Scott Barlow
A new report cited by the Economist suggests that homeowners – not the global financial Illuminati or central banks – are the root cause of economic inequality. The column highlights a widely-parsed critique of French economist Thomas Piketty's "Capital in the Twenty First Century" by M.I.T. graduate student Matthew Rognlie:
"The idea that workers' share of wealth can continue to decline rests on the assumption that it is easy to substitute capital (ie, robots) for workers. But if lots of the capital in question is tied up in houses, then this switch would be far harder than Mr. Piketty suggests."
"Through the Roof" – The Economist
The Bernanke is back! Former U.S. Federal Reserve Chairman Ben Bernanke has starting blogging for the Brookings Institution with an explanation for why global interest rates are so low. Mr. Bernanke notes that concerns about punishing savers that invest in bonds is unwarranted,
"The bottom line is that the state of the economy, not the Fed, ultimately determines the real rate of return attainable by savers and investors … if the goal was for retirees to enjoy sustainably higher real returns, then the Fed's raising interest rates prematurely would have been exactly the wrong thing to do… A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments."
"Why are interest rates so low?" – Ben Bernanke's Blog, Brookings
There are a few of us in the newsroom calling Bank of Canada Governor Stephen Poloz harsh names this morning for opening up in the Financial Times (while remaining cryptic in his comments to the Canadian press. We'll get over it). Mr. Poloz warned of an "atrocious" first quarter for Canadian gross domestic product growth:
"even though a lower oil price should increase domestic demand by boosting disposable income, the negative effects from the impact on the energy sector were widespread.
'In theory lower oil prices mean [putting] more money in consumers pockets, but . . . if an oil company cancels [an investment] project, laying off a worker, that guy will not have the money to buy a new pickup truck. That spreads pretty quickly,' Mr Poloz said."
"Bank of Canada chief Stephen Poloz bemoans 'atrocious' oil slump" – Financial Times (subscription may be required)
See Also: "Executives increasingly gloomy about oil shock's impact on economy" – Report on Business
Bloomberg details an interesting conspiracy theory in energy markets this morning – that big oil companies lobbied governments to make life difficult for smaller shale oil producers. The reporters uncovered a series of e-mails emphasizing the link between shale production and seismic activity:
"The e-mails suggest a steady stream of industry pressure on scientists at the state office. But oil companies say there's nothing wrong with contact between executives and scientists. 'The insinuation that there was something untoward that occurred in those meetings is both offensive and inaccurate,' says Continental Resources spokeswoman Kristin Thomas."
"Big Oil Pressured Scientists Over Fracking Wastewater's Link to Quakes" – Bloomberg
The announced closure of 131 Future Shop stores won't do much to breed optimism in the Canadian consumer. It is difficult, however, to separate the industry-specific aspects of the retreat of the company (owned by Best Buy Co. Inc. since 2001). Electronics retail has been a difficult market for years as the bankruptcy of Radio Shack highlights.
"No place for Future Shop as shopping's future shifts" – Report on Business
Tweet of the day: "@TheEconomist There is a growing gulf between how the rich and the poor can raise their children. It shows econ.st/1xJ9NyN https://twitter.com/TheEconomist/status/582478539494174720/photo/1"
Diversion: "Pilots on the Germanwings Murder/Suicide" – The Atlantic
Scott Barlow