EconomiX:, who cares about the Fed?

Casey b. Mulligan is Professor of Economics at the University of Chicago.

Short-term interest rates have an obvious effect on the housing market, but the rest of the economy.

The Federal Reserve policy affects bank regulation short-term interest rates and inflation. I will write to the week next inflation, and my colleague blogger from Economix Simon Johnson has written much about bank regulation, now that I am focusing on short-term interest rates.

The Federal Reserve, including its New York branch, is actively engaged in the purchase and sale of Treasury securities, and it lends money to banks based on the day the day. Accordingly, it is generally considered that the Federal Reserve is a determinant of the rate of interest paid on short-term Treasury securities.

By reducing the purchase of Treasury and loans offer day day, called "sa," monetary policy raises short-term interest rates. High short-term interest rates are said to discourage borrowing, reducing private investment projects. The idea is that private sector projects are undertaken only when their anticipated return exceeds the cost of borrowing.

In theory, result of short-term interest rates high in investment projects relatively little, with expected high returns and low rates result in the short term in several capital projects, including those with yields expected lower.

But the effect of the high interest rates in the short term on the economy of Main Street has been exaggerated. Is generally assumed that the current low rates should help strengthen a takeover of, but it seems that the conditions of the company actually not have much to do with short term money markets.

Many investment projects important private sector are relatively long term - is more likely to take a year or more for a project to complete and deliver positive cash flows to investors. As a result, many capital projects are funded by long-term borrowing, with the equity financing, or of companies profits not distributed, rather than borrowing on the market in the short term where the fingerprints of the Fed are so obvious.

In theory, long-term interest rates could increase while the Fed tightens monetary market in the short term, because some savers would be on the margin of save in two markets in the short or long term. Capital markets equity and retained earnings, in theory, could also subject to similar indirect effects.

Thus, the effects of the policy interest rate of Federal Reserve investment are indirect, and it is an empirical question as to whether the effects expected - tight money discourages investment projects - are significantly reflected in the prevention of capital with low expected returns projects.

Luke Threinen and I measured the national average profitability of capital projects of the national accounts, dividing the total interest and profits in the economy for a year by the stock of total capital in place at the beginning of the year. In so doing, we have distinguished residential capital (i.e. houses) capital of the company.

Produced capital value on a number of years. In the case of capital housing, the value is in the form of a dwelling and the convenience of a home. For any piece of capital, profitability (marginal product of capital, as economists say) can be calculated as the value of the dollar it creates during a year - after subtraction of depreciation, fees work, maintenance and intermediate goods hand - per dollar invested.

The capital owners prefer their capital to be more profitable, not less. It is the profitability of capital (after tax and grants, information on those below) which makes it an owner willing to buy the capital in the first place.

Table 1 compares the profitability of capital housing for the return of corrected for inflation on the one-year Treasury bills (for the comparability with the good profitability of housing is adjusted for property taxes). Compatible with the view that monetary policy increases the rate of the Treasury bills and reduced real estate investment, the two series are positively correlated. The home mortgage market seems closely linked, this high rate of Treasury bills cause banks to demand more loans mortgages home that discourages owners and the owners of the construction of houses that the demand for houses is sufficient (i.e.)(, owners can earn rent for their tenants to cover a high rate of mortgage).

Among other factors, Federal Reserve credit facility in the early to mid 2000's made easy to buy and build houses, and that the inventory of houses has increased the amount of rent that each House could win (many homes alla vacantpar example) fellshown in chart 1 as particularly low values of the Red series. In this way, the cycle of the 2000s housing confirms that the usual story about monetary policy how can affect real estate investment.

The usual story on political investment and Affairs of the Federal Reserve said that a similar process works on the business sector: high Treasury bill rates cause banks to pay more for loans to businesses, which discourages firms to invest unless there is sufficient demand for their product (c. - to-d .entreprises can earn enough) (benefits of their operations to cover a rate high loan).

Our results for the business sector are very different from the usual story. Graph 2 compares the profitability of the capital of the company for the return of corrected for inflation on the Treasury bills, and the correlation is negative.

One way that the easy monetary policy could hurt business investment is to promotes home-construction activity and construction of houses takes resources for the construction of the company.

In tables 1 and 2 evidence suggests that the housing market may be stimulated by easier monetary policy, at least in the short term. But the link between monetary policy and the business sector is much lower, and our data are consistent with the idea that, holding constant the rate of inflation and the amount of banking regulation, monetary policy is not a discernible effect on the cost of capital of the company.

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Rabbis raised the alarm about the eating disorders

While no one knows if these disorders are more widespread among Orthodox Jews in society, they can be more baffling for foreigners. Famous orthodox women should dress modestly, yet matchmakers feel no compunction in asking questions about the size of the bride a possible dress - and mother - and the preferred answer is 0-4, little extra.

Rabbis say that the problem is particularly difficult to treat the cause of shame surrounding long mental illness among Orthodox Jews.

"There is an incredible stigma associated with eating disorders - this is the real problem," said Rabbi Saul Zucker, education Director of the Union of Orthodox Jewish congregations of America, and O.U., the Organization issuing the patch of the a-okay very important for food. "But masking does not make disappear." If we do with it, it will get worse. ?

Referring to a high risk of death from heart problems and suicide in patients with anorexia, he said: "this is not a type of luxury of the disease, where, okay, someone is a bit underweight. People die. ?

Teenager, Naomi Feigenbaum developed bizarre eating habits that had nothing to do with Jewish dietary laws: puffs of cocoa and milk in the morning, when she said that she had throughout the day, burn calories and nothing but Crystal Light and the rest of the day chewing gum.

At the table of the kosher meal at his home near Cleveland, she said that she would begin arguments with her parents while she could stomp off and avoid eating. She lost weight so quickly in high school she used pins to tighten its long skirts around his waist.

At the time that the Rabbi came to visit him, she was emaciated. He was told that she must attend a treatment program which met on Saturday, the Jewish day of rest, even if it had to violate religious rules by riding in a car to get there. It could even eat food that was not kosher.

"That was when I realized that it was a matter of life or death", Ms. Feigenbaum, said in an interview. "My Rabbi takes no Jewish law slightly." "But he told me that the Jewish laws are things that God wanted us to live by pas die by and that saving a life takes precedence over all the".

Now 24, she wrote a memorandum, "one life" (Jessica Kingsley Publishers, 2009), on his restoration of anorexia after treatment to branch of Florida of the Renfrew Center eating disorders clinic across the country.

There is little research to indicate how many women in a similar situation. Studies Israelis are consistently high levels of Jewish teenagers but not Arabic ones eating disorders, and a diet Israel rate is among the highest in the world - over a four - women that obesity rates are relatively low.

Data on American Jews are limited, but two small studies reported high rates of eating disorders in some communities. One of those, a 1996 study of a high school in Brooklyn Orthodox, found 1 to 19 girls had a disorder of food - about 50 per cent higher than in the general population at the time. The 1996 study was done with the agreement that it would not be published. The other study, conducted in 2008, looked at 868 Jewish and non-Jewish high school students in Toronto and found that 25 per cent Jewish girls suffering from eating disorders deserve treatment, compared to 18% of non-Jewish girls.

The demand for treatment programs that take into account the Orthodox teenagers has prompted the Renfrew Center to start providing kosher food in his clinics in Philadelphia, New York, Dallas and Florida, while an institution residential new catering to young women in the United States, opened year last in Jerusalem. It is not affiliated with Renfrew.

Fallback resources, an agency of reference of the mental health serving the Orthodox communities, running a direct line of eating disorders, and last year, the fact O.U. team with a social worker for "hunger to be heard.""," a documentary on the Orthodox feeding disorders.

Most young women interviewed for this article said that they did not blame culture for their health problems and said that they derived from support of their religious faith. But they spoke openly of the enormous pressure that they feel to marry young and immediately begin to families and the challenges of their professional careers with the imperative of weighting to be consumed homemaker who prepare meals developed Sabbath.

Experts say that eating disorders usually emerge during adolescence and other periods of transition. And in the large Orthodox families, girls are often should help care for their brothers and younger sisters, leaving them little time to pursue their own interests. Experts suspect that anorexia may provide a way to stall the adult responsibilities literally stopping the clock: drastic weight loss can interrupt the menstrual period.

Orthodox young women should also adhere to a strict code of conduct, with a few points of sale in the rebellion. They are expected to be chaste until marriage and does not date until they start looking for a husband. Even gossip is considered a sin.

Once the match starts, they can be expected to choose a partner for life after only a brief courtship. The mental illness known in a family can affect the chances of a match, not only for the individual, but in addition, brothers and sisters for young women may well avoid psychiatric treatment.

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News Analysis: crisis of Portugal, is concerned about "debt trap Europe."

So far the markets took successive of European sovereign financière-troisième crisis in the wake. But many economists are much more alarmées, more, particularly because the formula for rescue of European leaders keep applying to their most indebted Member States shows no sign of work.

The Greece, the Ireland and almost certainly Portugal now have access to hundreds of billions of dollars in emergency European aid to help them avoid default on their debt. But help is really just more loans, and pay the interest rate of the country, if a little less than what the private market would charge, is still excessively high. Their pile of debt becomes larger with each passing day.

Moreover, the price of these loans was a commitment to slash spending much more radical that national leaders would have the desire or political power on their own Government. And for countries which depend heavily on government spending to generate growth, a rapid decrease in expenditures served sustained economic stagnation or recession pure and simple, making every dollar of the debt that much more difficult to repay.

Economists call it "the debt trap." Escape the trap of generally requires the devaluation of the currency, which can only be done between countries using the euro as their common currency, or economic growth strong, that none of the three, or a sort of bankruptcy processrenounce all three. Add to that the probability that the three countries continue to have unstable Governments until they are a way out, and the financial crisis has no end in sight.

"What has been lost in the debate on how countries can restore their finances to a sort of sustainability, is the limit of how much they can reduce in a period of austerity," said Simon Tilford, Chief Economist of the Center for European Reform in London. "There is a limit to how much any Government can reduce the expenses of return and survive politically unless there is a light at the end of the tunnel, a return to economic growth path."

The problems of the weakest countries are not fair debt, but also the lack of competitiveness in Europe and the rest of the world. Without nations restore competitiveness and sell more goods abroad, which can come only through a long-term process to reduce wages and taxes to stimulate investment from the private sector, economists are not optimistic about the prospects for growth of new soon.

The crisis in the Portugal also raises new questions on the issue of whether the European Union will be to tackle the other side of the crisis: banks. Many Greek, Portuguese and Irish account debt of the banks in countries such as the Germany, France and the Netherlands as well as the British, easy. And if these countries cannot pay its debts, they would have to reprogram the, reduce them or by default, causing a major banking crisis in the rest of Europe.

That reckoning would require Governments to ask their taxpayers to recapitalize the banks, which is exactly what politicians are afraid to do so.

"We have a banking crisis, interlaced with a sovereign debt crisis", said Mr. Tilford. "Europe must deal with both, and it must be recognized that creditor countries - especially Germany - banking sector are not now able to manage the restructuring and by default, and that Governments will have money in the banks to recapitalize the."

In essence, Mr. Tilford said, it is the taxpayers of the Greece, the Ireland and Portugal who are bailing out of German taxpayers, the French and the British and applicants - not the reverse. Indebted countries really get rescues, he said, "but high interest rate loans. To be a real rescue plan, he said, should be a default value.

António Nogueira Leite, a former Portuguese Secretary of the Treasury and Advisor of the center-right opposition, said that the rescue plan packages "does not really take into account the arithmetic of the debt." The experience of the Greece and Ireland shows, said, "that once austerity sets, the country does not generate the means to be able to pay the debt already incurred."

The Economist this week, in an article on the problems of the Greece, said: "international action to save the Greece is rather began to paralyse it.".

Stephen Castle contributed reporting from Brussels.

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Obama, to talk about budget key legislators

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Tea Party budget positions too extreme?House Republicans propose another short-term extensionDemocrats, Republicans differ on cuts in mandatory programsThe meeting will take place on Tuesday, the White House saysWithout year agreement, the government would shut down after Friday

Washington (CNN) - President Barack Obama has invited congressional leaders for a meeting Tuesday to try to push through a budget deal three days before the deadline to avoid a partial government shutdown.

The meeting comes as Republican and Democratic leaders signaled a continuing stalemate in negotiations on how much to cut government spending for the rest of the current fiscal year, which ends on September 30.

Without a deal by Friday, when the current spending authorization measure expires, parts of the government will shut down.

White House spokesman Jay Carney told reporters Monday that "significant progress" has been made in talks so far, including agreement on a target figure of $33 billion in total spending cuts below current levels.

Republican leaders, however, disagreed that any agreement had been reached on a total figure and said a government shutdown would be because of inaction on the parts of Obama and Democrats.

On Monday night, GOP leaders said they were proposing a one-week extension of the current spending resolution that would avert a shutdown and include spending cuts, while also funding the Department of Defense for the rest of the fiscal year. The deal would also cut about $12 trillion, House Appropriations Chairman Hal Rogers said in a statement.

The new extension is "an option" for now, a senior House GOP leadership help stressed, with no vote on it scheduled by the House. If negotiators come up with a broader agreement, the new House proposal could be amended, the aid said.

Republican leaders previously rejected the possibility of another short-term spending resolution like the ones that have kept the government funded for the first half of fiscal year 2011.

By posting the new short-term proposal on Monday night, House Republicans were ensuring they could act before Friday's expiry of the current spending measure. Under rules adopted in January, bills must be available online for 72 hours before a vote.

Year helps to House Majority Leader John Boehner said the lawmaker also told House Administration Committee Chairman Dan Lungren, R-California, to issue guidance to all members Tuesday on how the House would operate in the event of a government shutdown.

Earlier, House Majority Leader Eric Cantor, R-Virginia, accused Democrats of "promoting false promises and using sleight-of-hand budgeting to achieve an imaginary spending cut figure that is still far too low."

However, Senate Majority Leader Harry Reid, D-Nevada, said it was Republicans who were refusing to compromise on a bill passed by the GOP-controlled House that would cut $61 billion in discretionary funding.

Democrats consider the House bill draconian, complaining it would cut key programs for continued economic recovery while eliminating funding for others opposed by conservatives, such as Planned Parenthood and National Public Radio.

Reid cited conservative backed by the Tea Party movement for their unwillingness to work with his side.

"Tea Party Republicans refuse to recognize that their budget is simply an appalling proposal," Reid said of the House bill. "They stomp their feet and 'compromised' call a dirty word and insist on a budget that will hurt America rather than help it."

Carney also called for "solutions that can garner bipartisan support," urging a process "where both sides come together, calmly, willing to jettison their maximalist position because they know they won't get everything they want."

He said invitations for the Tuesday meeting went to Reid; Boehner, R-Ohio; Senate Appropriations Committee Chairman Dan Inouye, D-Hawaii; and Rogers, R-Kentucky.

A senior Democratic source with knowledge of the ongoing negotiations said the biggest remaining obstacle to a deal involves whether reductions in mandatory spending programs, known in appropriations parlance as "Changes in mandatory spending" or CHIMPS, should be part of spending cuts.

Examples of mandatory spending programs include Pell Grants, the Children's Health Insurance Program and some types of highway funding. Such programs are funded for multiple years at a time, with the spending set for the time period covered, free from congressional authorization each year.

According to the senior Democratic source, the chiefs of staff to Inouye and Rogers negotiated throughout the weekend, and the gap between them is about $8 billion to $10 billion.

Multiple Democratic sources say they want about half the overall cuts in this spending bill to come from mandatory spending programs, and that they have proposed the necessary reductions in programs at the U.S. Department of Agriculture, the Justice Departmentthe Treasury and Pell Grants.

Republicans, who want any spending cuts to reflect a reduction in the size of government, noted that reducing the spending in mandatory program for one year doesn't prevent the amount from going back to its original level the following year.

"I've made clear that their $33 billion is not enough and many of the cuts that the White House and Senate Democrats are talking about are full of smoke and mirrors," Boehner said Monday.

Other issues being negotiated include the amount of cuts in discretionary spending and so-called "policy riders" nonmilitary sought by Republicans to prevent federal funding of programs they opposed such as Planned Parenthood. Democratic sources also say Republicans are balking at a Democratic proposal to cut $2 billion to $3 billion in military spending.

On Sunday, top senators from both parties said they expected a deal to avoid a government shutdown purpose made clear that little consensus exists on other looming budget battles.

Reid said on the CBS program "Face the Nation" that Republican negotiators feared a backlash from the conservative Tea Party movement if they meet Democrats halfway on a budget deal.

Because of a surge in conservative support driven by the Tea Party movement, Republicans won control of the House in November and reduced the Democratic majority in the Senate.

Tea Party activists already have criticized Boehner for signaling possible agreement on smaller cuts than called for in the bill passed by the House but rejected by the Senate.

Boehner's hard-line stance Monday reflected the conservatives' concern.

"It's become sadly evident to me, and to the American people, that the White House and Senate Democrats are just not serious yet about enacting real spending cuts," Boehner said in a statement. "And real spending cuts are essential if we're going to create a better environment for job growth in our country."CNN's Dana Bash, Deirdre Walsh and Tom Cohen contributed to this story

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