Month: November 2012

Since the military junta stepped down in March 2011, the new Myanmar president has conducted a series of reforms toward liberal democracy and a more open economy. Besides releasing the political prisoner, Aung San Suu Kyi, and welcoming Hillary Clinton in December 2011, the government also drafted a new foreign investment law. Foreigners will no longer require a local partner to start a business in the country and will be able to legally lease (but not own) property.

Developed countries have seen this as a golden opportunity to expand their investment portfolios.

“Jobless Claims in U.S. Jumped Last Week After Sandy” (Bloomberg): Unemployment benefit applications jumped from 78,000 to 439,000 after Sandy. This is a result of both the physical inability of people to file claims during the storm and also a repercussion of the storm itself. Forecasters were anywhere between 300,000 to 450,000 and claim there are several other factors affecting the rise in filings, but the main cause is the storm and its electricity outages.

In the Fehr, et al paper, “Will China Eat Our Lunch or Take us to Dinner?,” the authors discuss various ways for the government to finance the welfare programs promised to the retiring baby boomers. One analysis looked at the privatization of pensions, modeled by “the elimination of any new public pension benefit accrual coupled with the establishment of individual accounts.” Basically, this privatization of pensions relies heavily on the effectiveness of free markets, as well as an “intergenerational redistribution.” The privatization of pensions would place the burden on the current elderly, as they would be “forced to pay for their benefits via the consumption tax.” Instead, “younger and future generations benefit enormously” because their wages are much higher without the payroll tax burden. While the Fehr papers notes that “the poor initially experience larger welfare losses,” Allan Meltzer thinks differently.

It is possible, that the Euro-zone begins to unravel in the next few weeks and months, starting with Greece. Yesterday, despite riots outside the Greek Parliament, Greece lawmakers passed an austerity bill which will further decrease salaries and pensions, raise the retirement age, and increase taxes. Greece needed to pass the bill in order to receive the next round of bailout loans. Greece politicians have said that Greece will go bankrupt on November 16th without the next round of bailout funds. In addition, Greece will need to pass a  budget vote for 2013 on Sunday. The budget will layout the basis for which the country’s creditors will make a decision whether or not Greece deserves the next round of bailouts.

In this post I look at a few articles whose authors have different viewpoints about the strength of the US economy’s recovery and how recoveries should be examined. In one corner there are co-authors Carmen Reinhart and Kenneth Rogoff, and in the other corner there are co-authors Bordo & Haubrich supported by Stanford economist John Taylor.

In Rogoff and Reinhart’s most recent article,