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We can do a lot better, but America is still a very resilient place.
The economy has been in a tepid, soft, slow recovery for the past five-and-a-half years. It’s the weakest rebound in generations. The Commerce Department’s revision of fourth-quarter GDP shows that nothing much has changed. Over the past year, real economic growth registered 2.4 percent, slightly higher than the recovery average. It ain’t much.
Meanwhile, winter economic reports for retail sales, manufacturing, and capital investment point to a weaker first quarter, perhaps around 1 percent. And Wall Street is talking about…

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In her press conference remarks earlier in March, Janet Yellen admitted that the economy may not be performing as previously thought. She dryly noted that, “participants are now seeing more slack in the economy than they previously did.” It was only a few months ago when third quarter GDP purportedly “confirmed” that 5% growth was now the rule rather than the exception, and that the Federal Reserve would have no choice but to move quickly to undercut any “inflationary” pressures about it. That is the entire point of “slack” in orthodox economic treatment and the reason it is so emphasized…

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How fast should the Federal Reserve tighten monetary policy? Should it tighten at all? I recently wrote about these issues but didn’t have the space to explore a fascinating aspect of the debate: the mostly forgotten 1937-38 recession. To many, it’s a cautionary tale against adopting tighter policies too soon. The latest to sound the alarm is Ray Dalio, the respected founder of Bridgewater Associates, a huge hedge fund group. His recent memo to clients inspired a Page 1 story in the Financial Times, headlined “Dalio warns Fed of 1937-style rate risk.”
At the time, it was called the “Roosevelt…

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In a previous RealClearMarkets column, I asked whether California could actually get any greener than it currently is. This matters when we remember that Golden State politics are increasingly centered on who can propose the most aggressive environmental plan. But what California’s elected leaders often ignore when “keeping up with the environmental Joneses” are the facts.
Earlier this week, the Hoover Institution released the inaugural issue of Eureka, a bi-monthly periodical featuring commentary on a timely policy topic. To augment the featured commentary, Eureka will also highlight via…

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Last week, in a blog post titled, “Your complaint is more than data-it’s your story,” the Consumer Financial Protection Bureau enticed consumers to “share your whole story, everyone will see it.” The post came as the Bureau pledged to move forward with plans to publish the narratives of consumer complaints about their financial institutions. The Bureau’s existing public complaint database includes only standardized data fields-not the consumer’s narrative description of the problem. Its decision to publish unverified consumer narratives is not surprising, but publishing these stories is not…

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On the campaign trail, we are already seeing evidence of the insidious effects of a number of myths about banking. Such myths make for bad policy, even though they are popular with the public, the media, and voters and therefore unlikely to die away. I am particularly worried about three myths that could produce policies that would make it harder for our financial system to fuel economic growth and could increase the risks of future crises despite purporting to make things safer.Two cautions before I begin. First, there is only enough space here to explain each myth and why it is harmful. I…

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Uber’s genius is ultimately a function of its common sense simplicity. Most sensibly, the car-sharing service seeks to serve its customers’ needs by virtue of it serving those of its drivers. Trade is a two-way street, by definition, but economists and government officials generally act as though there’s only a buyer.
Uber is many wonderful things to millions of people, but for the purposes of this piece it’s best to focus on CEO Travis Kalanick’s understanding of something that’s lost on economists, particularly those at the Federal Reserve. Obvious to Kalanick is the basic truth that if…

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The Federal Reserve is at a crossroads, and it doesn’t know where it’s going. After holding short-term interest rates near zero for six years, Fed policymakers, led by chair Janet Yellen, are prepared to raise them - but when, how much and with what consequences they haven’t said.
Higher short-term rates might trigger turmoil in stock and bond markets, as investors adjust to tighter credit. But it’s also possible that the reaction would be muted. The Fed mainly controls short-term rates, and there is only a loose relation between these rates and rates on long-term home mortgages and bonds….

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Congress is not just working on the budget for 2016, but also on a multitude of other important issues. One that is important to some people directly and to all taxpayers indirectly is what is known as the “doc fix.” Under a nearly forty year old law meant to keep Medicare fiscally sound, Medicare payments to doctors are supposed to be limited to the “sustainable growth rate” which would subject doctors to big cuts in their reimbursement rates. In all but a few years, Congress has suspended the cuts, usually finding the money somewhere to offset the impact of the higher doctors’ payments on…

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Don’t just rely on Benjamin Netanyahu’s passionate advice to Congress on his way to reelection that Iran is our arch enemy. Now we have the counsel of retired general David Petraeus, who gave a remarkable interview this week to the Washington Post. Petraeus agrees with Netanhayhu: Iran, not ISIS, is the real enemy.
His message: “I would argue that the foremost threat to Iraq’s long-term stability and the broader regional equilibrium is not the Islamic State; rather, it is Shiite militias, many backed by — and some guided by — Iran.”
The general adds, “Longer-term, Iranian-backed Shia…

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It is hard to say how much of an effect it had in the overall transactions that conspired to doom the prior financial arrangements of the last great “dollar” era, but as so often is the case in fragile, complex systems it is the smallest “errors” that produce the most carnage. Even in the events of March 2008, forgetting how Brutus told Caesar in Shakespeare’s play to “beware the ides of March”, the history of Thornburg Mortgage is all but forgotten except by those with a deep interest (too deep by some estimation). Bear Stearns remains with all the attention, but Thornburg might have been…

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In the closing months of 2014, Germany faced a difficult dilemma. Although its own economy was holding up well, incoming data showed that the rest of the Eurozone was rapidly slipping into recession. As a result, the calls for the European Central Bank (ECB) to unleash its own quantitative easing campaign grew louder. However, the policy had always been unpopular in Germany, both among high financial officials and rank and file Germans, where a strong euro has been prized. But in the end, Berlin was ‘persuaded’ to drop its efforts to forestall a QE campaign that everyone else in the world…

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Prior to this week’s FOMC meeting, here are three things we said to watch for: 1) the word “patient” would be stricken from the forward guidance around the path of the Fed funds rate; 2) the FOMC’s central tendency estimate of “full employment” would be lowered; 3) the “dot plot” - the chart showing individual Committee members’ expectations of the appropriate path of the funds rate - would be softened, showing a less aggressive course of funds rate hikes after the initial increase.Here is what happened at this week’s FOMC meeting: 1) the word “patient” was stricken from the forward guidance;…

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The U.S. Department of Energy just released a report in which it claims that consumers and the environment would benefit from increasing the proportion of electricity derived from wind power. As the White House press release puts it:”The report shows that with continuing technological advancements, cost reductions, and siting and transmission development, the nation can deploy wind power to economically provide 35% of our nation’s electricity and supply renewable power in all 50 states by 2050.”The “continuing technological advancements” and “cost reductions” mean the White House’s estimate…

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Here are two principles on which most members of both political parties agree.
1) Inflation should not increase people’s tax burdens.
2) Inflation should not erode Social Security benefits.
There is, to be sure, some disagreement on exactly how to measure inflation. But few disagree with the general principles. This stance is admirable. At the same time, however, members of both parties seem content to allow inflation to erode access to cash benefits for the poor. And the passive acceptance of that result is, I believe, shameful.
More than four decades ago, Congress enacted automatic…

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