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Republicans attacking Janet Yellen should be careful what they wish for.
Fed chair Janet Yellen testified this week on the state of the economy. The only interesting thing to come of it was some sharp-edged criticism by Republican members of the House Financial Services Committee. That includes committee chair Jeb Hensarling, who said, “Fed reforms are needed . . . Fed reforms are coming.”Senator Rand Paul, for one, is pushing a bill to audit the Fed, by which he means auditing the Fed’s policies and discussions. But Yellen and other Fed big shots fiercely oppose any rules that might be…

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The Europeans have a few months head start, having seen and experienced a negative “inflation” rate in December. For us in America, a negative CPI rate is exceedingly rare. Going back just to 1960, when Paul Samuelson and Robert Solow first introduced the policy idea of the “exploitable” Phillips Curve (and the Great Inflation shortly thereafter), there have been exactly nine months featuring a CPI below zero. Eight of those occurred in 2009 at the very bottom, very worst of the Great Recession. The ninth was January 2015.
There is an awful incongruity here as there is an almost reverse…

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Two weeksago I explored how California’s housing unaffordability crisis is impacting the Golden State’s business climate. Due to restrictive government zoning ordinances and regulations, California’s rental and for sale housing stock isn’t keeping up with demand. In response to the crisis, policy makers have turned to rent control, inclusionary zoning, and targeted subsidies - policies that just alleviate the symptoms, while exacerbating the problem (price floors and subsidies increase demand).
No one disputes that California is in the midst of an unaffordability crisis and scholars on all…

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The on-going “Greek Financial Crisis” is chock full of lessons about the nature of the entity that serves the functions of money in an economy. Historically, people have chosen to use as money everything from notched wooden sticks to metal coins to pieces of paper printed by governments. When alternatives have been available, people have chosen to hold on to “high-quality-money” and rid themselves of the lower quality forms of money. Sometimes that has meant the illegal holding of foreign forms of money-like US dollars or German marks-instead of the official currency of their own…

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When John Paulson began raising money for a fund meant to profit from future troubles in the mortgage market, he was somewhat of a joke on Wall Street. Michael Lewis writes in The Big Short that Paulson’s Goldman Sachs coverage said he “was a third-rate hedge fund guy who didn’t know what he was talking about.” The trader handling his orders at Morgan Stanley said about Paulson that “This guy is nuts.”
According to Gregory Zuckerman’s book, The Greatest Trade Ever, Paulson wanted to raise $1 billion for his mortgage fund, but ultimately stopped at $147 million so skeptical was the smart…

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Federal Reserve Governor Daniel Tarullo began a speech last month by saying, “Standing in front of this audience I feel secure in observing that we are all macroprudentialists now.” Having been a member of that audience, I can assure Mr. Tarullo that his statement was inaccurate. Macroprudentialists’ intensifying focus on the asset management industry offers the latest glimpse into how such an approach could undermine financial stability.Mr. Tarullo explained that the macroprudential approach to regulation “focuses on the financial system as a whole, and not just the well-being of individual…

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With the Federal Communications Commission (FCC) poised to act on Net Neutrality this week by adopting its controversial Open Internet rules, those who follow the Commission are turning their attention to the inevitable legal challenges soon to come. Contrary to the optimistic views of those who have been pushing for the adoption of these rules for the past decade, these rules face a bleak future in court. This is because they clearly exceed the intended scope of the Commission’s statutory authority. While clever lawyers surely can argue that the words of the Communications Act have enough…

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On March 4, the Supreme Court will hear oral arguments in King v. Burwell, a lawsuit that challenges the Internal Revenue Service’s implementation of the Patient Protection and Affordable Care Act (PPACA). Specifically, the lawsuit asserts that the PPACA limits federal subsidies to health insurance purchased from state-run health care exchanges, while the IRS has determined that federal subsidies are available for purchases on all health care exchanges-including those established by the federal government. While the decision in King v. Burwell will directly affect the ill-crafted health…

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Last week Wal-Mart surprised reporters by announcing a pay hike for its most poorly paid workers. The company declared it will raise its minimum base wage to .00 an hour starting in April and will boost the minimum hourly pay of all its current employees to no less than .00 an hour in February 2016. Wal-Mart’s press release promised that about 500,000 of its 1.3 million employees will see pay increases as a result of the new wage schedule. The announcement startled many observers because the retailer is famous for its efficiency and its commitment to maintaining rock-bottom costs. …

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Given the obsession with economic inequality, you might think it’s the main force squeezing the middle class. It isn’t. We have this not from some right-wing think tank but from President Obama’s top economists. The bigger culprit, they show, is the slow growth of productivity - that messy process by which the economy improves efficiency and living standards. Greater inequality is a distant second in assaulting middle-class incomes.
So concludes the annual report of the White House Council of Economic Advisers. The CEA, as it’s known, performed a fascinating “what if” exercise. Assume that…

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Recently, I have been having a bit of a back-and-forth with former Labor Secretary Robert Reich about labor markets (his, mine, his). While Secretary Reich stands out for obvious reasons, he is hardly alone in terms of criticizing my past columns about jobs and labor markets (if you want to join in, see my positions, for example, here, here, and here). Basically, the two main issues are that many people want jobs to serve as a delivery mechanism for social welfare benefits while I (and other conservatives) would prefer to keep the two separate and that liberals seem to have trouble…

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Yes, believe it or not, Wisconsin governor Scott Walker actually spoke at some length at the dinner this past week where Rudy Giuliani charged that President Obama doesn’t love America. All the hullabaloo went to Giuliani, but in terms of the Republican presidential race, a number of Scott Walker’s pointed comments about policy and politicians are not to be missed. First a word about the dinner itself, which was generously backed by John Catsimatidis. It was the second event sponsored by the Committee to Unleash American Prosperity, a new group founded by Arthur Laffer,…

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For the U.S. stock market, 2014 was another banner year. The headline S&P 500 index hit new all-time highs, corporate profits grew, economic growth strengthened and unemployment levels continued to fall. The S&P 500 Index returned nearly 14%, posting its fifth double digit return in the last 6 years. However as the year came to a close, many investors found their portfolios lagging these strong index returns. This was particularly true for investors using actively managed strategies. 2014 was one of the worst years on record for active managers. The passively managed Vanguard 500 Index fund…

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To the long list of economic mysteries can now be added interest rates. They’ve been at rock bottom, as everyone knows. But now we’ve encountered something novel: negative interest rates. Lenders are actually paying for the privilege of allowing someone to borrow their money. It’s occurring outside the United States, and the Federal Reserve’s next move is expected to be raising rates. Still, there’s no ironclad reason it couldn’t happen here.
Low rates are old hat. Here’s what Bloomberg showed as of this column’s publication: Deposit rates for U.S. savers averaged 0.73 percent for one-year…

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Talking to a good friend several years ago who is rich by most any measure, this individual surprised me with his recall of having once been very poor. In blunt, matter-of-fact fashion he went on to tell me that once he stopped “doing stupid things,” he started earning good money on the way to becoming rich.
What’s about to be said will no doubt be twisted by some as evidence of my lack of sensitivity, or better yet, elitism, but long-term individual poverty in what is the world’s richest nation is more about choice than most would like to admit. Hard as the latter may be for some to…

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