Free exchange

TODAY'S recommended economics writing:

• Who's afraid of economic data? (Forbes)

• Factories begin to shift back to US (Financial Times)

• Unequal shares (New Yorker)

• What falling export share says about US export competitiveness (Liberty Street)

View full post »

THE financial press went ape this week over the highly anticipated IPO of one Facebook, the Harvard social network turned $100 billion phenomenon. Facebook's soaring valuation has focused attention on a Silicon Valley that is once again booming, and it has led many to wonder whether social networking isn't inflating into yet another tech bubble. Nifty little online diversions with often questionable long-run revenue potential are increasingly trading hands for enormous sums of money—Instagram, Pinterest, Groupon, and so on. Maybe these companies are overvalued and maybe they aren't; I'm in no position to say.

Continue reading "Too hot for jobs" »

I ENJOY reading the Atlanta Fed's macroblog. Most of the time what draws me is the analysis—of labour markets, macro conditions generally, that sort of thing. Lately, however, it has become useful as a source of insight into the mindset of the inflation-averse central banker, thanks to a some recent writing by the Atlanta Fed's executive vice president and research director, David Altig. Two weeks ago, Mark Thoma wrote a piece questioning whether the Fed's approach to its 2% inflation target is actually symmetric (such that downside misses generate as aggressive a response as upside misses).

Continue reading "The central banker's bogeyman" »

THIS week in the paper I'm writing about welfare for and hostage-taking by billionaires, or as it's more commonly known, American football. On Monday, Minnesota's governor, Mark Dayton, signed into law a remarkable deal authorising a new stadium for the hapless Vikings. The stadium is projected to cost $975m, of which the Vikings will pay less than half. The rest ($498m) will come from the state, through an expansion of gambling revenue, and from a Minneapolis hospitality tax. The Falcons want a new stadium to replace the admittedly dreary Georgia Dome; it is projected to cost nearly $1 billion, $300m of which will come from taxpayers.

Continue reading "Them that's got shall get" »

SO MUCH of modern finance is a confidence game. Banks borrow short and lend long. A perfectly solvent bank can therefore go bust if depositors panic and rush to pull money out. This is why modern financial systems have backstops, despite the moral hazard cost; in their absence, the economy is at risk of irrational destruction.

European leaders have been playing their game with Greece like confidence doesn't matter. They have behaved as if an adjustment is necessary, and the only question at issue is which side will bear its costs. But confidence matters. As time has gone on, markets have become less sure of the talk that Greece would never be allowed to leave the euro area.

Continue reading "Going, going, gone?" »

IT IS another grim day for European markets. Break-up worries continue to grow. You can read Charlemagne on yesterday's disappointing euro-group meeting. The news has gotten worse today, as Greece's political parties seem to have failed to form a government, meaning that new elections will be held in June. Meanwhile, the tragedy of the performance of the real euro-zone economy was made clear in new GDP figures released today. The euro area managed no growth in the first quarter of 2012. That actually represented a slight improvement from a tumultuous fourth quarter in which the economy shrunk.

Continue reading "The no-growth zone" »