Is Facebook Really Worth $50 billion?

House Republicans Outline Budget Cuts – — The incoming Republican majority in the House is moving to make good on its promise to cut $100 billion from domestic spending this year, a goal eagerly backed by conservatives but one carrying substantial political and economic risks.  House Republican leaders are so far not specifying which programs would bear the brunt of budget cutting, only what would escape it: spending for the military, domestic security and veterans.  The reductions that would be required in the remaining federal programs, including education and transportation, would be so deep — roughly 20 percent on average — that Senate Republicans have not joined the $100 billion pledge that House Republicans, led by the incoming speaker, Representative John A. Boehner, made to voters before November’s midterm elections.  Even if adopted by the House, the Republicans’ budget is unlikely to be enacted in anything like the scale they envision, since Democrats retain a majority in the Senate and President Obama could veto annual appropriations bills making the reductions.
 

The Financialization of America – Scott Sumner tries to explain why finance is so much more lucrative today than it was in the 50s and 60s:  Finance becomes extremely important in an economy where it is not at all clear what should be produced, or on what continent that production should take place. This seems pretty unpersuasive. If Wall Street were making truckloads of money on their VC investments, then OK. Maybe he’d have a point. But I’m pretty sure that true venture capital constitutes a tiny fraction of finance sector earnings. Likewise, allocating capital to old-line industries is just….allocating capital to old-line industries. Why does it matter whether those industries are in Pittsburgh or Mumbai? If the finance sector were truly creating lots of extra value, then most of us probably wouldn’t mind that bankers were taking home outsize paychecks. But are they? Are overall global growth rates higher today than they were 50 years ago? Is productivity growth higher? Is modern finance repsonsible at all for higher economic growth than it was in 1965?

Researchers Find "Alarming" Decline In Bumblebees (Reuters) – Four previously abundant species of bumblebee are close to disappearing in the United States, researchers reported Monday in a study confirming that the agriculturally important bees are being affected worldwide. They documented a 96 percent decline in the numbers of the four species, and said their range had shrunk by as much as 87 percent. As with honeybees, a pathogen is partly involved, but the researchers also found evidence of inbreeding caused by habitat loss. "We provide incontrovertible evidence that multiple Bombus species have experienced sharp population declines at the national level," the researchers reported in the Proceedings of the National Academy of Sciences, calling the findings "alarming." "These are one of the most important pollinators of native plants," In recent years, experts have documented a disappearance of bees in what is widely called colony collapse disorder, blamed on many factors including parasites, fungi, stress, pesticides and viruses. But most studies have focused on honeybees. Bumblebees are also important pollinators, Cameron said, but are far less studied. Bumblebees pollinate tomatoes, blueberries and cranberries, she noted.

Armageddon Can Wait, by Kenneth Rogoff – After three years of huge, crisis-driven exchange-rate swings, it is useful to take stock both of currency values and of the exchange-rate system as a whole. And my best guess is that we will see a mix of currency wars, currency collapses, and currency chaos in the year ahead – but that this won’t spell the end of the economic recovery, much less the end of the world. Let’s start by acknowledging that the modern system of floating exchange rates has, on the whole, acquitted itself remarkably well. True, given complex risk factors and idiosyncratic policy preferences, it has been particularly challenging of late to divine the logic underlying big exchange-rate swings. For example, even though the United States was at the heart of the financial crisis, the dollar initially soared. But, even if exchange rates work in mysterious ways, their cushioning effect is undeniable. In hindsight, these exchange-rate swings mirrored the initial collapse and subsequent rebound in global trade, helping to mitigate the recession.

Fed Likely to Add New Dealers for Treasury Market – After a hiatus of more than one year, the Federal Reserve is likely to expand a select group of dealers to help with hefty Treasury debt sales and the central bank’s monetary-policy operations, according to traders and dealers familiar with the matter. Demand for safe-haven Treasurys has eased over the past couple of months as optimism over the economic outlook sparked more buying interest in riskier assets such as stocks. That means dealers need to play a bigger role in underwriting Treasury sales to avoid the risks of weak auctions.Lackluster participation by primary dealers could force the government to pay higher interest rates to issue debt, which in turn would hurt the broader economy by raising rates for consumers and companies. Treasury yields are benchmarks for mortgage rates and a variety of other borrowing costs for consumers and companies.
Fast money – New York Times published a long piece on a wave of investment in new financial market infrastructure. In a nutshell, financial market trading is now done almost exclusively through electronic means, and a host of firms are pouring money into their networks in order to allow as many people and institutions as possible to trade as fast as possible as cheaply as possible. The Times piece casts these developments in terms of a clear set of trade-offs. The good news is that transaction costs have plummeted, which should make for more efficient and liquid markets. The bad news is that massive, computerised, blink-of-an-eye trading could produce instabilities, like those which led to the flash crash last year.
 
New California Governor Proposes Initiative to Extend Tax Increases – In February 2009, California approved its budget, including a temporary increase in income and sales taxes, designed to enable the state to balance its budget. The income tax increases—0.25 percentage points on each tax bracket—expired on December 31, 2010. The sales tax increase-1 percentage point-will expire on July 1, 2011, as will a higher vehicle license tax (from 0.65% to 1.15%). Officials around newly sworn-in Gov. Jerry Brown (D) are hinting that he will seek a ballot initiative to re-enact the income tax increase and extend the sales tax increase. From the Los Angeles Times: Gov.-elect Jerry Brown is readying a budget plan that would call for a special election to ask voters to extend the soon-to-expire tax hikes, according to people involved in the discussions.

 How the mortgage clearinghouse MERS became a villain in the foreclosure mess – On March 4, 1994, the MBA unveiled its plan to county recorders who were charged with keeping track of titles signifying the ownership of land. Not everyone was sold on the idea.  "There needs to be some outside control or oversight," one recorder said, according to a transcript of the meeting.  Another said that if errors were put into the electronic system, "they’re really hard to track further down the road."  Sixteen years down the road, the mortgage business is a mess. The electronic clearinghouse has become a reality; Virginia-based Mortgage Electronic Registration Systems, a registry with 67 million mortgages on file, has become part of the industry’s standard operating procedure.  Critics say promises to increase transparency and iron out wrinkles in recordkeeping haven’t panned out. The firm, which tracks more than 60 percent of the country’s residential mortgages but whose parent company employs just 45 people in a Reston office building, is now on the firing line.

 A health-care fight Democrats should welcome – If the incoming Republican leadership in the House of Representatives is serious about trying to repeal health-care reform, there’s only one appropriate Democratic response: "Make my day."  Just to be clear, there’s no earthly chance that a bill repealing the landmark health-care overhaul could make it through Congress and be signed into law. Even if Republicans managed to hold together their new majority in the House, they would face the inconvenient fact that Democrats still control the Senate. And even if a repeal measure somehow sneaked through the Senate, President Obama would veto the thing faster than you can say "preexisting conditions."  So this exercise in tilting at windmills can’t even be described as quixotic, since that would imply some expectation of success, however delusional. The whole thing is purely theatrical – and woefully ill-advised.

Ezra Klein – Some thoughts — and graphs — on inequality… The story this graph seems to tell goes something like this: From about 1947 to 1970, times are good for the average American and not as good for the average rich American. That’s the part of the story that gets a lot of attention: It suggests that perhaps there’s a connection between falling inequality and rising wages. But the timing of the next few inflection points doesn’t really work for that theory: In the 1970s, median household income begins stagnating. But it’s not until the mid-1980s — and really beginning in 1987 — that the income share of the top 1 percent begins skyrocketing. Then in the ’90s, inequality rises sharply, but so too do median household incomes. And then in the aughts, inequality rises, but median household incomes don’t. There’s not a consistent relationship between the two variables. But that graph, which has informed my thinking on inequality, is, in some crucial ways, misleading: It compares changes in a percentage of something (the top 1 percent’s share of income) to changes in the value of something. Here’s a graph that’s apples-to-apples: It tracks changes in the dollar value of median household incomes against changes in the dollar value of incomes for the top 1 percent (both data sets are adjusted for inflation). I’ve set the level both incomes were at in 1947 to be the baseline:
 
 
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