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

Pro and Con of a Virtual Currency

What are we talking about here?

Federal Reserve is taking an initial step towards launching its own virtual currency. The move is disturbing to banks as it gives millions of low-income Americans access to the financial system and fortifies the dollar’s status as the world’s reserve currency.

The rise of private cryptocurrencies is motivating the Fed to start considering a digital dollar to be used alongside the traditional paper currency. The biggest driver of causing the concern was a Facebook – led effort in 2019, to build a global payments network using crypto technology. Facebook’s action demonstrated how the private sector could, theatrically create a massive currency system outside of government control.

Globally, central banks around the world are also exploring the idea of issuing their own digital currencies. Fiat versions of cryptocurrency that operate more like physical cash. They would have some of the same technological benefits as other cryptocurrencies. Digital currencies would compete with banks by giving depositors alternative safe places to put their money.

Voicing the Pro – Senator Elizabeth Warren

“Legitimate digital public money could help drive out bogus digital private money, while improving financial inclusion, efficiency, and the safety of our financial system — if that digital public money is well-designed and efficiently executed,”

Fed explores ‘once in a century’ bid to remake the U.S. dollar, Politico, Victoria Guida, June 2021

As said at a hearing on Wednesday, which Senator Warren convened as chair of the Senate Banking Committee’s economic policy subcommittee.

Voicing the Con – American Bankers Association in a statement to lawmakers

April Trade Deficit Decreased 8.2% on Lower Imports

April Trade Deficit Decreased 8.2% on Lower Imports of Consumer Goods and Automotives, Commenter and blogger RJS

Our trade deficit was 8.2% lower in April, as our exports increased and our imports decreased . . . the Commerce Dept report on our international trade in goods and services for April, incorporating an annual revision, indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $6.1 billion to $68.9 billion in April, from a March deficit that was revised from the originally reported $74.4 billion to $75.0 billion, a revision which should result in an downward revision of about 0.10 percentage points to 1st quarter GDP when the third estimate is released at the end of June; however, this month’s report also reflects revised statistics on trade in goods on both a Census basis and a balance of payments (BOP) basis going back to 2016, and revised statistics on trade in services beginning with 2013, so the 4th quarter basis for the 1st quarter’s growth in trade will also need to be revised to determine the ultimate impact on 1st quarter GDP, and the BEA will not make that revision till the annual revision to GDP is released at the end of July . . .

In rounded figures, the value of our April exports rose by $2.3 billion, or 1.1%, to $205.0 billion, on a $1.6 billion increase to $145.3 billion in our exports of goods and a $0.7 billion increase to $59.7 billion in our exports of services, while our imports fell by $3.8 billion, or 1.4% to $273.9 billion on a $4.5 billion decrease to $232.0 billion in our imports of goods, which was partly offset a $0.7 billion increase to $41.9 billion in our imports of services…export prices averaged 0.8% higher in April, which means the change in our real exports was less than than the nominal increase by roughly that percentage, while import prices were 0.7% higher, meaning that our real imports were likewise smaller than than their nominal value by that percentage . . .

Genetically Modified Mosquitos Released in the United States

First Genetically Modified Mosquito Released in the United States, Nature (News in Focus), Emily Watz, presented by Professor Joel Eissenberg commenter at Angry Bear.

Biotech firm Oxitec launched a controversial field test of its insects in Florida after years of opposition from residents and regulatory complications. The issue at hand is whether it is ethical to eliminate a species even though it causes human contagions. This is the first time science has moved to eradicate a carrier of a virus rater than eliminate the transmission of the virus (small pox and polio in the US).

Fighting infectious diseases can be difficult. Our toolkit includes drugs and vaccines to combat the diseases often times transmitted by bites. However, there is an arms race between the bugs and the drugs (and with COVID-19 and flu, the vaccines).

In some diseases, the transmission requires an insect or mammalian vector. Recent technology advances in genome editing have enabled so-called “gene drives” that are, in principle, capable of driving a host species to extinction at least in a region of the planet.

Gene drives to extinguish the anopheles and aedes mosquito vectors for malaria, yellow fever, zika, Dengue and others have been in development for years, and now one has been released in Florida. A bit of knowledge and history:

Anopheles is a genus of mosquito first described and named by J. W. Meigen in 1818. Approximately 460 species are exiting, while over 100 can transmit human malaria. Only 30–40 commonly can transmit parasites of the genus Plasmodium (unicellular eukaryotes that are obligate parasites of vertebrates and insects) which causes malaria in humans in endemic areas. 

The other type of mosquito is the Aedes a genus of mosquitoes inhabiting tropical and subtropical zones. It is now found on all continents except Antarctica. Some species were spread by human activity. Aedes albopictus is an  invasive species spreading to the New World and the United States by the used-tire trade.

From the link First Genetically Modified Mosquito Released in the United States:

“The genetically engineered males carry a gene that passes to their offspring and kills female progeny in early larval stages. Male offspring won’t die, but instead will become carriers of the gene and pass it to future generations. As more females die, the A. aegypti population should dwindle.”

The decision to release a GMO animal is certainly fraught with ethical complications. Unlike plants, mosquitoes and other animals (rats, kissing bugs, deer ticks) are not sessile organisms and can cross international borders. There are also genetic kill-switches that could be used to stop gene drives short of complete extinction, but those are untested in the field.

 Is it ethical to deliberately drive a species to extinction? Who gets to vote on such a decision? Weighed against that is the suffering and deaths of millions of humans, many of them children. Compassion or hubris?

Further considerations on the disappointing April jobs report. Consider the averages!

Further considerations on the disappointing April jobs report. Consider the averages!

I’ve been threatening for a couple of weeks to run some extended comments on the big miss in the April jobs report. As there’s no economic news of note today, here goes . . . .


1. It’s possible March was the outlier rather than April.


The original report for March was that 916,000 jobs were added. In this month’s report it was revised down to 770,000. Below is a graph of “civilian employment” from the household report (blue), “employment” from the establishment report (which is the commonly reported number (red), and the monthly change in initial jobless claims (green, inverted so that a decline shows as a positive, /100 for scale):


Note that in general – but not always! – the change in jobless claims correlates well with the change in both of the jobs numbers. Note also that the April change in jobless claims was the largest since early on in the pandemic. 

New dashboard on the PRC Advisory Opinion on the change in service standards

Steve Hutkins from Save the Post Office. As you can see, postal service delivery would lengthen from a maximum of 3 – day delivery to 4 and 5-day delivery service for First Class mail and Periodicals.

The impact of the changes in delivery would would slow approximately 20.7 billion pieces of First Class Mail, or about 39 percent of FCM volume (see chart below).

The Postal Service has requested an Advisory Opinion from the Postal Regulatory Commission concerning its plan to relax service standards on First Class mail and Periodicals. We started a new website page that provides easy access to the PRC’s docket (N2021-1), as well as some charts, tables, and blog posts about the proposal.

You can find the page here; it’s also a tab, N2021-1, in the main menu above.

Rep. Katie Porter on drug prices

April’s Producer Data

April’s consumer and producer prices, retail sales, and industrial production; March business inventories and JOLTS, Commenter RJS, Market Watch 666

Producer Prices rose 0.6% in April on Higher Wholesale Food Prices, Wider Margins for Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.6% in March, as prices for both finished wholesale goods and margins of final services providers rose 0.6%. That increase followed a March report that had the PPI 1.0% higher, as prices for finished wholesale goods rose 1.7% while margins of final services providers rose 0.7%, a February report that the PPI was 0.5% higher, with prices for finished wholesale goods on average 1.4% higher, while margins of final services providers increased by 0.1%, a revised January report that still has the PPI 1.3% higher, with average prices for finished wholesale goods now rising 1.6%, while margins of final services providers increased by 1.1%, and a re-revised December report that indicates the PPI was up 0.3%, with prices for finished wholesale goods up 0.9% while margins of final services providers were unchanged on an unadjusted basis, producer prices are now 6.2% higher than a year ago, up from the 4.2% year over year increase indicated by last month’s report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.7% for the month, and is now 4.6% higher than in April a year ago, up from the 3.1% year over year increase as was shown in February…

Record High Trade Deficit

Trade Deficit Increases 5.6% to Record High in March on Rising Imports of Consumer Goods, MarketWatch666, Commenter RJS

Our trade deficit was at another record high in March, 5.6% higher than in February, as both our imports and exports increased, but our imports increased by more. The Commerce Department’s report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit rose by $3.9 billion to $74.4 billion in March, from a February deficit that was revised from the originally reported record $71.1 billion to $70.5 billion. In rounded totals, the value of our March exports rose by $12.4 billion to $200.0 billion on a $11.7 billion increase to $142.9 billion in our exports of goods and a $0.8 billion increase to $57.1 billion in our exports of services, while our imports rose by $16.4 billion to $274.5 billion on a $15.3 billion increase to $234.4 billion in our imports of goods and a $1.1 billion increase to $40.0 billion in our imports of services. Export prices averaged 2.1% higher in March, which means the change in our real exports was less than than the nominal increase by that percentage, while import prices were 1.2% higher, meaning that our real imports were likewise smaller than than their nominal value by that percentage…

Alternatively

The executive increases the return to shareholders, in return they increase the executive(s) salaries; and so it goes. The Trump tax cuts were used by corporate executives to buy back shares; increasing the stock value, sending more along to the shareholders who then reward the executive(s) with bigger salaries. What’s missing? The workers. Time was when industrial work forces were huge and unions were strong; when the unions had lots of clout with the democratic party, ergo with government; when they could leverage their clout into a fairer share. Having little leverage, workers are left to suck hind teat. Consequently, more and more of the returns from business go to the shareholders, bondholders, and executives.

If workers were guaranteed a fair share, we wouldn’t be in the disparity we are in. Time was when the unions could ensure that some of the work force got something approximating a fair share. That was then. Needed today are laws that guarantee the workers a fair share of all profits. Corporate accounting, subject to rigorous review, or tax filings could be used. All corporate and business licenses would be subject to compliance.

In the case of start-ups, in lieu of, until, profitability, the workers would receive some minimum wage, plus stock and/or stock options.

As for workers having a say: Workers would have at least 30% representation on all corporate boards and means of input to management in sole proprietorships.

For the from partial to fully automated production facilities, an assessment as to the return on investment in automation would be made and a generous allowance for return on such investment would allowed. Return beyond that allowance would taxed separately a high rate. The revenues from this tax would be dedicated to the enhancement of the social safety net, to provide guaranteed income, etc.

The USPS 10-year plan may have future rate increases

What the USPS 10-year plan may have to say about future rate increases

What the USPS 10-year plan may have to say about future rate increases, Steve Hutkins at “Save The Post Office

The mailers were probably disappointed that the Postal Service’s new 10-year plan released yesterday, “Delivering for America,” did not reveal how big of a rate increase the Postal Service intends to make using the new authority it was granted by the Postal Regulatory Commission. While they wait in suspense, here’s a guess: 3.6 percent.

We already know that the calculations the Postal Service submitted to the PRC in February indicate the hike could be as large as 5.56 percent (on top of the CPI increase), but the new system allows some of the rate authority to be banked for future years, so the increase could be smaller. And that is just what the following analysis suggests.

This analysis is based on two tables and a couple of comments that appear in the 10-year plan. The tables show revenue and expenses under two scenarios, a base case using the status quo and an alternative that uses the revenue and cost savings under the Delivering for America plan. The tables contain numbers for projected volumes and revenues over the next ten years that can be used to estimate what the Postal Service is planning for future price increases under the new rate authority.