April 17, 2024

Economix: Podcast: Credit Ratings, Ponzi Schemes and Data

Despite an ever-growing mountain of debt, the United States government has an impeccable credit rating. But this week Standard Poor’s warned that the Treasury’s triple-A status is in jeopardy.

While it reaffirmed the Treasury’s sterling rating for the short term, S..P. said that there was a one-in-three chance of a downgrade over the next few years. In ratcheting its outlook downward, the agency cited concerns about the ability of Congress and the White House to agree on a plan to reduce the budget deficit. All of this threw the equity markets into turmoil for a day, before stocks moved upward again. The bond market was barely affected by the credit warning.

But why? In a conversation in the Weekend Business podcast, Floyd Norris, the chief financial correspondent for The Times, says part of the reason is that S..P. itself has less than a stellar reputation after failing to warn of the problems looming in the financial crisis of 2007 and 2008. And this current warning, he says, has been shrugged off by the markets to some extent. It’s also possible that by focusing on the fiscal deficit — and by putting some pressure on the politicians in Washington — S..P. may have made it more likely that the deficit will come down. Furthermore, despite signs of a slowing American economy, corporate earnings have been very strong in the United States and abroad, bolstering the markets.

The financial crisis upset the plans of many financiers, including Bernie Madoff, whose Ponzi scheme came to an end as unwitting participants called in their chits on investments that didn’t actually exist. Diana Henriques has been covering the Madoff case since it came to light, and she’s written about it in a new book, “The Wizard of Lies: Bernie Madoff and the Death of Trust,” portions of which are adapted for a Sunday Business article. In a podcast discussion with David Gillen, Ms. Henriques paints a vivid picture of Mr. Madoff’s last days as the engineer of one of the biggest frauds in history.

In another podcast conversation, Steve Lohr, a veteran Times reporter, sees some indications that a long-awaited data-driven surge in productivity may finally be at hand. In the Unboxed column in Sunday Business, he cites research led by Erik Brynjolfsson, an M.I.T. economist, showing that companies making heavy use of data in their decision-making have improved productivity more rapidly than other businesses.

Historically, as innovations percolate through the economy, there has always been a lag in bolstering overall economic productivity. The United States economy may at last be benefiting from the Internet revolution, but Robert Gordon, an economist at Northwestern University, suggests that we may be digesting those benefits so rapidly that they will be short-lived.

How to make the best use of the data that companies collect on individuals is the concern of Richard Thaler, an economist at the University of Chicago. In a separate podcast conversation and in the Economic View column in Sunday Business, he says that such personal data needs not only to be protected, but also to be made available to individuals for their own benefit.

If, for example, you could relay information about your cellphone use to a third-part Web site, you could find help in choosing the cheapest phone plan for your needs, Mr. Thaler says.

In the news section of the podcast, I discuss a major fraud conviction, a National Labor Relations Board complaint against Boeing, and the impact of the disasters in Japan on that nation’s auto companies.

You can find specific segments of the program at these junctures: Floyd Norris on the U.S. credit rating (32:24); news headlines (25:17); Diana Henriques on Bernie Madoff (22:02); Steve Lohr on data-driven productivity (14:12); Richard Thaler on data for personal use (8:42); the week ahead (2:20).

As articles discussed in the podcast are published during the weekend, links will be added to this posting.

You can download the program by subscribing from the New York Times podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=78a64b93a8e7934a44f034aa71005e86

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