As the clock ticked past 11:59 and Friday, March 1 turned into Saturday, March 2, the much-discussed sequestration went into effect. Did markets shudder at this lack of a last-minute deal? Not really – in fact, all three major U.S. markets (DJIA, S&P 500, and NASDAQ) closed up on Friday. So, how much of an impact will this roughly US$1 trillion in cuts have on the economy? Not as much as you might think. Read more
Posts tagged ‘economy’
Back in the late nineteenth century, the field of economics gave birth to the term Homo economicus (roughly, “economic human”). With all the new economic models and ideas that were being thrown around at the time, economists needed a stand-in for John and Jane Doe – some anonymous person who could serve as the rational, self-interested individual that their models required. This was Homo ecnomicus – a play of sorts on the Latin taxonomy used to classify all living organisms. The rest of us humans are just plain old Homo sapiens.
Over the last several months, a growing divergence between the economic outlooks of consumers and businesses in the United States has made it feel like Homo economicus was splitting into two different subspecies; one confident, and the other pessimistic. One of these subspecies, however, may be doomed to extinction. Read more
Having just returned from a two-week tour of Eastern Australia, I can confidently tell you that the Land of Oz is blessed with many great things: sunshine (a novelty for a Londoner like me), beaches, vineyards, and great food. But these blessings all come at a very high price. Everything – from food to clothes – seemed mighty expensive. And coming from a Londoner that’s saying something!
The very sharp appreciation in the Australian dollar goes some way to explaining the tremendous rise in prices. In the span of four years, the Australian dollar has strengthened from US$0.63 to US$1.05. All else being equal, that implies a virtual doubling of prices! So whereas a pizza in Australia may have cost around US$15 in 2009, it now goes for around US$25.
The incredibly powerful performance of the Australian economy over the past few years has contributed to this sharp strengthening of the Aussie dollar; meanwhile, the European and U.S. economies have been redefining the term “tepid recovery.” Read more
First off…thoughts and support to all those affected by the devastation wrought by Hurricane Sandy. As the storm moves on from New York and New Jersey, she leaves a path of destruction in one of most densely populated regions in the United States. Financial markets were at a standstill for days. Power is out for millions on the Mid-Atlantic. Economists – wanting to quantify everything – have already started to pose the question, how will Sandy affect the economy? Numbers seem such a crude medium for talking about a natural disaster like this, but in many ways, it’s all we have.
First, let’s look at how much the storm will cost. To be sure, Sandy will be costly for insurance companies; current estimates of the damage are between US$5 and US$10 billion, making Sandy the fifth most expensive storm. Katrina holds the title as “most costly storm” with US$46.6 billion in insurance losses. If you add damages to infrastructure and public property into insured losses, Sandy’s total damages are estimated to be around US$20 billion. Then, you have to measure Sandy’s effects stoppages in production and slowdowns in sales. Typically, these halts in production and sales are temporary. But, some sales will not be recovered or shifted. For example, restaurant purchases cannot be made up after the storm.
It may not be a bright, sunny day for the UK economy, but with Thursday’s news of a surge in economic growth in Q3, perhaps we can be forgiven for feeling that at least the clouds have parted. And believe me, Londoners will take “partly cloudy” when we can get it.
This uptick in GDP growth marks Britain’s emergence from a double-dip recession, and I have to say it feels like there is a real shift in policy focus off the back of that one number. The preliminary estimate from the Office for National Statistics put GDP growth at 1.0% for the third quarter of 2012. It was well above consensus estimates in the range of 0.6% to 0.8%.
This marks the first quarter of expansion since the third quarter of 2011, and it’s the fastest rate of growth in five years. What’s behind the surprise increase? Probably the Olympics. Read more
So, today Automatic Data Processing Inc. (everybody calls them ADP) announced that they’ll be changing (their press release used the word “enhance”) the methodology they use on their widely followed monthly survey of private-sector hiring. For those of you who don’t know, ADP is a big payroll-processing company that also counts payroll numbers. ADP payrolls are important statistics to compliment the Bureau of Labor Statistics’ nonfarm payroll (NFP) data and have the potential to move the markets. Typically, the ADP report comes out the Wednesday before NFP info.
The problem – if you want to call it that – has been the criticisms that ADP’s data send out confusing signals. Read more
What happens when you combine five economists to come up with six economically sensible policy ideas, and then use the result to create a fake presidential candidate? Well, you get what the folks over at NPR’s Planet Money called “A political candidate who could potentially fix the economy, but would never win an election.” Their group of economists came from such vaunted institutions as Harvard, Cornell, George Mason University, the University of Chicago, and the Center for Economic and Policy Research. They were tasked with finding “major economic policies they could all stand behind.” This would then serve as the basis for an economic platform.
So what policies does this Frankenstein’s Monster of a potential POTUS stand on? Five tax changes and one alteration of the criminal code.