Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Uncovering the Bad Math (or Logic) of an Economic Analysis Embraced by Bernie Sanders (The New York Times) This article claims that Friedman made an elementary logical error in his paper that ascribed large economic growth to result from Bernie Sanders' economic plan. The defect concerns the assignment of stimulus to increased spending in the year it occurs and continuing that every year after that even though the stimulus stopped. See next article for the study by Romer and Romer that Wolfers cited.
Senator Sanders's [sic] Proposed Policies and Economic Growth (Christine Romer and David Romer, INET Economics) Econintersect: We will be reading this very carefully over the coming days. The discussion presented by the Romers is not simple and cannot be readily digested by scanning their paper. For now, here is their conclusion:
The bottom line of our evaluation of Professor Friedman's analysis is that it is highly deficient. The estimated demand-induced effects of Senator Sanders's policies are not just implausibly large but literally incredible. Moreover, even if they were not deeply flawed, Freidman's enormous estimates of demand-fueled growth could not and would not come to pass. Even very generous estimates of the amount of slack still present in the American economy would not be enough to accommodate demand-driven growth of anything near what Friedman is estimating. As a result, inflation would soar and monetary policy would swing strongly to counteract them. Finally, a realistic evaluation of the impact of Senator Sanders's policies on productive capacity (something that is neglected in Friedman's analysis) suggests that those impacts are likely small and possibly negative.
Changing pension tax relief would be "daylight robbery" (City A.M.) Britain's largest mutual insurer has warned chancellor George Osborne could commit "daylight robbery" in next month's Budget with major new changes to pensions. In a new report today, Royal London said a pensions ISA or a flat rate of pensions tax relief would hurt existing savers and discourage future saving. A pensions ISA, which was first floated in a Green Paper last year, would see retirement savings change to a system where tax is charged on contributions but not withdrawals, which is the opposite of the current system. Osborne said last October that he would "respond fully" to the Green Paper at next month's Budget. Econintersect: In the U.S. there are options available for both retirement savings schemes: Roth accounts, funded after tax and withdrawn tax-free in retirement, and traditional accounts funded with before-tax income and later taxed when withdrawn.
Syria fighting halts as agreement kicks in (Reuters) Fighting appeared to stop across most areas of western Syria after a landmark "cessation of hostilities" came into effect under a U.S.-Russian plan which warring sides in the five-year conflict have accepted.
Reformists leading in Iran parliament vote (Associated Press) Reformists and moderate conservatives were leading in parliamentary elections according to early results Saturday, an indication President Hassan Rouhani may face a more friendly house to pursue his domestic agenda. Early returns from Friday's polls show that none of the three competing political factions will win a majority in the 290-seat parliament. But reformists seeking greater democratic changes are heading toward their strongest presence since 2004 at the expense of hard-liners. No official vote counts have been announced yet.
Can India Handle Bad Times Better Than China? (Bloomberg) As both countries confront economic headwinds abroad and structural weaknesses internally, India's more flexible and transparent democracy is looking better suited to tackling many problems than China's tightly-wound system. Meanwhile, the limitations of China's centralized policy process are being exposed, to the detriment of the global economy.
Delhi: Megacity, Megatraffic and Megapollution (Asian Century Institute) Delhi is predicted to have a population of 36 million people by 2030, and a big population will need big thinking from policymakers, according to authors Asit K Biswas and Cecilia Tortajada. When India became independent in 1947, Delhi had a population of 700k. By 1950, the population had doubled to about 1.4 million. By 1986, less than four decades after the country's independence, it had increased 10-fold. By 2015, it had an estimated population of 18.6 million, making it the fifth most populated city in the world.
Japan CPI Doesn't Budge in January With BOJ Far From 2% Goal (Bloomberg) The Bank of Japan's key price gauge didn't move in January as it continued to hover around zero, putting Governor Haruhiko Kuroda far from his 2 percent inflation goal even after adopting a negative-rate policy. Low energy prices are disrupting Kuroda's efforts to reach his inflation target, with some economists forecasting further monetary easing next month just weeks after the negative-rate policy announcement. Even after taking out the oil factor, recent economic data have indicated that Japan's economy has little momentum as its outlook has been dimmed by a market rout and China's slowdown.
As China's Economic Picture Turns Uglier, Beijing Applies Airbrush (The New York Times) The road to increased transparency long proclaimed by China is now being torn up. This month, Chinese banking officials omitted currency data from closely watched economic reports. Weeks earlier, Chinese regulators fined a journalist $23,000 for reposting a message that said a big securities firm had told elite clients to sell stock. Before that, officials pressed two companies to stop releasing early results from a survey of Chinese factories that often moved markets. Chinese leaders are taking increasingly bold steps to stop rising pessimism about turbulent markets and the slowing of the country's growth. As financial and economic troubles threaten to undermine confidence in the Communist Party, Beijing is tightening the flow of economic information and even criminalizing commentary that officials believe could hurt stocks or the currency.
Chinese central bank chief hints at more stimulus for slowing economy (The Guardian) The head of China's central bank has dropped a strong hint that Beijing is preparing to launch another round of stimulus as he sought to reassure the financial markets about the country's flagging economy. Central bank governor Zhou Xiaochuan, speaking at a conference held by the Institute of International Finance in Shanghai in conjunction with a G20 meeting of central bank governors and finance ministers, said China had more room and tools in its monetary policy to tackle downward pressure in the economy, and its fiscal policy would be more proactive. He also said that the direction of China's reforms would not change, but that the pace might change.
China's Struggling Middle Class Deserves Better (Asian Century Institute) The path to middle class wealth is proving to be more global (and treacherous) in China than it once was in the United States. The Chinese stock market is immature by Western standards and suffers from a lack of policy clarity, while uncertainty about property rights and market instability has sent Chinese housing investors scurrying to foreign markets, a path not open to many in the middle class.
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