In what could be determined as the understatement of the day, Federal Reserve Bank of Philadelphia President Charles Plosser told a group assembled at a banking forum in Prague that monetary policymakers must be vigilant to ensure rules-based policy decisions aren't skewed by poor data.

Plosser listed problems that are associated with measuring output gaps. An output gap is defined as the difference between the actual output of an economy and the output it could achieve at its most efficient. An output gap can be positive or negative (positive means actual output is more than full-capacity output and vice versa for negative). Plosser believes that output gaps and/or unemployment gaps could appear bigger than they are, which could lead to incorrect decisions as it comes to inflation. Plosser believes that "Explaining such decisions about the appropriate stance of monetary policy will be challenging, and central bankers will need to communicate with the public about these issues well in advance of their decisions to ensure that their policy actions are not misunderstood."

Continue reading Fed's Plosser Says That Poor Data Can Skew Policy

Fed's Plosser Says That Poor Data Can Skew Policy originally appeared on BloggingStocks on Tue, 23 Mar 2010 13:30:00 EST. Please see our terms for use of feeds.

Consumer spending had its largest fall this year, thanks to the end of the "Cash for Clunkers" program. And, incomes were flat. No change to the money coming in and a drop in the cash going out translates to an impediment to economic recovery.

In September, consumer spending fell 0.5%, the first decline in five months and the worst in nine. Wages and salaries dropped 0.2%, effectively offsetting the 0.2% up-tick in August. The economy did grow in the third quarter of 2009, hinting that the worst recession in 70 years may be coming to a close, but the tough September suggests we still have some work in front of us.

Continue reading Bad September, good Q3 for consumer spending, what's next?

Bad September, good Q3 for consumer spending, what's next? originally appeared on BloggingStocks on Sat, 31 Oct 2009 11:40:00 EST. Please see our terms for use of feeds.

True entrepreneurs will go to any length to get their companies off the ground. And, they're known for accepting the consequences of the risks they take. Some businesses never make it to launch, never bring in a dime, never lead to that killer IPO. In even rarer cases, these adventures can put two people behind the defendants' table on charges of corporate espionage. Lan Lee, an American, and Yuefei Ge, a Chinese citizen, allegedly swiped computer chip blueprints and tried to gain Chinese government support for a startup using these illicit goods. Now, they could face up to 65 years on charges of corporate espionage.

Continue reading Economic espionage comes to trial, first time with a jury

Economic espionage comes to trial, first time with a jury originally appeared on BloggingStocks on Thu, 22 Oct 2009 15:40:00 EST. Please see our terms for use of feeds.

Consumer spending may be down, but its share of U.S. economic activity has increased. So, we're now more dependent than before on the average Joe's open wallet to guide us out of the recession. A year ago, consumer spending accounted for 70% of the U.S. economy. Since then, it has edged up to 71%. The long-term average is approximately 65%.

The increase in consumer spending's share of the economy indicates that other sectors fell harder. Business and construction spending on new equipment have constricted at a record rate since 2008. This isn't unusual, though, as consumer spending tends to take a larger piece of the economic pie during downturns.

Continue reading Recovery now more dependent on consumers than ever

Recovery now more dependent on consumers than ever originally appeared on BloggingStocks on Mon, 12 Oct 2009 16:45:00 EST. Please see our terms for use of feeds.

There are two competing positions on consumer sentiment right now. One is that it turned south last week, as people worried about their jobs - always a bad sign for spending. The other is that consumer sentiment didn't crap out in July: it fizzled in May. So, it's not a question of whether consumers aren't confident in the U.S. economic machine, it's just a matter of when the collective mood changed.

The July camp is set up around the Reuters/University of Michigan Surveys of Consumers, which makes now the weakest point for consumer sentiment since March. Those who favor May look to domestic demand for foreign goods, which went soft two months ago, bringing the monthly trade deficit to its narrowest since 1999. The U.S. trade gap unexpectedly tightened to $26 billion in May, with exports up 1.6% and imports down 0.6%, according to the U.S. Department of Commerce.

Continue reading Consumer sentiment down, according to everyone

Consumer sentiment down, according to everyone originally appeared on BloggingStocks on Fri, 10 Jul 2009 17:20:00 EST. Please see our terms for use of feeds.

Continue reading Iran: Totalitarian rule begets totalitarian economy

Iran: Totalitarian rule begets totalitarian economy originally appeared on BloggingStocks on Wed, 17 Jun 2009 16:50:00 EST. Please see our terms for use of feeds.

Continue reading Iran will waste four more years

Iran will waste four more years originally appeared on BloggingStocks on Mon, 15 Jun 2009 18:47:00 EST. Please see our terms for use of feeds.

Continue reading Brazilian president warns of protectionist dangers

Brazilian president warns of protectionist dangers originally appeared on BloggingStocks on Tue, 17 Mar 2009 09:00:00 EST. Please see our terms for use of feeds.

This post was written by Minyanville contributor Bennet Sedacca.

My main reason for being long equities was purely a technical/sentiment call. But many of those that were asking me if they should liquidate their portfolios just 10 days ago were asking me what to buy and how long I thought the rally would last. I must confess that my honest to goodness answer is/was 'no idea.' But the change in sentiment was what quickly caught my attention.

Further, TV commentators and others turned bullish awfully quickly.

But the REAL reason is that MACRO TRUMPS TECHNICALS.

I just saw the latest Credit Market Debt/GDP number as of 12/31 (and this is before GDP was going to drop and before all of the recent issuance) and it was a stunning 370%. A record high by a long shot.

So much for de-leveraging. In fact the economy is getting MORE leveraged.

Why I sold: The economy is getting more leveraged originally appeared on BloggingStocks on Fri, 13 Mar 2009 14:50:00 EST. Please see our terms for use of feeds.

The Congressional Oversight Panel (COP) reports today that Hank Paulson's Troubled Asset Recovery Plan (TARP) stole $78 billion of our money. This sounds like a huge under count to me -- I would put the figure at much closer to $350 billion. The questions now are what to do about TARP and whether similar waste can be prevented for the next $350 billion.

How did COP arrive at the $78 billion? It claims that TARP received bank assets worth $176 billion in exchange for capital purchases of $254 billion. Two hundred banks have gotten TARP money so far. In addition to assets, TARP has gotten preferred stock and warrants in exchange for its cash. And I would guess that the amount taxpayers have lost is well in excess of the $78 billion.

Continue reading TARP robs $78 billion in taxpayer cash

TARP robs $78 billion in taxpayer cash originally appeared on BloggingStocks on Fri, 06 Feb 2009 09:42:00 EST. Please see our terms for use of feeds.

President-elect Barack Obama campaigned -- and has continued to generate positive press -- on his commitment to job creation.

I've been scratching my head at this for awhile and wondering: Why is job creation a worthy goal? Shouldn't the goal be economic growth, and job creation is a happy byproduct of that?

Writing in Reason, Jacob Sullum, dissects exactly why Obama's rhetoric on job creation is nonsensical, illogical, and flies in the face of economics:

Obama also wants to spend $60 billion to "provide financing to transportation infrastructure projects across the nation." He says "these projects will create up to two million new direct and indirect jobs and stimulate approximately $35 billion per year in new economic activity. Fixing a bridge, widening a highway or building a light rail system may or may not make economic sense. But the fact that it involves paying people to operate jackhammers and pour concrete does not make it any more worthwhile. If creating jobs can justify transportation projects, why not fill the country with bridges to nowhere.

My optimistic hope is that Obama realizes that job creation is not a worthy goal and mentions only because he's politically savvy enough to know that it will generate consensus around his ambitious proposals. But if his billions of dollars in infrastructure projects are motivated by a desire to create jobs, we are in a lot of trouble.

The myth of job creation originally appeared on BloggingStocks on Sun, 28 Dec 2008 09:10:00 EST. Please see our terms for use of feeds.

Today, the President-elect is meeting at the White House with the current President. No President in U.S. history has left his successor with two long wars with no end and an economic depression. That is until the current one. But George W. Bush has more trouble in store for his successor. And he's piling on the problems in his usual secretive manner -- hoping nobody will notice.

How so? First, the Treasury Department this morning announced that it would increase the size of the bailout of American International Group (NYSE: AIG) from $143.7 billion to $150 billion and it would do so from funds in the $810 billion bank bailout bill. Second, he snuck a $140 billion bank tax break into that same bailout bill that would encourage bank mergers by allowing profitable banks to pay less tax by using the losses from unprofitable ones they buy to offset their taxable income.

Each of these moves is complex but the bottom line is that more of your money is going to bail out the mistakes of a handful of executives without any input from taxpayer representatives. The new AIG bailout swaps a program that gave it $143.7 billion of taxpayer money -- the original $85 billion loan for warrants to buy 79.9% stake; plus $37.8 billion more to cover losses from AIG's money-losing securities lending unit; plus another $20.9 billion worth of Commercial Paper -- for a new deal.

Continue reading Bush sneaks $146.3 billion in bank tax breaks and new AIG cash onto Obama's plate

Bush sneaks $146.3 billion in bank tax breaks and new AIG cash onto Obama's plate originally appeared on BloggingStocks on Mon, 10 Nov 2008 09:09:00 EST. Please see our terms for use of feeds.

What might be considered a recession in the US is probably different from what a recession would look like in China. In the US, the economy has to have two quarters of negative GDP growth. In an economy like the one on the mainland, which has been growing at 10% a year, an economic calamity might begin if the move in GDP expansion slipped to 5%.

At a slower rate of growth, wage increases for China's middle class might stagnate. This group is the engine of the country's great improvements in consumer spending. Factory employment could drop if exports slowed due to a recession in Japan and the West.

Odd as it may seem, a GDP improvement that might be considered robust in the US could be a disaster for the Chinese.

According to Bloomberg, China's industrial output rose at the slowest rate in six years and much of that was due to a drop in export demand. The nation is now looking at tax cuts to improve growth prospects. That sounds a bit like the tax rebate program in the US.

The Chinese consumer fuels much of the import demand in the country. Many of those imported goods come from the US. It is a bit of a vicious cycle. China and America have become co-dependent

Douglas A. McIntyre is an editor at 247wallst.com.

A recession in China? originally appeared on BloggingStocks on Fri, 12 Sep 2008 08:42:00 EST. Please see our terms for use of feeds.

Democrats, including this one, are betting that once Palin is no longer the flavor of the week voters will move onto more pressing issues such as the economy (and, of course, "American Idol"). The economy is in terrible shape. The federal budget deficit is soaring and unemployment is at record levels. Former Treasury Secretary Larry Summers endorsed the second stimulus plan today in testimony before Congress.

Continue reading Will a second economic stimulus revive Obama's campaign?

Will a second economic stimulus revive Obama's campaign? originally appeared on BloggingStocks on Wed, 10 Sep 2008 12:45:00 EST. Please see our terms for use of feeds.

Continue reading Stocks have their worst week in six years

Stocks have their worst week in six years originally appeared on BloggingStocks on Fri, 05 Sep 2008 17:51:00 EST. Please see our terms for use of feeds.

Continue reading Why haven't the Republicans said much about the economy?

Why haven't the Republicans said much about the economy? originally appeared on BloggingStocks on Fri, 05 Sep 2008 15:07:00 EST. Please see our terms for use of feeds.

Not surprisingly, talk of protectionism seems to be on the rise in the U.S. One foolish member of Congress has proposed slapping new tariffs on Chinese goods to punish the country for currency manipulation. Such a law would probably be struck down by the World Trade Organization. Barack Obama, the presumptive Democratic presidential nominee, pledges to fight for a "a trade policy that opens up foreign markets to support good American jobs." He also wants to "amend" the North American Free Trade Agreement. Republican John McCain takes the opposite approach, vowing during his recent overseas trips to continue President Bush's free trade agenda.

Continue reading Will China's economy eclipse the U.S.?

Will China's economy eclipse the U.S.? originally appeared on BloggingStocks on Wed, 09 Jul 2008 14:00:00 EST. Please see our terms for use of feeds.

The New York Times reports that the European Central Bank raised its equivalent of the Fed Funds rate to 4.25%. Meanwhile, Bernanke's economic wrecking crew has kept the U.S. rate at 2%. Investors will sell dollars and buy Euros. That will cause the dollar to lose even more of the 72% it's lost since January 2001. But none of this is really happening because AFP reports that President George Bush has declared that "we're strong dollar people."

The key to U.S. policy is repeated denials of the obvious -- which is that U.S. policy is consistently intended to weaken the dollar. The reason is that a weak dollar makes the goods of big U.S. corporate exporters relatively cheap when they sell overseas. And of course, since oil is traded in dollars, a weak one causes the price of oil to spike. It now resides at a comfortable $146 a barrel, up 508% since January 2001.

But Reuters reports that Treasury Secretary Hank Paulson -- who last year brought us "subprime is contained" -- now says that the weak dollar is not to blame for high oil prices. With apologies to the old E.F. Hutton advertisements -- which said "When E.F. Hutton talks, people listen" -- when Hank Paulson talks, people snicker.

Continue reading Why the dollar will keep falling

Why the dollar will keep falling originally appeared on BloggingStocks on Thu, 03 Jul 2008 10:10:00 EST. Please see our terms for use of feeds.

If an enemy sworn to the destruction of the global economy was given free reign, it would follow the strategies of its current leaders.

One key to destroying an economy is to break its pricing mechanism. What does an effectively functioning pricing system do? It creates a market of buyers and sellers who can meet, agree on a price, conduct the transaction, and create an information trail that permits future market participants to judge what might be a fair price for their transactions.

Another key to destroying an economy is to put too low a price on risky behavior. Why is it important to price risk accurately? Because if decision-makers do not assess the risk at the time of their decision, the economy will end up paying for the under-priced risk long after those decision-makers have left office.

So how have current leaders broken the pricing mechanism and under-priced risk? Here are three ways:

Continue reading What wrecked the global economy

What wrecked the global economy originally appeared on BloggingStocks on Tue, 01 Jul 2008 08:45:00 EST. Please see our terms for use of feeds.

Continue reading The Federal Reserve says the party is over

The Federal Reserve says the party is over originally appeared on BloggingStocks on Wed, 25 Jun 2008 15:30:00 EST. Please see our terms for use of feeds.