Relevant and even prescient commentary on news, politics and the economy.

It’s not structural unemployment, it’s the corporate saving glut

Mark Thoma rightly points out the hypocrisy of the deficit hawks’ intent to cut spending while approving military spending in the same sentence. Ryan Avent furthers the dicussion by stating that Washington has used the ‘dire fiscal’ rhetoric to sell short-term cuts that were unwarranted, given that the fiscal problems are structural in nature.

Me, I’d argue that the fiscal deficit is simply the consequence of corporate America’s excess saving: the corporate saving glut – no I didn’t mean the ‘global saving glut’. Furthermore, the corporate saving glut is manifesting itself into the labor market, creating high and persistent unemployment. Some economists are wrongly referring to this as higher structural unemployment.

Exhibit 1: The 3-sector financial balance model demonstrates that elevated excess private saving (firms and households) keeps the government deficit in the red. For a discussion of the 3-sector financial balances, see Scott Fullwiler and Rob Parenteau; and I’ve written on this as well.

The excess saving rate for the public sector, external sector, and household sector is constructed using the Federal Reserve’s Flow of Funds accounts as: (Gross Saving – Gross Investment)/GDP. The excess corporate saving rate is the residual of the Current Account (external saving) net of government and household excess saving. If the corporate excess saving rate is positive, then investment spending falls short of asset purchases (financial or tangible).

* In Q4 2010, the household excess saving rate dropped to +3.5% of GDP
* In Q4 2010, the government excess saving rate dropped to -10.4% of GDP
* In Q4 2010, the current account deficit dropped to -3% of GDP
* In Q4 2010, the corporate excess saving rate jumped to 3.9% of GDP – this is the Corporate Saving Glut because while firms are investing, they’re saving more, thereby breaking the positive feedback loop.

The positive feedback loop remains broken: higher demand increases sales rates, revenues and production which grows firm profits that are translated into wage and income gains, only to drive demand further upward. It’s broken right between ‘grows firm profits’ and ‘translated into wage and income gains’.

The funny thing is, too, that economists sell this broken feedback loop as rising structural unemployment. Actually, unemployment is not structurally higher, it’s that when firms do not reinvest corporate profits, the lack of income flow manifests itself into the unemployment rate.

Exhibits 2 and 3. It’s not structural unemployment, it’s the corporate saving glut!

The chart below illustrates a simple univariate regression of the unemployment rate on the corporate saving glut. The correlation is very strong, 85%, and suggests that the structural unemployment rate is less than 5.8%. Furthermore, while the unemployment rate seems to be perpetually higher than normal (the upper-right circle), that perfectly coincides with a high corporate saving glut.

If the corporate excess saving glut just equaled zero, i.e., firms invested and saved at the same rate, the unemployment rate would be 5.8%. Now, if the corporate saving glut fell below zero to -2%, i.e., firms reinvested in the economy by way of capital investment in excess of saving, the simple model implies an unemployment rate of 4.7%.

The government doesn’t need to add jobs, per se, the government needs to figure out how to get corporate America to drop the saving glut and re-invest in the economy.

Rebecca Wilder

Tags: , , Comments (60) | |

Drugs, the US solution for all the pain

By: Daniel Becker

 

Just a little something that came across my desk. As you read it, think about the concept: War on Drugs.
“In the United States, the therapeutic use of opioids has exploded as witnessed by the increased sales of hydrocodone by 280% from 1997 to 2007, while at the same time methadone usage increased 1,293% and oxycodone increased 866% (5). In addition, the estimated number of prescriptions filled for controlled substances increased from 222 million in 1994 to 354 million in 2003 (5). Consequently, the milligram per person use of therapeutic opioids in the United States increased from 73.59 milligrams in 1997 to 329.23 milligrams in 2006, an increase of 347% (5). And, while hydrocodone is the most commonly used opioid in the United States, based on milligrams per person, oxycodone is the most commonly used drug with methadone use rapidly increasing the most… Consequently, Americans, constituting only 4.6% of the world’s population, have been consuming 80% of the global opioid supply, and 99% of the global hydrocodone supply, as well as two-thirds of the world’s illegal drugs (4-6,26-29).”
Read the whole study. There is a lot of info regarding the particular drugs. For instance, one researcher found that they had no effect on one’s ability to drive. Though another found there were cognitive issues. So, are they or are they not getting high?
I have all sorts of thoughts about it. Depression is highly associated with pain. That is, more pain is reported as depression is experienced and more depression is reported as pain is experienced. Emotional pain? Physical Pain? Are doctors just becoming more comfortable with such prescription practices, thus a kind of “heard” mentality? I mean, once you put them into happy land drug wise, there’s nothing left to do. Next patient please.

What does it say about our population? Our character? Our solutions we propose for all sorts of social issues? I don’t think it says much for the results we can expect if the increasing solution is to alter the brain chemistry. Can you say “framing”. Yes, I knew you could. Can’t imagine we have the character any more that produced things like the Hoover Dam (on time and budget with wealth creating benefit for all) which makes me cautious regarding any proposed “green economy” projects like a national high speed rail system. Was “hope” the drug for 2008?
Consumer confidence has been going steadily down since year 2000.  And here.    Consumer confidence is the highest in 3 years say the reports. Big whoop! Set the date for 1967. You’ll see we have managed to rise to the level of the bottoming for all the other recessions.   That’s a lot of pain…or depression. And, for a long time now. We are not kidding when we say “the good old day”. But then I’m told that the reason there seemed to be more snow when I was young is because I was shorter. It’s all relative.
There is real, as in non-virtual, pain increases being reported:

“Chronic pain’s prevalence and associated disability continue to increase. Harkness et al (181), in a 2000 publication, showed that there was a large difference in the prevalence of musculoskeletal pain over a 40- year period under investigation. The results showed that overall, the prevalence of low back pain increased from 8.1% in males to 17.8%, and in females, it increased from 9.1% to 18.2%. Similarly, Freburger et al (182) reported the rising prevalence of chronic low back pain following an evaluation of North Carolina (U.S.) households conducted in 1992 and repeated in 2006. The results showed a 162% increase in the prevalence of chronic impairing low back pain over the 14-year interval, going from 3.9% in 1992 to 10.2% in 2006 and an annual average increase of 11.6% associated with care-seeking and disability.”

I prescribe the “cold turkey” therapy in all it’s applications.   There was even a movie about it:

Reverend Brooks leads the town in a contest to stop smoking for a month, But some tobacco executives don’t want them to win, and try everything they can to make them smoke. If townspeople don’t go nuts, from wanting a cigarette, or kill each other from irritation and frustration, they will will a huge prize.

Oh the pain, the pain.
All I can say, is the war is in your head man.

 

Tags: , , , , Comments (20) | |

It’s lonely at the top: now it’s up to the Bank of Japan to hold the yen down

Wow, FX space is totally rattled this week: the yen hit 76.25 against the dollar at the end of the day on March 16 and has since rebounded to current levels 80.90 (1:50pm in NY on 3/18). What happened over this time span? Mass speculation on yen appreciation due to earthquake-related repatriation, followed by technical levels being hit that drove the yen up against the dollar, and a collapse of the dollar against the yen (spike downward in the chart below). And then yesterday the G7 central banks (the Bank of Japan, Bank of England, European Central Bank, the Federal Reserve, and the Bank of Canada) agreed to coordinate a weak-yen effort. Today the yen is off 2.7% against the dollar.

Note: In the chart above, a decline in the USD/YEN is an appreciation of the Japanese yen and a depreciation of the US dollar. The chart above illustrates the daily fluctuation of USD/Yen since the Tōhoku earthquake on March 11.

The coordinated depreciation of the yen against its major trading partners is ‘concerted’, and such an effort has not occurred since September 2000 when the G7 bid up the euro. The yen effort is very different, as I’ll explain below. Furthermore, ongoing weakness in the yen against the rest of the G7 currencies depends on further actions by the Bank of Japan into next week and beyond.

Some thoughts:

* In 2000 the wedge between the eurodollar spot and its PPP estimate of fair value diverged throughout the year. The spot rate became increasingly undervalued, hitting a wide in October 2000 (according to Bloomberg estimates of PPP). This seems to be a traditional initial condition for intervention. In contrast, though, the USD/YEN spot is seriously overvalued according to a similar measure of PPP fair value. I should note that currency fair value is a contentious topic. (more after the jump)

* The NY Fed makes available balances through 1999 only, so I am unable to ascertain the impact on the Fed balance sheet of the coordinated efforts from the 1987 Louvre Accord nor the 1985 Plaza Accord . I digress. In the 2000 effort, the euro bottomed in 9/21 at 0.8460 in dollars during the day, reaching an intra-day high of 0.8992 on 9/22. The closing impact of the G7 coordination was roughly a 2.7% appreciation of the euro against the USD. Efforts, however, were quickly retraced (see chart below).

* We are already there in yen space: the yen is down 2.7% in just one 24-hour session. It’s likely that this effort lasts throughout next week, since (1) a retrenchment of the dollar would challenge global central bank credibility, and (2) the statement is more explicit in its mention of “readiness to provide any needed cooperation”.

* In 2000 the Fed purchased roughly 10% of its stock of euro holdings, or $1.3 bn worth of euros (see second table below). Using 2000 as a guide, this would imply that the Fed purchases roughly $2.3bn this time around. However, given the size of the ‘model’ trading flows and technical barriers, this time’s flows are likely to be bigger. We’ll see in coming months when the Fed releases its FX holdings update.

* There is a limit to the Fed’s buying of yen, since the Fed is selling yen assets. The Fed and the Treasury (the Fed manages two accounts of FX holdings, the SOMA and ESF account for the Treasury) hold $23 bn in yen-denominated assets (see second table below) – that’s an absolute upper bound on purchases, although FX swaps do allow some room for maneuvering (although I find it very unlikely that the Fed would print currency for this effort). In 2000, the Fed purchased roughly $1.3 bn euro – that number should be at least doubled this time around, given that FX markets are bigger now. In comparison, Wall Street estimates that the BoJ bought $12bn-$40bn..

If there’s going to be succes, it depends on the Bank of Japan’s flows, not those of the other central banks.

My take is that given the size of today’s move, the 2000 effort was not nearly as concerted as has been demonstrated thus far. Next week will be interesting. The goal, I guess, is to get the currency back into a range that will not be prone to technical bounces. I think that the BoJ’s going all in.

Rebecca Wilder

Chart and Table Appendix:

Eurodollar in 2000

FX holdings in 2000

FX holdings in 2010

Tags: , , Comments (13) | |

Information Reporting on foreign depositors in US banks–Florida’s GOP delegation shamefully supports tax evasion facilitation

by Linda Beale
crossposted with Ataxingmatter

Information Reporting on foreign depositors in US banks–Florida’s GOP delegation shamefully supports tax evasion facilitation

Many wealthy Americans have taken advantage of banking secrecy in other countries, particularly Switzerland, to hide their assets and income from the United States, thus avoiding paying their fair share of taxes on their riches.  That practice became somewhat harder when reports on American accountholders became available to the government and the media were filled with stories of Swiss bankers for UBS carrying diamonds in tubes of toothpaste for their wealthy US clients, in order to help them evade US income tax laws.  The government instituted a voluntary disclosure program that permitted Americans with foreign accounts to come forward, at a relatively low penalty cost compared to the charges that could be assessed against them (including potentially criminal tax fraud charges).  When that program ended after thousands had voluntarily come forward, a new program (with a 25% penalty rather than the former program’s 20% penalty) was instituted and is currently ongoing.  The result of the UBS episode was a deferred prosecution and a final agreement to reveal the names of about 4500 accountholders, presumably the largest accounts and the most likely to involve fraudulent tax evasion.  At the same time, there was some progress on the attempt to get offshore banking secrecy jurisdictions to be more open and transparent and to participate more readily in tax information exchange programs, so that it would be harder for US taxpayers to evade their tax obligations by hiding their assets offshore in those jurisdictions.  All this is praiseworthy, though there is still considerable progress to be made before we can conclude that it is generally difficult for the wealthy to hide their assets from the US tax collectors.

What is perhaps even more interesting is the fact that the US is a tax haven for the wealthy of other countries.  The US is a tax haven in part because of the withholding exemption for “portfolio” interest–allowing foreigners to earn income by making deposits in our banks without taxation.  We have also not required banks to provide information reporting on that income–so that those foreigners can receive income in the US and avoid paying appropriate taxes on it back in their home countries.  This will change under a proposed regulation issued by the Treasury department in a move to make the US more forthcoming in tax information exchanges with other countries in hopes of reciprocity.  See  IRB 2011-8 regarding the new information reporting requirement under Section 6049 (REG-146097-09) (requiring information reporting for bank deposit interest payable to nonresident alien individuals).  The notice of proposed regulations includes the following explanation of the need for the change:

This extension is appropriate for several reasons. First, since the 2002 proposed regulations [which limited information reporting to accounts of nonresident aliens from a particular list of countries] were released, there is a growing global consensus regarding the importance of cooperative information exchange for tax purposes that has developed. Significant agreements have been reached on international standards for the exchange of information, including, for example, the understanding that information exchange will not be limited by bank secrecy or the absence of a domestic tax interest. Second, requiring routine reporting to the IRS of all U.S. bank deposit interest paid to any nonresident alien individual will further strengthen the United States exchange of information program, consistent with adequate provisions for reciprocity, usability, and confidentiality in respect of this information. Finally, this extension will help to improve voluntary compliance by U.S. taxpayers by making it more difficult to avoid the U.S. information reporting system (such as through false claims of foreign status).

This increase in information reporting is appropriate, if we want other countries to reciprocate and make it easier for us to catch our own tax cheats.  But the current neo-conservative GOP members of Congress seem to think tax cheating against other countries is just fine, so long as their big business buddies can make money off it.  See, e.g., this letter from the Flordia GOP delegation in the House regarding their opposition to these proposed rules: Posey leads delegation effort to stop harmful IRS regulation (website of House Republican representative William Posey).  What’s the argument in favor of taking no action to ensure that US banks aren’t helping foreigners evade their home taxes?  Seems to me it boils down to a narrow-minded self-interest that is willing to sacrifice global cooperation and reasonableness in favor of the profits of Florida banks.  The Florida Republican delegation claims that reporting on the assets held will lead foreign depositors to take all of the assets out of Florida’s banks, and their “worry” is that there will therefore be less money available for lending to legitimate US businesses.

These arguments seem extreme to me.   First, the arguments assume that all of those foreign deposits are sitting in US banks solely for tax evasion purposes.  They disregard the many other reasons that US banks may provide a positive choice for foreign depositors, including the stability of the US system in a world of highly volatile banking pressures, especially as European banks come into question because of the debt crises in Greek, Portugal and Spain; the lack of significant volatility compared to home country banks; or the general security of US deposits compared to the threat of strongman takeover in some third world countries.  Second, we’d have to assume that there isn’t a pure economic advantage in having assets in US banks compared to home country banks–whether from higher interest rates or easier transfer and liquidity provisions.  And of course, to the extent that the rationale for the deposit being held in US banks is to facilitate tax evasion, we’d have to conclude that it was reasonable for US banks to profit from helping foreigners be tax cheats in their foreign countries.

That last argument is especially worrisome, because it can easily be turned against us to justify banking secrecy in other jurisdictions that permit US taxpayers to avoid US taxes.  Maybe that’s the point for these GOP legislators–as a party beholden to the wealthy elite that has garnered most of the advantages of productivity gains over the last decades, they may well have lost their ability to comprehend the importance of tax compliance.  As they push for corporate tax breaks while insisting that the country is “broke”, they are essentially arguing that they don’t care about ordinary Americans.  Being against responsible measures to assure that the US banks don’t act as facilitators for other countries’ taxpayers to avoid their tax obligation fits well with that view.  Shame on them.

Tags: , , Comments (0) | |

Japan: The Post-WW2 Rise, the 1980s Peak, and the Decline – A Simple Theory

by Mike Kimel

Japan: The Post-WW2 Rise, the 1980s Peak, and the Decline – A Simple Theory
Cross-posted at the Presimetrics blog.

A lot has been written about the disaster in Japan. I don’t have much I can add to that, except that like everyone else (or at least everyone civilized), I am so very sorry that it happened. (What is with the folks talking about Pearl Harbor? Seriously. What is that about?)

Still, in reading about the tragedy, I had a thought about Japanese economic history and I’d like to expand on it in this post. But I’d like to lead off by pointing out I am not an expert on Japan. That means y’all can feel free to correct me where I’m wrong, but it also means I started off by going to this website, which has some cool country studies. The website:

contains the on-line versions of books previously published in hard copy by the Federal Research Division of the Library of Congress as part of the Country Studies/Area Handbook Series sponsored by the U.S. Department of the Army between 1986 and 1998. Each study offers a comprehensive description and analysis of the country or region’s historical setting, geography, society, economy, political system, and foreign policy.

Let me start by quoting liberally from Japan country studym specifically the section on bureaucrats.

Although the United States occupation dismantled both the military and zaibatsu establishments, it did little, outside of abolishing the prewar Home Ministry, to challenge the power of the bureaucracy. There was considerable continuity–in institutions, operating style, and personnel– between the civil service before and after the occupation, partly because MacArthur’s staff ruled indirectly and depended largely on the cooperation of civil servants. A process of mutual co-optation occurred.

Next quote:

In trying to discover “who’s in charge here,” many analysts have pointed to the elite bureaucracy as the people who really govern Japan, although they composed only a tiny fraction of the country’s more than 1 million national government employees. Several hundred of the elite are employed at each national ministry or agency. Although entry into the elite through open examinations does not require a college degree, the majority of its members are alumni of Japan’s most prestigious universities. The University of Tokyo Law Faculty is the single most important source of elite bureaucrats. After graduation from college and, increasingly, some graduate-level study, applicants take a series of extremely difficult higher civil service examinations: in 1988, for example, 28,833 took the tests, but only 1,814, or 6.3 percent, were successful. Of those who were successful, only 721 were actually hired. Like the scholar-officials of imperial China, successful candidates were hardy survivors of a grueling education and testing process that necessarily began in early childhood and demanded total concentration. The typical young bureaucrat, who is in most cases male, is an intelligent, hardworking, and dedicated individual. Some bureaucrats lack imagination and, perhaps, compassion for people whose way of life is different from their own.

The public’s attitude toward the elite is ambivalent. The elite enjoy tremendous social prestige, but members are also resented. They live in a realm that is at least partly public yet far removed from the lives of ordinary people. Compared with politicians, they are generally viewed as honest. Involvement of top officials in scandals such as the Recruit affair, however, had, to some extent, tarnished their image.

Japan’s elite bureaucrats are insulated from direct political pressure because there are very few political appointments in the civil service. Cabinet ministers are usually career politicians, but they are moved in and out of their posts quite frequently (with an average tenure of under a year), and usually have little opportunity to develop a power base within a ministry or force their civil service subordinates to adopt reforms. Below the cabinet minister is the administrative vice minister. Administrative vice ministers and their subordinates are career civil servants whose appointments are determined in accordance with an internally established principle of seniority.

In a 1975 article, political scientist Chalmers Johnson quotes a retired vice minister of the Ministry of International Trade and Industry (MITI) who said that the Diet was merely “an extension of the bureaucracy.” The official claimed that “the bureaucracy drafts all the laws…. All the legislature does is to use its powers of investigation, which for about half the year keeps most of the senior officials cooped up in the Diet.”

And now the change…

Administrative reform policies in the 1980s imposed ceilings on civil service staff and spending that probably contributed to a deterioration of morale and working conditions.

Still another factor limiting bureaucratic power was the emergence of an affluent society. In the early postwar period, the scarcity of capital made it possible for the Ministry of Finance and MITI to exert considerable influence over the economy through control of the banking system. To a decreasing extent, this scarcity remained until the 1980s because most major companies had high debt-equity ratios and depended on the banks for infusions of capital. Their huge profits and increasing reliance on securities markets in the late 1980s, however, meant that the Ministry of Finance had less influence. The wealth, technical sophistication, and new confidence of the companies also made it difficult for MITI to exercise administrative guidance. The ministry could not restrain aggressive and often politically controversial purchases by Japanese corporate investors in the United States, such as Mitsubishi Estate’s October 1989 purchase of Rockefeller Center in New York City, which, along with the Sony Corporation’s acquisition of Columbia Pictures several weeks earlier, heated up trade friction between the two countries.

The whole issue of trade friction and foreign pressure tended to politicize the bureaucracy and promote unprecedented divisiveness in the late 1980s and early 1990s. During the Structural Impediments Initiative talks held by Japan and the United States in early 1990, basic changes in Japan’s economy were discussed: reforms of the distribution and pricing systems, improvement of the infrastructure, and elimination of official procedures that limited foreign participation in the economy. Although foreign pressure of this sort is resented by many Japanese as an intrusion on national sovereignty, it also provides an opportunity for certain ministries to make gains at the expense of others. There is hardly a bureaucratic jurisdiction in the economic sphere that is not in some sense affected.

Repeatedly, internationally minded political and bureaucratic elites found their market-opening reforms, designed to placate United States demands, sabotaged by other interests, especially agriculture. Such reactions intensified United States pressure, which in turn created a sense of crisis and a siege mentality within Japan. The “internationalization” of Japan’s society in other ways also divided the bureaucratic elite. MITI, the Ministry of Labor, and the Ministry of Justice had divergent views on how to respond to the influx of unskilled, usually South Asian and Southeast Asian, laborers into the labor-starved Japanese economy.

Now a bit from Japan’s Administrative Elite by B C Koh(see pages 259, 260):

A decline in elitism can be seen in a number of trends: (1) a strong showing of universities other than Todai and Kyodai in the higher civil-service examination, (2) a notable increase in the proportion of private-university graduates who enter the higher civil service, and (3) advancement of “noncareer” bureaucrats to elite administrative positions.

Although Todai and Kyodai have consistently maintained their positions as the first- and second-largest sources, respectively, of successful candidates in the higher civil-service examination throughout the postwar period, their combined share of the total has frequently fallen short of 50 percent. In the eighteen-year period from 1970 to 1987, for example, the two top universities’ share fell below the 50-percent mark eleven times (see table 9 in chapter 4). This means that the majority of successful candidates in the higher civil-service examination came from other institutions of higher learning in those years. In the 1980s, private universities surpassed the 10-percent mark for the first time, reaching 12.6 percent by 1986 and 13 percent in 1987. In the ten-year period from 1976 to 1985 the number of private-university graduates who passed the higher civil-service examination increased 3.5 times.[6]

If we examine the situation at the hiring stage, we find the same trend: a steady increase in the proportion of private-university graduates. Since 1980, private-university graduates who passed the higher civil-service examination had a greater probability of being hired than graduates of national universities. In 1983 and 1984, six in ten of the former, as compared with four in ten of the latter, were hired. In the ten-year period from 1976 to 1985, the number of private-university graduates who entered the higher civil service quadrupled.[7]

A slight decline in the elitist character of Japan’s higher civil service is suggested by a steady increase in the number of “noncareer” civil servants who advance to elite administrative positions. As we saw in chapter 4 (table 8), graduates of the intermediate civil-service examination began to appear in grade-1 positions (assistant bureau chief, division chief, and senior-level section chief) in increasing numbers since 1974; in 1981, a graduate of the lower examination attained grade 1 for the first time, and a small but growing number of others followed in his footsteps in subsequent years. By 1986, the National Personnel Authority disclosed that two in ten civil servants at the rank of section chief or its equivalent and above in the national government had not gone beyond junior colleges, implying that they were “noncareer” bureaucrats.

So… a decade before the end of Japan’s economic miracle, the fabled bureaucracy that drove Japan Inc. started to erode – more of its members started coming from lower quality, private universities, it stopped being held in as high esteem by the public, it lost its ability to impose its will on the economy, and to boot (or perhaps I should say on a related note), it started to adopt new policies and philosophies being pushed by the Reagan administration. How long do you think it takes for something like that to have a long-term, possibly irreversible effect on an economy that used to be the envy of the world?

As an aside… ever notice how countries that adopt policies favored by right wing or libertarian think-tanks tend to have a few very successful years (with much crowing by those think tanks) followed by disaster? Be it Japan, Argentina, Russia, much of Eastern Europe, Ireland, Iceland, etc., it does seem that there’s a pattern. Heck, that pattern even applies to the US. I think even some of the promoters of those policies are starting to see that pattern. Its to the point where a lot of folks in those circles are trying to convince the public that Singapore, a country where the government’s role in the economy is larger and more intrusive than in most other countries, is an example of a libertarian paradise.

Tags: , , Comments (28) | |

Simon Johnson on Tim Geithner and Elizabeth Warren

Simon Johnson offers pointed criticism of the role Timothy Geithner has played to date in the Great Recession and bank regulation, in particular as an advisor and architect to the Obama economic team and how that policy is presented and pursued in Congress. Another worthwhile read.

Tags: , , , , Comments (2) | |

Currency Markets and the Disaster in Japan


I’ve been receiving questions about this week’s rather dramatic appreciation of the yen. Central banks around the world have been intervening today to prevent further volatility in exchange rates, but that still doesn’t explain exactly why currency traders have been so eager to buy yen this week.

There are rarely easy answers to questions involving exchange rate movements. However, I have shared a few thoughts on the subject over at The Street Light.

Tags: , , , Comments (1) | |

Notice on commenting

Comments have gotten heated and way off base (not a political statement 🙂 if the goal is adding knowledge and a thorough critique of ideas that are presented. I will be taking a more active role in moderation. I think we had crossed a boundary somewhere along the line.

The Brown-Johnston back and forth seemed a good choice because it involved multiple points to address and demanded the reader actually read an entire post and replies. Too often we stop at one point we question or occur to us that is missing, reply, and leave it at that, only to find it was dealt with later in the posting or comments.

(There are a number here that stop conservation completely unless giving each other the finger is debate)

In addition, such as today authors will be coming by to comment such as David Cay Johnston is doing today and later this evening Ian Fletcher should, so there is incentive to behave as if we have guests in the house.

Tags: Comments (15) | |