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Article Artículo

The Fed, Inequality and Accounting Identities

Annie Lowrey at the NYT continues a mini-debate about whether the Fed is promoting inequality with its quantitative easing program. The argument is that by pushing down interest rates it is contributing to the run-up in stock prices and housing prices. Since stock is hugely disproportionately held by the wealthy and homeowners are better off than the population as a whole, this policy is increasing inequality.

This is undoubtedly true, although the extent of the impact can be debated. (High corporate profits are also a big factor behind the rise in stock prices. Also, they began their run-up at unusually depressed levels.)

However, a little income accounting here would go along way in helping this discussion. The country has an output gap of around 6 percent of GDP. This is due to the plunge in residential construction following the collapse of the housing bubble and also the lost consumption that resulted from the loss of $8 trillion in housing equity. Standard measures of the housing wealth effect imply that a reduction of $400 billion to $560 billion in annual consumption.

There are a limited number of channels to fill this lost demand and thereby make up the 9 million jobs deficit we now face. One route is large government deficits, either from increased spending or tax cuts. That is probably the quickest and surest way to make up the demand gap, but the Serious People insist that we can't run large deficits.

Another obvious route, and probably the best long-term solution, is to get the dollar down. This will improve the international competitiveness of U.S. goods and bring the trade deficit closer to balance. Unfortunately this has not been a high priority for the Obama administration. There are powerful interests like Walmart, many large manufacturers, and the financial sector which benefit from an over-valued dollar. As a result, getting the dollar back to a more sustainable level has not been a priority for the administration.

Dean Baker / June 03, 2013

Article Artículo

Latin America and the Caribbean

Venezuela

World

Venezuelan Election Audit Nears its Finish with 99.98% Clean Results So Far

The Venezuelan National Electoral Council (CNE) is nearing the end of the third and final phase of its audit of the remaining votes from the April 14 presidential election, reportedly scheduled to finish on June 7. As we have noted, the English-language media has generally neglected to report the audit’s progress, despite that the process was originally demanded by opposition candidate Henrique Capriles as a means to resolving the dispute over the election’s outcome. Capriles has also underscored the audit’s relevance – despite having shifted his demands and decided to officially boycott it – by claiming this month that he had actually won the election by 400,000 votes.

As predicted through a statistical analysis of the initial “hot audit” of 53 percent of voting machines on April 14, the audit of the remainder has so far produced results upholding the official results showing Maduro to be the winner. According to the CNE, the first two phases “have yielded 99.98% agreement between the voting receipts deposited in boxes and the data recorded on the tallies issued by the voting machines," media outlets report.

Does Capriles have a plausible claim that the election could have been stolen? Contrary to his characterization of a biased and obstructionist CNE, as we have previously noted the CNE has made many concessions to the opposition, including 18 different audits, all of which involve witnesses from both parties. Capriles talks of numerous opposition observer complaints from throughout Venezuela on election day, yet our election live-blog on April 14 included numerous live reports from election monitors who talked to opposition representatives at dozens of voting centers in several states; few had any complaints, even less that could be considered serious. Capriles has shifted the focus of his attack to the electoral registry, but demographers from the Catholic University had reviewed the electoral registry prior to the election and found it trustworthy.

Dan Beeton / May 31, 2013