction is important. But it is a means to an end — not an end in itself. We need to think about what kind of economy, and what kind of society, we want to create; and how tax and expenditure programs can help achieve those goals.

Bowles-Simpson confuses means with ends, and would take us off in directions which would likely be counterproductive. Fortunately, there are alternatives that could do more for deficit reduction, more for putting America back to work now and more for creating the kind of economy and society we should be striving for in the future.

Vanity Fair: Of the 1%, by the 1%, for the 1%

Hey look, Stiglitz uses my numbers in this new opinion piece in Vanity Fair… too bad I didn’t get cited, but I guess that’s o.k. as they’re public record and all… but hey I beat him to it! Actually the numbers are a little worse than the ones he’s citing. However, it’s a good article and I recommend you read it if you have any interest in understanding how income, taxes, and efficiency affect our economy. This is most Americans, as there is a somewhat singular fascination with wealth and becoming wealthy in the country (as there are increasingly limited opportunities for the average person to do so).

The Atlantic: The ‘McJobs’ Stimulus Package: McDonald’s to Hire 50,000 People on April 19

The new face of economic opportunity in America.

The New York Times: Many Low-Wage Jobs Seen as Failing to Meet Basic Needs

Of course, these jobs will pay nowhere near close to $14/hour needed to have economic stability for a single working person, and don’t even think about having kids:

According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.

As you should all know, this isn’t news to anyone who has ever worked a basic, low paying job. Of course with most politicians and journalists coming from George Washington University, NYU, or Princeton… they are shocked by this revelation. After all, if  your family can afford to pay $50,000 a year for you to go to school, chances are you never worked one of these jobs in the first place.

Blog: Swampland: Can John Boehner Convince Republicans to Compromise on the Budget?

Can John Boehner convince Tea-Party Republicans to enact sane economic policies, when they based their entire candidacy on being as insane fiscally as possible. It’s still not looking great this week with a potential government shutdown on the way. I’ve already blogged about why this is stupid, so I’m not going say the same thing over again, even though that’s probably the only way to get it into their thick skulls.

New York Times: Krugman: The Mellon Doctrine

Krugman, self-appointed economic sane man explains why layoffs and wage cuts don’t create jobs. Even if it’s the government doing it (not that it particularly makes a difference unless you’re especially ideologically clouded).

But pay cuts at, say, General Motors have helped save some workers’ jobs by making G.M. more competitive with other companies whose wage costs haven’t fallen. There’s no comparable benefit when you cut everyone’s wages at the same time.In fact, across-the-board wage cuts would almost certainly reduce, not increase, employment. Why? Because while earnings would fall, debts would not, so a general fall in wages would worsen the debt problems that are, at this point, the principal obstacle to recovery.

He does a better job here, explaining the problem.

Yes, economics textbooks typically show a downward-sloping “aggregate demand curve”. But the reasons for that curve’s downward slope aren’t the same as for your ordinary demand curve. It’s a process that works like this: lower prices -> lower demand for money -> lower interest rates -> higher spending. And that process doesn’t operate when, as is currently the case, short-term interest rates (which are the ones that matter for money demand) are zero.

Things are different for a country that shares a currency with other countries. Ireland can raise employment by cutting wages of Irish workers relative to German workers. But America, with its floating dollar, gains nothing — nothing at all — from overall wage cuts. All we get is a magnified real debt burden.

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