Economy / Finance

Do smart-beta investment funds work?

Mar 16 11:55am Economics
IN THE world of investing, everyone is always looking for a better mousetrap—a way to beat the market. One approach that is increasingly popular is to select shares based on specific “factors”—for example, the size of companies or their dividend yield. The trend has been given the ugly name of “smart beta”.A recent survey of institutional investors showed three-quarters were either using or evaluating the approach. By the end of January some $534bn was invested in smart-beta exchange-traded funds, according to ETFGI, a research firm. Compound annual growth in assets under management in the sector has been 30\% over the past five years.The best argument for smart-beta funds is that they simply replicate, at lower cost, what fund managers are doing already. For example, many fund managers follow the “value” approach, seeking out shares that look cheap. A computer program can pick these stocks more methodically than an erratic human. A smart-beta fund does what it says on the tin.But does it work? The danger here is “data mining”. Carry out enough statistical tests, and you will always find some strategy that worked in the...Continue reading...
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Is the Federal Reserve giving banks a $12bn subsidy?

Mar 16 11:55am Economics
EVERY time the Federal Reserve has raised rates since the financial crisis, as it did on March 15th, it has done so in part by increasing “Interest On Excess Reserves” (IOER). This obscure policy rate is surprisingly controversial. Jeb Hensarling, the Republican chair of the congressional committee that oversees the Fed, has called it a “subsidy” to some of the largest banks in America.To understand the argument, consider the Fed’s year-end financial statement. In 2016 it earned $111.1bn in interest income on its vast portfolio of securities. But it also paid JPMorgan Chase, Wells Fargo, and other mostly big banks $12bn in interest on excess cash deposited at regional Federal Reserve banks. Such IOER payments are both woefully unpopular and critical to the Fed’s monetary policy.Over a decade ago, to give the Fed better control of short-term interest rates, Congress authorised it to pay interest on funds in excess of those banks need to meet reserve requirements. The policy was first used during the financial crisis in 2008. But today, IOER is the Fed’s primary monetary-policy tool, essential to its setting of...Continue reading...
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Trump's 'America First' infrastructure plan may need a lot of foreign help

Mar 16 11:47am Economy
Sorely needed — and promised — spending on U.S. infrastructure could mean foreign companies take a slice of the pie.
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Goldman's Hatzius: The Fed's going to hike rates more than the market thinks

Mar 16 11:30am Economy
The upshot: Investors may be underestimating how quickly the Fed will move in the future.
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Performance art: Trump proposes a 20% cut to the NIH

Mar 16 10:35am The Incidental Economist
From Science, Donald Trump’s first budget for research: President Donald Trump’s first budget request to Congress, to be released at 7 a.m. Thursday, will call for cutting the 2018 budget of the National Institutes of Health (NIH) by $6 billion, or nearly 20\%, according to sources familiar with the proposal. The Department of Energy’s (DOE’s) Office of Science […]...
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US jobless claims fall as labor market tightens

Mar 16 9:08am Economy
The number of Americans filing for unemployment benefits fell last week, pointing to a further tightening in the labor market.
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Forget About Food Miles

Mar 16 6:28am Cafe Hayek
TweetIn this short video, Johan Norberg  busts a major myth fueling the “buy local” craze. The post Forget About Food Miles appeared first on Cafe Hayek.
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As the Fed raises rates, Janet Yellens legacy is pondered

Mar 16 5:48am Economics
THIRD time lucky. In each of the past two years, the Federal Reserve has predicted multiple interest-rate rises, only to be thrown off-course by events. On March 15th the central bank raised its benchmark Federal Funds rate for the third time since the financial crisis, to a range of 0.75-1\%. This was, if anything, ahead of its forecast, which it reaffirmed, that rates would rise three times in 2017. “Lift-off” is at last an apt metaphor for monetary policy. But as Janet Yellen, the Fed’s chairwoman, picks up speed in terms of policy, she must navigate a cloudy political outlook. The next year will define her legacy.Ms Yellen took office in February 2014 after dithering by the Obama administration over a choice between her and Larry Summers, a former treasury secretary. Left-wingers preferred Ms Yellen, in part because she seemed more likely to give jobs priority over stable prices. Indeed, Republicans in Congress worried that she would be too soft on inflation. The Economist called her the “first acknowledged dove” to lead the central bank.Today Ms Yellen looks more hawkish—certainly than Mr Summers, who...Continue reading...
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Bank Supervision and the Central Bank: An Integrated Mission

Mar 16 5:30am On the Economy blog
The Fed is a more effective bank supervisor because of its central bank duties and a more effective central bank because it is a bank supervisor.
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Bitcoin Security: Bubble Boy and the Sewer Rat

Mar 15 9:34pm Nathan's Economic Edge
Super video, very important to understand the power of decentralization.  Bitcoin is going to erode the power base of the central bank and they do not yet realize how profound this transformation will be.  I believe this technology is a major part of a proper path forward, support its use fully, and own some myself.Later, and in my new book, I will explain the historical significance of it and how I think the concept of decentralized systems like Bitcoin can be used alongside of other forms of money in order to make a more diverse and robust system overall, one that has options outside the hands of the criminal central cartel.
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Russian Spy Charged in Yahoo Case Wont Be Extradicted to U.S. Hes Been Charged With Treason in Russia!

Mar 15 9:33pm A Marketplace for Ideas
This Russian-U.S. hacking/spying scandal just keeps growing tentacles. There is a mounting story here.  And no one is paying attention. Today’s latest move in this ongoing battle involved the U.S. Justice Department indictment of two Russians in connection with the hacking scandal involving Yahoo’s email accounts.  One Russian spy charged in the Yahoo case is Dimitry … Continue reading Russian Spy Charged in Yahoo Case Won’t Be Extradicted to U.S. – He’s Been Charged With Treason in Russia! The post Russian Spy Charged in Yahoo Case Won’t Be Extradicted to U.S. – He’s Been Charged With Treason in Russia! appeared first on A Marketplace for Ideas.
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Introduction To Bitcoin

Mar 15 9:28pm Nathan's Economic Edge
Bitcoin is a HUGE deal.  Much larger than most believe, historic.  If you are not yet participating, you should be.  I recommend that you go to Coinbase and start your account today!...
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I'm Back...

Mar 15 9:16pm Nathan's Economic Edge
Over a year ago I sold my latest two businesses and have been waiting for the right time to come back into the public domain.  I plan to do so in a big way, but not quite yet.The impossible mathematics that underlie our economy are unbelievably more impossible today.  The markets are less real, and more overvalued than at any other time in history.  Future returns from valuations above 20 are statistically unlikely, and they are bordering on impossible from these levels on any type of an extended timeline.  Accounting standards have continued to relax and if GAAP accounting standards of 15 years ago were used, then P/E ratios would be through the roof. Over the past several years many pundits have been premature in their calls for a market top.  A significant mid-term top is now near.  Today’s move higher after the FOMC likely will mark the beginning of the last wave higher before the next decline.  It will not likely be, I believe, THE decline.  There are high odds of volatility returning in both directions.  Eventual further upside will be the result not of underlying fundamental strength, but of monetary implosion.  Europe implodes first causing funds to flow to the U.S., and that has been occurring for some time now.  Japan implodes next, then the U.S. and the rest of the world, in that order, but it will still take some time to play out.There is a war going on inside our nation and around the globe.  The two sides are Faction A which is the Globalist socialist Deep State central banking cartel, and Faction B, currently lead by the new Trump Administration representing us proud to be Americans, non-socialist, decentralized, Constitution abiding, thinking and aware faction.  I could write much about the criminality in the CIA, the FBI, in the Justice Department, in Congress, the Senate, the media, the judicial branch, and many others.  And I will, but not here and not just yet.I 100\% foresaw Trump’s victory and was rooting for it.  However, while he’s a truth teller who is right 90\% of the time, it is the 10\% revolving around the root of our problems (central criminal banking performed outside a proper rule-of-law) that will doom the remaining 90\%.  Thus I do not expect significant resolutions to any major problems.  I expect a war cycle that was going to happen reg...
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Sovereign spreads in the Eurozone: Redenomination versus political risk

Mar 15 8:00pm Recent Articles
French sovereign spreads have risen in recent months, coinciding with debate over the euro ahead of the country’s elections in June. Italian sovereign spreads have been rising since the beginning of 2016. This column argues that investors are not pricing a break-up of France from the Eurozone. Most likely, they are pricing the possibility that the newly elected French government will not have enough supremacy to undertake important economic reforms. Market perception of redenomination risk in Italy, on the other hand, is rising slowly. ...
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Super-easy monetary policy and reflating Japans economy

Mar 15 8:00pm Recent Articles
The Bank of Japan has been pursuing quantitative and qualitative monetary easing since 2013, but has failed to achieve its target of a stable 2\% inflation rate. This column explores the Bank’s recent practices and performance, and identifies four structural factors that have contributed to the limited impact of unconventional monetary easing on aggregate demand and inflation. The Bank now needs to come up with more objective projections for the timing of achieving its price stability target. ...
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Treasury Bond Yields Sink Despite Fed Rate Hike

Mar 15 7:34pm Credit Trends from Moody's Analytics
Despite how a higher fed funds rate supposedly benefits banks, the KBW index of bank stock prices fell by -0.63\% on March 15.
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Hutchins Roundup: Productivity, banks reporting, and more

Mar 15 6:04pm Brookings Topics - U.S. Economic Performance
Studies in this week’s Hutchins Roundup find that surges in firm entry increase industry productivity growth, quarterly reporting requirements raise banks’ asset quality, and more. Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday. Surges in firm entry contribute to wider within-industry productivity dispersion […]        ...
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Economic Roundup: A Dovish-ish Hike by the Fed

Mar 15 5:34pm Credit Trends from Moody's Analytics
The central bank rates, but with a dovish undertone to the statement and rate projections.
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A Trade Deficit Is Not Necessarily Evidence of Domestic Consumption In Excess of Domestic Production

Mar 15 5:06pm Cafe Hayek
TweetHere’s a letter to the Wall Street Journal: Greg Ip correctly criticizes the Trump administration for believing that bilateral trade deficits are a problem (“Deficits Are a Flawed Guide to Unfair Trade,” March 15).  Bilateral trade deficits indeed are utterly meaningless.  But Mr. Ip errs when he writes that “The U.S. has a trade deficit [with […] The post A Trade Deficit Is Not Necessarily Evidence of Domestic Consumption In Excess of Domestic Production appeared first on Cafe Hayek.
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On Trumps taxes and the AMT

Mar 15 3:59pm Brookings Topics - Fiscal Policy
William Gale, co-director of the Urban-Brookings Tax Policy Center and senior fellow in Economic Studies, contextualizes the controversy surrounding President Trump’s released tax returns through the alternative minimum tax and Trump’s proposed tax reforms.   Related Content: The House GOP tax plan needs some tweaking Major tax issues in 2017 Trump’s tax plan will make America’s debt great again Subscribe […]         ...
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Economics Teaching Workship

Mar 15 3:04pm Greg Mankiw
I will be speaking at the University of Kentucky Economics Teaching Workshop on April 22.  If you are interested in more information, click here.
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Inflation is back, but economy remains weak

Mar 15 12:51pm Economy
If the Federal Reserve had any doubts about raising interest rates, the government's latest inflation data should help put them to rest.
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Atlanta Fed downgrades US Q1 GDP view below 1%

Mar 15 12:24pm Economy
The U.S. economy is on track to grow at a 0.8 percent annualized pace in the first quarter, following the latest jobs and retail sales data.
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US businesses boost stockpiles at modest pace as sales slow

Mar 15 10:12am Economy
U.S. businesses stockpiled more goods in warehouses and on store shelves in January, while sales growth slowed.
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Home builder confidence soared to highest level in 12 years as Trump rolls back regulations

Mar 15 10:00am Economy
The nation's home builders couldn't be happier with President Donald Trump's first move to remove strict environmental rules.
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Manufacturing in New York state expands in March

Mar 15 9:42am Economy
The pace was slightly slower than in February, however, when activity had climbed to the highest point in more than two years.
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Here's the big reason why the Fed should raise rates today

Mar 15 8:49am Economy
The economy is growing at a sluggish pace. So why should the Fed raise rates? There's one big reason, says NYT correspondent Binyamin Appelbaum.
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Consumer prices pull back sharply from January's jump

Mar 15 8:30am Economy
Clothing and housing costs rose last month, while motor vehicle and gasoline prices dipped.
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Consumers turn cautious, despite rising optimism about the economy

Mar 15 8:30am Economy
The data comes as a sign of consumer caution despite rising optimism about the economy.
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Trump budget would slice domestic programs, foreign aid

Mar 15 7:28am Economy
President Donald Trump on Thursday will offer the first details of his plans for deep cuts in domestic programs and foreign aid.
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Avoiding the health care run-around

Mar 15 7:00am The Incidental Economist
The following originally appeared on The Upshot (copyright 2017, The New York Times Company). You’ve all experienced it: There’s a problem with your health care bill, or you have difficulty getting coverage for the care you need. Your doctor or hospital tells you to talk to your insurer. Your insurer tells you to talk to your doctor […]...
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Mortgage applications rise 3.1% as borrowers rush to lock in rates

Mar 15 7:00am Economy
Mortgage interest rates moved to the highest level since 2014.
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Obamacare Tax Repeal Favors the Rich? Hogwash!

Mar 14 8:59pm A Marketplace for Ideas
Today the media reports another tax cut favoring the rich.  The Republicans propose an Obamacare tax repeal.  According to a piece published by CNBC: “The proposed repeal of taxes that were put in place to fund Obamacare would give America’s top earners the biggest tax cut.”  Wow, this “story” is just the latest example of … Continue reading Obamacare Tax Repeal – Favors the Rich? Hogwash! The post Obamacare Tax Repeal – Favors the Rich? Hogwash! appeared first on A Marketplace for Ideas.
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The great Chinese inequality turnaround

Mar 14 8:00pm Recent Articles
Sharply increasing inequality became an integral part of the narrative on Chinese development since the beginning of the reform process in 1978. Over the past decade, however, many studies have argued that inequality has been plateauing, or even declining. This column uses several datasets, including household surveys and regional-level government statistics, to show evidence of a mitigation of inequality in the early 21st century, and indeed, declining rates over recent years. Possible drivers of this turnaround are urbanisation, transfer and regulation regimes, and tightening rural labour markets.  ...
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Housing-Sector Stock Price Index Soars by 8.2% since December 14s Rate Hike

Mar 14 7:34pm Credit Trends from Moody's Analytics
housing-sector investors do not expect the forthcoming series of Fed rate hikes to be severe enough to depress interest-sensitive housing activity.
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Nowcasting with OMB Director Mick Mulvaney

Mar 14 7:11pm Econbrowser
Since Mr. Mulvaney has been criticizing the numbers produced by the BLS [1], and scoring by CBO [2], I thought it of interest to see Mr. Mulvaney’s record on predictions. To make things easy on Mr. Mulvaney, I thought it would be more fair to evaluate his “nowcasting” abilities. In July 2016, Mr. Mulvaney gave […]...
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JPMorgan's Dimon: Corporate cash infusion could lead to Fed-like stimulus boom

Mar 14 5:35pm Economy
The act of repatriating corporate cash held outside the U.S. back into the country would create an economic boom, Jamie Dimon said.
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Economic Roundup: U.S. Reflation Gathers Steam

Mar 14 5:34pm Credit Trends from Moody's Analytics
PPI comes in a touch hotter than expected, but the Fed can remain patient.
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The Quadrangle: China, USA, UK, EU

Mar 14 4:48pm Brookings Topics - U.S. Economic Performance
On April 3, Philippe Le Corre discussed “quadrangle” relationship between China, the United States under Donald Trump, the EU, and the U.K.        ...
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A Guide to the GOP Tax Plan

Mar 14 3:53pm Greg Mankiw
Tax policy nerds will enjoy this detailed and thoughtful discussion of the proposed Brady-Ryan tax reforms.
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Dan Griswolds New Paper on Trade Deficits

Mar 14 3:47pm Cafe Hayek
TweetHere’s the hot-off-the-e-press (and also off the metal press) new paper on trade deficits – “Plumbing America’s Balance of Trade” – by my Mercatus Center colleague Dan Griswold.  It’s superb.  I encourage you to read it fully and carefully. The abstract: By focusing only on the trade deficit, critics miss the full economic benefits of […] The post Dan Griswold’s New Paper on Trade Deficits appeared first on Cafe Hayek.
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On Bob Murphy On Mark Perry On Trade Deficits

Mar 14 3:31pm Cafe Hayek
TweetBob Murphy is unhappy with a recent Mark Perry post on the balance of payments.  Mark’s point (in summary) is that if the voluntary economic decisions of Americans and foreigners result in a U.S. current-account (“trade”) deficit – which is to say, a U.S. capital-account surplus of the very same amount – Americans should not […] The post On Bob Murphy On Mark Perry On Trade Deficits appeared first on Cafe Hayek.
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Populism and the Politics of Health

Mar 14 1:43pm Paul Krugman
Real populism doesn't sell, but fake populism has problems too.
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Podcast: Microsofter

Mar 14 12:37pm Economics
Microsoft has reinvented itself under its new CEO Satya Nadella with a move to the cloud. Is its friendlier approach to program developers likely to pay off? Also: as the Netherlands goes to the polls, our Europe editor Matt Steinglass examines how each party’s financial manifestos were put to the test. And: many people are fed up with their banks. Now help is at a hand from Europe’s banking regulators. Simon Long hosts.
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Want to solve world poverty? We dont know the answer but the answer is knowable

Mar 14 12:29pm Chris Blattman
Bill Gates spent a lot of 2016 talking about how chickens can solve world poverty, and how he’d like to help a third of rural sub-Saharan Africans start to raise them (up from about 5 percent today). I have a Vox piece today asking “why … Continue reading → The post Want to solve world poverty? We don’t know the answer but the answer is knowable appeared first on Chris Blattman.
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Businesses Big And Small 'Enthusiastic' About Trump Economic Policies

Mar 14 12:21pm Economy - Investor's Business Daily
The NFIB small business optimism index and the Business Roundtable CEO survey both showed companies are bullish under President Trump.
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Whats In the Republican Healthcare Bill? Pelosi Says Public Must Know This Time!

Mar 14 11:29am A Marketplace for Ideas
So what’s in the Republican healthcare bill?  It’s time for the Washington hypocrites to take another victory lap. None other than House Minority Leader Nancy Pelosi gets the spotlight on this one.  And she didn’t disappoint.  If you need another example of why Americans hold their political parties in contempt, then look no further than … Continue reading What’s In the Republican Healthcare Bill? Pelosi Says Public Must Know – This Time! The post What’s In the Republican Healthcare Bill? Pelosi Says Public Must Know – This Time! appeared first on A Marketplace for Ideas.
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Healthcare Triage: One Republican Backup Plan for the AHCA: Cassidy-Collins

Mar 14 11:00am The Incidental Economist
If the new AHCA doesn’t pass (which is definitely in the realm of possibility), Republicans in Congress will need to come up with another plan to fulfill their promise to repeal and replace Obamacare. Senators Susan Collins of Maine, and Bill Cassidy of Louisiana have a plan, we’re going to tell you about it. That’s […]...
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The CBO report on the AHCA in as few words as I can manage

Mar 14 10:34am The Incidental Economist
Just like last week, I’m trying to describe the report in a few words as I can manage, to make a Healthcare Triage script. The below is my attempt. I’m going to leave comments open, and I encourage you to tell me where I’m wrong or missed something. I don’t tape until tomorrow. You can […]...
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One reading on inflation came in hotter than expected in February

Mar 14 8:30am Economy
U.S. producer prices moderated in February, but the trend pointed to a steady building up of inflation pressures.
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Businesses Large And Small pes For Trump Tax Cuts Job Openings At Small Firms Hit Highest Since December 2000

Mar 14 7:56am Economy - Investor's Business Daily
Small businesses are upbeat and enjoying higher sales, but are struggling to fill job openings, NFIB's sentiment gauge found.
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Trump Fed appointees may lack desire to hike rates, says strategist Mark Grant

Mar 14 7:42am Economy
The Federal Reserve of tomorrow will not be the Fed of today, Hilltop Securities strategist Mark Grant says.
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No, Secretary Price, you cant fix the CBO score by regulating

Mar 14 7:30am The Incidental Economist
With the release of the dismal CBO report on the American Health Care Act, the administration is playing defense. Secretary Price says the report is “just not believable” because it does not take into account the regulatory changes that he intends to make to bring down the cost of coverage. It also “ignored completely the […]...
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CNBC survey: Look out for a more aggressive Fed this year

Mar 14 7:02am Economy
The CNBC Fed Survey sees 100 percent believing the Fed will hike on Wednesday and 70 percent again in June.
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How Tourism Affects China's Current Account Surplus

Mar 14 5:30am On the Economy blog
In recent years, a rise in Chinese tourism has contributed to keeping China’s current account surplus in check.
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Performance in mixed-sex and single-sex competitions

Mar 13 8:00pm Recent Articles
Differences in attitudes to competition or risk may contribute to explaining gender gaps in wages and other labour market outcomes. This column analyses performance data from speedboat races in Japan revealing that women tend to race more slowly against men than against other women only, while men are faster in mixed-sex races. This finding may be driven by the skewed gender balance towards men in mixed-sex races triggering awareness of gender identity for both men and women, with implications for other activities in which men and women compete and women are outnumbered, such as the STEM disciplines.
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TrumpCare Evaluated

Mar 13 7:49pm Econbrowser
“I am going to take care of everybody. I don’t care if it costs me votes or not. Everybody’s going to be taken care of much better than they’re taken care of now.” — Donald J. Trump, September 27, 2016 CBO has released its cost estimate. President Trump’s promise will not be fulfilled by this […]...
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Markets Will Influence the Likelihood of a June Rate Hike

Mar 13 6:34pm Credit Trends from Moody's Analytics
As inferred from the CME Group’s FedWatch Tool, the futures market now assigns a 56\% probability to a greater than 0.875\% midpoint for fed funds following the FOMC’s meeting of June 14.
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Dont undermine the Congressional Budget Office. Use it.

Mar 13 5:07pm Brookings Topics - Fiscal Policy
Congress faces a daunting legislative agenda. Health care is “complicated,” as President Trump discovered. So are tax reform and spending bills that reflect campaign promises without escalating future debt. There are deep divisions within the president’s own party over many of his proposals, and Republicans will need (and should want) Democratic help to pass many […]        ...
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The hounding of Owen Jones

Mar 13 1:11pm Economics
IN THE big scheme of things, the retreat of a Guardian columnist from social media is not a huge event - it will be drowned out by the latest antics of Donald Trump, the extraordinary diplomatic dispute between the Netherlands and Turkey, the triggering of article 50 by the UK and Scotland's push for a second independence referendum.Actually, though, I think that it's possible to tie all these events together as evidence of a much wider trend; one that is corrosive to both global politics and economics. let us start with the specifics. Owen Jones (pictured) is a left-wing writer; initially a great enthusiast for Jeremy Corbyn, Britain's Labour leader, he has become disillusioned. Those who previously agreed with his columns have denounced him, on Facebook and Twitter. As he wrote in one final post (complete with language that may offend some)On a daily basis I have angry strangers yellin...
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