Secondary Sources: Why No Taper?, U.S. Default, Returning to Egypt

A roundup of economic news from around the Web.

–Why No Taper?: Dave Altig lays out the case against the Fed cutting back bond purchases in September. “So, what do we have, then? Inflation is low relative to the FOMC’s objective—and has not moved in the direction of that objective with any conviction. GDP growth has disappointed, with the anticipated pickup in second-half growth nowhere in sight. “Continuing gains in the labor market” at the pace seen earlier in the year are looking a little shaky. I find it pretty easy to see how this fails to add up to satisfaction of the three-part economic conditionality laid out in June by the Chairman (on behalf of the FOMC).”

–U.S. Default: Donald Marron notes that the U.S. has defaulted. “The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown. This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest. The United States thus did default once. It was small. It was unintentional. But it was indeed a default. And the nation still stands. But that hardly means we should run the experiment again and at larger scale. Zivney and Marcus examined what happened to T-bill interest rates as a result of this small, temporary default. They find a surprisingly large effect. As best they can tell, T-bill interest rates increased about 60 basis points after the first default and remained elevated for at least several months thereafter. A simple way to see that is to look at daily changes in T-bill yields”

–Returning to Egypt: Simone Bertoli and Francesca Marchetta look at the impact of migrants returning to Wgypt. “Return migrants have major social and economic consequences for their countries of origin. This column uses Egyptian household-level data to analyse the effects of migrants returning from neighbouring Arab countries. Start-up firms by returnees are more likely to survive, and returnee families tend to have more children. These results imply that return migration may not be an unmitigated blessing for Egypt.”