A roundup of economic news from around the Web.
- Safe Dollars: Writing for Project Syndicate, Martin Feldstein says the dollar is safe. “The big risk to any investor is the possibility that inflation will virtually annihilate a currencys value. That happened in a number of countries in the 1970s and 1980s. In Mexico, for example, it took 150 pesos in 1990 to buy what one peso could buy in 1980. That is not going to happen in the U.S. Large budget deficits have led to high inflation in countries that are forced to create money to finance those deficits because they cannot sell longer-term government bonds. That is not a risk for the U.S. The rate of inflation actually fell in the U.S. during the early 1980s, when the U.S. last experienced large fiscal deficits.”
- Fed Exit: On the Financial Times Michael Bordo and John Landon Lane looks at history to try to figure out when the Fed will move rates. “From this historical perspective, how will the exit strategy play out now? Our evidence suggests that if we follow the patterns of postwar business cycles, and if unemployment has peaked in the fourth quarter of 2009, we may see a tightening in the first quarter of 2010 but more likely in the second quarter. However, if unemployment falls slowly — and if the last two recessions are any guide — the Fed may delay longer. This raises concerns that prolonged maintenance of low rates will fuel future inflation. Indeed, the publics rush into inflation-protected government bonds may be a harbinger of a future rise in inflation expectations.”
- Grading White House Economists: The Economist aims to see how different groups of White House Council of Economic Advisors fare. “Measured by citation scores per team member, though, the present CEA does not stand out as much. The average score for 2009 works out at 291, much higher than 2008s 185 (despite multiple citations for the then chairman, Edward Lazear) but well below the average for Mr Mankiws team of 2003, when the average was 641. The count for 1982s dream team is an impressive 755. For 1993, when Joseph Stiglitz and Alan Blinder were members of the CEA, and the senior economists included the eventually much-cited David Cutler and Matthew Shapiro, the average score is 736.5. Ms Romers team is handicapped by our use of lifetime citation counts, but the difference is still striking. Citations, of course, are an even more flawed measure of quality for staff economists, who tend to be younger. So we ranked the past ten years CEAs by the average quality of the economics departments where their senior economists got their PhDs. This too is imperfect, as the rankings do change, albeit slowly. But by this measure, the present cohort of senior staff economists is the second-best-qualified in academic terms of any of the past ten CEAs. It is beatenbut only barelyby the staff assembled by Glenn Hubbard for George Bush junior in 2001. It does even better than Mr Feldsteins 1982 team. If part of any CEAs influence comes from the academic prestige of its members and staff, the present council has little to worry about. But it is not yet the most brilliant since the 1960s.”
Compiled by Phil Izzo