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IMF: Fiscal Space

Fiscal Space, Prepared by Jonathan D. Ostry, Atish R. Ghosh, Jun I. Kim, and Mahvash S. Qureshi, September 1, 2010, IMF Staff Position Note

"The fiscal challenges facing advanced economies are unprecedented, and bring to the fore questions about how to assess fiscal sustainability. Intertemporal solvency—the notion that governments eventually repay their debts—requires only that adjustments to bring debt dynamics back on track occur at some point in the future. Given the sovereign’s right to tax and (not) spend, changes in these variables can always make the problem of insolvency disappear. But markets are not impressed by promises that are unsupported by countries’ track record of adjustment (words unsupported by deeds), and so it is critical to examine this track record to see whether it is indeed consistent with satisfying the intertemporal constraint. In this note, we reexamine the issue of debt sustainability in a large group of advanced economies. Our hypothesis is that, when debt is in a moderate range, its dynamics are sustainable in the sense that increases in debt elicit sufficient increases in primary fiscal balances to stabilize the debt-to-GDP ratio. At high debt levels, however, the dynamics may turn unstable, and the debt ratio may not converge to a finite level. Such a framework allows us to define a “debt limit” that is consistent with the country’s historical track record of adjustment in the sense that, without an extraordinary fiscal effort, any debt increment beyond this limit would cause debt to increase without bound."

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Executive Excess 2010: CEO Pay and the Great Recession

Executive Excess 2010: CEO Pay and the Great Recession, by Sarah Anderson, Chuck Collins, Sam Pizzigati, Kevin Shih: "The 17th annual executive compensation survey looks at how CEOs laid off thousands while raking in millions."

"Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflation adjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century. American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting. But they are, as we detail in these pages, causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies. Most careful analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive executive compensation played a prime causal role. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy."

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IMF: Long-Term Trends in Public Finances in the G-7 Economies

Long-Term Trends in Public Finances in the G-7 Economies, IMF Staff Position Note, September 1, 2010 SPN/10/13, Carlo Cottarelli and Andrea Schaechter

"Today’s record public debt levels in most advanced economies are not only a direct fall-out from the global crisis. Public debt had ratcheted up over many decades before, when it had been used, in most of the G-7 countries, as the ultimate shock absorber—rising in bad times but not declining much in good times. Alongside, primary spending increased, particularly during 1965–85, reflecting predominantly a surge in health care and pension spending. Looking ahead, advanced economies will face the formidable challenge of reducing debt ratios at a time when ageing-related spending, in particular often underestimated pressures from health care systems, will put additional pressure on public finances. Addressing these fiscal challenges will require growth-friendly structural reforms, a fiscal strategy involving gradual but steady fiscal adjustment, stronger fiscal institutions, expenditure and revenue reforms, and an appropriate degree of burden sharing across all stakeholders."

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IMF: Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely

Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely, Carlo Cottarelli, Lorenzo Forni, Jan Gottschalk, and Paolo Mauro, IMF Staff Position Note, September 1, 2010, SPN/10/12

"The state of the public finances has worsened substantially in the main advanced economies as a result of the 2008–09 global financial and economic crisis. For some “peripheral” European countries, market participants and some commentators occasionally seem to believe that default (here intended as some form of debt restructuring) will sooner or later inevitably occur. Concerns about fiscal solvency in those countries have been reflected in financial market pressures, large default risk premiums on sovereign bonds, and downgrades by rating agencies. At the time of writing (late August 2010), credit default swap spreads are about 900 basis points in Greece and 300 basis points in Ireland and Portugal. In general, volatility remains high and every auction of government paper—especially in Europe, including in the largest countries—is closely monitored to discern possible triggers of abrupt market reactions."

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August 2010 Manufacturing ISM Report On Business®

August 2010 Manufacturing ISM Report On Business® - PMI at 56.3%. New Orders, Production and Employment Growing, Supplier Deliveries Slower, Inventories Growing

"Economic activity in the manufacturing sector expanded in August for the 13th consecutive month, and the overall economy grew for the 16th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®. The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "Manufacturing activity continued at a very positive rate in August as the PMI rose slightly when compared to July. In terms of month-over-month improvement, the Production and Employment Indexes experienced the greatest gains, while new orders continued to grow but at a slightly slower rate. August represents the 13th consecutive month of growth in U.S. manufacturing."

See also WSJ: World-Wide Factory Activity by Country

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U.S. Unauthorized Immigration Flows Are Down Sharply Since Mid-Decade

U.S. Unauthorized Immigration Flows Are Down Sharply Since Mid-Decade by Jeffrey Passel and D'Vera Cohn

"The annual inflow of unauthorized immigrants to the United States was nearly two-thirds smaller in the March 2007 to March 2009 period than it had been from March 2000 to March 2005, according to new estimates by the Pew Hispanic Center. This sharp decline has contributed to an overall reduction of 8% in the number of unauthorized immigrants currently living in the U.S.-to 11.1 million in March 2009 from a peak of 12 million in March 2007, according to the estimates. The decrease represents the first significant reversal in the growth of this population over the past two decades. These new Pew Hispanic Center estimates rely on data mainly from the Census Bureau's Current Population Survey and decennial census. The unauthorized immigrant population is estimated using the widely accepted residual method, in which a demographic estimate of the legal foreign-born population is subtracted from the total foreign-born population. The difference provides the basis for estimating the size and characteristics of the unauthorized immigrant population."

Interactive Map: Unauthorized Immigrants in the U.S.

New GAO Report - TSA Has Taken Actions to Help Strengthen Security, but Could Improve

Pipeline Security: TSA Has Taken Actions to Help Strengthen Security, but Could Improve Priority-Setting and Assessment Processes, GAO-10-867, August 04, 2010

"The United States depends on avast network of pipelines to transport energy. GAO was asked to review the Transportation Security Administration’s (TSA) efforts to help ensure pipeline security. This report addresses the extent to which TSA’s Pipeline Security Division (PSD) has (1) assessed risk and prioritized efforts to help strengthen pipeline security, (2) implemented agency guidance and requirements of the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Commission Act) regarding pipeline security, and (3) measured its performance in strengthening pipeline security. GAO reviewed PSD’s risk assessment process and performance measures and observed 14 PSD reviews and inspections scheduled during the period of GAO’s review."

Google Launches Priority Inbox

Official Google Blog: "People tell us all the time that they’re getting more and more mail and often feel overwhelmed by it all. We know what you mean—here at Google we run on email. Our inboxes are slammed with hundreds, sometimes thousands of messages a day—mail from colleagues, from lists, about appointments and automated mail that’s often not important. It’s time-consuming to figure out what needs to be read and what needs a reply...we’re happy to introduce Priority Inbox (in beta) — an experimental new way of taking on information overload in Gmail."

See related article via NPR

DHS - 2009 Yearbook of Immigration Statistics

2009 Yearbook of Immigration Statistics, Office of Immigration Statistics, Homeland Security, August 2010

"Statistical data on immigration have been published annually by the U.S. government since the 1890s. Over the years, the federal agencies responsible for reporting on immigration have changed, as have the content, format, and title of the annual publication. Currently, immigration data are published in the Yearbook of
Immigration Statistics by the Office of Immigration Statistics in the Policy Directorate of the Department of Homeland Security."

Young Children of Immigrants: The Leading Edge of America's Future

Young Children of Immigrants: The Leading Edge of America's Future, Karina Fortuny, Donald J. Hernandez, Ajay Chaudry, Publication Date: August 31, 2010

"Children of immigrants have nearly doubled as a share of pre-K to 3rd grade students since 1990. The share of children under age 8 with immigrant parents stood at 24 percent in 2008, up from 13 percent in 1990. Young children of immigrants account for more than 30 percent of children in seven states, with California leading the nation at 50 percent. The majority (93 percent) of children of immigrants are U.S. citizens. This fact sheet also includes state-by-state data on the number of children of immigrants and the number of children whose parents come from more than 130 countries."

IMF - Sustainable Real Exchange Rates in the New EU Member States: What did the Great Recession Change?

Sustainable Real Exchange Rates in the New EU Member States: What did the Great Recession Change? Jan Babecký, Aleš Bulíř, and Kateřina Šmídková, August 2010

"The Great Recession affected export and import patterns in our sample countries, and these changes, coupled with a more volatile external environment, have profound impact on our estimates of real exchange rate misalignments and projections of sustainable real exchange rates. We find that real misalignments in several countries with pegged exchange rates and excessive external liabilities widened relative to earlier estimates. While countries with balanced net trade positions are expected to continue to experience appreciation during 2010-2014, several currencies are likely to require real depreciation to maintain sustainable net external debt. Our estimates point to somewhat larger disequilibria than those of IMF country teams, however, any estimates of equilibrium exchange rates are subject to sizable uncertainty."

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President Obama’s Address on Iraq

President Obama’s Address on Iraq...the text, as prepared for delivery, of President Obama’s address from the Oval Office on Tuesday night, provided by the White House: "The Americans who have served in Iraq completed every mission they were given. They defeated a regime that had terrorized its people. Together with Iraqis and coalition partners who made huge sacrifices of their own, our troops fought block by block to help Iraq seize the chance for a better future. They shifted tactics to protect the Iraqi people; trained Iraqi security forces; and took out terrorist leaders. Because of our troops and civilians — and because of the resilience of the Iraqi people — Iraq has the opportunity to embrace a new destiny, even though many challenges remain. So tonight, I am announcing that the American combat mission in Iraq has ended. Operation Iraqi Freedom is over, and the Iraqi people now have lead responsibility for the security of their country..."

Via the Economist: Big mistake - How America's opinion of the Iraq war has changed

AP: Birthplace of the Taliban: the next battleground

BLS - Productivity and Costs by Industry: Wholesale and Retail Trade, Food Services and Drinking Places

Productivity and Costs by Industry: Wholesale Trade, Retail Trade, and Food Services and Drinking Places Industries, 2009: "Labor productivity - defined as output per hour - fell in wholesale trade, but rose in retail trade and in food services and drinking places, in 2009, the Bureau of Labor Statistics reported today. Productivity
changes were as follows:

• -3.3 percent in wholesale trade,
  
• 1.5 percent in retail trade, and
  
• 1.0 percent in food services and drinking places.

In comparison, labor productivity fell in each of the three sectors overall in 2008. However, both output and hours declined more rapidly in each of the sectors in 2009 than they did in 2008. Unit labor costs, which reflect the total labor costs required to produce a unit of output, declined in retail trade but rose in wholesale trade and food services and drinking places. By comparison, unit labor costs increased in each of the sectors in 2008. Productivity rose in 2009 in nearly 60 percent of the 50 detailed industries studied. This was higher than the 36 percent of detailed industries that recorded productivity increases the previous year. In 2009, productivity growth in most industries resulted from declines in hours that more than offset changes in output. Output grew in only 10 of the detailed industries in 2009, while hours declined in 47. In comparison, output grew in 14 industries and hours declined in 30 in 2008. In 2009, only a single industry - farm product raw materials wholesalers - registered productivity growth as a result of increases in both output and hours. Unit labor costs declined in 46 percent of the detailed industries in 2009, compared to 32 percent in 2008."

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Earnings of FDIC-Insured Institutions Increased to $21.6 Billion in Second Quarter of 2010

News release: "Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $21.6 billion in the second quarter of 2010, a $26 billion improvement from the $4.4 billion net loss the industry posted in the second quarter of 2009. This is the highest quarterly earnings total since the third quarter of 2007. Despite the improvement, earnings remain below historical norms. On the positive side, one in five institutions reported a net loss for the quarter, compared to 29 percent a year earlier. And, the average return on assets (ROA), a basic yardstick of profitability, rose to 0.65 percent, from negative 0.13 percent a year ago...The primary factor contributing to the year-over-year improvement in quarterly earnings was a reduction in provisions for loan losses. While quarterly provisions remained high, at $40.3 billion, they were $27.1 billion (40.2 percent) lower than a year earlier. Net interest income was $8.5 billion (8.6 percent) higher than a year ago, and noninterest expenses were $1.5 billion (1.5 percent) lower. The FDIC noted signs of improvement in asset-quality trends as the amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) fell for the first time since the first quarter of 2006. Insured banks and thrifts charged off $49 billion in uncollectible loans during the quarter, down $214 million (0.4 percent) from a year earlier. This is the first time since the fourth quarter of 2006 that net charge-offs posted a year-over-year decline."

The complete Quarterly Banking Profile is here.

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Federal Reserve: Approval of proposal by China Investment Corporation

News release: "The Federal Reserve Board on Tuesday announced its approval of the application by China Investment Corporation, Beijing, People's Republic of China, to acquire indirectly up to 10 percent of the voting shares of Morgan Stanley, New York, New York. Attached is the Board's Order relating to this action."

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