John Irons's Blog


Economic News, Data and Analysis

The Investment Situation

The current economic situation in the US continues to be mixed. Employment is weak; GDP growth is slow, but positive; consumer spending is holding up, but confidence is down.
What about investment?
The graph below shows that there were signs of life at the end of last year. I would credit the Fed’s decision to lower interest rates over the past year (and to keep them at low levels) with this beginning of a recovery in investment spending.
Will it continue to recover?
Advance data for the first quarter won’t be released until the end of the month. In the meantime, data shows that Industrial Production has stabilized over the first part of the year. Unfortunately, an investment boom seems to me to be unlikely. Even though interest rates continue to be low, the start of the War in Iraq and general geo-political uncertainty will likely keep investment growth at low levels for the first quarter and into the near future.


Source: Nat Ec Trends, p. 22

Filed under: Data, Economy, Monetary Policy, Recession

Ignoring War

In case you were paying attention to the war, you might not have noticed the successful attempts today to pass over $700 billion worth of tax cuts and significant reductions in domestic programs.
The House today passed, by 3 votes, these cuts in taxes and domestic programs. The largest component the tax reduction is the elimination of the tax on dividend income. The Senate voted to remove $100 billion from the proposal, but also rejected an attempt to cut the proposed tax cuts to $350 billion.
*UPDATE: As of 3.26.03, the Senate has reduced the tax cut provisions to $350 billion and has passed the resolution. The resolution will now go to conference where it will be reconciled with the House version.
Republican John McCain was quoted as saying: “We cannot cut taxes and raise spending until we know what the cost of the war is.”
I agree.
It seems to me that, whether you are for or against these particular tax cuts, this does not seem to be an appropriate time to pass fiscal policy changes that will have a very significant impact on the budget for years to come, and especially when the costs of the war and reconstruction are unknown.
The attention of the US public is rightly focused on the war and our troops that are in harm’s way. Now is not the time for the US Congress to enact a large and controversial change in tax policy while the country is distracted.
Congress ought to sit down and turn on CNN like the rest of us.
House Approves Bush’s $726 Billion Tax Cut (
Senate Votes to Shave New Bush Tax Cuts by $100 Billion (

Filed under: Economy, Fiscal Policy, Policy, Politics

Forbes: ArgMax Among Best Economics Blogs

Forbes just named one of the Top 5 Economics Blogs. I guess this means that ArgMax is now a multiple “award-winning” website!
Be sure to vote for argmax on the Forbes poll.
1. – Arnold Kling
2. – John Irons
3. The Knowledge Problem – Lynne Kiesling
4. WinterSpeak – Zimran Ahmed
5. Institutional Economics – Steven Kirchner Best Business Blogs
John Irons loves keeping a close eye on the latest economic data and related news. So much so that he designed a software program–a “bot”–to automatically keep track of the latest information for himself and his readers. A professor of economics at Amherst College in Amherst, Mass., he’s been writing about economics online since 1997, when he hosted a site for Primedia’s ArgMax (the name is a mathematical term to designate “the argument of the maximum”) launched in March of 2002. …

Filed under: Website

How Much Oil Does the US Consume?

Oil prices have been on a roller coaster lately. I was wondering what the price fluctuations might mean for US consumers and the US economy. The answer, of course, depends upon how much oil is consumed and imported – a number that I didn’t know off the top of my head.
I thought I would do a quick back-of-the-envelope calculation. Here’s what I tracked down at the U.S. Energy Information Administration.
For 2001, the US consumed 19.65 million barrels a day, and produced 8.96 million barrels a day. Over the course of a year, this means 7.2 billion consumed and 3.3 billion produced. Hence 3.9 billion imported in the year.
At $30 a barrel, this adds up to $215 billion consumed. GDP in 2001 was just barely over 10 trillion. So oil consumption is then 2.15% of GDP.
So, it seems to me that oil consumption represents a significant, but not huge, part of the current US economy.

Filed under: Data, Economics, Economy

All That Glitters

Why the heck is gold still seen as a “safe haven” investment? Gold prices are rising on war fears, but have fallen $50, or about 13%, over the past month. (See article below.)
Looks to me like gold prices are more of a betting-on-war casino game.
Central Banks and international organizations (like the IMF) own – literally – tons of the shiny stuff. The gold would be much better used if it were made available to the public in the form of jewelry, electronics, etc., rather than sitting idle in vaults around the world.
How much better? Somewhere around $355,885,676,597 better. Don’t believe me? Run the simulation yourself! UPDATE 4-Gold edges up as Iraq on brink of war
LONDON/HONG KONG, March 19 (Reuters) – Safe-haven gold attracted fresh buying on Wednesday as Iraq appeared to be on the brink of war, traders said.
Gold prices were expected to be skittish as a U.S. deadline for Saddam Hussein to go into exile by 0115 GMT on Thursday ticked away.
The precious metal, which traditionally acts as an insurance policy for investors in times of trouble, had the potential to advance further if war broke out.
“The use of military action against Iraq is pretty much a foregone conclusion now and the start of which will give gold an upwards surge,” said James Moore, metals analyst at
[Gold up about 1$ to 338.75, but down from 288.50 last month.]
During the 1991 Gulf War, gold prices initially spiked at the start of allied military action to evict Iraqi forces from Kuwait but then quickly slumped as the campaign proved to be a swift victory.
Gold gained $45 to $415 when Iraqi forces invaded Kuwait in August, 1990, then fell by $40 to $366 when the allied campaign started in January, 1991.

Filed under: Economics, Microeconomics, Policy

Do Deficits Matter?

The short answer is “yes.”
The long answer (nicely laid out in a recent Macroeconomics Forum at Brookings) is that it depends on the time horizon.
Here are the basic ideas.
In the long run, persistent deficits can lower national savings and hence investment; thus harming the economy in the future.
In the short run, reducing national savings may be a good idea, if we have an economy that is operating below potential, and if we need some additional current expenditures to get the economy moving again. (*However, see note below.)
Of course the easy question is “does it matter?” – the harder question is “how much?” Unfortunately, this is a fundamentally hard question to answer (since just about everything depends on everything else in the macroeconomy, and we can’t exactly run controlled experiments on economies).
As a result, there is no consensus about the magnitude of the effect of deficits on, for example, interest rates or long-run growth. At most we can say that there is potentially a large and significant effect – it would seem prudent then, at the very least, to limit persistent deficits as much as possible.
For more on the effect of deficits, see the link below. For current and projected deficit numbers, see CBO: The Budget and Economic Outlook: Fiscal Years 2004-2013
*note – The more astute macroeconomists will of course note that Ricardian equivalence provides a theory in which private savings decisions may perfectly counteract the effect of deficits. My view is that Ricardian equivalence, while a nice extreme case, which provides some good intuition as to how the economy potentially works, fails both theoretically and empirically as a guide to policy. I think my view is common among most economists (although I haven’t done an exhaustive poll!)

The Brookings Institution
Controversies over the effects of fiscal policy on the economy have been at the heart of the policy debate surrounding the chronic deficits of the 1980s, the sharp rise in official budget surpluses in the late 1990s, and the equally sharp decline in the fiscal outlook recently.
This panel discussion, the first in an ongoing series on macroeconomic issues sponsored by the Brookings Institution, will examine a variety of questions regarding the effects of deficits on the economy: Do budget deficits matter? Under what circumstances and what time horizons are they good, bad, or neutral? How important are they to strong economic growth?
Following their remarks, panelists will answer questions from the audience.

Filed under: Data, Economics, Economy, Fiscal Policy, Policy, Recession

Oil and the Economy

With oil prices, and gasoline prices, at multi-year highs, I thought it would be useful to take a look back at the relation between oil prices and the economy: ArgMax Economics Weblog: Oil and the Economy.
It looks like my worries were justified!

Filed under: Economics

Employment Situation: Not good

The Bureau of Labor Statistics released its monthly employment report today. The unemployment rate was up 0.1 to 5.8% in February.
The big news in the report, though, was that total (non-farm) payroll employment fell by 308,000 after seasonal adjustment. This seemes to have been interpreted as a big negative for the economy and was much larger that expected.
Keep in mind that the employment data is often called a “lagging indicator,” meaning that the statistic tends to reflect the past state of the economy more that it indicates where the economy is headed. The weak employment number tends to indicates what we already know – that the economy was indeed weak; but it does not necessarily mean the economy is headed further downward.
However, for the unemployed – and those looking for jobs – it is certainly not good news.

Total nonfarm payroll employment fell by 308,000 in February, while the unemployment rate was about unchanged at 5.8 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job losses were widespread, with retail trade and services posting especially large declines.

Filed under: Data, Economics, Economy, Recession

UNIX TimeStamp Converter

PHP timestamp lookup
A mostly useless tool….

This is a tool to convert a
UNIX timestamp to “real” time.
The timestamp is the current time measured in the number of seconds since the Unix Epoch (January 1 1970 00:00:00 GMT).

echo "Current Time:" . date(" F j, Y, g:i a");
if (isset($ts)) {
echo "
Timestamp lookup:” . date(” F j, Y, g:i a”, $ts) . ““;

Enter timestamp:

Filed under: Website

BackIron Referral Tracking Tool

I’ve tried my hand at developing a PHP based referral tracking/displaying tool. I’ve named it BackIron for no good reason.
Just look at the bottom right of the page, below “Recent Referrals,” to see a sample of how it can be used. You can also see all referrals in the past 24 hours.
BackIron will display referrers to your website. Just include the .php script on any page(s) you want to track. You need to have a web server that provides PHP and a MySQL database.
Comments welcome!
To install:

The script currently only supports MySQL, but other modifications may be easy.
$output_type = [ “none” | “short” | “all” ] — Default: Short
$output_number = number — Default: 25
$output_min = number — Default: 2
1) To display the top 15 referrers (with a minimum of 5 refers).
$output_type = “short”;
$output_min = 5;
$output_number = 15;
2) To Track referrals only
$output_type = “none”;
The MySQL table srtucture should be as follows:
# Table structure for table `bi_refer_table`
CREATE TABLE bi_refer_table (
refer_name text NOT NULL,
refer_title text NOT NULL,
count int(11) NOT NULL default ‘1’,
time int(11) NOT NULL default ‘0’,
keycount int(11) NOT NULL auto_increment,
refer_full text NOT NULL,
PRIMARY KEY (keycount)

Read the rest of this entry »

Filed under: Website