• IMF Projecting Steady Growth in Asia, but Varying Rates of Growth Across the Region

    The IMF is projecting growth across Asia to be at about 6% through 2012.  This is the same rate of growth as the region experienced through 2011.  The outlook for 2013 is slightly higher, as the IMF is projecting 6.5% growth.  But what is striking about the survey released by the IMF is how much faster the growth is in "emerging asia," as opposed to "industrial asia."  Here's a look at the range from the IMF report:

    Anoop Singh, Director, Asia Pacific Department, IMF, says that these projections are dependent on the policy paths Asian leader take.  And while certainly Asian economies will do better with economic growth in Europe and the U.S, internal and regional factors will have a great deal of impact on growth over the coming years and months.

    Read the IMF survey here

  • UK Ad Spending and the London Olympics

    It may not be enough to make them confident that their economy will rebound soon, but it looks like the British can at least anticipate a bump in one arena this year: ad spending.  From eMarketer:

    In February, Strategy Analytics forecast that total ad spending in the UK will increase 4.2%, compared to 3.7% in Europe overall and 2.7% in the US. The boost from the Olympics will push the UK closer to the worldwide average of 4.9%, which is buoyed by fast growth in emerging markets like China, Brazil and India.

    For comparison, eMarketer estimates UK total ad spending to increase 4.8%, up from 3% in 2011, showing a convergence in the projections.

    “This summer’s Olympics are already generating extra interest and investment in UK advertising, as brands ramp up activity focused on the Games and the audiences they will attract,” said Karin von Abrams, eMarketer senior analyst. “The most recent Bellwether study from theInstitute of Practitioners in Advertising (IPA) also points to an uplift in ad spending this year, despite a generally gloomy economic picture. More UK marketers increased their ad spending in Q1 2012 than cut back—the third successive quarter this has happened. Online spending in particular rose by 7.8% during the quarter, according to the IPA.

    Here's a look at some ad spending projections:

    What is the potential for ad spending to lift other sectors?  Or is that increased ad spending a reflection of growth in other areas?

    Read Olympics Lift Ad Spending Growth in the UK here.

  • The Case for Microfinance and For-Profit Models to Fight Poverty Globally

    Jean-Philipe de Schrevel might be termed a pioneer in the field of micro-finance.  He raised $250 million for Blue Orchard and Bamboo Finance during the global recession, and he is a firm believer that for-profit models are an effective way of bringing needed resources into poorer communities.  In this interview with Knowledge@Wharton,  de Schrevel argues that charity and philanthropy, while important, are just not ever going to be able to truly battle widespread poverty alone.  

    Do de Schrevel's examples of microfinance success surprise you?   How big does microfinance need to become to reach de Schrevel's goal of being an "impact investing sector"?

  • UK in Double-Dip Recession

    Britain has entered into a double-dip recession, according to the UK Office for National Statistics.  To be more precise, it looks as though Britain is in the second dip of a double-dip recession, and has been since the end of 2011.  Here's the quarter-by-quarter growth rate for UK GDP, from the BBC:

    BBC Economic Editor Stephanie Flanders says the report from the ONS is anything but surprising, as conditions in the UK economy have been flat and disappointing for some time now.

    The 0.2% decline in GDP in the first three months of 2012 is slightly worse than many expected, and bad news for those hoping the UK would avoid falling formally back into recession. But the underlying story told by these statistics is not news to anyone: the UK's economy is bumping along the bottom and still struggling to gain momentum.

    Economists at Citi point out that, excluding the war years, it's been the worst four years for the UK economy in at least 100 years: worse than what happened in the 1920s and 1930s, and worse than anything in the 1970s and 1980s.

    In all those other cases, it took less than four years for the economy to get back to where it was before the downturn started. Indeed, four years after the start of recession in the early 1980s - that iconic example of a double-dip - output was 3.2% higher than its pre-recession peak.

    Read No recovery for UK: No let up for ONS here.

  • FOMC April Statement: Expectations for Moderate Growth Remain

    Here are the projections for overall GDP growth and unemployment from the Federal Reserve at the conclusion of the Federal Open Market Committee April meetings yesterday:

    While inflation expectations have picked up slightly, the Fed does not currently show much worry over longer-term inflation.  And the message on the economy remains one of moderate expectations.  From the release:

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

    Read the full FOMC statement here.  

  • Phil Angelides on the 'Avoidable' Global Financial Crisis

    Are you watching the Frontline series, Money, Power and Wall Street?  The first two parts of the series are airing on PBS member stations this week.  The series is packing a lot of history into a relatively short amount of time, but remains quite comprehensive.  It is quite a teaching tool.  

    Frontline has also made extended interviews with the experts and major players in the series available online.  Here is Phil Angelides, chair of the Financial Crisis Inquiry Commission speaking about how the FCIC came to the conclusion that the financial crisis was avoidable:

    Watch The FRONTLINE Interview: Phil Angelides on PBS. See more from FRONTLINE.

    Watch more extended interviews here.

  • Esther Dyson on the 'Magical Thinking' behind the JOBS Act

    Esther Dyson is a big believer in startups and the power of entrepreneurship.  So it may come as a bit of a surprise to learn that she is not on board with the JOBS Act.  JOBS stands for Jumpstart Our Business Startups.  Dyson doesn't seem to buy into the idea that government can do the jumpstart part effectively, and she likens such a move to policymakers thinking they could, or even should, help people fulfill the "American dream" of home ownership.  Writing at Project Syndicate, Dyson commends the trusting spirit behind the JOBS Act, but explains that such a well-meaning initiative is rife for exploitation:

    I wish I had more faith in the system, but the problem is not a lack of good people, good investors, or good entrepreneurs. The problem is that, without regulation, bad people take advantage of the good ones. While regulation and restrictions may hamper small business, not all regulation and restrictions are useless.

    Yes, there are some wonderful, honest companies that deserve investment and can’t get it, but they are not that common. I see a lot of start-ups. Many are appealing and have good ideas, yet most of them fail. Now the quality of even the honest start-ups is likely to decline as more of them are established, and they will spend more of other people’s money before failing.

    For example, with more start-ups, it will be even harder for each of them to find management talent and the right employees. Indeed, many people whom an entrepreneur might have hired will probably become CEOs of competing start-ups. Meanwhile, all of them will be competing for a finite number of customers, and those companies that make progress will then have to compete for scarcer scale-up capital.

    Many investors in these startups are likely to lose their money. Even under the current system, many angel investors lose money. The best route to success in angel investing is to invest in, say, ten or more separate companies, so that you have the chance of at least one big winner. But, again, a broader investor pool is likely to reduce the average number of investments per investor, with inadequate diversification leading to many more losers than winners.

    The faith that drives the JOBS Act is the same magical thinking that drives many Internet phenomena: people are good and everyone means well. But the Internet’s easy accessibility and low entry barriers have led to spam and malware and bad behavior; each new service starts out “clean,” but then ends up requiring its own regulations.

    Read Markets of Magical Thinking here

  • NYT: Price Controls and Food Shortages in Chavez's Venezuela

    Greg Mankiw points us to William Neuman's article on Venezuelan food shortages in the New York Times.  Mankiw writes that the article presents a strong case study for the impact of price controls, and maybe even the unforeseen results of a government's economic policy.  Neuman:

    Venezuela is one of the world’s top oil producers at a time of soaring energy prices, yet shortages of staples like milk, meat and toilet paper are a chronic part of life here, often turning grocery shopping into a hit or miss proposition.

    Some residents arrange their calendars around the once-a-week deliveries made to government-subsidized stores like this one, lining up before dawn to buy a single frozen chicken before the stock runs out. Or a couple of bags of flour. Or a bottle of cooking oil.

    The shortages affect both the poor and the well-off, in surprising ways. A supermarket in the upscale La Castellana neighborhood recently had plenty of chicken and cheese — even quail eggs — but not a single roll of toilet paper. Only a few bags of coffee remained on a bottom shelf.

    Asked where a shopper could get milk on a day when that, too, was out of stock, a manager said with sarcasm, “At Chávez’s house.”

    At the heart of the debate is President Hugo Chávez’s socialist-inspired government, which imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to find.

    Read With Venezuelan Food Shortages, Some Blame Price Controls here.

  • Conversation Starter: Real Disruption Requires Learning From Failure

    It seems most business leaders have learned to use the words innovation and disruption, but do they know what those words really mean?  For Doug Rauch, former president of Trader Joe's, those ideas seem central to his past company's success.  But they are linked to failures--many failures on the way to overall success.  Rauch makes his case for "failing to success" in this short Harvard Business Review video:

    This should raise many questions about what degree of failure a true innovator must be able to handle.  What is your take?  

  • Ritholtz: Future of American Business is in Good Hands

    You may think of Barry Ritholtz as a wise bear, but he is bullish on the future of the US economy.  His optimism does not come from watching any of the nation's current business and political leaders in action.  He recently spent some time with young entrepreneurs and techies, and came to the realization that they are built to navigate the choppy economic waters ahead.  He wrote about the experience, and his optimism, in the Sunday Washington Post

    It is not merely about the ideas and the technology, but about the drivers of them. If you want to understand the future of America, if you want to grasp why we are not doomed, then you must spend some time with young entrepreneurs. Their creativity, business acumen and technological insights are uplifting, energizing, empowering. It’s fertile ground, not just in Silicon Valley but across the land: San Francisco, New York, Boston, Miami, Washington, San Diego, Denver, Atlanta. That is where economic growth will come from.

    As the demands of life pile on, it’s easy to forget how much you wanted to change the world when you were young. You might be stuck in a job you don’t love, a too-big mortgage, demands of family . . . suddenly, we forget who we once were.

    They still know. The youth of America don’t care that their parents screwed everything up — they are going to steamroll over the old order and replace it with one of their own (just like their parents were and theirs before).

    A thing I have noticed about today’s youth: They have no illusion that any company will offer them much in the way of economic security. They have a firm grasp on the idea that they are a business of one — even if they work for IBM or Uncle Sam. They are their own team, a singular brand, their own idea factory.

    Read On Investing: The future isn’t grim, and it belongs to young entrepreneurs here.

    (Ritholtz notes at The Big Picture, that he prefers the title Post editors used for the print version: Step aside, old man. Let moxie and imagination lead the way.  We prefer it too.)

  • It's All About the Washingtons, Until It's Not: Planet Money on the Dollar Coin

    The Planet Money team wants us to spend more time thinking about the money in our pockets.  Not the amount, but rather the type of money in our pockets.  And not what that money represents, but the actual dollars and coins.  The paper and the metal.  If legislation currently moving through Congress passes, you will have to say goodbye to a lot of George Washingtons, Take a listen to the latest Planet Money podcast, in which they lay out the battle between the dollar coin and the dollar bill in some creative ways (including getting dollar-coin proponent Sen. Tom Harkin to discuss the virtues of the coin at a vending machine):

  • BLS: Employment Gains Across the US from March 2011

    The Bureau of Labor Statistics released regional and state jobs data on Friday, and while the month-to-month comparison shows little change, the comparison to March 2011 paints quite a positive overall picture.  Unless you are in New York.  All of the other 49 states and the District of Columbia have had positive job gains in the last year.  Some states and regions are seeing a faster drop in the unemployment rate than others, of course.  But only four states now have double-digit unemployment rates.  From the report:

    Among the nine geographic divisions, the Pacific continued to report the highest jobless rate, 10.2 percent in March. The West North Central again registered the lowest rate, 5.9 percent. Two divisions experienced statistically significant unemployment rate changes over the month: the East North Central and South Atlantic (-0.2 percentage point each). Eight divisions had measurable unemployment rate changes from a year earlier, all of which were decreases. The largest of these occurred in the East South Central (-1.5 percentage points).

    Nevada continued to record the highest unemployment rate among the states, 12.0 percent in March. Rhode Island and California posted the next highest rates, 11.1 and 11.0 percent, respectively. North Dakota again registered the lowest jobless rate, 3.0 percent, followed by Nebraska, 4.0 percent. In total, 23 states reported jobless rates significantly lower than the U.S. figure of 8.2 percent, 7 states and the District of Columbia had measurably higher rates, and 20 states had rates that were not appreciably different from that of the nation.

    Mississippi and Oklahoma experienced the largest over-the-month unemployment rate declines in March (-0.6 percentage point each). Five other states also had statistically significant rate decreases: Florida and Massachusetts (-0.4 percentage point each), Nevada (-0.3 point), North Carolina (-0.2 point), and Vermont (-0.1 point). The remaining 43 states and the District of Columbia recorded jobless rates that were not measurably different from those of a month earlier, though some had changes that were at least as large numerically as the significant changes.

    Alabama and Michigan registered the largest jobless rate decreases from March 2011 (-2.0 percentage points each). Sixteen additional states reported smaller but also statistically significant declines over the year. The remaining 32 states and the District of Columbia recorded unemployment rates that were not appreciably different from those of a year earlier.

    Read the full report, and access the data from the BLS here

  • Alan Murray on Zuckerberg's 'Maverick' Ways

    The Wall Street Journal's Alan Murray puts Mark Zuckerberg in the maverick CEO category.  And not because of the hoodie.  But because of how he conducts business.  And Murray points to Facebook's acquiring Instagram, and the way Zuckerberg went about negotiating the acquisition, as evidence.

  • Scott Shane: State tax rates 'have little bearing on where people start companies'

    Scott Shane thinks we may be hearing a little too much talk about the influence of state tax rates on where entrepreneurs set up new businesses.  Shane, professor of Entrepreneurial Studies at Case Western Reserve University, looked into the data and found that what we take for conventional wisdom is not particularly wise.  In part, he notes, with the complexity of tax codes there is not one good tax policy that works for all types of small businesses.  From Shane's article at BusinessWeek:

    Consider the case of two startups—a new distribution center and a new capital-intensive manufacturing venture. (Note to readers: That’s a “capital-intensive” manufacturing startup, not a “labor-intensive” one, because many states tax the two at different rates.) A 2012 Tax Foundation/KPMG report (PDF) shows there is almost no correlation between states’ effective tax rates on the two types of businesses. State taxes that are low for one are not low for the other. For instance, Louisiana has a 1 percent total effective tax rate on new, capital-intensive manufacturers—the lowest in the nation. Yet it imposes a 50 percent rate on new distribution centers, making only seven states heavier taxers of these types of startups. By contrast, neighboring Mississippi has the sixth-lowest tax rate for new distribution centers but only the 39th for new, capital-intensive manufacturers. Is your head spinning yet?

    And states with the lowest tax burdens aren’t the ones with the highest fraction of their population starting businesses. High-tax states, it seems, often have other advantages that offset the disadvantages of higher taxes. Consider, for example, California and Nebraska. According to the analysis I mentioned above, Nebraska has the lowest tax burden on new businesses. California, by contrast, was ranked a lowly 45th on this measure. If the favorability of the state tax regime drove new-business creation rates, Californians would start businesses at a much lower rate than Nebraskans.

    The opposite, however, is true. Entrepreneurial activity is much more prevalent in California than in Nebraska. The Kauffman Index of Entrepreneurial Activity (PDF) shows that from 2009 to 2011, the fraction of working-age Californians employed by others who went into business for themselves every month was 44 per 10,000 people, but for Nebraskans it was just 26 per 10,000 people.

    Read Small Businesses Don't Choose Low-Tax States here.

    (H/t Brad Plumer)

  • Geithner on Positive Signs for US Economy Moving Forward

    Secretary of the Treasury Timothy Geithner visited the Brookings Institution this week to talk about the state of the economy.  He addressed a variety of issues during the talk, from China, to the importance of education and health care in the US.  He offered a cautiously optimistic take on the short term prospects for the US economy.  But he was more bullish on the underlying strengths of the recovery.  In this excerpt, he speaks to why he believes the US is poised for strong growth down the road:

    Watch the more of the talk here

  • What Mad Men Can Teach About Small Business

    The fifth season of Mad Men is well under way, and fans of the show are once again hooked.  But for , the program is not simply entertainment, but also instructive.  Bellamkonda, Director of Social Media at Network Solutions, sees a lot of useful lessons in watching Don Draper and colleagues conduct business.  At Small Business Trends, he lists five:

    1) Don’t depend on one customer for all or your major part of your business

    2) Take risks. Don’t be afraid to let a client go under compelling circumstances

    3) Offline networking and shaking hands is as important today as it was in the 1960’s: 

    4) Dedicate resources to work on the business development and make it part of everyone’s job

    5) Keep an eye on the bottom line

    Bellamkonda elaborates on these lessons are here.  

    Note: We think there is a business lesson in a program developing a clearly defined style and consistent approach and finding success despite lack of big name stars and major network carriage. 

  • IMF World Economic Outlook: Slow Growth, but Many Downside Risks

    The IMF's latest World Economic Outlook has the global economic recovery on a "narrow path."  The projections are for small growth globally: 3.5% in 2012 and 4% in 2013.  But the report is full of warnings.  The biggest concern is the Euro crisis worsening.  And here is a look at the global impact of European economic struggles:

    In the report, the IMF puts the onus on policymakers around the globe to "solidify the weak recovery and contain the many downside risks."  Even emerging economies, which had been seeing significant growth as major developed economies slowed, will now need to be managed carefully lest they turn the corner toward recession themselves.  Olivier Blanchard, Economic Counsellor and director of research at the IMF,  lays out some of the challenges in this summary video:

    Read the full report here.  

  • My Kingdom for an iPad, or the Curious Case of Scottish Independence

    It isn't the most pressing international issue, but the Scottish vote for independence--two years away at this point--does make for an interesting case study.  The push for independence may sound like a lot of cultural and nationalistic pride, and indeed that may be the driving force for the leaders of the independence movement.  But for most Scots it appears economics will rule the day, according to a recent Economist report:

    Opinion polls suggest that they will determine whether or not Scots go for independence. One poll found that just 21% of Scots would favour independence if it would leave them £500 ($795) a year worse off, and only 24% would vote to stay in the union even if they would be less well off sticking with Britain. Almost everyone else would vote for independence if it brought in roughly enough money to buy a new iPad, and against it if not.

    Opinions on the economics of independence are starkly divided. Nationalists argue that, mostly thanks to North Sea oil and gas, Scotland subsidises the union and would be better off alone. The more sneering sort of unionist argues the opposite, that Scotland is a parasitic subsidy junkie.

    Both are wrong, in the short term at least. Assuming it keeps the oil and gas extracted from under Scottish waters, an independent Scotland would currently gain roughly as much in taxes as it would lose in subsidies (see article).

    The future, however, looks much dicier. This is a stormy economic world, and an independent Scotland would be a small, vulnerable barque. It would depend on oil for some 18% of its GDP, making it subject to shifts in global commodity prices. Though high oil and gas prices have pushed up tax revenues, if they drop production as well as receipts would plummet. The richest reserves have already been exploited, leaving inaccessible oil that becomes uneconomic when prices fall. North Sea production has been falling by about 6% a year for the past decade. Eventually the oil will run out entirely.

    A small country is more vulnerable to other shocks. In 2008 the British government had to bail out Royal Bank of Scotland (RBS) and HBOS, Scotland’s two biggest banks. At its peak, RBS’s balance sheet was 13 times Scottish GDP. Edinburgh has faltered as a financial centre since, and would be hard to revive. There is a limit to how large a financial sector an independent Scotland—a new, small economy—could support. Mr Salmond has already rebuffed suggestions that he should take a share of RBS’s £187 billion of toxic assets.

    So what might be the economic advantages of a small independent nation such as Scotland or the Basque region going it alone, or as part of the EU? 

    Read It’ll cost you: Scottish independence would come at a high price here.

  • McKinsey Quarterly: Correlation Between Board Diversity and Corporate Success

    McKinsey & Co's Thomas Barta, Markus Kleiner, and Tilo Neumann took a look into diversity at the executive board level of publicly traded companies in the US, UK, Germany, and France.  And they have found a strong correlation between successful companies and boards that have higher representation among women and foreign nationals:

    From the report:

    The findings were startlingly consistent: for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile. At the same time, EBIT margins at the most diverse companies were 14 percent higher, on average, than those of the least diverse companies (exhibit). The results were similar across all but one of the countries we studied; an exception was ROE performance in France; but even there, EBIT was 50 percent higher for diverse companies.

    The broad range of companies in our sample makes us confident that industry-specific distortions—those arising, for instance, when a particularly profitable industry has high numbers of foreign executives—are negligible. We did another stress test as well, looking at a subset of German companies for the independent (as opposed to combined) effects of gender and international diversity. Here, too, the performance relationships were strong. Research by our colleagues that focuses on senior women alone (and was conducted over time frames different from ours) also produces similar results.

    We acknowledge that these findings, though consistent, aren’t proof of a direct relationship between diversity and financial success. At high-performing companies, the board or CEO may simply have greater latitude to pursue diversity initiatives, and other management innovations may contribute more directly to superior results. We will continue to explore these issues in further research.

    Read Is there a payoff from top-team diversity? here.

  • Credit and a Singular Recession

    In an Economic Letter for the San Francisco Fed, University of California-Davis Economist Òscar Jordà argues that history is not a helpful guide in determining the near-term future of the US economy.  And he breaks the news to us with two illustrations of how different the Great Recession is from past recessions.


    Figure 1 shows employment and Figure 2 investment in the 17 quarters following the start of the average post-World War II recession and the 17 quarters since the onset of the recent recession. These figures display how much more severe and prolonged the falls in employment and investment have been in the most recent recession and recovery, eclipsing anything else observed in the United States during the post-World War II period.

    Importantly, a year into the recent recession, conditions did not seem substantially different than the average post-World War II downturn. But the financial crisis that followed the fall of Lehman Brothers appears to have extended the recession by an extra year and sunk the economy to extraordinary depths. Today employment is about 10% and investment 30% below where they were on average at similar points after other postwar recessions. Much of the slow recovery in investment is in structures and residential housing, as might be expected. However, investment in equipment has also rebounded somewhat more slowly than in previous recoveries.

    What do the diverse histories of 14 advanced economies tell us? Quantifying the leverage built up in the 2001–07 U.S. expansion, we can compute how much the financial crisis is weighing on the recovery relative to the norm. Data on leverage leading up to the Great Recession and the Jordà, Schularick, and Taylor (2011) analysis suggest that, even years after the recession ended, economic performance should be subdued, as we are now experiencing.

    The key to understanding this crisis, Jordà argues, is understanding the role credit played in the buildup to the recession.  

    Read Credit: A Starring Role in the Downturn here

  • Ongoing Dangers with Shadow Banking

    At the Marketplace Whiteboard, Paddy Hirsch reminds us that the so-called "banking crisis" of 2008-2009 was really more of a "shadow banking crisis."  The crisis seemed to be resolved, but were the underlying dangers taken out of the system?  Not so much, says Hirsch, as shadow banking is bigger than ever.  

  • Roubini: Europe 'has an austerity strategy but no growth strategy'

    Nouriel Roubini is afraid Europe may be headed toward a very rude awakening to what he calls a "short vacation."  At Project Syndicate, he credits Mario Draghi and the European Central Bank with taking important measures that staved off major problems like a liquidity run on Europe's banks.  But the positive impact of those moves may have been temporary, and now, Roubini argues, the short-term approach by Europe's policymakers could have medium and long term negative impact on growth and economic stability. 

    To make matters worse, the eurozone depends on oil imports even more than the United States does, and oil prices are rising, even as the political and policy environment is deteriorating. France may elect a president who opposes the fiscal compact and whose policies may scare the bond markets. Elections in Greece – where the recession is turning into a depression – may give 40-50% of the popular vote to parties that favor immediate default and exit from the eurozone. Irish voters may reject the fiscal compact in a referendum. And there are signs of austerity and reform fatigue both in Spain and Italy, where demonstrations, strikes, and popular resentment against painful austerity are mounting.

    Even structural reforms that will eventually increase productivity growth can be recessionary in the short run. Increasing labor-market flexibility by reducing the costs of shedding workers will lead – in the short run – to more layoffs in the public and private sector, exacerbating the fall in incomes and demand.

    Finally, after a good start, the ECB has now placed on hold the additional monetary stimulus that the eurozone needs. Indeed, ECB officials are starting to worry aloud about the rise in inflation due to the oil shock.

    The trouble is that the eurozone has an austerity strategy but no growth strategy. And, without that, all it has is a recession strategy that makes austerity and reform self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels. Moreover, the social and political backlash eventually will become overwhelming. 

    Read Europe's Short Vacation here.  

  • Global Information Technology Report 2012: Impact of IT on Economic Growth

    The World Economic Forum's annual Global Information Technology Report is an effort to "explore the impact of information and communication technologies (ICT) on productivity and development as a component of the Forum's research on competitiveness."  The 2012 report is now out and it is more than just data porn (though it most certainly is that).   It may be of little surprise that the nations that top most of the ICT rankings in the report are those countries that show up at the top of most of the quality-of-life rankings--Switzerland, New Zealand, Finland, Sweden, Hong King etc.  But the correlation there is still interesting to observe.  For example, take a look at this scatterplot graph of computer use at home, and note the countries in the cluster to the top right:

    The U.S. is near the top of most, though not all, lists.  For example. the US comes in at just 33 on broadband bandwidth per capita, and is now 51st in quality of math and science education.  Here is a look at how the US stacks up in network readiness:

    Read the full report here.  

    And watch this video, in which some of the researchers who worked on discuss the impact of advancements in digitization on overall economic growth:

  • CPI Rises 0.3 Percent in March

    The Consumer Price Index for All Urban Consumers rose again in March.  CPI was up 0.3 percent over February (seasonally adjusted) and is up 2.7 percent over the last 12 months (not seasonally adjusted).  The gas index pushed the overall energy index up 0.9 percent.  Here's a look at the CPI for All Urban Consumers over the last year:

    Here are some key details from the BLS release:

    The energy index, which rose 3.2 percent in February, increased 0.9 percent in March. The gasoline index rose 1.7 percent following its 6.0 percent February increase. (Before seasonal adjustment, gasoline prices increased 8.1 percent in March.) The fuel oil index also continued to rise, increasing 2.7 percent in March after rising 2.8 percent in February. In contrast, the index for energy services (comprised of electricity and natural gas) fell 0.4 percent. The natural gas index rose 0.9 percent after declining in each of the previous five months. The electricity index, however, fell 0.8 percent, its largest decline since June. Over the last 12 months, the gasoline index has risen 9.0 percent and the fuel oil index has increased 5.3 percent. The electricity index, however, has only increased 0.6 percent and the index for natural gas has declined 9.1 percent. 

    The index for all items less food and energy increased 0.2 percent in March after a 0.1 percent increase in February. The shelter index increased 0.2 percent, the sixth straight such increase, with the indexes for rent and owners' equivalent rent both increasing 0.2 percent. The index for used cars and trucks rose sharply in March, increasing 1.3 percent after declining in each of the previous six months. The medical care index rose 0.3 percent in March, with the index for medical care commodities increasing 0.4 percent and the medical care services index advancing 0.3 percent. The apparel index rose 0.5 percent after declining in February; similarly, the index for recreation rose 0.2 percent after a February decline as the index for recreation services rose 0.4 percent. Other increases in March included the indexes for new vehicles (0.2 percent), airline fares (0.4 percent), and personal care (0.4 percent). In contrast, the index for tobacco fell 0.3 percent in March, and the indexes for household furnishings and operations and for alcoholic beverages both declined 0.2 percent.


    The index for all items less food and energy has risen 2.3 percent over the last 12 months. The index for shelter has risen 2.1 percent over the period. The apparel index has risen 4.9 percent, the medical care index has increased 3.5 percent, and the index for new vehicles has risen 2.5 percent.

    Read the full release here.

  • Shiller Floats the Idea of Creating Shareholder Model for Nonprofits

    Now here's a provocative proposal.  Robert Shiller thinks that philanthropy would be more fulfilling if those giving away money felt ownership over more than a tax break or, say, a tote bag.  Speaking at the Carnegie Council, Shiller proposed providing donors with shares.  

    How would you see this working?  Would there be greater accountability on the part of charitable organizations?  Or does this create a more narrowly defined growth driven model that may, in the end, force nonprofits to think about their size rather than the quality of their work?

    Shiller spoke about more than just his modest proposal for nonprofits.  Watch the full speech here.