| Why printing money makes sense | Dean Baker Right now, even a counterfeiter issuing dud dollars would be better for the economy than our deficit-fixated policymakersBeneficent Counterfeiters and Economic StimulusPresident Reagan once famously quipped that everyone who is supports abortion has already been born. In the same vein, it is worth noting that all the policymakers who don't think we should worry about 9.6% unemployment have jobs.This simple fact cannot be repeated enough times because it explains a huge amount about current economic policy. For the tens of millions of people who are unemployed, underemployed or have given up looking for work altogether, we are in a crisis. The economy is an absolute disaster, ruining their lives and also jeopardising the futures of their children and grandchildren. But that is not the way that the people paid to contemplate economic policy in Washington see things. This gang is busy congratulating themselves because things could have been worse. They point out that if they had been even more incompetent that we could be in a second Great Depression with unemployment staying in the double digits for a decade. Instead of worrying about the millions of unemployed workers today, they are worried about their deficit projections for the years 2018, 2020 or even 2025. This crew, which could not even see the $8tn housing bubble that was about to wreck the economy, wants the whole country to genuflect before their projections of deficits for 10-15 years into the future. This situation really would be funny if it did not lead to so much unnecessary suffering.Obviously, we have to teach some elementary economics to the geniuses who design economic policy. The basic problem we face is a lack of demand. Note that this is the exact opposite of the deficit fixation – budget deficits are a problem when we have too much demand. To better understand this demand problem, suppose that we had a super-effective counterfeiter: someone who could make near perfect copies of $50 or $100 bills. Suppose this person printed up $2tn of counterfeit money and began to spend it on all sorts of items. Our counterfeiter buys up houses and cars. They pay for incredibly lavish parties and trips. They hire all sorts of servants, groundskeepers and investment advisers. What would be the effect of this counterfeiting scam on the economy? In the current situation, it would provide an enormous boost to GDP and create millions of jobs. After all, everyone thinks the money is real. It is no different whether the counterfeiter and his underlings spend $2tn of counterfeit money or if firms suddenly start investing their hoards of cash or households begin to spend again as though the housing bubble had never collapsed.That may sound troubling, but this is because the current economic situation is so extraordinary. In normal times, the economy is, at least partially, supply-constrained. Collectively, we want more goods and services than the economy is capable of producing. If our counterfeiter manufactured his $2tn in normal times, it likely would cause a serious problem of inflation. There would be more demand for cars, houses and other goods than the economy was able to supply. This would push up prices and wages, leading to a cycle of inflation that would persist until policy measures were taken to slow the economy – or the counterfeiter was caught.In our demand-constrained economy, however, there is no problem of inflation. The economy can produce more of almost anything right now. The reason that we are not doing it is simply the lack of demand.But the interesting part of the counterfeiter story is that his $2tn of phony money will not create problems even in the long run, assuming that he is eventually shut down. Suppose that the counterfeiter's lavish spending gets the economy back towards full employment around 2012, at which point he gets nailed by the FBI who finally figure out how to recognise the dud notes. At that point, the $2tn will be grabbed out of circulation and destroyed. Assuming that the economy is strong enough at this point to remain near full employment even as this counterfeit wealth disappears, then there would be no lasting damage from the episode. The fictional wealth had generated demand when the economy needed it, but then was pulled out of circulation at the point when it could have generated inflation and "competed away" goods and services from others.While it is unlikely we will see a successful counterfeiter on this scale, the government and the Federal Reserve Board can imitate the counterfeiter's actions. This is the story of fiscal stimulus: safe, fun and legal. Instead of putting people to work filling the counterfeiter's frivolous whims, we could have them work to build up the economy and meet important needs. The list of necessary tasks is long and well-known.As is the case with the counterfeiter's illicit stash, the stimulus spending need not even create any long-term debt burden. The Fed could simply buy and hold the bonds issued to finance the spending. When the economy returns to more normal levels of employment, the Fed would raise interest rates, as it always does, to prevent inflation from posing a serious risk.It's all very simple. Unfortunately, our Washington politicians lack the courage to take the necessary steps to get the economy back on its feet. That means that the best hope we have right now might be a very successful counterfeiter.US economyUS unemployment and employment dataQuantitative easingEconomicsEconomic policyUS economic growth and recessionGlobal recessionInflationUnited StatesDean Bakerguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
Countrywide's Mozilo settles lawsuit Angelo Mozilo, highest-profile defendant to face trial over US sub-prime mortgage collapse, pays $67.5m in SEC lawsuitAngelo Mozilo, former chairman and chief executive of Countrywide, the biggest US sub-prime mortgage lender, has agreed to pay $67.5m (£42m) in penalties and compensation to settle a lawsuit brought by the US Securities and Exchange Commission.Known as "the orange one" for his luminous tan, Mozilo will pay a $22.5m civil penalty, plus $45m in compensation to investors.Two other defendants – Countrywide's president, David Sambol, and former chief financial officer Eric Sieracki – also agreed settlements in a Los Angeles federal court. Sambol is to pay $5.5m and Sieracki $130,000. Mozilo also agreed to a permanent ban as a director of a public firm.The settlement came just before Mozilo and his former colleagues were due in court to face charges of civil fraud and insider trading. Under the terms of agreement, the men did not admit wrongdoing.The Securities and Exchange Commission accused the men of misleading shareholders about the quality of the loans on Countrywide's books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company's precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139m.Mozilo is the highest-profile defendant yet to face trial for risky business practices leading to the housing collapse that sent the US into recession.In legal filings, regulators portrayed the defendants as engaging in a single-minded pursuit of market dominance, even if it meant knowingly taking disastrous risks. The firm was a major player in the market for high-risk sub-prime mortgages and became the biggest US mortgage lender overall before it spiralled into disaster when the mortgage market collapse hit.As the largest US mortgage provider, Countrywide has shouldered much blame for the aggressive promotion of loans to poorer households. It is under investigation in Illinois for misleading customers about their repayment commitments.The company provides one in seven US home loans but its shares collapsed by 80% in 2007 as the market realised that many of Countrywide's mortgages were to people unable to afford repayments once their short-term "teaser" rates expired.Countrywide was saved from bankruptcy by Bank of America, which paid billions to settle investigations over the mis-selling of risky loans to thousands who could not afford them. The firm ran a "VIP programme" that gave loans on favourable terms to influential figures including Christopher Dodd, chairman of the Senate banking committee; heads of the federal-backed mortgage lenders Fannie Mae and Freddie Mac, and former assistant secretary of state Richard Holbrooke.US housing and sub-prime crisisUS economySecurities and Exchange CommissionRegulatorsCredit crunchMarket turmoilFinancial crisisUnited StatesReckitt BenckiserPharmaceuticals industryHealthcare industryNHSHealthJulia Kolleweguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
A fair wind for educational reform | Michael Lisman Despite a fractious political sphere, a powerful consensus is emerging on the need for visionary change in US schoolsEducation reform is hot. A wonky topic normally relegated to second tier media coverage, it was the subject of both an Oprah Winfrey special and an Economist feature in the same week. The buzz from new movies like Davis Guggenheim's Waiting for Superman, The Lottery and Race to Nowhere have played a part in pulling on heartstrings with compelling narratives. But the movies are based on some compelling trends in education reform, which are capturing hearts and headlines on their own.First, there is the new breed of education reform "rockstars" hitting their stride. Media-savvy and visionary educators like Michelle Rhee, Geoffrey Canada and Roland Fryer have brought unprecedented visibility to their causes (Rhee graces magazine covers, and Fryer and Canada were both featured on the Colbert Report). Billionaires like Bill Gates and Eli Broad have made game-changing donations to American education reform experimentation, and have made it a popular cause célèbre (cue Mark Zuckerberg).Government efforts are being ramped up and becoming more visible, as well. Secretary Arne Duncan – himself a popular former superintendent and, at 45, the youngest, arguably hippest secretary of education ever (he can dunk a basketball) – has helped usher in an unprecedented amount of federal investment into education reform. "Race to the Top" is a billion-dollar incentives programme for, among other things, states to open more charter schools and promote merit pay – hallmarks of the new reform movement. The Investing in Innovation (i3) fund, a $500m federal awards programme to support reform-minded experiments, is also a federal first, doling out dollars to NGOs and universities that will pilot promising programmes aimed to boost education quality.The states – where US education power constitutionally resides – have been busy, too. The common core standards movement culminated this year when all 50 states agreed upon a final draft for the math and reading standards. It sought non-partisan, multi-sector partners and new learning standards that everyone could get on board with, including politicians, unions, testing experts, and parents.Media coverage and opinion pieces eager to diagnose, endorse new policies or wag a finger are in high gear (Merit pay good! Merit pay bad! Merit pay inconclusive!). Whatever the stance, there is a real sense today that education reform is a story with legs, more than it has been at any other time in recent memory.How can we explain the buzz? Perhaps, most simply, by a growing sense that average people – not just analysts and academics – are at last starting to understand just how flat-out bad and unequal so many American schools have become. Oprah's special last month began with the line: "Today, you are going to learn things that you had no idea were going on in America's schools." Many are now familiar with the stats: only 7 out of 10 kids graduate from high school, a figure that drops precipitously for minority and poor children. Today, we all know about New York's "rubber rooms", where bad teachers get paid to rot. We know about the dismal performance rankings of Los Angeles' public school teachers. We know that congress couldn't agree on maintaining the federal voucher programme for several hundred poor District of Columbia children enrolled in private schools.We know, in short, US schools are not the best in the world. There is a sense that a tipping point is near.Part of what's compelling about the unprecedented educational moment we are in now is that those who lament that "we don't know what works" in education reform seem to be losing ground to the charge of progressive innovation – even if it turns out to be just for innovations' sake. We should, however, be careful not lose the momentum. The mayoral vote in Washington, DC that led to Michelle Rhee's resignation – and was widely considered a referendum on aggressive education reform – might serve as a reflection point. Michael Petrilli noted aptly in the Wall Street Journal that "the American public expresses support for the idea of education reform, but when it comes down to the tough decisions, like firing bad teachers or closing schools, they become more skittish."Whichever innovations we ultimately embrace, we should not squander this moment.US domestic policyOprah WinfreyEducation in crisisUnited StatesSchoolsTeachingEducation policyMichael Lismanguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
IMF: China Bolsters African Growth Sub-Saharan Africa is expected to post better-than-expected growth this year and next, due in part to increased trade with China and other fast-growing economies, according to a new report by the IMF. online.wsj.com |
Kimberly-Clark Introduces Scott Naturals Tube-Free - the First Coreless Bath Tissue for the Home - Video DALLAS, Oct. 28 /PRNewswire/ -- Making it easier for consumers to take a "green step" at home, Kimberly-Clark today announced the introduction of the first toilet paper in the U.S. without the cardboard tube for use at home – Scott Naturals Tube-Free bath tissue. This innovative product eliminates the cardboard tube that has been the central fixture of rolled toilet paper for more than 100 years – a simple step with major potential to eliminate millions of pounds of material from the waste stream. Scotts Naturals Tube-Free bath tissue is currently being tested exclusively at selec feedproxy.google.com |