Entries filed under 'U.S. Economy & Policy'

    Deflation: What's the Problem?

    July 24, 2014 11:44 AM by Lord Abbett Editorial Staff

    In the Eurozone, as elsewhere, heavily indebted countries will be hurt most.

    Economic growth in the eurozone continues to be weak, and inflation has been declining as well. Like most central banks, the European Central Bank is concerned about the possibility of deflation and is implementing policies to combat it. But is deflation really a problem?

    Financial journalist James Grant and others have argued that deflation is not the problem it’s made out to be. In fact, it is the natural result of improvements in efficiency that have resulted from computer technology and the Internet. If business costs have been reduced dramatically, it only makes sense that consumer prices would also come down. This kind of deflation is also known as a higher standard of living, says Grant.  

    So why do central banks consider deflation the enemy?

    Read More »

    U.S. Economy: The Muddle Gets Deeper

    June 25, 2014 2:31 PM by Milton Ezrati

    While a far larger-than-expected decline in revised first-quarter GDP does not signal recession, it does point to continued subpar growth.  

    Though a downward revision in first-quarter U.S. gross domestic product (GDP) was widely expected, the actual change reported by the Commerce Department on June 25 was more severe—and troubling for that reason alone. Instead of the previous estimate of a 1.0% annualized rate of decline in real GDP reported on May 29, the revised data revealed a 2.9% decrease. Economists surveyed by Bloomberg projected a 1.8% drop.

    Read More »

    Oil Spillover: Could the Iraq Conflict Dampen U.S. Growth?

    June 16, 2014 4:05 PM by Milton Ezrati

    Expectations of stronger second-quarter growth may have to be trimmed if gasoline prices rise sharply.  

    Given the deepening conflict in Iraq, it is remarkable that oil prices have not risen higher than the $107 per barrel (Bloomberg data) reached on June 16.  Whichever side has the advantage-—the government of Prime Minister Nouri al-Maliki, or the insurgency led by the Islamic State of Iraq and Syria (ISIS)—or whether the United States or Iran, cooperatively or unilaterally, intervene in the conflict, the prospect of ongoing fighting and chaos threatens to keep some or all of Iraq's ample oil supplies off the market. 

    Read More »

    U.S. Economy Will Weather a Weak First Quarter

    May 29, 2014 12:22 PM by Milton Ezrati

    Shocking as the first-quarter GDP release looks on the surface, it still is no big deal.

    The Commerce Department’s release of revised first quarter GDP figures on May 29 offered a negative surprise.  Though the pattern of monthly data since the preliminary GDP estimate of 0.1% annualized real growth have led many to suspect that the figure could be negative, the reported decline of 1.0% went further than most any forecaster expected.  Yet, the picture still is one of temporary weather-related problems that have little bearing on the future. 

    Read More »

    Piketty: Misremembrance of Things Past

    May 21, 2014 2:04 PM by Milton Ezrati

    The French author cherry-picks certain periods of economic history to make his point—and totally ignores the prospective impact of current demographic trends.

    Professor Thomas Piketty’s new book, Capital in the Twenty-First Century, certainly has caused a stir—with a vivid description of income inequality over a long past and across several economies and with extreme recommendations on how to remedy the presumed injustice. There is, however, a serious problem with the picture he paints and, consequently, his policy prescriptions. Because his conclusions reflect only a particular historical period, they say nothing about the nature of capitalism, as he suggests they do, and little about a future in which aging demographics will create very different trends than he has found in the past.

    Read More »