New Deal democrat's blog

1946! Interest rates, inflation, and war

I'm not a trader, and I don't put much faith in short term charts the likes of which you typically see in financial porn. Longer term charts, however, are more interesting. It is much easier to separate the signal (or trend) from the noise, and the "trend" is a reflection of the economic psychology of the public. Not just that part of the public that invests, but the public who buys houses and has mortgages, buys cars and retail and pays on credit, or even saves in CDs and money market accounts. In short, just about everybody.

Taking on some Redstate BS

Over at Redstate a econ-wingnut named Pejman Yousefzadeh claims he is schooling David Leonhardt, a NY Times reporter who discussed economic conditions in Ohio, including the fact that:

Back in 2000, the typical Ohio family was still making more money than the typical American family, according to Moody’s But over the last eight years, real median income in Ohio has dropped almost 10 percent, to about $47,000, leaving it $2,300 below the national median.

Our Redstate blogger says Leonhardt owes a retraction, relying on a 2007 Cato institute study that claims: [my response in brackets]

Contrary to public perceptions:
Trade has had no discernible, negative effect on the number of jobs in the U.S. economy. Our economy today is at full employment, with 16.5 million more people working than a decade ago.

2 housing crisis proposals Democrats should support

Like many people, I loathe the idea of a housing "bailout" for the greedy, the reckless, and the spendthrift. Certainly those bankers and borrowers had no problem "privatising their gains" in the early part of this decade. I see no reason why they should look to the prudent and the thrifty now, especially when so many millions of those prudent and thrifty are those whose own dreams of owning a home of their own at a reasonable price were frozen out by the housing mania.
But out of crisis comes opportunity. In this case, the opportunity for the Democratic party to show average Americans what a Democratic majority would do for them and their financial well-being. The opportunity to earn their trust and their votes for years to come. To show that a party that believes in governance for the average citizen can separate the wolves from the sheep, penalizing the former and acting with basic humanity to the latter.

Why inflation isn't the problem

With the release of today's January 2008 CPI showing a yearly reading of 4.1%, inflation hawks are certainly out in force in the blogosphere. While I certainly agree that the average American family has faced a vastly increased burden purchasing food, gasoline, and medical care, I do not think it is inflation itself that will be the problem going forward in 2008. Below I explain why.

Below is a graph showing how inflation tends to play out over economic cycles. The blue line is consumer inflation (cpi). The red line is producer inflation (ppi) which is the rate at which costs are increasing to producers. The green line is household debt.

Recession watch: retail sales, new jobless claims rolling over

One of the things I wanted to try here is to post bits of significant economic data that would scroll off the page on the great orange satan in about 10 minutes. One of those items was yesterday's retail sales number. For about the last 6 months, most economic data has been deteriorating steadily, but two of the holdouts were retail sales and jobs data. A couple of weeks ago the December nonfarm payroll number finally went negative.

NonFarm Payroll