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Thursday, August 13, 2015

Some macroeconomics news


In case you're interested in learning some macroeconomics that you can apply to the task of sorting out intelligent commentary from incompetent drool, here's some stuff:


Krugginator - international money mania. Interesting point made about being a reserve currency:
So what are the advantages of owning a reserve currency? You do get to borrow in your own currency — but then, so do others; again, it’s about reliability rather than a special role. There’s nothing in the data suggesting that you can borrow more cheaply than other safe borrowers.

What you’re left with, basically, is seigniorage: the fact that some people outside your country hold your currency, which means that in effect America gets a zero-interest loan corresponding to the stash of dollar bills — or, mainly $100 bills — held in the hoards of tax evaders, drug dealers, and other friends around the world.
To repeat: US dollar bills are an interest-free loan to the US government. Interesting point.


Liberty Street Economics - do asset purchases push capital abroad? Short answer: no. Because balance of payments accounting doesn't work that way:
The balance of payments tracks a country’s international transactions. It comprises the current account, which measures cross-border flows of goods, services, investment income, and transfers; the capital account, which is usually trivial; and the financial account, which records cross-border financial flows. The three components of the balance of payments add up to zero, apart from statistical discrepancies. Putting aside the small capital account and ignoring the statistical discrepancies, this means that the current account balance is exactly matched by the financial account. The intuition is that a country running a current account surplus, with exports greater than imports, is lending to the world to make up the difference. This lending is reflected in net purchases of foreign assets measured in the financial account.
It all adds up to zero. Continued:
In late 2012, the yen started to depreciate with the increased likelihood that the country would expand its asset purchase program. In April 2013, when the policy was actually implemented, commentary similar to that on the ECB program anticipated a “wall of money” flowing out of Japan in search of higher yields and affecting global asset prices. Indeed, analysts worried that emerging countries would have trouble absorbing these flows, leading to asset price bubbles. While asset prices and exchange rates adjusted in Japan and abroad, a surge in outflows never occurred.

[...]

The euro’s fall has been a key channel through which the ECB’s asset purchase policy has affected financial markets in the rest the world. However, the idea that foreign asset prices would be pushed up by a surge in money flowing out of the region, as some observers predicted, runs contrary to balance of payments accounting and asset pricing principles and should be discounted.
Bam! Macroeconomics, bitches!


Economist's View - why wages aren't keeping up. Solow has an interesting take. Seems he likes using the idea of "economic rents" all across the economic spectrum, which is an interesting idea and pretty much invalidates all the theory I learned so far in undergrad:
The suggestion I want to make is that one important reason for the failure of real wages to keep up with productivity is that the division of rent in industry has been shifting against the labor side for several decades. This is a hard hypothesis to test in the absence of direct measurement. But the decay of unions and collective bargaining, the explicit hardening of business attitudes, the popularity of right-to-work laws, and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all point in the same direction: the share of wages in national value added may have fallen because the social bargaining power of labor has diminished. ...

Now I would like to connect this hypothesis with another change taking place in the labor market..., the casualization of labor. The proportion of part-time workers has been rising... So are the numbers of workers on fixed-term contracts and independent contractors...

Casual workers have little or no effective claim to the rent component of any firm’s value added... If the division of corporate rents has indeed been shifting against labor, an increasingly casual work force will find it very hard to reverse that trend.
"Division of rent in industry" is a meaningless concept in standard economics, because all people make the absolute minimum and every market is perfectly competitive. The real world, however, has little competition, rampant oligopoly, and thus market power everywhere, which means rents everywhere. I like this guy and wish to subscribe to his newsletter.


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