• Are You Spending Less? Where are you Cutting Costs?

    The Bureau of Economic Analysis has released data on personal consumption expenditures--what Americans spend on goods and services--over the last year.  While Americans increased their consumption from December to January, the overall trend of the last year was to spend less.  A lot less.

    In looking at the specific areas of spending from January 2008 to January 2009, Michael Mandel, chief economist for Business Week, was surprised by the second leading category: 

    In real terms, Americans are spending $164 billion less (in 2007 dollars) in January 2009 compared to January 2008. Out of that, $112 billion is user-operated transportation--purchases of cars and trucks, and spending on gas and oil.  But another $56 billion of decline came from food! That is to say, adjusted for inflation, real personal consumption of food fell by $56 billion. That's the second largest contributor to the decline in personal consumption. Number 3, clothing, was only $18 billion down.

    Mandel goes on to speculate that the rise in the cost of food last year helps explain why Americans are cutting back there, and that , perhaps, the "incessant public drumbeating  about 'fat Americans'" has some effect.  Read Mandel's full post here.

    We want your stories.  Odds are you are spending less.  So here are three questions:

    1) Where are you cutting back (what goods or services are you spending less on)?

    2) What was the event or piece of news that prompted you to cut spending?

    3) Why did you decide to cut back where you did?

    Click on comments at the top of the post and share your answers. 


  • Frank Promises 'Tough Rules'

    Barney Frank was king of the Hill yesterday, holding court for several hours as the House Financial Services Committee, of which he is the chair, grilled the CEO's of 8 companies that received TARP funds.  And last night he told MSNBC's Rachel Maddow that Congress is going to be sure those executives will be held accountable. 

    And, I think, by the summer, we're going to have a set of rules in place. It's going to be comparable, I think, to what FDR did with the New Deal, with the Securities and Exchange Commission and other rules. We will not depend on their goodwill. We will put some tough rules in place.

    Here's the interview with Maddow. 

    Obviously, Frank remains a polarizing figure.  Those of us who have dealt with directly know he suffers no fools and doesn't much care whether you agree with him or not.  But he is always prepared to give a clear point of view.  So for a moment forget whether you think he did a service to the country with yesterday's hearings.  Here's the question: If you were to choose one rule to place on big banks and other recipients of federal bailout funds, what would it be?  How would it help the overall economic climate, and why would citizens benefit?

  • Frontline: 'Inside the Meltdown'

    Frontline's documentary on the beginning of the financial crisis airs tonight on PBS stations around the country.  Inside the Meltdown chronicles the collapse of Lehman Brothers, the "rescue" of AIG, last fall's bailout of financial institutions, and, as seen in the below clip, the Bear Stearns/J.P. Morgan Deal. 

    Given Frontline's production calendar, it is unlikely there will be any new information in the program, but it should provide a good, comprehensive look at the major events from last year, and provide, as the producers promise, the "inside stories," from Washington and Wall Street. 

  • Economist Gone Wild: The Story of Al Parish

    Last night, CNBC 's American Greed series profiled Al Parish, a professor of economics at Charleston Southern University who, as a financial advisor, bilked his clients out of millions of dollars and built a lavish lifestyle for himself.  He was convicted of fraud last summer and sentenced to 24 years in jail.  The breadth and scope of Parish's scheme pales in comparison to that of Bernie Madoff, but Parish's conviction was a major get for the SEC and federal prosecutors.  Of course, Parish's fraud hit his home city of Charleston hard, financially and otherwise.  He was dubbed 'Economan'--he says by his students--and used the super-hero image of himself at right on his investment firm's website.  He bacame a local celebrity and appeared on the local news as an investment expert.  But, as he tells The Post and Courier in this interview, he never took a course in finance or investments:

    Q: Do you think you were smarter or better than the experts? Where did this come from?

    A: I honestly don't know. I'm very good at mathematics and I'm very good at economics. I have never had a course in investments. I have never had a course in finance. I've taught graduate level courses in both. I went and looked back at my transcripts and I've never had courses in either.

    Q: But you've been called on as an expert in both?

    A: That's kind of interesting, isn't it?  Finance is one thing. That is math and economics. That's not hard to learn if you have a good math background. But investments is different, it involves psychology. Teaching a course in investments is one thing. Managing money for someone is something else ... The teaching part I did pretty well but the latter was disastrous. I guess it was arrogance to think I could do that, that I thought I'd found a way to generate these returns for these people.

    Charleston Southern not only allowed Parish to teach graduate level courses in areas he hadn't himself studied, the univeristy's board was so enamored with their star professor they gave him $10 million of the school's endowment to invest.  That money is, of  course, long gone.  The full Post and Courier interview is striking in that Parish plays the role of one who has been duped himself, almost as a third party.  The interview is from the day before Parish's sentencing, and his biggest regrets are that he "got involved in this."  Read the full interview here

    American Greed  airs next at 11pm ET Sunday.  You can watch a slide show and a short video at American Greed's website.  

  • Key Characteristics for Home Based Entrepreneurs

    In the interest of helping home based business owners survive the tough economic times, Entrepreneur.com lists 25 Common Characteristics of Successful Entrepreneurs.  It is a comprehensive list with a lot of the old standby bits of advice, like #4: "Manage your money wisely"; and #9:"Get to know your customers."  But there are a few characteristics that might surprise, or even seem counterintuitive, like #23: "Take time off":

    The temptation to work around the clock is very real for some home business owners. After all, you don't have a manager telling you it's time to go home because they can't afford the overtime pay. Every person working from home must take time to establish a regular work schedule that includes time to stretch your legs and take lunch breaks, plus some days off and scheduled vacations. Create the schedule as soon as you have made the commitment to start a home business. Of course, your schedule will have to be flexible. You should, therefore, not fill every possible hour in the day. Give yourself a backup hour or two. All work and no play makes you burn out very fast and grumpy customer service is not what people want.

    Read the full list here.  

  • Jeff Bezos, The Kindle 2, and Amazon's "Seamless" Approach

    Amazon continues to zag as other companies zig.  Or at least it has kept profits and sales going strong as others fall short in this recession.  It is a remarkably different story from 2001, when the company's stock plummeted and people pushed for company founder Jeff Bezos to resign as CEO.  Now Bezos is the darling of business media, and he's making the rounds to talk up the launch of its Kindle 2 e-readerBezos went on Charlie Rose to talk about the Kindle and the company's approach to its customers.  In the interview, Bezos stresses the need to focus on customers rather than competition, and perhaps that helps explain the company's success.  Watch the full interview here.

    Om Malik, writing at Fortune online and at Gigaom.com, picked up on Bezos's use of the word "seamless."

    He wasn't talking about the device itself, of course, but the experience of the customer that uses it. Whatever you think about the Kindle, Bezos' choice of that word goes right to the heart of Amazon's own strategy, and the reason why the company, its operations and its stock have held up so well in the past few months. Everyone knows that Amazon's (AMZN) e-commerce site succeeded because its interface was intuitive to the point of being completely natural. What isn't discussed as much is the ethic behind that success: Simplicity is hard. Just as Amazon went to great lengths and expense to make the Kindle experience seamless, it has gone to a considerable amount of trouble to adhere to what is a very simple corporate strategy: Make it easy for the customer, and make it cheap. 

    Some may bicker with the Kindle 2's $360 price tag as cheap, but the device is selling, so at the moment it is hard to argue with Bezos about that.  One way for companies to keep prices down is to watch the bottomline in operations and control its own debt.  In this case, Malik points out a bit of news that hasn't been getting so much attention in the Kindle craze: Amazon is set to go nearly debt free by the end of this month.

    By March 27, Amazon plans to redeem the outstanding principle on its convertible subordinated notes due next year. Amazon offered the notes in 2000, and they accounted for $335 million of the company's long-term debt at the end of 2008. After the notes are redeemed, Amazon will have only $133 million in long-term debt outstanding. That's a far cry from the $2.8 billion in debt it held six years earlier.

    Read Malik's Why Amazon is Bucking the Trend here.

    And for a different sort of interview with Bezos, watch this clip from The Daily Show


  • February Jobs Report

    The Labor Department's official jobs report came out this morning, and the best news is that the bad news is not as bad as some expected.  Another 651,000 jobs were cut last month.  That is down from the 655,000 drop in January and 681,000 in December, but the overall trend still looks ugly.  Labor Department statistics show the US economy shed 4.4 million jobs since the start of 2008.  Unemployment (see below chart from the Bureau of Labor Statistics) is now at 8.1%, the highest in 25 years.

    Professional and business services led the way with 180,000 jobs lost.  Manufacturing was the second hardest hit sector, with employment down 168,000. 


  • Frontline on American Debt: 'Ten Trillion and Counting'

    Frontline's latest documentary focuses on debt.  Ten Trillion and Counting "traces the politics behind this mounting debt and investigates what some say is a looming crisis that makes the current financial situation pale in comparison."  It aired last night on public television stations around the country.  Here's the promo from PBS:

    The full episode is now available at Frontline's Website, here.  And the site includes a set of supplementary analysis and interviews (both in video and transcript form).  It may not all contain the depth necessary for understanding the complexities of the debt buildup over the last three decades, but it provides great breadth of Washington voices.  Noted economists, members of the Clinton and Bush administrations, and key members of Congress all share their thoughts.  For example, New Hampshire Senator, and short-time Commerce Secretary nominee, Judd Gregg on the debt threat:

    The way I describe it is this: Except for a terrorist getting its hands on a nuclear weapon and exploding it somewhere in the United States, [debt] is the biggest issue we have. We are facing a financial catastrophe of inordinate proportions, because we have on the books obligations which exceed the net worth of the American public. In other words, there is $66 trillion of debt out there, and we don't know how we're going to pay for it. ... The net worth of the United States is $44 trillion, so ... we're essentially bankrupt as a country even though we don't admit to it.

    And David Walker, U.S. Comptroller from 1998-2000, on the likelihood of the US's credit bond rating dropping:

    I absolutely can see the United States losing its AAA credit rating in the future if it doesn't get its own financial house in order. In fact, both Standard & Poor's and Moody's have already issued a shot across the bow, saying that that AAA credit rating is at risk.

    There are four key factors that led to the current subprime crisis that exist for the federal government's finances: a disconnect between who benefited from policies and practices and who paid the price and suffered the losses; inadequate transparency as to the nature and extent of the real risk; overleverage, over-reliance on credit ratings, and not enough attention on cash flow; and a failure ... of both private-sector and government risk-management oversight mechanisms to act until there was a crisis.

    So those are four common denominators. There are three big differences. Number one, the American government's financial problem is not as immediate, which is good news; we have time to act. Secondly, it's much bigger. And thirdly, nobody is going to bail out America. We need to solve our own problems, and the time to start is now.

    Visit the Ten Trillion and Counting site from WGBH and Frontline here.  

  • Simon Johnson: Break Up the 'Banking Elite'

    Simon Johnson was chief economist for the International Monetary Fund in 2007 and 2008.  Now he is a professor at MIT, is a senior fellow at The Peterson Institute for International Economics, and blogs about the global economic crisis at The Baseline Scenario.  For the last several months, he has been among the most vocal public economists warning that the US government's response to the crisis is far from enough.  Now, in a new piece for the May issue of The Atlantic, Johnson warns that the very people who lead the way into the financial crisis--the management of America's biggest banks--are being given too much say in how to respond to the crisis.  

    In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

    But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

    Read The Quiet Coup from The Atlantic here.  

    Johnson has been making the rounds today to sound the warning in person.  You can watch the five-minute version, from MSNBC:

    Or for a more extensive, 50-minute version from On Point with Tom Ashbrook,  download the podcast or listen here

  • Economic Predictions and Google Trends

    Google Chief Economist Hal Varian, and Hyunyoung Choi, Decision Support Engineering Analyst, have a new paper out about using Google data to predict economic activity....in the present:

    Not surprisingly, Google Trends seems most useful as a predictor of consumer behavior.  Automotive sales is one example.  Home sales are another. According to Varian and Choi, the Google search index for Real Estate Agencies is "the best predictor for contemporaneous home sales."  And the search index on "Rental Listings and Referrals" is negativley related to sales.  In the below charts, the red line represents home sales, the black line represents Google Trends data (or the frequency of searches in the category):

    Varian and Choi hope that their paper shows the value of "predicting the present," and using Google Trends--which is updated weekly, and even daily--to get useful economic data closer to real time.  Of course, they have a vested interest, and they want to encourage economists to work with Google Trends to see if there are other economic prediction models.

    Our paper outlines one approach to short-term economic prediction, but we expect that there are several other interesting ideas out there. So we suggest that forecasting wannabes download some Google Trends data and try to relate it to other economic time series. If you find an interesting pattern, post your findings on a website and send a link to econ-forecast@google.com. We'll report on the most interesting results in a later blog post.

    Go to the Google Research blog to download Varian and Choi's paper.  

  • AT&T Responds to User Complaints

    AT&T has been drawing the ire of many of its customers, especially those with big monthly bills for their iPhone coverage.  AT&T has been late on bringing some key functionalty of the iPhone to market--namely MMS and the ability to tether the iPhone to a laptop for wireless connectivity.  Add that to those AT&T subscribers who have complaints about the basic phone service for their iPhones, and you have what sounds like a brewing customer revolt.  

    AT&T's response provides an interesting case study in customer relations.  The company put a PR employee out in front to explain the problems.  Here is "Seth the Blogger":

    Does this diffuse some of the tension out there?  Maybe all that matters is that AT&T gets the service up to speed.  But Jackie Huba writes at the Church of the Customer Blog that the company forgot to say two very important words.  

  • Must Read: Economists Tell WSJ the Best Way to Spend $8

    The Wall Street Journal's Real Time Economics blog asked the Feldsteins, Shillers, and Mankiws of the world for suggestions on the best way to spend $8 a week--the amount most Americans will see added to their paycheck as a result of tax credits in the stimulus bill.  Here's the response of Adam Posen, of the Peterson Institute for International Economics:

    Invest in human capital through existing institutions: buy $8 of cupcakes at the PTA bake sale; attend a lecture at a community college ($8 admission); purchase a book on personal finance or retraining - any of these get spending into the economy with no lag, but also improve your or your family’s future productivity.

    The whole post is a must-read.  Get it here

  • Small Business Owners' Waning Optimism

    Small business owners continue to lose faith in the economy rebounding any time soon.  The National Federation of Independent Business's Optimism Index dropped another 1.5 points with all the bad economic news last month.  It is now down to its lowest level in the survey's 35 year history. 

    Small business owners are especially pessimistic about future sales.  A record low percentage expect sales to improve.  The decline in employment was also a record low.  The NFIB has been critical of the Federal government's reaction to the crisis, and the commentary attached to this latest report is not exception.  They find the tone from national leaders to be unnecessarily negative:

    Consumers are saving (finally) and those with a job are seeing their real incomes rise as prices fall. Hopefully, they will see past the deluge of dire warnings from Washington, D.C. and New York and take advantage of low prices and interest rates. Measures of consumer sentiment confirm that they are scared. The economic weakness is not caused by reduced spending from those losing jobs, but reduced spending from everyone who has a job, including those unaffected to date by the recession (9 out of 10 will still have their jobs at the worst). Discretionary fiscal policy will not save the economy, as usual it is too late and poorly focused. We’ve been in a recession over a year and Congress has yet to get new spending of any meaningful size injected into the economy. As usual, the private sector will lead us out of the recession, but it would be helpful if our leadership stopped scaring everybody.

     You can read a synopsis of the survey, or download the report from NFIB's website here

  • TARP Tuesday

    President-elect Barack Obama is back to Capitol Hill today.  He's meeting with Senate Democrats in an effort to get the remaining $350 million of the Troubled Assets Relief Program (TARP) released as soon as possible.  Yesterday, after what was likely his final press conference as President, George W. Bush put in the official request for Congress to release the funds. 

    TARP has critics all over the map.  Rep. Spencer Bachus (R-AL), ranking minority member of the the House Financial Services Committee has said he will not support releasing the funds.  Financial Services Committee Chair Barney Frank (D-MA) is pushing for a set of controls before he okays the money.  And beyond politics, plenty of analysts question how the first half of TARP was handled by the Treasury Department.  Barry Ritholtz lays out his criticism in seven points on The Big Picture.  For example points 4:

    Wasting Taxpayer Monies:  Why did private investors like Warren Buffett get so much of a better deal than Uncle Sam? Its clear to me that both Treasury and the Fed lack the expertise to negotiate these investments. Instead, set up a matching investment. Let those in the private sector with the expertise to do so make substantial arms-length investments, with the the US matching ( at 10 or even 20X) on the same terms.

    and 7:

    Moral Hazard:  Why are we rewarding companies that were poorly managed, reckless money losers? All of the TARP recipients should have anyone senior management associated with the bad investments fired; bonuses suspended, shareholders wiped out. How are these firms paying dividends with government money? Where are the clawbacks of bonuses from Stan O’Neill, Angelo Mozilo, Chuck Prince? That the people responsible for the mess are even remotely profiting from it is simply unconscionable.

    Later yesterday, Obama's incoming director of the National Economics Council, Lawrence Summers, addressed concerns about TARP in a letter to Congressional Leaders in which he wrote that the President-elect agrees with the criticism that "there has been too little transparency and accountablity; too much upside for financial institutions and esecutives who acted irresponsibily without providing enough help for small business owners, families who are struggling to keep their jobs and make ends meet, and innocent homeowners." 

    Summers went on to lay out five pledges from the incoming administrationaddressed

    1) To use “Our Full Arsenal of Tools” to make sure credit gets flowing not just financial institutions but to “small businesses, auto purchasers, and municipalities.”

    2) To reform oversight both of the TARP and our financial system at large, including “a full and accurate accounting of how the Treasury Department has allocated the funds spent to date and going forward.”

    3) To “Launch a Sweeping Effort to Address the Foreclosure Crisis,” reducing the number of preventable foreclosures “by helping to reduce mortgage payments for economically stressed but responsible homeowners while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners.”

    4) To impose new “tough and transparent conditions” on firms getting taxpayer money to ensure that the money is being used to get credit flowing and bolster the economy, not for personal profit.

    5) To increase the role of private capital, and “invest taxpayer money only when sufficient private capital cannot be attracted.”

    You can read the full Summers letter here.

  • Markopolos Takes the Hill

    Harry Markopolos is the star of the day in Washington, but unfortunately for many investors, institutions, and charitable organizations, his day in the spotlight comes too late to save their investments.  A Massachusetts-based financial fraud investigator , Markopolos spent nine years investigating Bernard Madoff and telling the Securities and Exchange commission that Madoff was running a Ponzi scheme.  Today he appeared before the a House Financial Services subcommittee and testified that the powers that be in the SEC wouldn't pursue a case against Madoff, even though, Markopolous "gift wrapped and delivered the largest Ponzi scheme in history to them."  Watch his opening statement:

    The full text of Markopolos's statement is here

  • When "Bad Banks" are a Good Thing

    In his speech yesterday at the London School of Economicsm, Fed Reserve Chair Ben Bernanke revived talk of the US government buying up so-called "toxic assets."   Marketplace Senior Editor Paddy Hirsch explains Bernanke's plan at the Marketplace Whiteboard:

  • Young Entrepreneurs Battle for Funding at the Rice Business Plan Competition

    The Rice Business Plan Competition gets underway today, pitting dozens of teams of entrepreneurs from universities across the country against one another as they compete for $800,000 in prize money.  CNNMoney.com profiles some of the teams in this year's competition here.  You can check up on last year's winners here.  

    We'd love to see your comments on what the judges should be looking for.  How much should they weigh the current economic climate when considering the viability of each plan?  Click on comments and weigh in.  

  • Bruce Bartlett's Modest Proposal for Getting His Generation to Leave Less Debt

    Bruce Bartlett, who worked in the Reagan and George H. W. Bush administrations and is now a columnist for the Fiscal Times, says Baby Boomers have a responsibility to give back to the country and the government coffers.  But he argues that we should not look at the estate tax as a way to get that money.  Rather, the government needs to act more like a university, or church, and get into the philanthropy game:

    I think every government in America, including the federal government, should have an official foundation to solicit and receive private donations for public programs and projects. People should be able to designate funds for schools, police, roads or any other function that suits them. Since money is fungible, whatever is made available to fund things the government would have funded anyway will free up funds from taxation for less sexy but no less important functions.

    Make the contributions tax-deductible, too. It may seem redundant, but there are lots of methods of charitable giving, such as charitable remainder trusts, that depend on tax-deductibility to work. Why not let governments have it work for them instead of against them for a change?

    I think there are lots of Americans who chafe at the burden of taxation who would nevertheless be happy, at death, to leave something to the governments that served them during their lives. They already leave vast sums to public universities, so why not extend the principle to other public institutions? I think it's really only a matter of making it possible for people to do so and encouraging them through recognition and honor for their gifts just the way universities and other public charities do now. It's not rocket science; there are already thousands of people working in the philanthropy field who know exactly how to do it.

    Read Hey Boomers: Leave Some Money to the Government here.  Bartlett put forward the idea in response to Michael Kinsley's cover story in the latest issue of The Atlantic, titled Can the Baby Boomers Save America?.  

  • Social Media Trends for 2012

    There may be new apps and new gadgets to facilitate our engagement with one another and with retailers and other companies, but surely social media will only become a bigger part of our daily lives this year.  It will be interesting to watch how companies push new ways of interacting, and what trends develop.  At Harvard Business Review, David Armano makes his predictions.  Armano is executive vice president of the interactive arm of global communications for Edelman Digital, and he predicts that some social media activities that started in 2010 or 2011 will take off in 2012.  Namely:

    Convergence Emergence.

    The Cult of Influence.

    Gamification Nation.

    Social Sharing.

    Social Television.

    The Micro Economy.

    Read Armano's descriptions for these trends here.  And then weigh in, either by offering up your comments, or in discussions with your peers/classmates.  What has to happen for these activities to become meaningful trends?  What social media trends do you anticipate being a big part of commerce in 2012?

  • Christina Romer Shares Lessons from The Great Depression

    When Council of Economics Advisers chair Christina Romer has studied the Great Depression in her work as a professor at UC-Berkeley.  Yesterday, she drew on that past experience in a speech at the Brookings Institution, in which she talked about lessons that she and others working with and in the Obama Administration should take from the Great Depression, and from the Roosevelt Administration's response.  While she took care to point out that the economic crises of today, as "severe" as they are, do not reach the "truly horrific conditions the previous generation of Americans endured and eventually  triumphed over,"  her speech centered on the parrallels that do exist between then and now:

    This similarity of causes between the Depression and today's recession means that President Obama begins his presidency and his drive for recovery with many of the same challenges that Franklin Roosevelt faced in 1933. Our consumers and businesses are in no mood to spend or invest; our financial institutions are severely strained and hesitant to lend; short-term interest rates are effectively zero, leaving little room for conventional monetary policy; and world demand provides little hope for lifting the economy. Yet, the United States did recover from the Great Depression.

    Romer then laid out 6 lessons from the Great Depression that apply to today:

    1) A small fiscal expansion has only small effects.

    2) Monetary expansion can help to heal an economy even when interest rates are near zero.

    3) Beware of cutting back on stimulus too soon.

    4) Financial recovery and real recovery go together.

    5) Worldwide expansionary policy shares the burdens and the benefits of recovery.

    6) The final lesson: A key feature of the Great Depression is that it did eventually end.

    For details on the above lessons, read Romer's speech here


  • The Merits of More Spending on Infrastructure

    In his Labor Day speech Monday, the President announced a plan to pump $50 billion into infrastructure projects across the country.  Brookings Senior Fellow Robert Puentes thinks this is a good move, as he believes bridges, roads, and railways are all in need of significant repairs.  But he also wants the government to have a plan for using infrastructure projects to increase long term employment, and not just temporary jobs:

    Read more from Puentes on the federal government's infrastructure policies here.

  • A Call for Schools to Foster Entrepreneurial Skills

    Cameron Herold struggled in school.  But he's had a successful career as an entrepreneur and in coaching entrepreneurs around the globe.  And he argues that this was not coincidence.  Schools, Herold says, need to do a better job of recognizing and encouraging entrepreneurial skills.  Here he is speaking at a TEDxEdmonton:

  • Growing Percentage of Americans Unemployed for 27 Weeks or Longer

    The scariest graph of the Halloween weekend came from Mark Thoma at Economist's View:

    Please share your thoughts on the striking percentage of long-term-unemployed Americans and what it means for the economy going forward by clicking on comments.  

  • Closer Look at GDP Numbers, Stimulus Effect, and Consumption Details

    The rise in GDP during the third quarter prompted the Room for Debate blog of the New York Times to ask whether the Obama Administration's $787 billion stimulus plan worked.  MIT and Baseline Scenario's Simon Johnson says the stimulus package worked on both an economic front and a political front (which then led to larger stimulus effects globally).   Harvard University Economist Jeffrey Miron says no, look to monetary policy.  Russell Roberts, economist at George Mason University, is sekptical of the stimulus plans power and suggests the growth might have occurred without it.  And Mark Thoma says that "the stimulus programs in place now are probably too small."  Read the full "debate" here.  

    Meanwhile, James Hamilton had one of the most instructive pieces on the GDP numbers at the Econbrowser blog.  Hamilton feels very positive about the GDP growth, and he neatly breaks down, and illustrates, the various contributors to the growth:

    Consumption spending is the biggest component of GDP and the main contributor to third quarter growth, accounting by itself for 2.4 percentage points out of the 3.5% total, and with consumer purchases of motor vehicles and parts alone 3/5 of the contribution of consumption. Next in importance was inventory rebuilding, which added 0.9 percentage points to the total and could make a significant further contribution in the quarters ahead. Housing is finally making a positive rather than a negative contribution, and nonresidential fixed investment was a smaller drag than I had been expecting. Imports grew faster than exports, though I'm relieved that trade overall is coming back. The government sector made a smaller contribution than one might have thought given the fiscal stimulus, in part because lower state and local spending offset some of the increased federal spending. For a healthier long-run growth path I'd prefer to see business fixed investment and net exports adding rather than subtracting. But, compared with what we've been seeing recently, this overall is a quite welcome report.

    Hamilton and Menzie Chinn track recessions through their Econbrowser Recession Indicator Index--a pattern recognition algorithm for identifying recessions that waits one quarter for data revisions and clear trend identification before making an assessment.  With the third quarter GDP numbers out they looked at the revised second quarter figures.  And they conclude that the recession did not end during the second quarter.  Read the full GDP analysis here.  

  • Rosabeth Moss Kanter on Big Companies as a Force for Progress

    Rosabeth Moss Kanter has a great deal of faith in "vanguard corporations" and their ability to adapt to a change and create a better world.  In her new book, SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good, she writes about how she sees companies like IBM, Banco Real, and Proctor & Gamble as global innovators that focus on the social good as well as profits.  She discussed her book with Sarah Green of Harvard Publishing: