Research Reports

India’s Secret Engine -- May 7, 2012

High growth in the emerging economy’s service sector offers lessons for the U.S.

Unlike China, which relies heavily on manufacturing to boost its economy, India has based much of its growth on service industry exports.

Five Changes to Bring Back Jobs -- May 7, 2012

Productivity gains are making manufacturing in the U.S. more attractive. Policy shifts and improved education could speed a comeback.

Manufacturing is no longer the lynchpin it once was in the United States economy. Although about 9 percent of Americans currently work in the field, increased offshoring over the past few decades has diminished industry as a source of employment. In 2010, China finally surpassed the U.S. as the world’s top manufacturing nation.

The Boom That Isn’t -- April 13, 2012

The weak recovery is partly the result of a long-term change: The U.S. has become a mature economy.

A number of factors are inhibiting the recovery. Among them: the debt burden carried by people and businesses, regulation in the aftermath of the financial crisis, and the structural misallocation of the boom years. But an even more fundamental force is restraining growth.

The United States has become a mature economy, in which easy sources of economic growth have been mostly used up. The only thing that can boost growth is the invention of new production methods and new products.

Less developed countries have more room for improvement. High growth rates are often the result.

The same process that explains the slowdown in advanced economies also explains why growth is faster in less developed countries. The result is a convergence of output among the world’s nations.

As Chart 2 on page 2 shows, output growth of developed countries besides the United States is also moderating. In the 1960s, for example, growth in France exceeded 5 percent, but has lingered below 2.5 percent since mid-1980s.

On the other side of the world, growth in Australia slowed from over 4.5 percent in the 1970s to around 3.5 percent in the last decade.

Fooled by the Fed -- April 13, 2012

The effect of monetary policy on unemployment is short-lived at best. And it comes at a serious cost.

Congress has repeatedly said that it expects the Federal Reserve to solve the problems of the recession and recovery through money creation. Unfortunately, by about 1980, economists had resolved that monetary policy has everything to do with inflation, but it can have no lasting effect on employment and output. It appears that no one in the U.S. government was listening.

Restoring Trust in Banking -- April 2, 2012

When executives pay attention to customers’ long-term needs, business will prosper. And the findings are backed up by data.

Violence, ethnicity, and personal choices are among the factors critical to living longer.

The United States ranks 27^th in life expectancy among the 34 members of the Organisation for Economic Co-operation and Development (OECD). This seems at odds with the widespread perception that the world’s richest country also has the most advanced healthcare system.

According to the most recent statistics, the average life expectancy at birth of an American male born now is 75.4 years, compared to 78 years for the OECD as a whole. The life expectancy for women is 80.4 years, compared to 83 years.

Striking increases in fuel efficiency since the first oil shock dampen the impact of a rise in costs. What’s more, only half of the retail spending on gasoline flows out of the economy.

The United States economy is much more energy efficient than it was 40 or even five years ago. An increase in the price of oil today would be much less damaging to the economy’s ability to produce goods and services than it was during the first oil price shock of 1973-74. Nor will a spike in gasoline prices hurt consumers as much as it has in the past.

The move to reduce fraud and erroneous returns may help some consumers. But new fees and regulations will also drive up costs.

The days when the average taxpayer could be expected to master the arcane Internal Revenue Code are long gone. A majority of taxpayers rely on others to prepare their returns. Of those who do self-prepare, most use commercial software developed by third-party experts. In view of this, the IRS has set some new rules.

Simple policy arithmetic translates into potential inflation of 7.2 percent within two years. But that’s before unprecedented bank reserves come into play.

Rough estimates suggest that inflation could rise as high as 15 percent by late 2013 or 2014 if the Federal Reserve is unable to drain off more than 25 percent of the reserves in the banking system.

That’s the best estimate based on a variety of forces that traditionally drive inflation.

Un-Taxing Business -- March 5, 2012

Bringing jobs back home matters more than reducing the deficit when considering changes in the corporate tax structure. Shifts in four areas can help.

Corporate tax revenue accounts for only around 12 percent of total U.S. tax revenue, a relatively small amount compared to the 45 percent contributed by income taxes and the 36 percent provided by payroll taxes. Because of this, increasing corporate taxes won’t do much to reduce the deficit. Changes in the tax structure could help the economy, but unfortunately, proposals currently in the works won’t do enough.

At least four key aspects of the current corporate tax system have led to a deteriorating business environment in the United States.

Money from Momentum -- March 5, 2012

Positive Feedback Trading takes into account trends in the stock market. It posits an alternative to theories that advocate buying the market or tracking corporate performance.

According to advocates of technical analysis, it is possible to discern trends and cycles in securities prices that can be traded profitably. The simplest form of this is momentum trading—buying securities with prices that are rising and selling those with prices that are falling. Recent studies find that this can work.

The meltdown wreaked havoc on a cornerstone of the economy, leaving the market awash in empty foreclosed properties. Now, an obscure inventory threatens growth.

The Fed Targets Inflation -- February 6, 2012

In a formal departure from its longstanding dual mandate, the Federal Reserve commits to a new course. But how long will it last?

Ben Bernanke is getting ready to fight inflation. This comes through loud and clear from recent statements and initiatives.

Over the years, the U.S. has lost an advantage by failing to reduce corporate tax liabilities.

In his State of the Union speech this January, President Obama pledged to fix the high corporate tax rates that have helped drive manufacturing jobs overseas.

The Housing Trap -- January 16, 2012

Encouraged by government policies, the upsurge in home ownership reduced saving rates, made households more vulnerable, and deepened the recession.

U.S. household saving rates were in decline for about 20 years prior to the onset of the Great Recession. This helped deepen the downturn, made it last longer, and has slowed the recovery.

No Bargains -- January 16, 2012

The cheap houses available in the wake of the meltdown aren’t necessarily good buys.

The American housing market has yet to recover from its collapse five years ago. Average home prices have fallen to 2004 levels. Sales are down to almost a quarter of what they were that year, and the number of new houses that have broken ground are down a third. But bargain hunters are likely to find that good deals are more urban legend than practical reality.

Food production, energy shortages, and the need for financial reform pose challenges for the new leadership of this isolated communist country.

With the recent death of “Dear Leader” Kim Jong-Il, many are wondering about the future of North Korea. The stability of any new government depends on how well its leadership can address the country’s needs.

Online shopping is changing the holiday marketplace for retailers and consumers alike.

Underlying strong early holiday sales are extensive structural changes in the marketplace. These changes include the impact of growing online sales, changes in the way retailers are responding to technological innovations related to shopping, and changes in consumer behavior.

Medicare Is Not Free Care -- December 20, 2011

A new payment schedule kicks in January 1. Recipients need to plan for uncovered costs.

Medicare is not as cheap as many believe. Various deductibles and co-pays can make hospital stays and medical procedures quite expensive.

The tables at right summarize the fees that will apply starting Jan. 1.

Empirical evidence shows that this proven inflationary hedge helps portfolios during any kind of price instability.

The evidence for gold as an inflationary hedge is overwhelming, while information on gold’s performance during deflationary periods has been relatively hard to come by. But if gold should only be held during inflationary periods, then investors are left with an apparent market timing problem.

Since the early 1970s, increased transfer payments have had little effect in helping the poor.

Transfer payments are the most common means used by governments to address poverty. These payments take income from one group of people through taxes and give the money to another group, in the hopes of lifting them from the lowest income strata.

The necessary cooling of the Chinese economy brings challenges and opportunities to trading partners and competitors alike.

As the second largest economy in the world, China plays an important global role. The country’s quick recovery from the 2007 worldwide financial crisis evidenced the great power of China’s economic engine. However, a few indicators show that China’s economy—the economy that posted an annual two-digit growth rate for the last three decades—is slowing down.

Make Money, Not Love -- November 21, 2011

Today’s youthful protestors begin adult life trying to pay off educational loans in the face of debt-ridden governments, stagnant economies, and a grim job market.

Students in many countries face an economic double-bind: It is difficult to afford a college education and difficult to find a well-paying job without one. And because of high unemployment rates, even a bachelor’s degree doesn’t necessarily guarantee college graduates jobs.

The high cost of education has led students abroad to organize protests for nearly a year. American students were comparatively quiet until recently, when the Occupy Wall Street movement began in New York City and quickly spread across the country.

Inadequate training doesn’t merely hold back individuals. A dearth of highly skilled workers can hurt the economy for years to come.

Today’s economy is experiencing continuing sluggish growth, off-shoring of jobs, and persistent structural unemployment. A major cause: a growing mismatch between the skills that American workers offer and the skills that U.S. firms need to compete and prosper in the global economy.

Research Reports

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