econoblog.info

A roundup of economic news from around the Web.

Risk Factors: Mohamed El-Erian of Pimco has a long piece on the secular outlook. “Let me share with you other risk factors that we will be following closely in the months ahead. First, politics matter a great deal. Over the next few months, political feasibility (rather than economic desirability) will dictate most economic policy responses… Second, the healthy functioning of markets (and societies at large) depends on a set of implicit contracts — what our MBAs labeled social contracts. As is often the case in emergency situations, these contracts are being subjected to major shocks… Third, the management of public debt in industrial countries will be a delicate process… Fourth, any further erosion in the autonomy and mission of key economic institutions, including the Federal Reserve and to a lesser extent the FDIC, would be terrible news… Fifth, even our muted projections for global growth assume some important handoffs that are inherently difficult and face large time-inconsistency challenges. Remember, we are postulating that continued robust growth by some major emerging countries (particularly Brazil, China and India) will serve to partially offset the lower growth in the G-3 and the U.K. We are also postulating that growth in these countries will be driven by a significant pickup in the consumption of an expanding middle class.”
Foreigners and Treasurys: On his blog, Brad Setser says China, Japan and others aren’t putting their money where there mouths are in relation to the U.S. dollar and Treasurys. “All the talk about the risks of holding Treasuries, central bank demand for Treasuries also has held up far better than central bank demand for almost any other asset. Central bank demand for Treasuries hasn’t grown as fast as new issuance. Indeed, for the first time in years, central bank reserve managers aren’t absorbing the majority of the Treasuries new paper. But that is entirely a function of the huge size of the U.S. Treasury’s borrowing need, not a function of any fall in central bank demand.”
Health-Care Overhaul: On his blog, Keith Hennessey is critical of health-care proposals. “Every time Congress tries to make health insurance more generous (and therefore expensive) through coverage or benefit mandates, they are reducing workers’ wages. They are also reducing workers’ freedom to choose the form of their compensation. It’s easy to imagine that if the Thompson family had $69,000 and a competitive well-functioning individual market in which to shop for health insurance, they might choose to spend less than $12,000 on health insurance so they would have more money for other needs. If Congress tries to mandate that employers provide health insurance to their employees, they will be: reducing the wages of those workers who now lack employer-provided health insurance, or turning their jobs into temporary jobs, or pushing that work overseas, or just eliminating those jobs entirely. “
Homeowner Sentiment: Reuters reports on a Zillow survey on homeowner sentiment. “Most American homeowners believe their home’s value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday. A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey. In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow’s first-quarter Real Estate Market Reports. Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.