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April 28, 2005
Global Trader's Diary Answers The Bell
Michael at the Global Trader's Diary provides a thoughtful critique of Fed policy:
I don't really have problem with Fed policy until around Nov 1998 and I think these issues are best addressed by Paul McCulley's more constructive Fed criticism from March of 2000:
Which brings us to the question of whether the interest rate tool is the right exclusive instrument for dealing with the problem. I know of no economic model that postulates a high interest elasticity of demand for lotteries! Virtually every economic model incorporates, however, a high interest elasticity of demand for the goods and services of the Old Economy.
Thus, using the interest rate tool exclusively to thwart wealth creation in New Economy stocks carries grave risks for the Old Economy...
Under Regulation T, the Fed has the authority to set initial margin requirements for the purchase of stocks on credit, which has been at 50% since 1974. The Fed should raise that minimum, and raise it now.
That's an interesting comment. The November 1998 date gets my attention because, well, I don't actually disagree. The record shows that my boss at the time, Jerry Jordan, actually dissented on the rate cut from that meeting on the grounds that it was too much ease:
Mr. Jordan dissented because he believed that the two recent reductions in the Federal funds rate were sufficient responses to the stresses in financial markets that had emerged suddenly in late August. An additional rate reduction risked fueling an unsustainably strong growth rate of domestic demand.
That, in fact, was his fifth dissent of the year. Prior to the rate cut in September that year (following the Russian currency crisis and LTCM debacle), Jerry had been arguing that the best course was to remove what he believed to be an excessively stimulative stance of monetary policy. In his dissents, I saw the same sentiment that was just recently articulated by my current boss:
How, then, should monetary policy deal with current account imbalances today? I do not think that the FOMC should take preemptive measures to address these imbalances. However, I do think that the Committee should continue to bring the federal funds rate target to a level that is consistent with maintaining price stability in the long run. If we achieve that, then we will be in a position of strength to address whatever challenges arise.
It is good to have conversation about whether mistakes have been made, or are being made, in achieving that goal. It is productive to have intelligent critiques of the regulatory practices of the Federal Reserve, and generate discussion on whether those practices contribute to financial stability, or not. (Although I do not generally think of these responsibilities under the heading of "monetary policy" -- they are the province of the Board of Governors, not the Federal Open Market Committee.) I objected to the Roach article because it was not all constructive. The GTD post is.
While defending Roach's piece is a bit difficult, I am not that comfortable absolving the Fed either.
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The GDP Report: We, Apparently, Are Not Pleased
I'm not sure I had ever contemplated what the day would look like when 3.1 percent growth was considered bad news, but now I know for sure. From Bloomberg:
The U.S. economy grew at a 3.1 percent annual pace in the first quarter, the slowest in two years, while inflation accelerated. Inventories swelled as consumers and businesses reined in spending, suggesting cutbacks in production may hinder growth this quarter.
An inflation gauge tracked by the Federal Reserve rose the most since late 2001, today's Commerce Department report in Washington showed. The initial estimate of gross domestic product, the total value of goods and services produced, trailed the 3.5 percent median forecast in a Bloomberg News economist survey...
The personal consumption expenditures price index excluding food and energy, a measure tied to consumer spending and watched by Fed officials, rose at a 2.2 percent annual rate last quarter, the fastest since the fourth quarter of 2001. The rate was 1.7 percent in last year's final three months.
That was not the only unpleasant price statistic. From the Wall Street Journal Online:
Inflation gauges in the report were mixed. The chain-weighted GDP price index, a measure of economy-wide inflation, increased at a 3.3% rate -- the fastest since an identical jump in the first quarter of 2001-- after rising 2.3% in the fourth quarter. The price index for personal consumption rose at a 2.1% rate after climbing 2.7% in the fourth quarter. The price index for gross domestic purchases, which measures prices paid by U.S. residents, rose at a 3% rate in the first quarter after advancing 2.9% in the fourth quarter.
That dip in the personal consumption expenditure price index was trumped, of course, by the increase in its ex food and energy version.
The experts did not like. From the previously cited Bloomberg report:
"The rise in inventories was an especially unwelcome development,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York. ``If this inventory is not cleared quickly, it will lead to cutbacks at the factory.''
Ditto, from the Financial Times:
“It is the mix of growth that is the biggest disappointment,” said Paul Ashworth, an analyst at Capital Economics, a consultancy.
“If business investment is slowing, there is nothing to pick up the slack as consumer spending weakens.” A big rise in inventories during the quarter suggested some companies might have been caught by weaker demand, he said.
This comment, which appeared in a report from Reuters...
"The market digested the economic data and wasn't at all pleased that the GDP numbers came in at a lower-than-expected rate," said Gordon Fowler, Jr., chief investment officer at The Glenmede Trust Co. "There's growing concern that this slow patch is going to be longer and deeper than people originally thought, and that's going to have a negative impact on earnings and economic growth over the next few quarters."
... sounded positively cheery compared to this one from another Bloomberg article...
"The market's having trouble with the question of how much the economy is going to slow,'' said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc. in St. Louis. "The concern is that economic growth is going to collapse.''
... and this one from a Rex Nutting article at MarketWatch:
"Stagflation is rearing its ugly head," said Peter Morici, a business professor at the University of Maryland. "The Fed faces a Hobson's choice: reining in inflation or tolerating unacceptable levels of unemployment."
At least Rex decided to put a little perspective on things:
For all the anxiety, however, growth in the first quarter was still close to or above trend, while inflation remained within the Fed's target. Growth has averaged 3.2% a quarter for the past 20 years...
"There is plenty of strength buried in the details," said Mat Johnson, chief economist for ThinkEquity Partners, noting the 20% growth in investment in information technology. "The pace of consumer spending growth remained high, despite the persistence of high energy prices."
In the same column, Steve Stanley makes the million dollar query:
"The big question is whether the economy is weakening on a trend basis or March was just another one-month soft patch," said Steve Stanley, chief economist for RBS Greenwich Capital, casting his vote for the temporary slowdown scenario.
In response, it is hard (for me) to argue with this analysis, from CBSNEWS.com:
"The problem appears to be the higher energy prices, and if energy prices stay elevated, the economy is going to struggle," Mark Zandi, chief economist of Economy.com told CBS Radio News. "If energy prices moderate, which I think at this point is still the most likely scenario, then the economy should have a reasonably good year."
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» Signs of the Times from Brad DeLong's Website
David Altig writes: macroblog: The GDP Report: We, Apparently, Are Not Pleased: I'm not sure I had ever contemplated what the day would look like when 3.1 percent growth was considered bad news, but now I know for sure... So much have our estimates of ... [Read More]
Tracked on Apr 28, 2005 11:37:55 PM
Assorted news Stories I Missed...
... as I feverishly typed my serial novel in response to the Stephen Roach essay. In no particular order:
Kash reports on continuing signs of softness coming from the data on advance durable goods orders. Barry Ritholtz isn't thrilled either. Nor is Brad DeLong. Nor is The Prudent Investor. Nor is The Skeptical Speculator (who shares my reading list). The Capital Spectator invokes the "S word."
The New Economist has lots on the EU constitution votes, and what they may or may not mean. And Tim Worstall fills us in on how Europe really works.
The Financial Times reports that the Russians may allow more real rouble appreciation -- although that may be actually mean nominal depreciation.
The Big Picture (Barry Ritholtz again) has an excellent wrap-up of news on the oil front.
I think Brad Setser overstates things some by characterizing Ben Bernanke's speech on the source of current account deficits as the “don't worry about the current account deficit, there is a global savings glut” hypothesis, but I don't much dispute his analysis of the current environment, and his post on the subject is well worth reading.
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April 27, 2005
Roach To Fed: J'Accuse! (The End)
My obsession concludes.
I may appear to have been a bit defensive in this series of posts. Perhaps it is so. But statements like this...
The Fed is not only hard at work in the engine room in keeping the magic alive with a super-accommodative monetary policy but is has also become the intellectual architect of the New Macro. Time and again, since Alan Greenspan rolled out his New Paradigm theory in the late 1990s, senior Federal Reserve policy makers have taken the lead role as proselytizers of a new macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy.
... are just plain silly.
OK. I'll be generous and chalk that up to creative writing for effect. But a really constructive conversation would tackle these sorts of questions:
-- I gather the prescription favored by those who feel the same as Stephen Roach is for the Fed to be more aggressive in tightening policy. Fine, but is that what you really would have done in 1997, confronted with the circumstances at the time? In 1998? Would you have been impervious to the global financial stress I noted in the second post?
-- Would you choose to ignore the fact that employment growth in the U.S. has consistently struggled to gain traction? Would you be confident enough that bubbles exist, and that monetary policy can do something about them if they do, to tighten monetary policy if you had some concerns about the underlying strength of the real economy?
There is a reasonable debate to be had on all of these issues. Let's have it.
Did you gather that I didn't particularly care for the Roach column? Right. The critics, on the other hand, loved it: Resonance says "If you're into this topic, go read the whole thing"; The Housing Bubble bubbles "Mr. Roach is right on the mark again and the article is worth the few minutes it takes to read"; Bill Cara advises "I think you ought to be reading Stephen Roach’s daily commentary as I do"; The Cunning Realist claims "Stephen Roach, one of the few Wall Street pundits worth listening to, put out an excellent piece..."; James Wolcott agrees that, in that of which Roach speaks, "Fed chief Alan Greenspan has ignobly, disastrously, almost incomprehensibly failed"; The House of Cards endorses Wolcott; Moon of Alabama exclaims "Go read the whole piece, it provides more in-depth explanations of how the Fed has dug itself deeper at every turn, by inflating a new, bigger bubble whenever the previous one threatened to burst".
UPDATE: In my initial post I complained about the dearth of critical reaction to Roach's comments. Not to fear. Calculated Risk has filled the void.
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Tracked on Apr 28, 2005 1:50:32 PM
Tracked on Apr 28, 2005 1:53:57 PM
Roach To Fed: J'Accuse! (III)
The Roach saga continues:
This whole story, in my view, remains balanced on the head of a pin of absurdly low real interest rates. And the Fed has certainly been pivotal in nurturing this low-interest-rate regime. In an extraordinary display of policy accommodation, the real federal funds rate is only now moving above the zero threshold after having spent three years in negative territory. Of course, a central bank has little choice to do otherwise if it has made a conscious decision to underwrite the Asset Economy.
In my view, Mr. Roach is making a classic mistake: Confusing a low federal funds rate with "an extraordinary display of policy accommodation." If I may, I will quote from myself:
A “neutral” monetary policy—one that avoids both inflationary and disinflationary pressures (as well as both artificial stimulus and unwarranted restraint on the pace of real economic activity)—requires that the funds rate target adjust to the evolving demand in credit markets as consumption, investment, and employment expand in anticipation of continued growth...
How far, and how fast, must the funds rate rise? What is neutral? It should be clear from this discussion that the answer is wholly dependent on economic developments well outside the scope of monetary policy. “Neutral” can only be defined relative to the state of the economy at a particular point in time. The economy of mid-2000 through mid-2003, characterized by distinct weakness in investment spending and employment growth, inevitably meant low real interest rates. Neutral in that situation meant a low—perhaps very low—funds rate to contain disinflationary pressures building in the economy.
Now, as the economy strengthens and investment and employment growth recover, the neutral setting of the funds rate is moving up. The distance it will go depends on myriad factors, most (if not all) of which will only be revealed in time (perhaps at a measured pace).
The suggestion that the low interest rates we have lived with over the past several years is proof of exceptionally stimulative policy is flat-out wrong. A corollary, of course, is that it is not generally possible to put a number on what "restrictive" is at any point in time. Hence, Roach predicts...
Given the excesses that now exist, it may even require a federal funds rate that needs to move into the restrictive zone -- possibly as high as 5.5%.
... and I, for one, would accept the proposition that 5.5% would be restrictive in the current environment. But I might also accept the proposition that something quite a bit lower than 5.5% would be restrictive. Or that if and when we get there, 5.5% will not be restrictive at all. After all, the funds rate was at 5.5% in the summer of 1997 when, according to Roach view of the world, policy was fueling the stock market bubble.
One more to go.
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Roach To Fed: J'Accuse! (II)
Stephen Roach continues:
I am not a believer in conspiracy theories. But the Fed’s behavior since the late 1990s is starting to change my mind. It all began with Alan Greenspan’s worries over “irrational exuberance” on December 5, 1996, when a surging Dow Jones Industrial Average closed at 6437. The subsequent Fed tightening in March 1997 was aimed not only at the asset bubble itself, but at the impacts such excessive appreciation in equity markets were having on the real economy -- consumers and businesses alike. It was a classic example of the Fed playing the role of the tough guy... Unfortunately, the tough guys weren’t so tough after all. Predictably, there was a huge outcry on Capitol Hill as the Fed took aim on the US stock market. But rather than stay the course as an independent central bank should, the Fed ran for cover in the face of political criticism...
Do you think maybe, just maybe, the fact that CPI inflation was actually falling throughout 1997 might have had something to do with it? Or that perhaps the Asian currency crisis that began in summer 1997, continuing into summer 1998, followed by the collapse of the Russian ruble, the Long-Term Capital Management meltdown, and the collapse of the Brazilian real might have played some role in the course of policy over that period?
The Committee certainly did. From the minutes of September 30, 1997 FOMC meeting:
... the risks to the economy appeared to be strongly tilted toward rising inflation whose emergence would in turn threaten the sustainability of the expansion. Several members emphasized in this regard that a tightening move could be most effective if it were implemented preemptively, before inflation had time to gather upward momentum and become embedded in financial asset prices and in business and consumer decisionmaking.
There were, nonetheless, a number of reasons for delaying a tightening of policy. The behavior of inflation had been unexpectedly benign for an extended period of time for reasons that were not fully understood. Forecasts of an upturn in inflation were therefore subject to a considerable degree of uncertainty, and the expansion of economic activity could still slow to a noninflationary pace. Members also commented that a policy tightening was not anticipated at this time and such an action might therefore have unintended adverse effects on financial markets. Members recognized that from the standpoint of the level of real short-term interest rates, monetary policy could already be deemed to be fairly restrictive.
By the next meeting, the Asian crisis was making its presence felt:
The current momentum of the expansion, together with broadly supportive financial conditions and favorable business and consumer sentiment, suggested that economic growth was likely to be well maintained, especially over the nearer term. As a consequence, the members agreed that there remained a clear risk of additional pressures on already tight resources and ultimately on prices that could well need to be curbed by tighter monetary policy. But the members also focused on two important influences that were injecting new uncertainties into this outlook. Turmoil in Asian financial markets and economies would tend to damp output and prices in the United States. To date, it appeared that the effects on the U.S. economy would be quite limited, but the ultimate extent of the adjustment in Asia was unknown, as was its spillover to global financial markets and to the economies of nations that were important U.S. trading partners.
By the July 1998 FOMC meeting, the Asian crisis was an explicit driver of the Committee's interest-rate decision:
[An] important reason for deferring any policy action was that a tightening move would involve the risk of outsized reactions and consequent destabilizing effects on financial markets in the growing number of countries abroad that were experiencing severe financial difficulties. It was not possible to anticipate precisely what those effects might be, but the risks seemed to be particularly high at this time. To be sure, U.S. monetary policy had to be set ultimately on the basis of the needs of the U.S. economy, but recognition had to be given to the feedback of developments abroad on the domestic economy. Those repercussions could be quite severe in the event of further sizable economic and financial disturbances in some of the nation's important trading partners. Many members concluded that because there did not seem to be any urgency to tighten current policy for domestic reasons, given the likelihood that inflation would remain subdued for a while, important weight should be given to potential reactions abroad.
As we now know, things did not soon improve, and the next moves would be to cut the funds rate (ironically just at the time that the benign inflation performance we had been enjoying was coming to an end).
Is it that unreasonable to accept that the FOMC might have been inclined to forgo raising the funds rate in 1997 because the 12-month CPI inflation was falling (from over 3% to under 2%)? Would Mr. Roach have us believe that restraining the supply of the world's reserve currency would have been the correct response to severe distress in global financial markets? Should a reasonable person attach him or herself to Oliver-Stonesque conspiracy theories instead of the straightforward explanations of the actual decisionmakers?
Yet more to come.
P.S. for the economists: Plug the inflation rate and almost any reasonable assumption of the output gap in 1997 into your favorite version of the Taylor rule. I think you'll find that, by this measure, monetary policy does not appear to be particularly "easy."
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Roach To Fed: J'Accuse!
I was going to ignore Stephen Roach's latest tee-off on the Fed, until I noticed that Kash at Angry Bear added a qualified amen to Roach's general thesis. I might have let it pass even then, but my quick survey of the blogosphere (via Technorati.com) uncovered not a single critical assessment of the piece. I guess, then, it's left to me.
In all my years in this business, never before have I seen a central bank attempt to spin the debate as America's Federal Reserve has over the past six or seven years...
... senior Federal Reserve policy makers have taken the lead role as proselytizers of a new macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy.
Of course, Mr. Roach offers plenty of examples of Fed officials making wild, wacky, throw-caution-to-the-wind statements like this one from Mr. Greenspan:
Although I scarcely wish to downplay the threats to the U.S. economy from increased debt leverage of any type, ratios of household debt to income appear to imply somewhat more stress than is likely to be the case. For at least a half century, household debt has been rising faster than income, as ever-higher levels of discretionary income have increased the proportion of income spent on assets partially financed with debt.
The pace has been especially brisk in the past two years as existing home turnover and home price increase, the key determinants of home mortgage debt growth, have been particularly elevated. Most analysts, even those who do not foresee a mounting bubble, anticipate a slowdown in both home sales and the rate of price increase...
To be sure, some households are stretched to their limits. The persistently elevated bankruptcy rate remains a concern, as it indicates pockets of distress in the household sector. But the vast majority appear able to calibrate their borrowing and spending to minimize financial difficulties. Thus, short of a significant fall in overall household income or in home prices, debt servicing is unlikely to become destabilizing...
In summary, although some broader macroeconomic measures of household debt quality do not paint as favorable a picture as do the data on loan delinquencies at commercial banks and thrifts, household finances appears to be in reasonably good shape. There are, however, pockets of severe stress within the household sector that remain a concern and we need to be mindful of the difficulties these households face.
In addition, a significant decline in consumer incomes or house prices could quickly alter the outlook; nonetheless, both scenarios appear unlikely in the quarters immediately ahead. If lenders, including community bankers, continue their prudent lending practices, household financial conditions should be all the more likely to weather future challenges.
Or this blinders-on diatribe by Governor Don Kohn:
Some observers worry that recent Federal Reserve policy, by keeping short-term rates at very low levels for an extended period, has encouraged investors to "reach for yield"--that is, to shift their portfolios toward riskier and longer-term securities, which generally have higher yields, to keep realized returns from falling. They also worry about the effects of a related behavior in which financial intermediaries borrow at low short-term rates to lend at higher long-term rates--the so-called "carry trade"--and about the effects of low interest rates on the prices of houses. To a considerable extent, these processes are part of the efficient functioning of markets... The issue is whether this process has gone too far--that is, whether investors are failing to take adequate account of the risks of those alternative investments. Forming such a judgment requires a view on the level of asset prices that would be "appropriate" given economic fundamentals. Unfortunately, economists are not very good at this, but neither is anyone else, including Wall Street analysts...
Warnings about a possible "bubble" in house prices have been sounded for a number of years now. About a year ago, I examined this issue in some detail and concluded that, while one could never be very confident about such a judgment, house prices were not obviously too high and the housing stock was not clearly too large. Since then, however, prices have climbed further, and by more than the rise in rents--a proxy for the return on houses. Consequently, the odds have risen that these prices could be out of line with fundamentals. We still cannot be very confident about whether a significant misalignment exists, however...
In the absence of any substantial distortions in asset prices and debt levels, households and businesses, on average, have not likely been engaging in misguided decisions that they, or the central bank, will come to regret. Nevertheless, as emphasized above, policymakers face a tremendous amount of uncertainty regarding this judgment... Because they cannot rule out the chance that some asset prices might correct more than anticipated, policymakers must consider how the economy might withstand such a correction...
I am not disputing the argument that current policy has contributed to higher asset prices, more household indebtedness, and strong activity in interest-sensitive sectors such as housing. But I am questioning the apparently firm conclusion of some that these developments represent distortions or imbalances that are likely to correct in an abrupt and harmful manner. At the very minimum, one cannot reach this conclusion with a great deal of confidence... Nonetheless, I cannot rule out the possibility that destabilizing imbalances are building.
I would attempt to pull appropriate passages from the recent speeches by Greenspan, by Kohn, and by Governor Roger Ferguson that Roach proclaims "a veritable broadside against the time-honored notion of the current-account adjustment," but I don't have the first clue what he is talking about. Ferguson's speech for example -- a quick summary is here -- is essentially a textbook breakdown of various sources of current account deficits. His crime appears to be that he agrees with Ben Bernanke's (admittedly provocative, but far from heretical) suggestion that restoring fiscal balance in the U.S. may not be enough to substantially reverse our current account deficit.
Is this what counts as "macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy"? Are we to believe that any expression of confidence that the landing will be soft, no matter how qualified, is an act of corruption?
I'm just getting started. More in part II.
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April 26, 2005
In The News Today
Purchases rose 12.2 percent to a 1.431 million annual rate in March following a 1.275 million pace in February, the Commerce Department said today in Washington...
The median price fell to $212,300 in March from $234,100 a month earlier. Compared with the same month last year, the median price is up 1.3 percent.
which elicited this response from GTD:
I have looked through the past median price data and am less convinced the price drop means anything. I have a natural contrarian reaction when I read the word "record" relating to monthly % changes though. The better interpretation is probably that if the U.S. consumer is hitting some sort of wall it has not showed up in housing data yet.
If your looking for signs of the hitting of walls, Mark Thoma has the April consumer confidence report for you:
U.S. April Consumer Confidence Index Falls to 97.7 From 103 April 26 (Bloomberg) -- U.S. consumer confidence fell to a five-month low in April as record gasoline prices and doubts about job prospects threatened to slow the world's largest economy, a private survey showed…
Consumer prices fell for a seventh straight year in the 12 months to end-March 2005, confirming that the economy remains stuck in deflation in spite of three years of stop-start growth.
The decline in the core consumer price index, of 0.2 per cent, was far less severe than the 0.8 per cent of the previous two years.
But let's end on a positive note. Knowledge Problem heralds the awarding of the John Bates Clark award for the best economist under the age of 40 to MIT's Daron Acemoglu, and links to a nice discussion of Daron's work at economicprinciples.com. (And here's a post from the past just to prove I really am one of Daron's longtime fans.)
UPDATE: Calculated Risk has an update on the new home sales.
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Do Americans Support Privatization?
Mark Thoma gives the heads-up on Congressional hearings on the subject that begin today, noting this bad-sounding piece of news for the administration.
And despite the president's efforts to rally support for his Social Security plan, seven in ten Americans say they're uneasy about his approach to the issue.
More people (49 percent) say the president's plan to partially privatize the system is a bad idea than say it's a good idea (45 percent).
There is certainly news there about confidence in whatever the public perceives the adminstration's plan to be, but I'm not sure how much we learn about attitudes concerning privatization per se. Is it not possible that one could be a proponent of reforms that include privatized accounts and still be profoundly uneasy about the administration's approach?
Paul Krugman, of course, thinks he's got it figured out. In yesterday's column, to which Mark links, Krugman starts with the results from a Gallup poll question on the general state of the economy, throws in a little Terry Schaivo and Tom Delay red (er, blue) meat, before finally moving to the (ambiguous) CBS poll question and somehow concluding that the evil Bushies and their minions are about to shove privatization down the throats of a resistant public.
The truth about public sentiment is more complicated, I think. Last month, I posted on a March Gallup poll on attitudes about privatization. Here's a quick round-up of the responses.
-- 56% of respondents favored reform that included some provision for private accounts invested in the stock market
-- 58% of respondents favored legislation that would allow people who retire in future decades to invest some of their Social Security taxes in the stock market and bonds
-- 51% of respondents felt it was necessary to make changes to Social Security this year
-- a slim majority -- 50% vs. 46% -- responded that they relying on the current system to delivered promised benefits was riskier than investing in stocks and bonds
-- A significant majority favored limiting benefits to wealthy retirees and eliminating the cap on wages subject to taxation as ways to address concerns about Social Security
Interestingly, today's Wall Street Journal reports that the wealthy may not be particularly enthusiastic about privatization.
... affluent Americans are split on the merits of Social Security overhaul, although about 45% of respondents believe that this move could boost stock-market returns...
[The April UBS/Gallup survey of investors] showed similar results, with 50% saying that the Social Security system should be kept as is, and 47% opting for personal savings accounts. This is the first time since June 2000 -- when respondents were first asked about their support for Social Security overhaul -- that more people preferred the status quo.
Do Americans support privatization? Who knows? I think what we are seeing in all these survey results is good old-fashioned common sense. I'd bet that most Americans think some sort of privatized account option is a good thing, recognize that there is no free lunch, and know that the devil lives comfortably in the details.
UPDATE: John Irons has more on the survey of "affluent Americans."
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» Social Security Debate Degeneration from The Dead Parrot Society
President Bush's recent campaign stop in Galveston, Texas, was a public relations disaster. Years ago, the President's Social Security Commission articulated a Social Security reform that (a) increased benefits to the poorest of the poor, (b) increased... [Read More]
Tracked on Apr 28, 2005 6:39:07 PM
April 25, 2005
Existing Home Sales: Not So Cool
Sales of existing U.S. homes rose 1.0 percent in March to the third-highest level on record as an increase in single-family sales offset a dip in sales of condominiums, [the National Association of Realtors] said on Monday...
The national median home price jumped 11.4 percent to $195,000 from the same month a year ago, the NAR report showed. That price increase was the biggest since December 1980, when prices rose 11.5 percent, NAR said.
"The market is very strong," said NAR Chief Economist David Lereah. "The problem in this country is housing supply. It's still very lean."
In March, the supply of homes for sale at the current pace was 4 months' worth, down from 4.2 months' worth in February.
"We still have this awkward balance between demand and supply," Lereah said.
New home sales tomorrow.
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- Hitting a Cyclical High: The Wage Growth Premium from Changing Jobs
- Thoughts on a Long-Run Monetary Policy Framework, Part 4: Flexible Price-Level Targeting in the Big Picture
- Thoughts on a Long-Run Monetary Policy Framework, Part 3: An Example of Flexible Price-Level Targeting
- Thoughts on a Long-Run Monetary Policy Framework, Part 2: The Principle of Bounded Nominal Uncertainty
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- What Are Businesses Saying about Tax Reform Now?
- A First Look at Employment
- Weighting the Wage Growth Tracker
- GDPNow's Forecast: Why Did It Spike Recently?
- How Low Is the Unemployment Rate, Really?
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