This month Congress passed new regulations on cigarettes and tobacco that were long fought by Republicans and the Bush Administration. It requires European labeling — 14 rotating graphics and lettering so it looks like part of the package — saying stuff like “Smoking causes fatal lung cancer” (these labels are tricky, if they are too graphic and scary, like a skull and cross bones, teenagers flock to them like, well, addicts flock to coffin nails. If they don’t rotate users get inured.

The F.D.A. will not be able to ban cigarettes or nicotine; but, it can order a reduction in nicotine and other harmful ingredients. Smokers will now know a cigarette’s ingredients and companies cannot suppress research about cigarettes and tobacco’s health effects. All new tobacco products will have to get marketing approval from the F.D.A..

That is the part Philip Morris likes....

Yesterday I wrote about false inflation scares and predicted that Wednesday’s inflation report would be scary, not because it would show inflation; but, because it would not.

I was right.

The key measure of inflation, the consumer price index had its steepest annual drop in 59 years.

My prediction was based on the weakness in fundamental economic indicators. Unemployment is still rising and economic activity is flat on its back.

Some (below) have argued that U.S. Treasury and corporate bond interest rates have converged because bond investors think Congress, the president, and the Federal Reserve will ruin the dollar by causing inflation. But they are wrong.

Think this is just some professor saying there’s no inflation risk? Nope. I am not alone in my no-inflation worries.

Based on current stock prices, investors in the stock...

Yesterday I wrote about false inflation scares and predicted that Wednesday’s inflation report would be scary, not because it would show inflation; but, because it would not.

I was right.

The key measure of inflation, the consumer price index had its steepest annual drop in 59 years.

My prediction was based on the weakness in fundamental economic indicators. Unemployment is still rising and economic activity is flat on its back.

Some (below) have argued U.S. Treasury and corporate bond interest rates have converged because bond investors think Congress, the President, and the Federal Reserve will ruin the dollar by causing inflation. But they are wrong.

Think this is just some professor saying there’s no inflation risk? Nope. I am not alone in my no-inflation worries.

Based on current stock prices, investors in the stock market...

Despite what you hear from Fox News — that massive stimulus spending and unprecedented loose monetary policy will cause harmful inflation — there are, sadly, few signs of future inflation and a lot of signs of a depressed world economy.

It’s not that inflation doesn’t matter. On the contrary, the ability of producers to raise prices is a welcome sign of economic vitality. If inflation is our most biggest worry, let’s party now. Choose: price increases (inflation) or price decreases (deflation). Any sane society chooses inflation, hands down. An important sign of mental health is not the absence of worry, but the presence of the appropriate worry.

Inflation is not the appropriate worry.

The key measure of inflation, the consumer price index, has had...

401(k) plans look good on paper. If someone contributes their whole life in a modest earning portfolio, weathering the ups and downs of markets, the average earner should amass about $400,000. At the end of 2007, the lucky workers with a 401(k) aged 55 to 65 had a median retirement account value of $100,000, but it fell by 25% to something near $70,000 by the end of 2008.

What happened?

Real life.

Employers need not provide 401(k) plans — half of the work force has no 401(k) plan or any other pension plan. When employers actually do sponsor 401(k) plans, their contributions are voluntary: since November 2008, name-brand employers — Motorola, FedEx — have led the way for employers to drop their matching contributions. Even when employers and employees contribute, the amount is usually 3 to 5 percent of pay. Experts recommend 10 to 15 percent.

Even if people have accumulated...

The Financial Times headlines screamed “Bernanke warns on deficit” when the Federal Reserve Chief really said that the government had to act quickly when facing a crippling economy and that we should “begin planning now” to restore fiscal balance.

What’s the plan? Well, restore the economy and then slow government spending while receiving more tax revenue.

How do you do that?

Pull out all the stops, which includes conventional, but unusually aggressive, monetary and stimulus spending policies and unconventional stuff like lending to banks, lending to businesses and home buyers, and taking over car companies.

Also, the Obama adminsitration threw in some unconventional negotating and turned lemons into lemonade: Hummers...

If your house is on fire, do you stop the hoses to prevent water damage to the carpet? Complaining now about the government spending is like scolding the firefighters for using water.

The economy is burning up and the President, Congress, businesses, workers, pensioners, virtually all of us, called 911.

The Euler Hermes Global Insolvency Index reports world corporate bankruptcy rates are at historic highs — the rate is higher in the United States — and will turn “the world economy into a burial ground for business.” Unemployment rates are rising — for men its over 10 percent. (One consequence, EPI reports, is that poverty rates will rise 50 percent for children.) Cities and towns face bankruptcy ...

States deliver health care, and essential social and educational services to Americans. When the states are poor, the poor are really poor. California is asking the federal government to be backstop insurance so private investors will loan California money. Without the help, 2 million low income people will lose health insurance, thousands of teachers and firefighters will be laid off. The losses are concentrated among the vulnerable, the aged, the sick, and children in all states when economic downturns affect state revenues. States don’t have a Federal Reserve bank or the ability to run deficits like the Feds do. Federal aid is hard to get.

In a Financial Times article, which was festooned with a picture of Obama and Schwarzenegger, UCLA economist Daniel Mitchell summed up the political situation:...

We have two kinds of bailouts going on: one for banks, one for the auto industry. I wrote last week about bank executives skittering to leave the TARP program — to escape control and executive pay limits — even if it hurts the bank’s health and the shareholders. Now the banks want even a better deal. Yesterday Bank of America, one of the nations most troubled banks, announced it is selling its most valuable assets and new shares to raise cash and break off with the federal government.

The U.S. government signals this is OK since the Treasury is allowing banks to buy back valuable assets — warrants — for cheap.

This is how it works. In exchange for TARP funds banks gave the...

When we were rich and Europe was poor, the Europeans worked more. In the 1960s the Germans and English worked more than Americans, now they work close to 1,600 hours per year, while Americans work over 1,900 hours. One reason is because we turned secure pensions into pretzels.

Over the last 30 years defined-benefit pensions have turned into individual-account pensions called defined-contribution plans. Instead of pensions being paid like Social Security, a steady check every month no matter what happens to stock markets, pension income now fluctuates with financial markets.

Before, when depressions struck, the workers who could retire on their pensions and Social Security did and that was a good thing — more jobs were available for young people. But now with defined-contribution plans going south — TIAA-CREF is such a plan — older workers, including professors, are staying on the...