Explaining Southern California's economy

Greek default averted: It's all a game of kick-the-can

Violence Erupts As Greece Decides On Euro Future

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ATHENS, GREECE - FEBRUARY 12: People clash with police in the streets during a demonstration against the new austerity measures on February 12, 2012 in Athens, Greece. Greece's creditors have demanded further austerity measures before approving a new bailout from the European Union, European Central Bank and International Monetary Fund amid renewed concerns the country may default. (Photo by Vladimir Rys/Getty Images)

Here's the quote of the past weekend (from Bloomberg), stemming from the latest Greek bailout deal:

The euro area has...“bought time” for countries such as Portugal to prove they are more creditworthy than Greece and to erect stronger defenses in the form of a larger bailout fund, said Carsten Brzeski, an economist at ING Groep in Brussels.

“The often-cited Greek can has again been kicked down the road,” he said. “The good thing is that the can is still on the road, but it requires a huge amount of stamina and patience to keep it there.”

Translation: We're going to playing kick-the-can for...another eight years at least? Because it's hard to see Greek reducing its debt from the current 160 percent of GDP to 120 percent until then. The obvious question is, "Just how much road have we got it?" And, "Will that can hold up to another decade of kicking?"

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Welcome to the era of slow U.S. economic growth

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Brendan Smialowski/Getty Images

Secretary of the Treasury Timothy F. Geithner (L) and William C. Dudley (R), President and Chief Executive Officer of the Federal Reserve Bank of New York, listen to Federal Reserve Chairman Ben S. Bernanke (C) speak during a hearing of the House Financial Services Committee on Capitol Hill March 24, 2009 in Washington, D.C.

The fourth quarter of 2011 was much better for the U.S. economy than the year as a whole. But if you can believe it, it actually disappointed many economists. The economy grew at a rate of 2.8 percent, a vast improvement over the sub-2-percent growth that typified the year. But we were looking for 3 percent GDP growth

I know, I know — 0.2 percent doesn't sound like such a big deal. Unless your yearly GDP is $14.5 trillion and you need to add something like 350,000-400,000 jobs each and every month to bring unemployment down to pre-crisis levels (nationally, it's at 8.5 percent now).

This is from Reuters:

The Fed on Wednesday said it expected to keep interest rates at rock bottom levels at least through late 2014, and Chairman Ben Bernanke said the central bank was mulling further asset purchases to speed the recovery.

The central bank warned the economy still faced big risks, a suggestion the euro zone debt crisis could still hit hard.

"We're still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the United States," U.S. Treasury Secretary Timothy Geithner said at the World Economic Forum in Davos.

Prospects of sluggish growth could hurt President Barack Obama's chances of re-election in November.

The economy grew 1.7 percent in 2011 after expanding 3 percent the prior year, and the unemployment stood at a still-high 8.5 percent in December.

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Good rich people v. bad rich people: Whom to hate

Dow Jones Industrial Average Closes Slightly Down

Spencer Platt/Getty Images

At the Nation, Jamelle Bouie pretty well summarizes not just what the Occupy Movement stands for, but what lots of everyday Americans are feeling:

It’s hard to look at the wealth worshiping of American culture and conclude that Americans hate the rich. Rather, Americans hate people who become rich through rent-seeking, and then use their power and influence to pull up the ladder for everyone else. Financial elites crashed the economy, but rather than suffer any adverse consequences for their reckless behavior, they’ve prospered. Worse, they’ve yet to show any contrition for their actions, even as millions of Americans—who had no part in the sideshow—languish in a wounded economy.

This is the end result of what some have called the "financialization" of the U.S. economy, with the financial-services sector accounting for a historically disproportionate share of GDP. 

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Visual Aid: Why fiscal responsibility may cost the U.S. money

The above chart is from the U.S Treasury's Treasury Notes blog (Cute, right?). It was written by Jan Eberly, who argues that this is not a good time to be pulling back on support for the economy, even though we're running up some significant deficits in the aftermath of the financial crisis. 

What it all boils down to is a question about what we should do in the short term:

While there is a nearly complete consensus among economists and budget analysts that deficit reduction sufficient to stabilize our debt would have significant long-run economic benefits, the literature also cautions that fiscal consolidation is contractionary in the short run. Though under certain conditions the withdrawal of fiscal support can be partially offset by economic and policy changes, those conditions do not prevail in the United States today. Interest rates are currently at historic lows, leaving little room for them to go lower, and though exports have grown at a healthy pace recently, they cannot be counted on to grow enough to offset substantial near-term cuts.

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The stakes are very high for future U.S. medical research

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Associate research specialist at the Wisconsin National Primate Research Center at University Wisconsin-Madison removes a new batch of Embryonic Stem Cells from deep freeze to be thawed before being worked on.

My KPCC colleague Stephanie O'Neill contributed a must-listen report to a recent broadcast of "The Madeleine Brand Show." It was all about the economics of stem-cell research and how this kind of very high-tech, advanced medical therapy is imperative for the future of the country's population. Here's a sample:

Right now the US spends about $2.7 trillion health care annually, a figure that's expected to soar with an aging and increasingly obese population.

"Traditional approaches, whether it's through the use of pharmaceuticals or traditional types of biologics or devices or surgical intervention, really are not going to be able to effectively deal with the challenges we face," said Gil Van Bokkelen, chairman of the non-profit Alliance for Regenerative Medicine in Washington DC and CEO of the Ohio-based biotech firm, Athersys.

"What I think is going to happen over the course of the next several years is we're going to see the first clinical evidence that shows how big of an impact these types of therapies can really have. Which means we can overcome some of the rising tide of pressure that we're trying to fight against with an aging population that's more susceptible to a lot of different, very expensive disease conditions."

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