Cartoon: Economists and the consumer
Angry Bear links to the following cartoon from Tom Toles at the Washington post (ht Econospeak):
Spectacular 🙂
Archive for year: 2008
Fed cuts to zero
Well well well, the Fed has decided to actually set its cash rate target at a range of 0-25bps.
Note:
The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level
I suppose we can see the Federal Reserve jumping into the Treasuries market and getting deeper into mortgage backed securities.
the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses
Looks like the Fed is taking its role as lender of last resort to heart 😉
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The temporary redundancy package
So National got in, and as a result it is their redundancy package that has passed into law (as opposed to the Labour one).
I am still not happy that we are running a redundancy package now and not in normal economic times. Why are people that are made redundant now any more deserving of an additional government handout than people who are made redundant in normal economic times?
Sure we can state that it is “harder” for people to get work during a recession, so it is more likely that the redundant person is genuinely unemployed rather than “lazy” – but I just don’t buy that.
I do not think this policy is solving any market failure, and as a piece of fairness legislation I am not sure if it is all that fair. Luckily, its not particularly expensive anyway, so there is little chance of a massive government failure, unless … we don’t have mass unemployment, only a structural change in where labour is most highly valued. In this case, the redundancy payment will prevent the transition between industries, and lead to a longer, more painful, adjustment process for the New Zealand economy.
So do we think that the construction industry needs to be smaller while there are other industries (say exporters) who are now desperate for labour? Or will the global recession cause genuine involuntary unemployment?
The proper way to levy taxation
The full set of briefings to incoming ministers (BIMs) following the recent election are now helpfully available on a single page, and between them cover a host of quite interesting, practical, and in some cases timely economic questions. One quite meaty suggestion that I noticed in Treasury’s BIM related to taxation, but it was given very little space (perhaps they knew that it would be ignored?).
The full passage is quoted below, but the bit of interest is in the final bullet: