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the lead indicator

the lead indicator

Shock Therapy, Japanese Style

chandan silo for web

The Bank of Japan’s campaign of shock and awe is approaching its half-year anniversary. Early results are mostly according to plan. The economy expanded at a relatively brisk pace in the first quarter. Though it’s purportedly not the goal, the yen has fallen 20 percent against the dollar. The Nikkei’s broad stock indices are up sharply, even after last Thursday’s 7 percent dive. Retail sales data due this week could get a lift from a modest wealth effect. Read More

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What Do Goldilocks And The Economy Have In Common?

chandan silo for web

The inflation hawks were sent packing again last month when reports showed prices falling. The latest Economist poll of forecasters pegs inflation below 2 percent until at least 2015. That’s not far removed from the local view. As part of its expectation-setting exercise, the Fed sees its preferred measure—the personal consumption expenditures price index—holding below 2 percent now and over the long run. Read More

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Tax It All or Don’t Tax at All

chandan silo for web

The Senate has taken up the Marketplace Fairness Act, which would upend the overlong tax holiday for Internet commerce.

It’s not that online purchases have been tax-free. Unless you are in one of the few jurisdictions with no sales tax, your opportunity for a good-citizenship declaration of online purchases comes every April 15. Predictably, only a tiny share of American taxpayers seizes the chance. Read More

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Power, This Time for the Keynesians

Sam Chandan

Speaking of power, the Austerians have lost one of their most powerful corroborations. At least for political purposes, the oft-cited and rather particular relationship between sovereign debt and growth has been sundered by a graduate student’s homework assignment. Never has so much of consequence turned on a spreadsheet error. Read More

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A Bridge Too Far: It Isn’t a Lack of Funding Keeping Infrastructure From Being Built

chandan silo for web

Ask someone if there’s a problem with American infrastructure and there’s a good chance he’ll point at the nearest bridge.

It needn’t be a grand structure. As a generation of Wharton alumni will confirm, crossing the Schuylkill by way of the modest South Street overpass was a risky proposition until just a few years ago. In its dying days, the bridge was closed to heavy vehicles but open to daredevil and presumably light-footed Penn students. The long-deferred move to replace the 1923 bascule bridge began in 2008, which happened to coincide with city engineers’ declaration it would not survive another winter. Read More

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Employment Remains the Weakest Link of the Recovery

chandan silo for web

It’s been clear since long before the Great Recession that something is amiss in the labor market. Unbeknownst to the most recent crop of college graduates, this is not our first “jobless recovery.” That term was introduced to the popular lexicon in the early 1990s. It was revived in 2003; more than a year into that recovery, the turnaround in employment had never been weaker. In retrospect, those were halcyon days when compared with our current run.

What’s gone wrong? Read More

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Girding for Growth in Midtown

chandan silo for web

There are good reasons to envisage a refresh of Midtown Manhattan’s office inventory.

A prolonged lull in construction has left us with an abundance of heirlooms but few modish buildings. As a global center of finance, Midtown East’s built environment compares especially poorly with its peer markets. Average rents are much higher in London, but the premium over Midtown is less pronounced when comparing our small basket of best apples with theirs. Rezoning with an eye to new construction has its winners and losers. As new properties come online over the next decade, incumbents saddled with older buildings may find their highest and best use takes them outside the office sector altogether. Read More

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Is Office Space a Thing of the Past?

chandan silo for web

Is the office obsolete?

The argument has been going on since before the Internet, when its antecedents were limited to connecting university research labs to the Department of Defense. The adoption of new technologies may afford smaller server rooms and fewer filing cabinets, but the location of people dominates everything else when it comes to office space utilization. At least on the margins, the data show we are using less office space for every employee. We cannot assume that reflects the impact of technology, but it’s not an unreasonable hypothesis. Read More

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How to Have a Banking Crisis

chandan silo for web

A run on the banking system is one of the surest paths to a credit crisis. The mechanics are simple: worried that their banks might fail or otherwise endanger their savings, consumers shift to their mattresses as preferred storehouses for cash. The expectation fulfills itself. In a fractional-reserve banking system, mass withdrawals drive institutions to insolvency. A failure of one bank raises the possibility that others could also fail. And so the process cascades. Read More

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Can the Apartment Market Manage Without Fannie and Freddie?

chandan silo for web

The debate over housing finance reform has taken place largely behind closed doors, with public discourse limited to speculation. Since the collapse of Fannie Mae and Freddie Mac into effective insolvency in September 2008, the public has been shielded from serious discussion about their future. At least for the time being, weakness in the housing market has encouraged the status quo; policymakers have sidestepped the question of the government’s long-term role in shepherding homeownership outcomes. Read More

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Should We Raise the Minimum Wage?

chandan silo for web

Among the various proposals put on the table during his State of the Union earlier this month, the president called for a higher federal minimum wage. That was guaranteed to push the ideological buttons. Along the absurdly one-dimensional political spectrum that now defines the norm of policy debate, each side has its arguments for or against such a move. The minimum wage has been around since the Great Depression, when it was set at a quarter.

For all its longevity, divided interests have not succeed in settling the minimum wage debate conclusively, in part because distributional considerations are an important part of the evaluation that clouds clear thinking on both sides. Read More