Why exchangerates cannot just be managed!

As an economist I really like when non-economists talk economic nonsense. It sort of gives us economist a minor alibi when we are wrong...

Anyway, Arnols Kling explains in a simple manner why exchange rates cannot just "be managed" without having serious consequences. He's so right!

Germans know how to reduce food prices!

So why not listen a bit to them. Norbert Walter from Deutsche Bank Research tells us how to make the prices fall again.
This shouldn't be so difficult, since he's about right in every one of his arguments. But ... One thing is economic mechanisms. Another thing is political reality. To stop subsisizing the setting-aside of agricultural land shouldn't be too difficult politically. I really hope farmers would love to grow more crops at higher prices. But giving up subsidies on biofuels that run on crops/food (1. generation) and only subsidize biofuels that run on organic waste (2. generation) would leave large parts of an industry completely broke. They rely on subsidies because of politicians (that probably saw "An Inconvinient Truth" more times than they saw documentaries about starving children in Africa).

The best way to go immediatly is to expand supply to it's maximum. and this can be done by cutting subsidies. If this measure does not have an large enough impact on food prices, then let's talk. Of course subsidies to 1. generation biofuels shouldn't have been implemented in the first place...

Is the US in a recession? Jeff Frankel says yes!

So the white house is able to show estimations showing an actual GDP growth in the first quarter of 2008. If true this is very surprising to many. Me too. I really hope the estimates are rigt and that the US economy isn't heading for a giant slump as have been argued numerous times by numerous people.

A side remark: This reminds me of the (hypothetical) fact, that if you place a lot of monkeys in front of a lot of typewriters and give them a lot of time. Then one of them will produces a critically aclaimed novel eventually. Or the collective works of Shakespeare. It's only a matter of time.This applies to economists too. If you place enough economists in enough medias one of them will eventually be able to predict the future. And by "predict" I mean guessing right... Not exactly the same thing, but not completely off either.

Anyways, Jeff Frankel argues why these positive numbers shouldn't be taken too seriously. And further more, if they are right, why the US is still likely to end up in a recession very soon.

I pretty much agree with Jeff Frankel on this. But I do not think the recession will be nearly as severe as noumerous economists have predicted.

Rodrik on foodprise crisis: Don't criticize liberalization 15 years ago!

The case is that some countries liberalized their foodproducing sector some 15-20 years ago. Demanded by the World Bank when supplying loans. This led to a decrease in the uncompetitive agrarian sector and thus rising food imports. And the costs of this is rising today!

This has led to the conclusion from some that if no liberalization had taken place, they would be better of today. This is not the case as Rodrik explains.#

I really, really agree with him.

Krugman: Show me the oil!? Show me the oil!

Krugman doesn't believe that oilprices are driven up because of speculation. Speculation would mean that oil is being stored somewhere. And secretly since it's not showing up in any inventory data. His back-of-the-envelope calculations shows that the amount would equal some 2 million barrels a day and that's a pretty big secret oil-hiding-chamber.

He's probably right!

But what if the speculators were OPEC itself? Then they would have a pretty big pre-built oil-hiding-chamber in the ground. From where they pump up their oil. If the oilproducing countries reduced production with a few percent, then prices would rise and the excess oil could just wait nice and still in the ground. I should probably check supply data in order to falsify my speculation. Because honestly I think demand is driving the price increase. And the depreciating dollar of course!

Israel turns 60

This is not really an economic blogpost in a narrow sense. But broaden your mind and this is at least as economic as "Gas tax holiday"-smalltalk.

Daniel Levy has given an interesting analysis of Israel at it's 60th birthday.

"...Israel has locked itself into a box of fear that is not only substantially self-generated and all-embracing, but has also become a danger in itself, preventing Israel from taking urgently needed steps."

We want our wheat to ourselves!

This is just saaaad: Felix Salmon on the U.S corn flake/ baking industry childish wishes

Not Felix Salmons article but what he's commenting on. Kellogs and the U.S baking industry wanting to reduce U.S wheat exports... Please...

"Let's have american consumers save a penny and give us 99 cents of extra profit and help the world wheat price increase even further. Poor people? In what countries? Bah, never heard of it..."

PLEASE!!!

Them Danes and all their succes

In the first Economic Blogpost Of The Day, Dani Rodrik spends a few lines elaborating over the apparant succes of the danes! It's actually a former piece by Bob Kuttner he gives a few remarks.

Read the entire thing here





Sometimes... when I'm alone and sure no one is watching... I think that it's all just a matter of luck and coincidence. But being an economist I - of course - quickly let that disturbing feeling pass!

:-)