November 28, 2008
William Kristol on Economic Theory and Practice
I don't usually read Bill Kristol's column, but once in a while, my eyes get caught by a headline (that's the difference between reading online and "on paper"), and I'll check out what he has to say. The other day, I read his column "Admit we don't know" on the current economic crisis that, while not in my mind "wrong", seemed puzzling to me. Pay attention to the last paragraph (highlighted in bold).
November 27, 2008
The more the merrier
How many economic-advice-giving organizations does it take to run a White House?
November 25, 2008
Synchronized Recession, Synchronized Stimulus?
The OECD has just released its forecasts. This follows the recent updated IMF forecasts. Growth is evaporating the industrial countries. What is to be done?
Chinn and Collender on the Obama Stimulus Plan
I discussed current economic conditions and the prospects for the Obama stimulus plan on Kerri Miller's "Midmorning" show on Minnesota Public Radio today. Capital Gains and Games' Stan Collender was also speaking. Here's a link to the audio.
November 24, 2008
Obama's economic plans
President-elect Barack Obama today announced more details of the economic team that will be advising the new president. I find these quite encouraging.
Time for a change at the Fed
Plan A didn't work. Plan B didn't work. I suggest the Fed get going on Plan C.
November 23, 2008
GDP Prospects: Mean Estimates Fall and Dispersion Increases
One of the points that all the panelists at last Thursday's event sponsored by WAGE ("The Global Economic Crisis") agreed on was how quickly the macroeconomic situation has deteriorated. I wanted to see if one could quantify the rapidity with which growth prospects have changed. Here is one perspective, showing the mean forecast from the October and November WSJ surveys of forecasters.
November 22, 2008
The Global Economic Crisis: Propagation to the Rest of the World
Last Thursday, I had the opportunity to participate in a panel on Global Economic Crisis: The Untold Stories, sponsored by the Center for World Affairs and the Global Economy (WAGE). I was tasked with surveying the impact on the economy outside the borders of the United States -- in 20 minutes.
November 19, 2008
The Progress of the Financial Crisis in One Picture: Mortgages, Flight to Safety, Credit Lock
Markus Brunnermeier provides an excellent summary graph of the financial crisis, told in "spreads".
November 18, 2008
The check is in the mail
Falling gasoline prices will provide some stimulus to the economy. But how much?
November 17, 2008
Triple "Ut-Oh": September Trade Release and the End of the Consumer of Last Resort
Brad Setser says "Ut-Oh", beating me to the punch on the September trade release, which showed US exports plunging. It's a post that Paul Krugman rightly expresses some angst upon reading. And now I'm going to add two more reasons to worry (not that I think Setser and Krugman aren't aware of these points).
November 16, 2008
The anomalous fed funds market
Some further thoughts on the bizarre behavior of the interest rate that used to be the core instrument of U.S. monetary policy.
November 14, 2008
Real Retail Sales
Here's a picture of 12-month percentage changes in real retail sales. Certainly unprecedented for the current series, not so much when including the previous (more volatile) discontinued series -- although you do have to go back to 1980 to see a bigger 12-month drop.
November 13, 2008
Investment advice for a wild market
Your retirement nest egg might have lost 40% of its value since this summer and 10% the last 2 weeks. What should you do? Here's the advice I've been giving to friends who ask, as well as what I've been doing with my own portfolio.
The Consumption Path under Certain Assumptions: Back of the Envelope Calculations
Suppose by 2009Q4, GDP is 0.13% below 2008Q3 levels, real equity wealth is 35.2% below end-June levels, and real nonequity wealth is 6% below end-June levels. Further assume that the real Fed Funds rate remains at 2008Q3 levels (-2.45%). Then, the conditional estimate of 2009Q4 consumption will be 2.16% below 2008Q3 levels. This implies a 3% y/y decline in consumption by 09Q3; the only comparable instance of such a decline is 1951Q3, when consumption declined y/y by 2.3% (all percent calculations in log terms).
November 11, 2008
Some Consumption Trends Reviewed
There's been a lot of talk about how consumption will fall in the future -- some of it added by myself . I'm trying to fit some regressions now, to make some guesses about how consumption will move in the future, based on guesses about GDP and net wealth. I haven't got very far, but at the very least, I can share some interesting pictures. Figure 1 depicts nominal shares of services, services and nondurables, and total (i.e., adding in durables) consumption, over the 1967-2008 period.
November 10, 2008
Update on FDIC guarantee fees
On Saturday I noted that details of the FDIC guarantees of fed funds implemented on October 14 could introduce a substantial wedge between the fed funds target and the effective fed funds rate. Rebecca Wilder argues that this could not be affecting the current effective fed funds rate due to details of the "opt out" provision. Here I provide some further discussion of this point.
November 09, 2008
China Announces 4 Trillion Yuan Economic Stimulus (Update2)
By Li Yanping and Chia-Peck Wong
Nov. 9 (Bloomberg) -- China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world's fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.
The funds, equivalent to almost a fifth of China's $3.3 trillion gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said today on its Web site. China will adopt a "pro-active fiscal policy" and pursue a "moderately loose" monetary policy, it said.
November 08, 2008
The Economic Situation: Some Random Snapshots
The latest employment release was stunning, insofar as the NFP employment figure was far below consensus . Net job loss was 240K, rather than 200K; moreover, September job loss was revised upward by 125K. In addition to Jim's assessment, some reaction is summarized here. The acceleration in net job loss is depicted in Figure 1.
The new, improved fed funds market
Yet another week of institutional changes that render all those nice macroeconomic texts and professors' lecture notes obsolete.
A new one for the playbook
Via Hot Air, an interesting way to score a touchdown.
November 07, 2008
A very weak employment report
More bad economic news arrived today from the Bureau of Labor Statistics.
November 05, 2008
Main Street Recession Watch: ADP Report on Employment
Further evidence that the small business segment of the economy is undergoing stress. From the ADP National Employment Report:
[Joel] Prakken added, "This month's employment loss was driven by the goods-producing sector which declined 126,000 during October, its twenty-third consecutive monthly decline. The manufacturing sector marked its twenty-sixth consecutive monthly decline, losing 85,000 jobs. These losses were compounded by an employment decline in the service-providing sector of the economy which fell by 31,000, the first loss in the serviceproviding sector recorded by the ADP Report since November of 2002."
"Large businesses, defined as those with 500 or more workers, saw employment decline 41,000, while medium-size companies with between 50 and 499 workers declined 91,000. Employment among small-size businesses, defined as those with fewer than 50 workers, declined 25,000. This is the first outright decline in small business employment reported by the ADP Report since November of 2002, and the largest percentage decline since the economy was emerging from recession in early 2002," said Prakken.
Manufacturers report more bad news
A quick update on the October ISM report.
November 03, 2008
Another bad month for autos
To say that the U.S. auto sector continues to bleed may be an understatement. Maybe we should start talking about a severed artery.
November 02, 2008
Fiscal Implications of the Candidates' Plans
I think now is the time to consider the fiscal implications of the candidates' budget -- and particularly tax -- plans, especially considering the revenue declines and outlays that will confront the next President. Indeed, I would say imminent revenue declines will place an even greater premium on sensible tax plans, and efficient use of Federal dollars. Figure 1 displays the budget surplus to GDP ratio, both actual and CBO baseline.