Thursday, March 5, 2015

The Greek Myth

Tyler Cowen thinks most people have it backwards:

… That out of control Greek government spending and borrowing has been converted into a (supposed) cautionary tale about the dangers of fiscal conservatism is one of the greatest (and most unfortunate) public relations triumphs of modern times.

Ponder that one carefully.

The post that came from links to this article entitled “Austerity Is Not Greece’s Problem” by Ricardo Hausmann (Cornell Ph.D., Harvard professor, cabinet official in Venezuela when it was still the richest country in Latin America). I knew the situation was bad, but not that bad:

… The truth is that the recession in Greece has little to do with an excessive debt burden. Until 2014, the country did not pay, in net terms, a single euro in interest: it borrowed enough from official sources at subsidized rates to pay 100% of its interest bill and then some.

His diagnosis of the problem is earthier than mine, but fairly similar:

Fiscal deficits, like unwanted pregnancies, are the unintended consequence of actions taken by more than one person who had other objectives in mind.

The numbers sound like the spending problems of a dysfunctional family:

… From 1998 to 2007, Greece's annual per capita GDP growth averaged 3.8%, the second fastest in Western Europe, behind only Ireland.

But by 2007, Greece was spending more than 14% of GDP in excess of what it was producing …

And Greece is not in a good position to work off its debts:

… The way to minimize the pain is to cut spending without cutting output, which requires selling to others what residents can no longer afford. …

The problem is that Greece produces very little of what the world wants to consume. Its exports of goods comprise mainly fruits, olive oil, raw cotton, tobacco, and some refined petroleum products. … The country produces no machines, electronics, or chemicals.

Sunday, March 1, 2015

Greece, Creditors, and the IMF

SF sent in a link to this article entitled “Greece Stirs Doubt On Debt Owed to the IMF” from the February 27 issue of The Wall Street Journal.

SF remarked that Greece’s grandmother may be looking peaked again. It had been less than a week since Greece worked out this year’s deal to fend off its creditors.

Here’s a podcast from NPR’s Morning Edition from 3 years ago, discussing how Greece will find a way to pay back the IMF first.

No matter what Greece says now, it will probably find a way to pay back the IMF. Think about it this way: even Argentina paid back the IMF (even if they did it 3 years too late). Basically, member countries treat the IMF like a charity: you don’t steal from them, and you make sure they get paid.

Reasonable Suspicion on Chinese Growth Rates

I have nothing against China specifically.

But, I do know generally that the real GDP values and growth rates of countries that don’t have open political and media systems should not be taken at face values.

So, in 2014 IV, China reported growth over the previous 4 quarters of 7.3%. That’s very high: it will lead to doubling in size every 10 years, and this is for a country with a very low population growth rate, so almost all of it could be viewed as improving real GDP per capita.

Unless …

Here’s an example of what Chinese academics are allowed to say about China’s economy from inside China:

… The consumer price index dropped to 0.8%; the producer price index fell by 4.3%; exports contracted by 3.3%; imports were down by 19.9%; and growth of broad money (M2) slowed by 1.4%.

Moreover, the renminbi has come under downward pressure, owing partly to economic recovery in the United States, which has fueled capital outflows. Given huge declines in industrial profit growth (from 12.2% in 2013 to 3.3% last year) and in local-government revenues from land sales (which fell by 37% in 2014) …


I suggest there’s some dissonance between what the more granular numbers say, and what the government announces for the consumption of incredulous western legacy media.

None of this changes viewpoints I’ve been clear on before: thinking China’s economy is larger than that of the U.S. right now is foolish, and thinking that China’s economy won’t be bigger than that of the U.S. in 30 years is also foolish.

Via Marginal Revolution.

Thursday, February 26, 2015


Economists who work on growth, technology, and productivity:
... Wonder if automation technology is near a tipping point, when machines finally master traits that have kept human workers irreplaceable. 
You guys probably need to make sure you make it into the top of the income distribution:
... Rather than killing jobs indiscriminately, Mr. Autor’s research found automation commandeering such middle-class work as clerk and bookkeeper, while creating jobs at the high- and low-end of the market.

This is one reason the labor market has polarized and wages have stagnated over the past 15 years, Mr. Autor said. The concern among economists shouldn’t be machines soon replacing humans, he said: “The real problem I see with automation is that it’s contributed to growing inequality.”

If you've been paying attention in class ... this is the Thanksgiving analogy I talked about in class in "The Future You", and "What's Wrong with America's [sic] Right Now? Is It the Economy, or Is It Us?".

Read the whole thing, entitled "What Clever Robots Mean for Jobs" in the February 24 issue of The Wall Street Journal". 

* This is required, but it's not like there's a huge amount of exam-worthy content you need to worry about. Just some viewpoints on stuff that macroeconomists need to be thinking about.

The Disability Scam That Isn't

There's a (mostly conservative) meme out there that 1) there's record numbers of people claiming disability, and 2) most of those people must be lazy scammers.

Of course there's a record number of people claiming disability: our population gets larger every day, and we add disabled people at roughly the same rate.

So point # 1 falls into the useless and misleading record category, much as the many records (e.g., number of breakfasts I've eaten in my lifetime) I've already set this morning.

But, what about point # 2?

There is a serious problem with disability funding. This comes out of the Social Security Administration, and the money they "set aside" for this is "going to run out". I've put those in quotes because that isn't actually what's going to happen; but there is a lack of political will to allocate more money to this without some pointless grandstanding.

So, here's two facts to think about.
... 5.6% of Americans ages 35-44 reported having a work-limiting disability in 1984, while in 2014 that figure was 5.4%.
... The percentage of the working-age population collecting disability insurance benefits has more than doubled to 5.7% in 2014 from 2.7% in 1984. 
Those statistics don't match up perfectly, but they're pretty close. How is that possible? Let's slice and dice the information and restate it this way:

  • In 2014, 5.4% reported having a disability and 5.7% received benefits.
  • In 1984, 5.6% reported having a disability and 2.7% received benefits.
This sounds like we're a lot better at giving benefits to people who say they need them (but there isn't much change in people saying they need them).

That sounds like government doing it's social welfare job ... you know ... outreach to people who need help. 

Gee ... government doing its job ... that's not the tone of that conservative meme at all.

And just what happened to all those people in 1984 who said they were disabled but didn't get benefits? No doubt, some of them worked. But presumably that wasn't always a good thing. And then I think a lot of them sat around the house, supported by their families, who weren't supported by the rest of society. 

When you put it that way, it sounds like in the good old days ... we were jerks to each other.

Read the whole thing, entitled "Averting the Disability-Insurance Meltdown" in the February 23 issue of The Wall Street Journal. The author works for the American Enterprise Institute, a conservative think tank; like most conservatives he's more interested in how we pay for our government's largesse, but I don't really think he'd understate the number of disabled in a relatively conservative newspaper.

Tuesday, February 24, 2015

Hopefully, the Last About Greece for a while.

The Greek government filed the final draft of its proposed reforms, and these were accepted this morning.

In related news, Greece's grandmother is feeling much better. ;)

One More Way to Think About Greece (Not Required)

It was inevitable that there'd be a rap video about the Greek crisis:

NSFW (but no worse than most rap).