Sunday, September 22, 2019

3 Charts Showing Just How Boxed-in the Fed Is | Robert P. Murphy

3 Charts Showing Just How Boxed-in the Fed Is | Robert P. Murphy: The Fed met market expectations by cutting its target for the fed funds rate by 25 basis points, down to the range of 1.75 - 2.00 percent. In this post I want to demonstrate just how boxed in the Fed has now become, with the help of 3 charts. First, let's review just how low interest rates have been (and still are), in a long-term historical context:

Friday, September 20, 2019

The Depression You've Never Heard Of: 1920-1921 | Robert P. Murphy

When it comes to diagnosing the causes of the Great Depression and prescribing cures for our present recession, the pundits and economists from the biggest schools typically argue about two different types of intervention. Big-government Keynesians, such as Paul Krugman, argue for massive fiscal stimulus—that is, huge budget deficits—to fill the gap in aggregate demand. On the other hand, small-government monetarists, who follow in the laissez-faire tradition of Milton Friedman, believe that the Federal Reserve needs to pump in more money to prevent the economy from falling into deep depression. Yet both sides of the debate agree that it would be utter disaster for the government and Fed to stand back and allow market forces to run their natural course after a major stock market or housing crash.

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The Depression You've Never Heard Of: 1920-1921 | Robert P. Murphy

Stop pushing poor people to save more for retirement

It’s a fact: low-wage workers don’t save much for retirement. States are aiming to fix that. But here’s a question: is it really a problem that needs to be fixed? How hard should we push the poor to save for retirement?

Bureau of Labor Statistics data show that 75% of workers in the upper half of the salary distribution — those who earn at least $36,000 on a full-time basis — participate in a retirement plan. Among workers in the bottom quarter of the wage distribution, with average salaries of about $24,000 per year, only 25% participate. That’s a big difference.

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Understanding the impact of the newly proposed Senate drug pricing legislation on manufacturers’ investment decisions

The Medicare Part D prescription drug program has been rightly criticized for its benefit design. The framework includes problematic incentives that both raise costs to the federal government and leaves beneficiaries’ with potentially significant out-of-pocket spending. With this in mind, the Prescription Drug Pricing Reduction Act (PDPRA) that was recently reported out of the Senate Finance Committee includes a substantial reform of the Part D benefit design which would simplify the Part D structure and afford more financial protection to beneficiaries. The proposal would alter liabilities facing insurers, drug manufacturers, and beneficiaries alike. In this piece, we consider how the new benefit design could change the incentives facing drug manufacturers, and in turn, the direction of their investment decisions.

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