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

More on Interest on Reserves

I did a couple of posts a while back asking (and concluding) what would result from the Fed ending their interest on reserves policies. (Not suggesting they do so — just wondering what the effects of that one change would be.)

I got a lot of good answers and discussion, but nobody mentioned the very interesting paper by Alex Tabarrok discussed here (emphasis mine):

…there was typically a daily shortage of reserves which the Fed made up for by extending hundreds of billions of dollars worth of daylight credit. Thus, in essence, the banks used to inhale credit during the day – puffing up like a bullfrog – only to exhale at night. (But note that our stats on the monetary base only measured the bullfrog at night.)

Today, the banks are no longer in bullfrog mode. The Fed is paying interest on reserves and they are paying at a rate which is high enough so that the banks have plenty of reserves on hand during the day and they keep those reserves at night. Thus, all that has really happened – as far as the monetary base statistic is concerned – is that we have replaced daylight credit with excess reserves held around the clock.

This explanation finds support in a post from Liberty Street Economics (NY Fed blog). The key graphic:

Cross-posted at Asymptosis.

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Real Personal Consumption Data

Today’s personal income data release was interesting.

Overwhelming, everyone is reaching the conclusion that the economy is strengthening and that stronger consumer spending is a major factor behind this conclusion.

But today’s report shows that we now have three consecutive months of zero growth in real personal consumption expenditures( PCE ) — the single largest component of real GDP. The report shows that as of January the first quarter growth rate for real PCE is zero.

Just a warning to be careful of accepting the consensus view of a strengthening economy.

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More on Michigan Voting

The U.S. Election Atlas shows the Michigan county by county results for the general election in 2008.  Note that they have inexplicably reversed the normal Red-Blue color coding.   Contrast those results with the 2012 Republican primary results.

In the Lower Peninsula, the counties that went for Romney in a big way generally went for Obama in a big way in 2008.  Wealthy, densely populated Oakland county went for Obama by 56% to 42% (660,000 total votes.)  Romney crushed Santorum there by 50% to 29%. (116,000 total votes.) Romney tended to win the counties that were close between Obama and McCain four years ago.   Along the west coast, though, many counties that were solidly in Obama’s camp in 2008 went overwhelmingly for Santorum in the Republican primary.  But these counties had big margins on Tuesday with small turnouts.

Commenter CSH at Johnathon Bernstein’s blog remarked, “I can’t recall seeing the rich-poor, East-West gap in that state as strongly represented as last night.”  CSH also pointed out that Romney won the State by 32,000 votes.  Coincidentally, he won Oakland County by 32,000 votes.  The rest of the State was a wash.

The Upper Peninsula as always, has its own different story.  Santorum carried all but two counties, and generally by large margins, while the the ’08 vote was split among counties between Obama and McCain.  The primary was closest in the eastern section of the U.P., which McCain carried in ’08.  But vote counts in the U.P. on Tuesday were very sparse – in the range of a few hundred to about 3,000 total, per county. 

It’s far from one-to-one, but Romney’s results vs Santorum more or less parallel Obama’s results vs. McCain four years ago.  Romney’s best showings were in places where he has virtually no chance in the general election.  Santorum’s best showings were in less populated areas that are likely to vote Republican, regardless.

The other significant factor is voter turnout.  Romney and Santorum together collected 787,420 votes, Statewide.  In 2008, McCain got over 20 2 million votes in Michigan, and lost the State by 16%.

Despite the hype, the stark differences between the two front runners, and Romney’s alleged home field advantage, the total turnout was less than half of McCain’s votes in ’08 this looks like a lot of less Republican apathy than I first thought, but still a significant lack of interest.  Can that bode well for their prospects in November?  (Corrections made in last 2 paragraphs.)

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Comparisons of charitable giving among presidential candidates

by Linda Beale

Comparisons of charitable giving among presidential candidates
[Hat Tip to Tax Prof]

Len Burman, now a professor at Syracuse but still affiliated with the Tax Policy Center, wrote a blurb for Forbes on Stingy Rich People, Santorum-Gingrich Edition, Forbes (Feb. 20, 2012), which was a followup to Caron’s comparison of presidential contender giving based on “Romney and Obama vie for title of most charitable; Santorum gave least to charity,” Washington Post (Feb. 16, 2012).

Romney gave about 13.8% of his income to charity in 2010, and Obama gave about 14.2% of his in 2010. The Gingrichs (with about $3.1 million in income) gave only about 2.6% of theirs in 2010 and the Santorums (with about $0.9 million in income), only about 1.8% of theirs in 2010.
Burman professes his surprise at Gingrich and Santorum’s relative stinginess, given their avowed commitment to religion (and their open claim to religious merit) and the Christian doctrine of tithing 10% of one’s income to the church.


But Burman finds that the relative stinginess of the two candidates is about on a par with members of their respective income classes. The group of people making between half a million and a million give an average 2.6% in 2009 and the group making between $2 and $5 million gave about 3.2% on average. Conclusion–Santorum and Gingrich are “in the middle of the pack” in terms of generosity for people of their income level.

Personally, I’ve always thought candidates should keep their religious faith to themselves. I don’t think we have any business at all taking into consideration whether a presidential candidate is a Mormon, a Baptist, a Muslim or an atheist. But if they do make a point of their religious faith and present it as a worthy attribute qualifying them for the presidency, then it is rather revealing when those who openly “brag” about their religiosity don’t comply with the most fundamental concept of sharing and generosity in the bible, the tithing requirement

crossposted with ataxingmatter

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