A blog by Jonathan Conning of the Economics Department at Hunter College of the City University of New York. This blog comes back to life when I happen to be teaching a course on trade and/or development but at other times may lay dormant.
Help the World’s Poor: Buy Some New Clothes : "Back to school shopping leads many people to buy apparel that was made in sweatshops. Rather than feel guilty for “exploiting” poor workers, shoppers should rejoice. Their spending is some of the best aid we can give to people in poorer countries." So says Benjamin Powell on the always provocative AidWatch blog. Liberal New York Times columnist and Economics Nobel Prize international economist Paul Krugman wrote an earlier and now often cited statement along similar lines titled " In Praise of Cheap Labor: Bad jobs at bad wages are better than no jobs at all ." Do you agree with these arguments?
An intriguing column from Prof. Robert Shiller of Yale University (famous for his book Irrational Exuberance which correctly predicted the dot-com bust): The saving rate in China is the highest of any major country. China’s gross saving rate (the percentage of GDP that is not consumed immediately), which includes both public and private saving, is around 50%. By contrast, the saving rate in the United States is the lowest of any major country – roughly 10% of GDP. ...the uptrend in saving in China began at around the same time as its one-child policy was implemented in 1979.... economist Franco Modigliani...argued that this demographic change explains much of the increase in the saving rate, as Chinese substituted investment in capital for investment in children. Now to me this is only partly convincing. No doubt it explains part of the reason the Chinese have saved so much, but there must be other reasons as well (e.g. the real rate of return on investing is high in this fast growi...
Remember the term 'liquidity trap' from your Eco 100 discussion of the Great Depression? Paul Krugman fears we might be entering one right about now.. based upon amongst other things, the sudden one day dive in yields on US treasuries: This suggests investors flight to safe investments even if they yield very little at all, which in turn clearly signals their lack of interest in making most other types of loans that would normally be part of the money creation process. In such situations the Federal Reserve loses their ability to control the money supply. update 9/18: Paul Krugman checks the markets again this morning and finds that the return on the three month treasury is negative ! People are willing to pay $100 today for a treasury bill that pays less than $100 in three months time! As he points out, this didn't even happen in the Great Depression. No surprise then to hear this 3am announcement that "the world's biggest central banks planned to pump...
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