Another NYC accents article

This one from the Wall St. Journal, whose reporter managed to locate a (self-described) childhood friend of De Niro and Scorsese.

Wolfers on the Fed's two-year promise

Justin Wolfers provides a very helpful interpretation of the Fed's announcement of a two-year commitment to a near-zero federal funds rate. It's a nice, teachable application of the term structure of interest rates, a common topic in introductory money and banking and probably finance courses. If the Fed wants long-term rates to fall, it can commit to keeping short-term rates low for a while, since the former depend on the latter (and on other things).

There's plenty of other helpful commentary on the Fed's move. This NPR article quotes Alan Blinder as stating that the average car loan has a maturity of 3 years, or only 50% longer than the Fed's commitment to low interest rates. I did a double-take, wondering whether I was an outlier in having a 5-year auto loan. But according to Fed survey data, the average maturity is actually above 60 months and has been fairly continuously since early in the new millennium.

Credit rating transparency

It's a shame when a credit rating agency's actions, which in theory are meant to increase transparency between borrowers and lenders, seem to reduce transparency about its own methodologies. The U.S. Treasury details the $2 trillion error in S&P's penultimate statistical analysis of the U.S. debt position and states that in response, S&P simply changed its principal rationale for the downgrade. The case for S&P's primary, or only, rationale the whole time being the political stalemate the whole time seems rather convincing in this light, if one believes that an additional $2 trillion in committed deficit reduction would have avoided the downgrade, as was widely reported. It would be nice if S&P made clear the rationales for its judgments rather than listing one that seems kind of bogus.

Hispanic wealth off a cliff

Princeton's Doug Massey opines about the reasons underlying the 66% decline in Hispanic households' wealth (as measured in the SIPP), compared with 53% for blacks and 16% for whites reported by the Pew Hispanic Center in The Toll of the Great Recession.

Massey argues that stepped-up enforcement of immigration laws probably kept a sizable number of undocumented Hispanic immigrants from leaving the U.S. and caught in a underworld with reduced options for legal recourse. Hispanic homeowners may have been particularly susceptible to predatory lending if they were undocumented. He also mentions that many Hispanics had construction jobs, which have taken a huge hit during the recession.

I'm a little skeptical whether legal status really explains that much of the statistic. If all 12 million undocumented immigrants were Hispanic, they'd represent about one quarter of the roughly 50 million Hispanics in the U.S. Assuming the SIPP captures undocumented immigrants (researchers seem to think they're underrepresented in the panel but still there), I think the experiences of legal Hispanics must be responsible for a substantial amount of the reported results.

It's very plausible that tendencies to hold wealth in the form of housing rather than financial investments might be cultural; it's also possible that the lower average socioeconomic status of Hispanics might explain some. And lower SES surely correlates with employment in heavily hit industries such as construction.

Viewed this way, I'm not sure the Toll of the Great Recession is a good argument for immigration reform, but I think there are others.

Rogoff on crisis policy

Thanks to Greg Mankiw for posting a link to Ken Rogoff's piece on proper financial crisis macro policy. Rogoff makes the case for targeting debt and overleveraged borrowers rather than traditional aggregate demand stimulus.

More on plagiarism in China

The latest from NPR on plagiarism in Chinese academic circles. I think awareness may be an issue in a developing country, especially one where imitation isn't only flattery but perhaps a route to an "A." But it occurs to me that the result of plagiarism detection software run on many U.S. academic journals might reveal some uncomfortable patterns too.

Mankiw on Bernanke and price-level targeting

In an op-ed with a great title, Greg Mankiw reviews the Bernanke years at the helm of the Fed thus far. He mentions the Fed's focus on the core rate of consumer inflation, excluding food and energy, which might be one of the more inscrutable tenets of central banks.

Here's a look at some recent inflation history, with the top chart showing the levels of the core Consumer Price Index (CPI) alongside the energy and food indexes, and the bottom chart showing a 12-month moving average of the monthly inflation rate in each. Energy prices really steal the show, but food prices are also a bit more volatile than the core rate. Inflation in food and in energy prices both peaked in the summer of 2008 and turned around rather sharply, leading to disinflation and even (slight) deflation in both while trends in the core rate were much more subdued.