January 23, 2020

Economix Blog: Podcast: Bonds, Markets, the Economy and History

The markets are being whipsawed. How severe has the volatility been? One statistic tells the story: for the first time in its history, the Standard Poor’s 500-stock index moved up or down by at least 4 percent on four consecutive days.

In the new Weekend Business podcast, I talked to Floyd Norris and Julie Creswell, two veteran financial reporters for The Times, about the turmoil in the markets. Ms. Creswell has been covering the impact on individual investors and says many have been rushing to sell their stock holdings.

Of course, selling in a downturn is not always the best approach, Mr. Norris pointed out, especially if markets rise again soon. A big issue at the moment is whether we are experiencing a repeat of the 2008-9 crisis, when markets fell far more steeply than they have in recent weeks, or whether the current situation is more benign. Unfortunately, there are no firm answers.

One reason for the plunge in asset values is a global economic slowdown. In a separate conversation on the podcast, Christina Romer, an economist at the University of California, Berkeley, says the Great Depression and World War II supply some important lessons for dealing with the current crisis. In the Economic View column in Sunday Business, she says that expansive monetary and fiscal policy worked well back then to promote economic growth. In addition, the United States took on a far heavier debt load in the war years than it has so far, and still managed to pay it down when the economy was stronger.

Reconciling economic stimulus with a prudent long-term fiscal policy can be done again, she says, but the logic for these intertwined approaches needs to be conveyed forcefully to the American public.
I also chatted with Steve Lohr, a Times technology reporter, about a new approach to corporate social responsibility. In the Unboxed column in Sunday Business, he says academic theorists are proposing a concept known as shared value, in which companies profit by taking on tasks that result in public good. One example is General Electric’s “ecomagination” program, in which the company has invested in technology to lower the energy consumption of its products and to reduce the use of water and other resources in manufacturing. The company says its sole motive has been profit; the social benefits are ancillary.

And in another podcast conversation, Phyllis Korkki interviewed me about the implications of the downgrading of United States Treasury debt, the subject of my Strategies column in Sunday Business. Treasury bonds have been the linchpin of the world financial system, and the center of myriad calculations in business, portfolio construction and capital markets. The 10-year Treasury yield has been plugged into countless algorithms as the putative “risk-free rate of return,” against which other cash flows are compared. Now, the rate for a risk-free investment may need to be approximated, and the center of the global financial structure seems much less solid than it was just a few years ago.

You can find specific segments of the podcast at these junctures: Floyd Norris and Julie Creswell (37:06); news headlines (27:41); Steve Lohr (23:14); Christina Romer (16:01); Strategies column (8:51); the week ahead (1:57).

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

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

Article source: http://feeds.nytimes.com/click.phdo?i=ef68e80ca754b549afaca15dd36d98e1

Economix: Podcast: I.B.M., Diamonds and Paying for Medicare

Like countries, companies rise and fall, and some of them rise again.

I.B.M., which dominated the business of mainframe computers, is perhaps the best contemporary example of such a phoenix-like giant. It celebrated its 100th birthday last week, although as Steve Lohr says in the new Weekend Business podcast, it hasn’t always been clear that I.B.M. would make it to this milestone.

After running into serious trouble in the 1990s, when its mainframe business was threatened by the rise of personal computers, I.B.M. has flourished by moving beyond the mainframe and building a business increasingly based on software and services. On the cover of Sunday Business, he writes about some lessons from I.B.M. that may apply to giant tech companies like Microsoft, Google and Apple.

The Graff diamond business is the focus of another cover article on Sunday, this one by Geraldine Fabrikant, which she discusses on the podcast with David Gillen. Laurence Graff, the business’s founder, specializes in the buying and selling of seriously big diamonds. It is a global enterprise, and like so many other businesses these days, it has been expanding rapidly in China.

In another podcast conversation, N. Gregory Mankiw, the Harvard economist, says that while political campaigns tend to polarize opinions on public issues, Democrats and Republicans actually have a fair amount in common when it comes to health care.

Here’s one example: While Republicans generally oppose taxing the rich to close the budget gap driven largely by soaring health care costs, some prominent members of the G.O.P. favor “means testing” Medicare. In the Economic View column in Sunday Business, Professor Mankiw says this means that wealthier people might be required to pay higher premiums. When you pay an extra $10 in premiums, he asks, is that really different from paying $10 extra in taxes?

In the Strategies column in Sunday Business, I point out that recent financial news has a very familiar ring to it. Headlines from May and June 2010 could just as easily appear today, with absolutely no changes required. (“Concerns Over Europe Flare Again, Pushing U.S. Shares Lower” is but one example.) As Mark Twain is often reputed to have said — although there’s no convincing evidence that he ever actually said it — “History doesn’t repeat itself but it often rhymes.”

The Greek debt crisis, concerns over Federal Reserve policy, and fears that the economy is weakening have all rocked the markets lately. But as I point out in the podcast, the markets absorbed very similar news last year and managed to rise anyway.

You can find specific segments of the podcast at these junctures: I.B.M. (29:55); news roundup, and financial history that rhymes (20:41); diamonds (16:22); health policy (9:33); the week ahead (2:20).

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

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

Article source: http://feeds.nytimes.com/click.phdo?i=5555ddcec624c28473d20621e4564756