Yotta Point

Reads for Jan 14

Economics & Finance

• Dean Baker at Beat The Press: How Is It Possible The Fed's Image Can Be Tarnished Further?; The Japan Story; More on the Celebration Over December's Job Report
• Gavyn Davies at FT: America’s incredible shrinking labour force (via)
• Joe Weisenthal at Business Insider: Something Has To Give Here; CHART OF THE DAY: The Final Word On ADP, The Most Controversial Economic Report There Is (also see this)
• Simon Johnson at Economix: Ron Paul and the Banks
• Kenneth Kutner: Low Interest Rates and Housing Bubbles: Still No Smoking Gun (via)
• Paul Krugman at NYT: Germans and Aliens; US Net Investment Income
• Andrew Berg and Jonathan Ostry in Foreign Policy: How Inequality Damages Economies (via)
• Alan Krueger, Chairman of the Council of Economic Advisors of the US: The Rise and Consequences of Inequality in the United States (see the accompanying slides here, via)
• An old post by Lane Kenworthy at Consider the Evidence has an interesting chart: Slow Income Growth for Middle America (via)
• Robert Greenstein at CBPP's Off The Charts Blog: Romney’s Wrong: Federal Low-Income Program Dollars Go Overwhelmingly to Beneficiaries
• Mike Konczal at Rortybomb: A Quick Note on the Distributional Consequences of a Lack of Refinancing Options
• William Black at Credit Writedowns: Real Financial Regulators Love Prosecutions of Fraudulent Bank CEOs
• Yves Smith at Naked Capitalism: Crowd-Sourcing the Revolving Door (also see here and here)
• Mark Whitehouse at Bloomberg's The Ticker: On the Capture of Economists (via)
• Simon Wren-Lewis at Mainly Macro: Mistakes and Ideology in Macroeconomics (via) - also see: Chris Dillow at Stumbling and Mumbling: Mechanisms and Models (via)
• Ejaz Ghani at Vox: Reshaping Tomorrow: What will India look like in 2025? (via)

Energy & Environment, Food Security, Climate Change

• Global Macro Monitor at Credit Writedowns: Chart of the Day: U.S. Gasoline Consumption Tanks in 2011
• James Hamilton at Econbrowser: Reducing Petroleum Consumption from Transportation - has a bunch of illuminating stats for the US v. other countries from this paper by Christopher Knittel
• Tom Smerling at Skeptical Science: U.S. 2011: The Wet Get Wetter, the Dry Get Drier [also, a useful 2005 report on Natural Disaster Hotspots is a good related reference]
• Tom Curtis at Skeptical Science: Global Warming: Trend and Variation
• Dana1981 at Skeptical Science: A Big Picture Look at Global Warming
• Stephen Lacey at Climate Progress: What Do Falling Natural Gas Prices Mean for Renewables?
• Peter Sinclair at Climate Denial Crock of the Week: Climate Change and Sea Level Rise: “An Emerging Hockey Stick”

Healthcare and Education

• Aaron Carroll at The Incidental Economist: Lots of people can’t fire their insurance companies (via)
• Kelly Kennedy at USA Today: 5% of patients account for half of health care spending [link to full study here]
• Ray Fisman at Slate: Thanks, Teach ("A new study suggests that a good grade school teacher can boost college attendance rates, reduce teenage pregnancy, and increase a student’s earning potential.")
• Catherine Rampell at Economix: Do College Grads Earn Less Now Than 40 Years Ago?; College-Educated Workers Gaining Jobs, High School Grads Losing Them

Miscellaneous

• Barry Ritholtz at The Big Picture: Internet Censorship
• Kevin Drum at Mother Jones: Less Lead, Less Crime

That's it for today.

Reads for 1 Jan 2012

A very happy new year to everyone! Here are some readings to ring in the new year...

Economics & Finance

• Bill at Calculated Risk: Private Investment and the Business Cycle; Vehicle Miles Driven Decline: A possible contributing factor; Labor Force Participation: The Kids are Alright Part 2 [Bill also provides a helpful how-to link on "How do you put recession bars on graphs using Excel?"]
• Yves Smith at Naked Capitalism: Global Savings Glut or Global Banking Glut?
• Christina Romer in the NYT: A Financial Crisis Needn’t Be a Noose
• Richard Peach, Josiah Bethards and Joseph Song at Liberty Street Economics: Labor Force Exits Are Complicating Unemployment Rate Forecasts
• David Cay Johnston at Reuters: The corporations that occupy Congress; Where's the fraud, Mr. President?
• Menzie Chinn at Econbrowser: Regulatory Uncertainty, Macro Policy Uncertainty, and Demand
• Dave Altig at Macroblog: Uncertainty about uncertainty; Maybe this time was at least a little different? (regarding the failure of economic forecasting)
• Tara Sinclar at Econbrowser: Guest Contribution: US Federal Regulatory Budget and Macroeconomic Outcomes: What Do We Know?
• Cardiff Garcia at FT Alphaville: 'Tis the Seasonality, Hold the Jolly
• Barry Ritholtz at The Big Picture: Clouded Title - The Gross Illegality of MERS
• TaxProf Blog: CRS on Income Inequality (via)
• Mark Thoma at Economist's View: Peddling a False Narrative on the Financial Crisis
• Zsolt Darvas: A Tale of Three Countries: Recovery After Banking Crisis [focus on Iceland, Ireland and Latvia, via]
• Paul Krugman ay NYT: Debt and Growth in the G7
• David Romer: What Have We Learned about Fiscal Policy from the Crisis? (via)
• Bruce Bartlett in Economix at NYT: Cutting the Corporate Tax Rate Is No Economic Panacea
• Jake at Econompicdata: Consumers Don't Care About Savings Rates
• Louis Uchitelle in the NYT: Factory Jobs Gain, But Wages Retreat (via)
• Dean Baker in CEPR's Beat The Press: Robert Samuelson, Wrong Again
• Uneasy Money: Which Fed Policy is Boosting Stocks? (includes an interesting look at the link between inflation expectations and S&P 500 returns)
• Michael Panzner at Financial Armageddon: Buzzing Again (topic: "Heightened speculation about economic recovery...doesn't mean it will happen")
• Derek Thompson in The Atlantic: It's Beginning to Look a Lot Like 2009 in India (via)

Energy & Environment, Food Security, Climate Change

Reads for Dec 18

Economics & Finance

• Paul Krugman at NYT: Inflating Your Way to Prosperity; Slow Learners; Lake Wobegon, Europe; No, It's Not The Welfare State; Chronic Confusion
• Brad DeLong: "Expansionary" Austerity in Europe
• Economist: Are Persistent Trade Deficits a Bad Thing?
• Paul Bergin at the SF Federal Reserve: Asset Price Booms and Current Account Deficits
• Kash Mansori at The Street Light: House Prices and Current Account Deficits; More House Prices and Current Account Deficits
• Global Macro Monitor at The Big Picture: Italy Works 20% More Hours than Germany or France
• Uneasy Money: Deutsche Bank Gets It, Why Can’t Mrs. Merkel?
• Scott Sumer at The Money Illusion: Like deer caught in headlights (talking about the Fed)
• Washingtons Blog at The Big Picture: FBI Estimates 80% of Mortgage Fraud Involved Industry Insiders
• Calculated Risk: Research: New paper on the role of investors in the housing bubble
• Michael Olenick at Naked Capitalism: NAR’s Big Miss on Home Sales Underscores Lack of Transparency and Accuracy in Mortgage/Housing Data
• Tamara Keith at NPR's It's All Politics Blog: GOP Objects To 'Millionaires Surtax'; Millionaires We Found? Not So Much [via]
• Mark Thoma at Economist's View: Percentage Growth in Annual Wages and Salaries [also see]
• Alex Tabarrok at Marginal Revolution: Roman Empire More Equal than the United States
• Brad DeLong: Why Oh Why Can't We Have a Better Press Corps? No, High Unemployment Is Not Primarily The Result of "Generous" Unemployment Insurance Benefits
• Chad Stone at CBPP's Off The Charts Blog: It’s the Great Recession, Not the Great Vacation, That’s Responsible for High Unemployment
• Mike Konczal at Rortybomb: What is the Real Unemployment Rate and How Could We Tell?
• Macromania: Beveridge Curves for 36 U.S. Cities (Updated)
• Ben Walsh at Business Insider: A Bunch Of Academics Think They've Figured Out How To Tell If A Hedge Fund Will Outperform The Market
• Barry Ritholtz at The Big Picture: Interest Rates: 1831-2011; US Housing Prices Mirror Japan's Experience; Beware The Retail Hype; Retail Sales Disappoint on False Black Friday Reports
• Cardiff Garcia at FT Alphaville: The Decline of "Safe" Assets

To wrap up this section, here's an interesting comment by William Cohan in this FDL Book Salon on his book "Money and Power: How Goldman Sachs Came to Rule the World":

Goldman actually almost went out of business many times in its history; it is very good at getting into trouble — and also very good at getting out of trouble

...and he also notes:

actually i go through chapter and verse of the many frauds that Goldman has committed or participated in over the years

Should make for some interesting reading.

Energy & Environment, Food Security, Climate Change

Eurozone Government Debt and Current Account Deficits

Background

In my previous post - The Stormy Petrel of Eurozone Budget Deficits: Current Account Deficits - I examined this question:

Do pre-crisis current account balances, as opposed to pre-crisis fiscal balances, better predict crisis-period fiscal balances (quantitatively) for countries that are part of the European currency union (EMU)?

I showed that the answer was yes and discussed the implications in the context of the recently concluded EU summit. The analysis in the post focused on current account (CA) and fiscal balances in the 7 years preceding the start of the Great Recession (pre-crisis) and fiscal balances in the 2008-2010 (crisis) time period. Countries that joined the Euro currency union in 2007 or beyond were excluded from the analysis since they were not on the Euro long enough in advance of the financial crisis. The key finding was that the average CA balance/GDP by country for 2000-2007 is a much better quantitative predictor of the average fiscal balance/GDP for the same country in 2008-2010, than is the average fiscal balance/GDP of the country in 2000-2007. The EU "fiscal union" was largely a fiscal austerity pact, with inordinate emphasis on minimizing fiscal deficits and sovereign debt levels as a % of GDP, with little or no focus on the current account. However, as I discussed in the above post, pre-crisis fiscal balances are less effective in predicting future fiscal balances than are pre-crisis CA balances. Hence, I argued that a "fiscal union" that demands fiscal austerity as a way to ensure low fiscal deficits in the future, with no attention paid to CA balances, is unlikely to consistently prevent large future fiscal deficits.

In this post, I turn my attention to government debt - the other element of the EU pact. The question I ask here is:

Do pre-crisis current account balances/GDP, as opposed to pre-crisis government debt/GDP, better predict crisis-period debt/GDP or changes in debt/GDP (quantitatively) for countries that are part of the European currency union (EMU)?

The answer is mixed as I will explain below.

---

Summary

In this post, I summarize the results of a simple analysis of the average current account (CA) and government debt, as a percentage of GDP, for nearly a dozen European countries that use the Euro as their currency [Section 1]. With the usual caveat that correlation does not always imply causation, the key findings can be summarized as follows:

1. The average debt/GDP change from 2000-2007 to 2008-2010 was ~12.2 percentage points, with a standard deviation of ~11.9 percentage points. If Ireland and Luxembourg are excluded as outliers, the average is 10.0 and standard deviation is 9.8 [Section 1].

2. The % change in average debt/GDP between 2000-2007 and 2008-2010 was ~ 35.2%, with a standard deviation of 47.3%. If Ireland and Luxembourg are excluded as outliers, the average is 14.9% and the standard deviation is 13.9% [Section 1].

3. Pre-crisis average debt/GDP was a fairly good predictor of the absolute value of post-crisis average debt/GDP (slightly greater than 1X) but was poor in predicting the % change to pre-crisis average debt/GDP due to the crisis [Section 2]. The reason for this behavior is unclear.

4. Pre-crisis average current account balance/GDP is a low to moderate predictor of the absolute value of post-crisis average debt/GDP as well as the % change to pre-crisis average debt/GDP due to the crisis [Section 3].

Hence, if we were interested in knowing the likely % change to average debt/GDP [pre- to post-crisis], the pre-crisis average CA balance/GDP was more likely to give us some insight on this than the pre-crisis average debt/GDP. If, on the other hand, we were interested in knowing the likely absolute average debt/GDP [post-crisis], the pre-crisis average debt/GDP hits the mark much more effectively on this than than the pre-crisis average CA balance/GDP. In the context of the recently concluded EU "fiscal union" summit, a focus purely on nominal debt/GDP levels will likely provide less insight on the mechanisms that might allow for net debt reduction. A focus on CA balances/GDP is more likely to be useful in understanding how to shape the % change in debt/GDP in the desired direction.

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1. Eurozone Countries - Assumptions & Data

The Stormy Petrel of Eurozone Budget Deficits: Current Account Deficits

[NOTE: The second part of this analysis is posted in the next post: Eurozone Government Debt and Current Account Deficits]

Background

In my previous post discussing the recent EU "fiscal union" summit, I said:

You'll notice that Spain and Ireland were running fiscal surpluses with acceptable debt/GDP in the years immediately preceding the financial crisis - yet these countries are amongst the worst affected by the meltdown and and in the crosshairs of the ECB and austerity hawks. Slovenia had run modest deficits ahead of the financial crisis and its debt to GDP ratio was low and declining ahead of the crisis - yet, Slovenia's bond yields have been in crisis territory recently and its debt situation is worsening as the economy teeters into recession. Undoubtedly, countries like Greece made their problems much worse with very high levels of deficits and debt prior to the crisis. That said, even Germany ran significant deficits and had high debt levels prior to the crisis - yet, Germany remains relatively unscathed because it has run massive current account surpluses thanks in part to the Eurozone periphery that ran massive trade deficits that benefited countries like Germany.

This is a point that has been made by many people before: rather than fiscal profligacy, the main root cause of the current European financial crisis can be traced back to large current account deficits run by many EU members following the establishment of the Euro as a common currency, culminating in a sudden stop (in the vicinity of the Great Recession) that pummeled the economic and fiscal health of those countries. A useful chart is available from Kash Mansori at The Street Light - along with his follow-up observations...

In their book "This Time is Different: Eight Centuries of Financial Folly", Carmen Reinhart and Kenneth Rogoff point out:

An even stronger regularity found in the literature on modern financial crises is that countries experiencing sudden large capital inflows are at high risk of experiencing a debt crisis [15]. The preliminary evidence here suggests that the same is true over a much broader sweep of history, with surges in capital inflows often preceding external debt crises at the country, regional, and global levels since 1800, if not before.

[I've discussed some of these issues in more detail in a couple of other prior posts: Capital Flow Bonanzas and Their Aftermath and Q&A with President Bill Clinton at the 2011 Clinton Global Initiative, Part 2 - The Financial Crisis in Europe]

Given the known impact of large net capital inflows and current account deficits on fiscal stability, here's a natural question that came to mind in the context of the Eurozone:

Do pre-crisis current account balances, as opposed to pre-crisis fiscal balances, better predict crisis-period fiscal balances (quantitatively) for countries that are part of the European currency union (EMU)?

This post focuses on that question. The answer, as it turns out, is yes and the implications of this are obviously significant in the context of the recently concluded EU summit.

---

Summary

In this post, I summarize the results of a simple analysis of the average current account (CA) and fiscal balances, as a percentage of GDP, for nearly a dozen European countries that use the Euro as their currency [Section 1]. The analysis focused on CA and fiscal balances in the 7 years preceding the start of the Great Recession (pre-crisis) and fiscal balances in the 2008-2010 (crisis) time period. Countries that joined the Euro currency union in 2007 or beyond were excluded from the analysis since they were not on the Euro long enough in advance of the financial crisis. The key finding from this analysis is that the average CA balance/GDP by country for 2000-2007 [Section 3a, 3b] is a much better quantitative predictor of the average fiscal balance/GDP for the same country in 2008-2010, than is the average fiscal balance/GDP of the country in 2000-2007 [Section 2a, 2b].

The analysis was completed with and without Ireland in the mix. Ireland is a massive outlier in the data when it comes to fiscal deficits - likely due to the fact that the main issue in Ireland was large-scale private debt rather than sovereign debt, and sovereign debt ballooned only later because of the Irish government's huge borrowing to bail out private banks during the crisis. With the exclusion of Ireland, the positive correlation between average pre-crisis CA balance/GDP to crisis-era fiscal balance/GDP is very high and even more stark [Section 3c, 3d]. It is significantly higher than the correlation between average pre-crisis fiscal balance/GDP to crisis-era fiscal balance/GDP [Section 2c, 2d]. 

The findings here raise more questions about the effectiveness of the recently touted EU "fiscal union" which was largely a fiscal austerity pact, with inordinate emphasis on fiscal balances as opposed to CA balances. Specifically, the data shown here indicate that pre-crisis fiscal balances do not effectively predict fiscal balances during downturns/crises - they are less effective in doing so than pre-crisis CA balances. Hence, a "fiscal union" that demands fiscal austerity as a way to ensure low fiscal deficits in the future, with no attention paid to CA balances, is unlikely to consistently prevent large future fiscal deficits. Further, given the limited direct correlation between CA and fiscal balances over the same period of time [see "Baseline Charts" in Section 3], it is quite possible that countries might run fiscal surpluses along with large current account deficits over the same time period, and yet have little or no protection against future fiscal deficits during downturns [as shown in Section 3a-3d]. Finally, a misguided focus on short-term fiscal deficits and debt (as opposed to longer-term fiscal health) is more likely to drive deflationary results as well in the current environment - which could be another negative consequence of the recently announced EU "fiscal union".

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1. The Eurozone Countries

The EU Brand of Hopium

It's abundantly unclear how the EU summit on Friday actually solved the foundational problems behind the financial crisis in Europe - if anything the implications for the future might be worse. Here are a few posts that get to the gist of the problem with the touted "fiscal union".

Let's start with this NPR piece by Chana Joffe-Walt which helpfully summarizes the recent historical data on Eurozone deficits and debt as a percentage of GDP. First, EU countries' deficits as a percentage of GDP compared to the threshold limit set by the pact on Friday, December 9.

Second, EU countries' debt as a percentage of GDP compared to the threshold limit set by the same pact.

Reads for Dec 4/5

Economics & Finance

• Catherine Rampell at Economix: Rating the Credit Raters
• Rebecca Wilder at News N Economics: Malicious ECB Rate Hikes [also see her post from September: The European debt crisis in charts]
• Michael Darda of MKM Partners: Memo to the ECB - Money's Too Tight
• James Kirkup at The Telegraph (UK): Euro doomed from start, says Jacques Delors [Delors was a key architect of the Euro] (via Credit Writedowns)
• Kash Mansori at The Street Light: Italy and Japan
• Joe Weisenthal at Business Insider: Guess Which Country Has Debt Of Nearly 1000% Of GDP...; The Entire Sovereign Debt Crisis Can Be Understood By Looking At Sweden Vs. Finland
• David Cay Johnston at Reuters: The Taxpayers Burden and Closing Wall Street's Casino [absolutely fascinating chart showing bank failures, de-regulation & income inequality in the US since 1910 and another on fewer Federal financial prosecutions in 2000+ era]
• Hannah Shaw at CBPP's Off The Charts Blog: Exploring Income Inequality, Part 5: The Concentration of Income and Wealth
• Mish's Global Economic Trend Analysis: Banks Make $13 Billion on $7.7 Trillion in Secret Fed Loans; SEC Stands by Does Nothing
• Mike Konczal at Rortybomb: Comparing the Federal Reserve's Reaction to the Financial Crisis Versus the Unemployment Crisis [Wow!]
  • Konczal says: "To recap: Lehman Brothers goes worse than the Federal Reserve’s projection and the Fed goes to the most extreme lengths it can find to extend emergency lending. Every single unemployment number turns out to be worse than all of the Federal Reserve’s projections, and the Federal Reserve finds every excuse to look the other way. Only Charles Evans has the courage to say that we should let inflation go to 3% while unemployment is over 7% to catch up to trend growth. Amazing."
• Historinhas: The "hole theory of unemployment" (via)
• Bill McBride at Calculated Risk: Employment Summary, Part Time Workers, and Unemployed Over 26 Weeks
• Menzie Chinn at Econbrowser: The November Employment Situation
• Mark Thoma at Economist's View: Unemployment Falls, But Is It Good News?
• Brad DeLong: The Household Survey: A Note on the December 2, 2011 Report
• Barry Ritholtz at the Washington Post: Did Black Friday save the season? Beware the retail hype.
• Kenneth Rogoff: Is Modern Capitalism Sustainable? (via)
• Paul Krugman at NYT: British Debt History; Bleeding Britain; Explaining Business Investment; The Summer of Confidence; Memories of VSPs Past; Oh? ECD;  There is Something Not Rotten (in the State of Denmark);
• Noahpinion: Harrison & Kreps 1978: The power of irrational expectations (via)
• Vivek Wadhwa in the Washington Post: China opens doors of state-run companies to world's top talent
• Vivek Wadhwa in the Washington Post: Why silicon valley should fear India

On that last article....I agree with much of Wadhwa's observations about India based on my experience - in particular, these passages:

India’s information technology sector may have started by running call centers and maintaining old computer code for American companies. But, today, instead of starting more I.T. services companies, a new breed of Indian entrepreneurs are developing high-value technology products based on intellectual property.

[...]

But something is missing in India: The angel investors, venture capitalists, and, most critically, experienced mentors. This problem will fix itself as more companies achieve success and seasoned entrepreneurs decide to give back to the next generation. When that happens, Silicon Valley better watch out. It is in for some very real competition.

Energy & Environment, Food Security, Climate Change

Reads for Nov 25

Economics & Finance

• Brad DeLong: Department of "Huh?!": John Taylor and Milton Friedman's Monetary Policy Edition
• Global Macro Monitor at Credit Writedowns: Chart of the day - China's Credit Bubble
• Adrian Peralta-Alva at The Big Picture: Real Estate Bubbles and Weak Recoveries
• CBO Report: Estimated Impact of the American Recovery and reinvestment Act on Employment and Economic Output from July 2011 through September 2011 [also see here]
• Ken Houghton at Angry Bear: How Keynesian Policy Led Economic Growth In the New Deal Era: Three Simple Graphs
• James Hamilton at Econbrowser: Taxing the 1%
• James Hornet at CBPP's Off The Charts blog: Why Doing Nothing Would Reduce Deficits by $7.1 Trillion
• Catherine Rampell at Economix (NYT): Deficit Deals Weren’t Always So Antitax
• Catherine Rampell at Economix (NYT): How Other Countries Do Deficit Reduction
• David Glasner at Uneasy Money: Watching the CPI Can Get You into Deep Trouble
• Hyun Song Shin: Global Banking Glut and Loan Risk Premium [also see Kevin Drum]
• Dan Crawford at Angry Bear: EA Balance of Payments: the Current Account [also see this Deutsche Bank Research paper]

Let's wrap this section with this excellent paper "Why stricter rules threaten the eurozone" by Simon Tilford and Philip Whyte of the Center for European Reform (CER), via Paul Krugman. Can't say there is a lot that is new here, but the authors do a good job of explaining in a simple way some of the issues behind the European crisis. Here are some excerpts from their paper:

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 3: Shared Value and Shareholder Value

[Part 1 includes links to President Clinton's comments on a number of topics; Part 2 was focused on his comments on Greece, the Euro and the financial crisis in Europe; Part 2A and Part 2B were focused on food security - the role of commodity market speculation & corn-ethanol conversion on food prices and sustainable agriculture]

The focus of this post is President Clinton's observations on the role of shared value vs. shareholder value when it comes to corporations, their impact on society and job creation.

Summary

The key takeaways from this post are the following:

a) President Clinton strongly endorsed the need for U.S. businesses to focus on shared value as opposed to merely shareholder value, in order to be successful in the long-term and create more jobs in the US. According to Michael Porter and Mark Kramer, the "principle of shared value...involves creating economic value in a way that also creates value for society by addressing its needs and challenges." [Section 1]

b) Shared value does not refer to "corporate social responsibility" but a very different way to shape and run a business which recognizes that societal and environmental impact should not be viewed as externalities for firms but rather as key factors that shape business strategy and practices. As Porter and Kramer have illustrated with examples, if this is done correctly, perceived "harms and constraints [do] not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets." [Section 2]

c) There are many examples of firms that are achieving great success by focusing first on key stakeholders other than shareholders, e.g., Apple, which has become one of the most successful companies in the world with a focus first on customers, rather than shareholders. [Section 2]

d) There is growing recognition, as was particularly evident from some of the CGI panel discussions [Section 3], that:

• Corporations should focus on creating shared value and be given the legal flexibility to operate as such - e.g., via the creation of a new corporate legal entity called a benefit corporation
• A pure focus on profit is not necessarily likely to lead to long-term success or profitability - e.g., the massive collapse of financial companies worldwide recently, given financial companies perhaps more than any other class of companies, are ostensibly focused solely on financial profitability
• Free market principles by themselves do not allow for optimal outcomes at the level of individual countries; country-level strategies require the cooperation of public, private and non-profit entities.

In the following sections, I'll explore the above points in greater detail.

1. President Clinton's Observations

Reads for Oct 23

Jobs, Economy and Financial Markets

• Stratfor: Special Series (Part 1): Assessing the Damage of the European Banking Crisis
• Scott Sumner in National Affairs: Re-targeting the Fed
  • Also see this video, where he discusses the idea of Nominal GDP targeting, something that's getting a lot of attention
• Joe Weisenthal at Business Insider: Goldman Advises The Fed To Go Nuclear, And Set A Target For Nominal GDP
• Rob Parenteau at Credit Writedowns: Leaked Greek bailout document: Expansionary fiscal consolidation has failed
• Famous Peruvian economist Hernando de Soto in the Washington Post: The Cost of Financial Ignorance
• Simon Johnson at The Baseline Scenario: European Debt - The Big Picture
• Kash Mansori at The Street Light: Where Exactly Are Those Lazy Southern Europeans, Anyway?
• Simon Johnson at The Baseline Scenario: Jon Huntsman: Too Big To Fail Is Too Big
• Karl Smith at Modeled Behavior: Greg Mankiw on Fiscal Policy
• CBPP's Off The Charts Blog: Jared Bernstein and Chuck Marr Discuss a Tax Holiday for Overseas Corporate Profits
• CEPR's Mark Weisbrot et al: The Argentine Success Story and its Implications
• Kenneth Rapoza in Forbes: US Businesses Not Being Strangled By Regulation And Taxation, World Bank Says
  • World Bank report: Doing Business 2012
  • also see this earlier piece by Larry Mishel at EPI: Regulatory uncertainty - A phony explanation for our jobs problem]

Food

• Justin Gillis at the Green blog in the New York Times: Deep Thinking About the Future of Food
• Darcy Palmquist in the Christian Science Monitor: The world can feed itself without ruining the planet, study says
• Both of the above, refer to this paper...Foley et al. in Nature: Solutions for a Cultivated Planet
  • The gist of their paper: "To meet the world’s future food security and sustainability needs, food production must grow substantially while, at the same time, agriculture’s environmental footprint must shrink dramatically. Here we analyse solutions to this dilemma, showing that tremendous progress could be made by halting agricultural expansion, closing ‘yield gaps’ on underperforming lands, increasing cropping efficiency, shifting diets and reducing waste. Together, these strategies could double food production while greatly reducing the environmental impacts of agriculture."

Climate Change