CO2 emissions in East Asia are growing faster than GDP.

Why have gold prices soared despite low demand?

Krugman and Delong on whether Obama should worry about the carry trade.

Our continuing housing problems.

40% of gov't debt will be refinanced in the next year.

Labor economists generally agree that each extra year of school raises someone's earning by 10-15%. But it turns out that math classes could account for half of those gains. 

And we can thank Ronald Reagan for this piece of knowledge. Following a critical report of the American education system by the Reagan administration in 1983, many states around the country raised the number of math and science courses that were required for graduation. In a new paper, Harvard's Joshua Goodman looks at what happened to earnings following the reforms. The higher math requirements (typically from 0 or 1 required courses to 2 or 3 courses) had the biggest impact on schools in low-income, black areas (most likely because white/higher income students were already taking 2 or 3 math classes.)

Goodman finds that:

[B]lacks benefited substantially from the additional math courses they were induced to take by these reforms. Each class is estimated on average to raise blacks' earnings by around 8%. Given that 15% is usually an upper estimate for the value of a year of schooling, these results imply that math coursework can [account for] a substantial portion of that value, at least for blacks.

Overall, however, the increased requirements that followed the Reagan report didn't have a sizable impact on earnings for the nation as a whole -- again, probably because the average student was already taking more than the new minimum requirements.

Martin Wolf: Tax windfall bank bonuses.

Did the home buyer tax credit weaken the rental market?

Given the crisis, 401(k)'s are actually doing pretty ok.

Is it time for a tax credit to make hiring cheaper for employers?

Correction: Dark pools aren't making aggregate market data unreliable.

Will Ferrell is Hollywood's most overpaid star.

That would be the dread Kanjorski amendment, which created a real uproar when the Pennsylvania congressman first announced it two weeks ago. According to Politico's Victoria McGrane, the measure isn't as hawkish as a lot of bank lobbyists feared at the time--for example, it doesn't lay out a set of criteria according to which the government would automatically break up large, interconnected firms. But it does shift the discretion to break up big banks from the Fed (which is generally less hawkish on these matters) to the proposed council of regulators, which is likely to be a bit more skeptical of them (particularly the FDIC, which will have a seat on the council).

On the other hand, we don't know what the council protocol will be. If, for example, each member gets a veto over this kind of thing, then the council is obviously only as hawkish as its least hawkish member...

Interesting point about the China trip from expert Minxin Pie, via Mike Allen:

What was accomplished: There may be a silver lining. Because the press coverage of his trip is quite bad, it may have caused some heartburn in Beijing. At the end of the day, Chinese leaders know that a good relationship with Obama (and a weakened Obama cannot manage U.S.-China ties effectively) will be in China's interest. So there is a chance that China will do something after the trip is over to show that Obama's visit is not fruitless after all.

Sounds plausible. One thing you can't emphasize enough is that, just as we're pretty sensitive to the domestic political constraints facing the Chinese regime, they're hyper-conscious of similar constraints on our administration.

P.S. For what it's worth, Pie also thinks Obama's options in China were pretty limited, but that he should have held his ground on the live national broadcast:

Opportunities missed: I would say that he did not miss any big opportunities because there were none to begin. He did miss one or two minor opportunities. For example, insisting on a nationally televised town hall meeting in Shanghai (and calling the Chinese government bluff by threatening to cancel the event if it is not televised nationally), Obama would have scored a minor pr victory.

I guess there are two theories on this question: 1.) That the Chinese have a huge amount of leverage over us because we owe them over $1 trillion; it's only natural that we'd pull our punches under the circumstances. 2.) Obama's believes you're more likely to make progress through patience and dialogue than with in-your-face demands; his instincts are conciliatory rather confrontational.

While both probably apply on some level, I happen to think the latter looms larger. There's no question that our dependence on Chinese debt-buying gives them power over us--long-term interest rates would abruptly spike if they suddenly stopped vaccuuming up U.S. Treasuries. (And it would be an absolute calamity if they went so far as to sell their U.S. debt holdings.) But, of course, that wouldn't just hurt us. It would send the market value of China's Treasury holdings into a nosedive and subject the Chinese leadership to some whithering domestic criticism (for being dumb enough to build that trillion-dollar stockpile of Treasuries in the first place). The regime gets enough criticism for the mere possibility that they'll lose money on this investment. Actually seeing its value collapse could be closes to destabilizing.

To the extent our silence on their mercantilist policies (currency manipulation, export subsidies, etc.) is driven by their economic leverage over us, I think it's much more subtle than our fear that they'll retaliate. The practical upshot of their leverage, I think, is agenda-setting power. That is, when we get together for bilateral meetings, the Chinese insist on talking about things like our long-term budget deficit, health care (a major driver of that deficit), the proper timetable for withdrawing U.S. monetary stimulus, U.S. protectionism, etc., etc. And because they hold so much of our debt, we have little choice but to honor those requests. But, of course, more time spent talking about our deficit and monetary policy is less time we have to nudge them on their currency.  

Still, I'm fairly certain that the rationale for the Obama approach runs much deeper. I've talked to several Treasury officials about this in recent months, and they all maintain that, given the m.o. of the Chinese leadership, and the domestic political constraints they face, they can make far more progress talking about currency policy "behind closed doors" (that's a phrase you hear a lot) than in public. And they insist that that's precisely what they've been doing. The argument, in a nutshell, is that lecturing the Chinese on their currency only makes it harder for them to act, because it would make them look like they're caving to foreign pressure, which is a dicey issue domestically.

Now we can argue whether it's the case that you make more progress this way--that obviously remains to be seen. But I've heard this argument often enough from administration officials,  and with enough conviction, that I think they sincerely believe it.

The growth of dark pools is making stock market volume data less reliable.

Regional Fed presidents fearful of losing power and autonomy under Dodd plan.

Despite getting paid less, women have the same job satisfaction as men.

Goldman disagrees with Roubini's 'carry bubble' theory.

Ezra Klein: Why would any company want to provide healthcare for employees?

Courtesy of Barry Ritholz:

Question: Is the decline in good rock music driving the decline in oil production, or is it vice versa? Economists and aesthetes will debate this for decades, I'm afraid.

(With apologies to Felix Salmon for ripping off his "correlation of the day" franchise--all proceeds go to him.)

P.S. Another question: It says on this wiki page that the "Rolling Stone 500 Greatest Songs of All Time" list was chosen "based on votes by 172 musicians, critics, and music industry figures." If that's the case, then it occurs to me that the distribution of songs across years might always look something like this, regardless of when you plot it. That is, it may be that people--particularly insiders and elites--have a bias toward thinking the best music was made 50 years ago. So if you did another 500 greatest songs list in 2054 rather than 2004 (when this one came out), the peak might come some time this decade. (Hard to believe, I know, but just wait till you hear the schlock the kids are listening to in the 2050s...) Meanwhile, I'm guessing that peak oil production is going to stay put right where it is.

Just thought I'd highlight another layer of spuriousness in our analysis...

The worst pullback in consumer spending since the 1970's has apparently come to an end, as the following chart shows:

Since August this data point has reentered positive territory -- a fairly good indicator that a recession is over. Still, the major worry out there is that the end of the home-as-ATM era means people will have fewer funds to spend. This in turn would imply that a return to the long-run-average of 3.5% annual growth in spending is a long shot.

But a new study by the Boston Fed's Daniel Cooper suggests that we shouldn't be overly concerned with the impact of declining home-equity extraction on spending. Cooper argues that only the credit-constrained (that's economist shorthand for those with little access to credit) borrowed heavily against their homes to consume. He estimates that an 11% decline in housing wealth in 2008 lead to only a 0.75% fall in non-housing-related spending. In other words, declining home prices could only have a small impact on people's willingness to spend. The basic reason is that, in a given year, the majority of homeowners are not credit constrained, so a big drop in home prices shouldn't affect their spending ability (that is, if you believe Cooper and Willem Buiter's contention that the housing wealth effect is really the housing-as collateral effect).

Sure, there are other reasons why Americans might be more cautious about spending going forward: Say, a post-crisis change in the consumption culture or the impact of high credit card debt levels. On the other hand, a better-than-expected job market, which isn't out of the question, might put many worries to rest.

Today's big financial story is the TARP inspector general report criticizing the New York Fed for not negotiating a better deal with all the banks--like Goldman and Merrill Lynch--whose mortgage-backed securities AIG had effectively insured, and to whom it owed big money once the market melted down. The inspector general, Neil Barofsky, says the Fed should have used its leverage to persuade the banks to accept less than 100 cents on the dollar (aka, a haircut).

For what it's worth, I think Matt Ygelsias is right about why this would have been a lot trickier than it sounds:

[O]ne big question is how would that have worked. If AIG were a firm going bankrupt, what you would do is call everyone up and say “uh…we screwed up…we can pay everyone 80% of what we owe you or else we can declare bankruptcy and you guys can roll the dice and see what you get in the end.” That’s a good strategy. But once AIG had been taken over by the government, the government couldn’t really threaten to default on AIG’s contracts. The government could have threatened to use its regulatory authority in a punitive way unless AIG counterparties agreed to a quasi-voluntary haircut. I can see the case for doing that, but I can also see the case for not doing it.

The crux of the matter is that once AIG goes from being an on-the-verge-of-bankruptcy company to a government-owned company, there’s really no more leverage that’s 100 percent legitimate.

Exactly. Recall that the government takeover came in September, whereas the counterparty negotiations happened in November. At that point the Fed could have just lied and said it was going to let AIG slide into bankruptcy if the counterparties didn't take a haircut. But 1.) it's not a great policy for the government to get into the business of systematic, strategic lying, and 2.) almost no one would have believed it in any case, since most of the reasons for bailing AIG out in September also existed two months later.

What will happen to Berkshire Hathaway after Warren Buffett dies?

The best day to buy a car: Black Friday.

Home prices in southern California tick upwards.

Hong Kong says Fed policy is creating bubbles in its markets.

The Boston Globe endorses Bill Belichick's 4th-down call.

As I mentioned yesterday, I'm somewhat skeptical of the benefits of "getting tough" with the Chinese on issues like currency manipulation and our trade deficit. (I think you need to do it, but you've got to be sophisticated about it.) But Obama's town hall meeting in Shanghai, which was heavily stage-managed by the Chinese, is one place I think the administration really should have gotten tough. From the NYT:

The event in some respects signaled a retreat from the reception given at least two earlier American presidents, Bill Clinton and George W. Bush, who both asked for, and were granted, the opportunity to address the Chinese people and answer their questions in a live national broadcast.

One local television station broadcast Mr. Obama’s session live. But the official Xinhua news agency offered only a transcript of the exchange on its Web site instead of the live Webcast it had promised. The White House streamed the event live on its Web site, which did not appear to be blocked inside China. But that site is not a common destination for most Chinese looking for breaking news.

I obviously don't know all the back and forth that went into negotiating the protocol for this event, and so I hate to second-guess. But this strikes me as a bluff by the Chinese that we probably could have called. Given the precedent with Clinton and Bush, it doesn't seem like the Chinese were going to blow up the whole trip over our insistence on a live national broadcast. Likewise, I'm not sure when the administration found out that Xinhua would only provide a transcript rather than stream the event live, but, if it was beforehand, it seems like it would have been worth standing our ground. And if it was afterward, it seems like it would be worth retaliating in some small but unmistakable way. This  all just seems like classic salami tactics by the Chinese...

P.S. Of course, it's possible that the administration is planning to do just that. Worth keeping an eye on.