On June 22, 1775 the Continental Congress Created a New Currency

See Happy Birthday, Money by Jason Furman, who was the chairman of the White House Council of Economic Advisers from 2013 to 2017. Excerpts:

"On this day in 1775, the Continental Congress invented a new currency and authorized the printing of $2 million. 

"In theory, the $2 million of “bills of credit” it ordered up (initially in denominations from $1 to $20) were like bonds, entitling the bearer to be repaid in silver or gold at a future date, albeit without any promised interest or a plausible mechanism to raise the precious metals in question. In practice, the paper looked and functioned like currency today"

The increase in the money supply led to inflation. 

"More notes were issued to deal with higher inflation, which further drove up prices. Treacherous Loyalist New Yorkers compounded the problem by adding forged notes into the mix."

"In 1779, the Continental Congress delayed the promised repayment of the notes, which further eroded their value. By the early 1780s, the currency was nearly worthless — giving rise to the expression “not worth a continental.” [to refer to something cheap or that has no value] The last years of the war were instead financed with foreign aid, loans and a new national bank."

"The Continental currency was good enough to help America get through the first critical years of war but the failure to replace it with a credible national system of finance helped to doom the peace. The newly independent states each went its own unsuccessful way. Rhode Island issued large amounts of paper money, which led to inflation and riots. Massachusetts returned to using silver and gold coins and levying high taxes — and the result was even worse, with Shays’ Rebellion helping to end the Articles of Confederation."

"Fiat money returned, briefly, during the Civil War, when it was once again rendered useless by inflation. Otherwise, U.S. dollars were backed by something shiny and solid more or less all the way through 1971, when President Richard Nixon took the final steps to exit the Bretton Woods system in order to prevent a large outflow of gold to other countries." 

"It was not ignorance that sealed the fate of the Continental currency. Many policymakers of the era understood that printing more money would raise prices, and that paper promises without credible mechanisms for repayment would not be taken seriously." 

Related post:

How Benjamin Franklin Helped Foil Early American Money Counterfeiters: Scientists identified specific pigments, minerals and fibers used in the bills (2025) 

Young Graduates Are Facing an Employment Crisis

Slow hiring is especially daunting for those just starting out; ‘Right now, I’m pretending employment doesn’t exist’

By Justin Lahart and Te-Ping Chen of The WSJ. Excerpts:

"The overall national unemployment rate remains around 4%, but for new college graduates looking for work, it is much higher: 6.6% over the past 12 months ending in May. That is about the highest level in a decade—excluding the pandemic unemployment spike—and up from 6% for the 12-month period a year earlier." (people ages 20 to 24 looking for work who have at least a bachelor’s degree)

"Those ages 35 to 44 with bachelor’s degrees had a 2.2% unemployment rate over the past 12 months, though that was up from 1.8% over the prior period."

"unemployment among college grads ages 22 to 27 averaged 5.8% in the first three months of this year"

"he gap between the unemployment rate for these young graduates and the broader population became its widest in about 35 years"

"The culprit, economists say, is a general slowdown in hiring. That hasn’t really hurt people who already have jobs, because layoffs, too, have remained low"

"Entry-level hiring has fallen by 17% since April 2019"

"hiring has . . . weakened in . . . areas that have traditionally snapped up many college graduates including tech and financial services"

"companies are increasingly leaning on artificial intelligence to perform low-level tasks that a new employee might have done."

"High-school graduates ages 18 to 19 with no college averaged an unemployment rate of 14.5% over the past 12 months. That is up from 13.3% over the prior 12-month period."

Other related posts:

What Happens When a Whole Generation Never Grows Up? As American 30-somethings increasingly bypass the traditional milestones of adulthood, economists are warning that what seemed like a lag may in fact be a permanent state of arrested development (2025) 

The White-Collar Hiring Rut Is Here. That’s Bad News for Young College Grads. (2024)

The Class of 2023 Faces a Jittery Job Market: ‘The World Seems to Have Flipped on Its Head.’ (2023) 

The Class of 2020 Looks for Work (2020)

Historically, college students who graduate into a recession have settled for lower-paying jobs at less prestigious companies (2020)

Has The Recession Been Hard On College Graduates? (2010)

How Recessions Affect Young People (2010)

Chocolate, nationality and price elasticity of demand

See Soaring Costs Expose a Trans-Atlantic Chocolate Divide: As cocoa prices surge, Europe’s chocolate habit is proving more resilient than America’s by David Wainer of The WSJ. Excerpts:

"Europeans may be a bit more committed to chocolate than their American counterparts." 

Perhaps this means that there are fewer close substitutes for chocolate for Europeans based on their tastes-this would make their demand less elastic.

"the U.S. accounts for about a quarter (25%) of global chocolate sales"

"Americans and Europeans tend to satisfy their sugar cravings in different ways" 

Another example of differing tastes and preferences, which affect demand.

"American consumers are often more impulsive, picking up a bar as a last-minute decision at the checkout line or while filling up at a gas station"

"Europeans treat chocolate more like a daily staple. Bars with higher cocoa content are often a regular item on the family grocery list in Europe, which accounts for roughly 50% of global sales." 

This suggests that Europeans spend a larger share of their budget on chocolate than Americans do, although it is not for sure-but if their total spending is twice ours (50% of world sales vs. 25%) and their incomes are lower than ours then it would be true and when you spend a larger share of your income on something it has a higher elasticity. But then why does the article elsewhere suggest European demand is less elastic or lower? Perhaps their greater taste for chocolate means fewer substitutes, as stated above. This means a lower elasticity and maybe this greater love of chocolate outweighs the share of income factor.

"Since 2021, chocolate prices have risen more than 30% in both the U.S. and Europe"

"the impact on demand has been more pronounced in the U.S., due to key differences in price elasticity between the two markets."

European companies "have been able to pass on price increases there without sacrificing volume too much." 

That suggests that the demand is not very elastic in Europe.

"Mondelez (European) is forecasting a 10% drop in adjusted earnings per share, which is relatively mild when compared to a mid-30% estimated decline at Hershey"  

We would expect that if demand was less elastic in Europe. 

"Another downside of focusing on the U.S. . . . is the significant discrepancy in GLP-1 penetration. The weight-loss and diabetes drugs have taken off in the U.S. and are known to suppress cravings for snacks and sweets." 

This suggests more substitutes for chocolate in the U.S. and higher elasticity. More substitutes since people like other things just as well. 

What ends expansions? (or what causes recessions according to Alan Blinder and Austan Goolsbee)

I originally posted this in 2019. The two articles excerpted here are both from 2019.

See The Obama-Trump Economic Boom: The current expansion may soon be America’s longest, and neither inflation nor tariffs are likely to stop it by Alan S. Blinder. He is a professor of economics and public affairs at Princeton University and a former vice chairman of the Federal Reserve. Excerpts:

"A common answer in the modern era is that the Federal Reserve clamps down to fight inflation. But today inflation remains quiescent despite extremely low unemployment. That the Fed didn’t raise interest rates in January, even with the federal-funds rate barely above inflation, suggests that Jerome Powell may be an even more dovish Fed chair than Janet Yellen. It sure doesn’t look as if an overzealous Fed will squelch the expansion.

Another common expansion killer, though not lately, is a spike in the price of oil. Predicting the price of oil is a fool’s errand, and I won’t try. But a jump to, say, $90 or $100 a barrel doesn’t look likely any time soon."

Lots of people are fretting about a full-scale trade war with China. That remains possible—and a threat to the world trade system. But would it derail the U.S. expansion? Not unless it’s a whopper. Exports to China are only about 1% of U.S. gross domestic product. Even if they fell by half—well, you can do the math. America’s total exports to all countries are vastly larger. But lately, our bellicose president doesn’t sound inclined to declare trade war on Canada. Let’s hope it stays that way.

According to legend, stock-market crashes often end booms, but that’s an exaggeration. A crash may have to coincide with some other financial calamity, as in the banking, bond and mortgage disasters of 2008-09. In contrast, the U.S. economy sailed right through the megacrash of 1987. The current expansion has already survived a market “correction” in December without much apparent damage. So while I never predict stock prices, a market crash ranks low on my expansion worry list.

Last but certainly not least, expansions are sometimes killed by sudden drops in either consumer or business confidence—or rather by the declines in spending that such drops engender. Might that happen in the next few months? I suppose so, but recent economic data don’t point in that direction.

Recent political “data” are a different matter. It is certainly possible that the U.S. will find itself in a full-fledged constitutional crisis in the coming months, precipitated by, say, the “national emergency” over immigration. What then? If business managers and market traders behave like Mr. Trump’s base, they’ll shrug it off: Constitution, shmonstitution. But if threats to democracy shake confidence, look out.

A low probability, you say? I agree. My bet is that the current expansion will sail through June, setting a new record."

See also You Never Know When a Recession Will Sneak Up on You by Austan Goolsbee. He a professor of economics at the University of Chicago’s Booth School of Business and was an adviser to President Barack Obama. Goolsbee seems to think a recession is more likely than Blinder and that an unforseen event that hurts confidence is more likely. Excerpts:

"recessions don’t come only from large, foreseeable events. Modest, unpredictable incidents can cause economic downturns if they lead businesses or consumers to freak out."

Seemingly small events can cause enormous problems. Think back to 2001 and the last recession of a “normal” size. (The recession that started in December 2007 was, by far, the deepest and longest since the Great Depression — about as far from normal as a recession can be.)

The 2001 recession developed when the internet bubble popped, or at least that’s how we tend to remember it. But go back and check the numbers. The internet accounted for, at most, about 2 percent of the economy then. If we use the logic we’ve been applying to trade wars and government shutdowns, it would seem that popping the internet bubble shouldn’t have been enough to cause a recession. But it did.

The reason it did was that the pop freaked out people outside just the internet sector. Consumer confidence plunged, and businesses stopped investing. The recession spread far beyond its origin.

In this sense, virtually every recession in the last 40 years coincided with a signal of fear, like a significant drop in consumer confidence. Sometimes confidence fell and didn’t spiral into recession, but all recessions have started with a confidence spiral."

"Another government shutdown could spiral into something far more damaging than the small decline in workers’ share of the economy that the simple math suggests. An escalating trade war with China could ignite a recession, even if the numbers show that trade isn’t a large share of the United States economy. These events just need to spook consumers or businesses into putting off spending, and then more dire consequences can start to snowball."

"If something scares people enough, it can start a recession, and you probably won’t know until it’s too late.

That’s because recessions are hard to recognize at the start. Looking back, for example, we know that a recession officially began in April 2001, yet scarcely anyone understood that then. In June 2001, only 7 percent of economists in the monthly Blue Chip survey believed a recession was underway. In the months before that 2001 recession began, only 16 percent of economists expected that a recession would start within the next year. Now, 25 percent of economists in a Wall Street Journal survey say they expect a recession within the next year, and anxiety seems to be growing."

Related post:

Monetary Policy and the Great Crash of 1929: A Bursting Bubble or Collapsing Fundamentals? (2025) 

Some posts on rare earth materials

China’s Rare Earths Aren’t as Rare as You Think: When the country tried to choke off supply of the metals before, the world found ways to adapt (2025)

China's Threat To Restrict Exports of Rare Earth Minerals to the U.S. Is an Empty Bluff: China's 2010 export restrictions on rare earth compounds failed then, and they would fail now  (2019)

Rare Earths Crisis in Retrospect (2018)

China’s Rare-Earths Bust: A new Honda engine shows the limits of Beijing’s coercion (2016)

The rare earth crisis was exaggerated and what wasn’t exaggerated the market alleviated (2014)

How the Great Rare-Earth Metals Crisis Vanished: China's attempt to control the market for materials essential to the tech industry is turning to dust (2014) 

Life is full of tradeoffs: If we want more solar panels do we have to give up some pine trees? And cause inbreeding and birth defects in bears due to reduced habitat?

See The South Is Having Second Thoughts About Trading Pine Trees for Solar Panels: Americans used to focus on the cost and reliability of electricity. Now, they are fighting over how it is produced, a solar executive says by Ryan Dezember of The WSJ. Excerpts:

"Hunters, botanists, residents worried about water quality and people citing Scripture lined up to oppose the installation of 2,100 acres of solar panels next to a wildlife preserve.

But it was the plight of the local black bears that doomed the proposal from Silicon Ranch, one of the South’s largest solar operators."

"The 300 or so bears that roam the Oaky Woods Wildlife Management Area and adjacent timberland are already so hemmed in by highways and development that they are inbreeding"

"The timberland that Silicon Ranch wanted to buy and develop near Perry was long managed as part of the adjacent wildlife preserve. Much of the property was logged to make way for solar panels. 

The bears, for which an area high-school football team is named, were a concern from the start. Ben Carr, a graduate student at the University of Georgia who studies them, said bears can coexist with timber operations, denning in the slash piles left by loggers and feeding on the blackberries that sprout. He presented research at public meetings showing how development reduced their range and pushed sows and their cubs from familiar territory.  

He described the deformities turning up due to genetic isolation. “Those are warning signs,” Carr said."

Related posts:

Life is full of tradeoffs: We can have more data centers and local tax revenue or less tourism and a dirtier environment (2025) 

Life is full of tradeoffs: Seafloor mining could bring us metals used in the making of electric-vehicle batteries at the cost of harming the environment (2025) 

Life is full of tradeoffs: If we want a cleaner environment in Massachuesetts do we have to give up sand used to make concrete? 2024 (this one has another 20 posts on this topic that are not linked here)

Life is full of tradeoffs: If we want a cleaner environment in Minnesota do we have to give up metals needed for green energy? (2024) 

Life is full of tradeoffs: If we want to protect Hawaii's marine life and tuna fisheries we will have fewer rare minerals for defense applications (2024) 

Life is full of tradeoffs: If we want to keep gas prices low we might have to reduce sanctions on Russia (2024)

Life is full of tradeoffs: if we want more "big data" and artificial intelligence then we might have less green energy (2024)

Life is full of tradeoffs: if we want more nickel to make EV batteries we might have to use more coal (2024)

Life is full of tradeoffs: it costs money to keep chemicals out of our water systems (2024)

Life is full of tradeoffs: reaching net zero emissions by 2050 vs. the costs of the transition (2023) 

Life is full of tradeoffs: If we want more wind farms, we might have fewer jaguars & pumas and less water (2023)  

Lawmakers Traded Stocks Heavily as Trump Rolled Out ‘Liberation Day’ Tariffs

Buying and selling of stocks spur new push to further restrict lawmakers’ market activities

By Katy Stech Ferek, Jack Gillum, James Benedict and Gunjan Banerji of The WSJ. Excerpts:

"As markets tanked in the wake of President Trump’s “Liberation Day” tariffs in early April, members of Congress and their families made hundreds of stock trades, shining a spotlight on a controversial practice that some lawmakers have pushed to ban.

From April 2, when Trump launched the sweeping tariffs, to April 8, the day before he paused many of them, more than a dozen House lawmakers and their family members made more than 700 stock trades, according to a Wall Street Journal analysis of disclosure filings. Top stocks purchased in that “Liberation Week” period, by the number of trades listed in the disclosures, included MKS Instruments and JPMorgan Chase, while the most sold stocks included Honeywell International and Visa."

"Disclosure rules only require members to report wide ranges of transaction values, not specific amounts or the price. For most members who both bought and sold, that makes it impossible to tell whether their overall trading activity that week made or lost money."

"Lawmakers passed a law in 2012 prohibiting trading on insider information and mandating disclosure"

"the opportunity for insider trading by members of Congress is very real . . . said Rep. Seth Magaziner"

Related post:

Looks Like Some Pretty Good Capitalists Run The Congress (2024)

Did U.S. government officials make money buying and selling stocks based on their inside information about Covid policy? (2022) 

60 Minutes: Insider trading is legal for members of Congress-but it is nothing new, it started in 1790  (2011)

Schools Can Pay Their Athletes—and College Sports Will Never Be the Same

The landmark House settlement seeks some equilibrium on the playing field. But plenty of questions—and some denial—remains

By Jason Gay of The WSJ. Excerpts:

"a settlement has been approved allowing schools to directly pay their athletes.

This isn’t a salary, technically. This is compensation from schools to athletes for use of their “name, image, likeness,” but it’s not a measly NIL like a burly offensive lineman getting all the bratwurst he can eat. This is a real paycheck, directly from the college."

"The settlement of this class action—House vs. NCAA, in which current and former athletes sought name, image and likeness opportunities and a share of athletic department revenue—had been in the works for a while. 

On Friday, a federal judge signed off on the $2.6 billion settlement, which includes back pay to litigants but also creates a revenue-sharing system “in which each Division I school will be able to distribute roughly $20 million a year to their athletes,” the Journal reported."

"The bulk of those $20 million allotments are expected to go to high-revenue sports like football and men’s basketball—that’s where the money’s coming from, after all. Other beneficiaries may be growing sports like women’s basketball and softball."

"The revenue sharing payments will come from the schools, and third party NIL deals over $600 will be subject to review by “NIL Go,” an oversight group overseen by Deloitte.

The idea here is to put outside NIL deals under a microscope—find out what player deals are legitimate arrangements, and what are booster largesses masquerading as NIL."

"Enforcement will be a headache. So will the invariable league challenges."

"the proportion of revenue (22 percent) given to athletes"  

Related posts:

Are lucrative deals for college athletes doomed? (2025) 

The University of North Carolina is trying to turn its student-athletes social media stars (2025)

March Madness will cost $17.3 billion in lost work (2023)

Supreme Court Rejects NCAA’s Tight Limits on Athlete Benefits, Compensation (2021) 

March Madness Is a Moneymaker. Most Schools Still Operate in Red (2021)

NCAA Takes Another Court Hit on Athlete Compensation: The Ninth Circuit ruled that the organization’s restrictions violated federal antitrust law  (2020)

The NCAA wants an antitrust exemption from Congress so it can oversee name, image and likeness deals (2020)

Cost of attendance stipends in college sports  (2018)

How The Economics Of College Sports Might Be Distorted  (2017)

All is not well (financially) in the world of college football (2015)

Public universities spend more per athlete than they do per student (2013)

Will Moving To NCAA Division I Status Pay Off For The University of the Incarnate Word? (2012)

There's A New Book On The Economics Of College Sports  (2011)

What Economists Say About "March Madness" (2009)

The Flutie Effect: When The Teams Win, More Students Apply To The College. (2008)

Basketball on Office Monitors Madness for Business (2008) ("streaming all 63 final college basketball games free, will cost American businesses about $1.7 billion in lost productivity" plus computers  servers might crash)

Are Businesses Absorbing the Tariffs or Passing Them On to Their Customers?

Jaison R. Abel, Richard Deitz, Sebastian Heise, Ben Hyman, and Nick Montalbano. They are all with the Federal Reserve Bank of New York. Excerpts:

"most businesses passed on at least some of the higher tariffs to their customers, with nearly a third of manufacturers and about 45 percent of service firms fully passing along all tariff-induced cost increases by raising their prices."

"As a result of the higher tariffs, manufacturers indicated that the cost of their tariffed goods had increased by an average of about 20 percent over the past six months, while service firms reported a roughly 15 percent average cost increase. While these figures are quite close to the increases in the firms’ average tariff rates, firms’ costs of tariffed goods may not have increased by as much as the tariffs in part because importers may have switched towards suppliers in other countries or in the United States; foreign suppliers may also have lowered their prices to help offset the tariffs."

"Almost a third of manufacturers and about 45 percent of service firms reported fully passing along all tariff-related cost increases, while 45 percent of manufacturers and a third of service firms said they passed along some but not all of the cost increase."

" a quarter of both types of firms said they absorbed all tariff-related cost increases and were not raising their prices. This pattern is consistent with other research using business surveys showing that in response to a hypothetical 5 percent cost increase, about a quarter of firms would fully pass through this cost increase into higher prices, while another quarter of firms would not change prices at all."

"Consistent with textbook economics, tariffs generally resulted in higher prices to customers. Indeed, roughly half of businesses reported raising prices of goods directly subject to tariffs. Interestingly, a significant share of businesses also reported raising the selling prices of their goods and services unaffected by tariffs. Many businesses indicated they increased prices to cover other rising costs such as wages and insurance"

The article mentions that some prices rose more than others.  How does this work? Let's look at the graph below.

What if there is a reduction in the supply of a good? (this happens when a product is taxed, like in a tariff although the supply line actually shifts upward by the amount of the tax). If we have demand 1 (D1), price will go up quite a bit (as shown by the long green line). This is inelastic demand.

But if demand becomes more elastic and we move to demand 2 (D2), the same decrease in supply means a much smaller increase in price (as shown by the short green line). So if we have more elastic demand (D2), the price is lower than at D1 when supply decreases.

So the products that don't go up as much that the article mentions will have more elastic demand like D1.

 

One caveat. Slope and elasticity are not the same thing. Elasticity usually changes as you move along a demand curve (the elasticity going from a price of 10 down to 9 is not the same as when the price falls from 2 to 1). But if we picked two prices (any prices that are not where the demand curve hits the price axis and zero) and the calculate the elasticity, the steeper line will have a lower elasticity. 

Price elasticity of demand-It tells us how responsive quantity demanded (Q_d)is to a change in price. That is, when price changes, will the change in Q_d be large or small? The bigger the change in Q_d  the greater will be the price elasticity of demand.

We will use E_d to stand for price elasticity of demand. Here is the definition

E_d = %DQ_d /%DP

where D (the Greek letter delta) means "change in."

OR  E_d = % change in Q_d divided by % change in P

Related posts:

Trump’s Tariffs Are Unique in History: U.S. trade policy went through three eras, focused on ‘revenue, restriction and reciprocity,’ economist Douglas Irwin says. The 47th president likes all three Rs, and a fourth, ‘retribution.’ (2025) 

Can Trump’s Tariff Offensive Deliver New American Jobs? (2025)

Americans Are Stockpiling Ahead of Trump’s Tariffs (2025)

Powell Warns of ‘Challenging Scenario’ for Fed as Trade War Rages (2025) 

How Much Do Tariffs Raise Prices? (2025)

Politicians talk about creating manufacturing jobs but do people really want them? (2025)

How some of Trump's policies might affect the economy (2024)

Tariffs are regressive: they fall more heavily on lower-income families who tend to spend more of their income on cheap imported goods (2024)

Americans Are Stockpiling to Get Ahead of Tariffs: Some consumers are snapping up computer parts, vacuum cleaners, coffee and olive oil before levies take effect (2024)

Life is full of tradeoffs: If we support American workers with trade restrictions it might mean more inflation (2023)