February 27, 2009
Q4 Preliminary Release and Re-thinking That "Massive" Stimulus
The BEA released its preliminary numbers for 2008Q4 GDP. There was little good news in it, as many have observed. , , ,  Consumption fell even further than first estimated. In an accounting sense, support from exports collapsed. Even the downward revision in inventories, which might have suggested a production rebound in this quarter, seems to incorporate more of a signal of further anticipated declines in demand, at least given the high inventory to sales ratios. And while declining imports add, in a mechanical sense, to output, it certainly hints at a sustained decrease in anticipated economic activity. Figure 1 shows these GDP components.
Point of Clarification: The Economic Report of the President, 2009
Misinformation in the talk-show world. From today's Rush Limbaugh show (which is titled "A Teachable Moment on Tax Hikes"):
CALLER: Thank you for taking my call. I just wanted to point out something to you about your comments on taxing, and Obama's own economic advisors agree with you, and it's in a report that I found online. It's the Economic Report of the President. It's issued by the Council of Economic Advisors, which were appointed by Obama, and there's an entire section in that report that says lowering tax rates stimulates economic growth.
RUSH: That was then. They have removed that from the website. What's the woman's name that wrote that? I'm having a mental block. Romer. Christina Romer. She wrote that. She put it on their website and once Obama won: Bam! It came off, and now in its place is: "Spending a dollar generates a dollar and a half." It used to be, "Reducing taxes every dollar generates a dollar and a half," or a half a dollar. They've totally reworked it. She's been neutered, as it were.
February 25, 2009
Not Nonsense (House Prices)
Remember this graph?
February 24, 2009
The Bernanke rally
Tuesday's stock market rally was pretty impressive. But can the mere words of the Federal Reserve Chair actually produce a 4% increase in the value of the U.S. capital stock?
February 23, 2009
The Output Gap: Neoclassical Synthesis, New Classical and New Keynesian
It has been interesting to me how much excited commentary has been elicited by my posts on output gaps. , , ,  I had thought the subject fairly uncontroversial, especially my reliance upon the CBO measure, which is calculated in a conventional manner, and is an object well-understood in mainstream macroeconomics (take your pick -- from Hall and Papell to Mankiw). However, it's clear that there is no such agreement in the blogosphere (which can be taken as an indicator of how dispersed beliefs are in that world). In any case, the reaction tells me that one's belief in what determines potential GDP defines in large part how one thinks about the workings of the economy, and so I thought it useful to discuss alternative measures coming out of current academic work.
February 21, 2009
Deflation risk down but not out
February 20, 2009
First Reading on (part of) Q1 GDP
Here's a compilation of e-forecasting's January GDP estimate, Macroeconomic Adviser's December GDP estimate and forecast for 2009Q1. E-forecasting's estimate is that January real GDP was declining at an 11.8% at annual rates.
February 18, 2009
Industrial Production and Manufacturing Output, Compared
One can get an idea of how bad this recession is compared to previous ones at the St. Louis Fed's Recession Watch.
They haven't They've now updated the pictures to account for today's industrial production release (-1.8% vs. Bloomberg consensus -1.5%). , so I will convey the situation in two graphs. To sum up, industrial production is lower than at the corresponding point in any previous post-War recession. For manufacturing output, the same is true back to the 1973 recession (as far back as this series goes).
February 17, 2009
Prospects for the U.S. banking system
Some thoughts on the extent of the problem and options for solution.
February 16, 2009
Recap: The Stimulus Bill and the Macro Impact
CBO has now released an analysis of spend rates of the final stimulus bill to be signed by the President on Tuesday. While the proportions of expenditures and tax cuts are changed, the time profile is little changed from the original House bill -- wherein most of the stimulus takes place in the next 19.5 months.
February 15, 2009
Japanese GDP contracts 3.3% q/q in 2008Q4
Or, 12.7% on an annualized basis. From Reuters:
TOKYO (Reuters) - Japan's economy shrank 3.3 percent in the fourth quarter, the biggest drop since 1974 and further confirmation that the world's second-biggest economy is in a severe recession as the global economic crisis deepens.
Projected size of the deficit
It's interesting that as we discuss the magnitude of the economic problems and proposed solutions, the units everything is quoted in have gone from billions to trillions.
February 14, 2009
Former Bernanke home in foreclosure
A couple of stories that provide some personal perspective on the scope of the current problems.
February 12, 2009
WSJ February Survey of Forecasters
The picture says it all. Based on data from the WSJ:
February 11, 2009
CBO Assessment of the Stimulus Package
As found here:
The Current Downturn: Labor-leisure tradeoff or technological regress
Some views from an economist who is not "advancing the science".
Reader Joseph commenting on the stimulus bills brings my attention the Cato ad, wherein several Nobel laureates write against a stimulus plan. Ed Prescott is the Nobel laureate who won for work on growth/macroeconomics, so attention must be paid! I looked a bit for his reasoning, and only found this quote from the East Valley Tribune:
"I don't know why Obama said all economists agree on [the need for a stimulus bill]," Prescott said. "They don't. If you go down to the third-tier schools, yes, but they're not the people advancing the science."
Estimated Output Gap, post Trade, Inventory Releases
The picture says it all, but here's the quote from RealTime Economics "Fourth Quarter Looking Worse Every Day":
Yesterday, wholesale inventory numbers came in smaller than expected, prompting economists to revise down fourth-quarter GDP estimates a bit. But a much bigger adjustment is likely in store thanks to today's data on trade.
The trade deficit for December was wider than anticipated, and economists estimate it will shave up to 0.9 percentage point off of the fourth-quarter number. "These figures were much worse than BEA assumed in preparing the advance fourth quarter GDP estimate," said Morgan Stanley economist Ted Wieseman, who now expects fourth quarter GDP to be revised down to a 5.2% decline. That figure was in line with other estimates from J.P. Morgan, Macroeconomic Advisers, IHS Global Insight and RDQ Economics, who all expect the number to be around 5%.
February 10, 2009
The Treasury's Financial Stability Plan
Here's my two cents on the latest two trillion.
February 09, 2009
House and Senate Stimulus Bills in Perspective
The Senate has closed debate on its bill. What have "moderates" wrought? Figures 1 and 2 depict the fiscal impulse arising from Senate and House bills, respectively.
February 08, 2009
Kash Mansori on a home purchase tax credit
We're pleased today to feature a guest contribution to Econbrowser from Kash Mansori, senior economist for Jefferson Wells International.
The paradox of thrift
Or, how come you used to say that if consumers don't save more, it will wreck the economy, and now you say, if consumers do save more, it will wreck the economy?
February 06, 2009
What Are These Three Numbers?
Here is a bar chart of three figures. What are they?
Figure 1: Costs, in billions of dollars.
The Employment Situation in January
Looks pretty bad to me -- especially after taking into account downward revisions for December. Not too good on the output side either.
February 04, 2009
Why Can't We All Just Get Along? The Great Multiplier Debate
I've been thinking about why the numbers that are typically bandied about in policy circles (at least that I'm familiar with) have so little impact on the overall general and blogosphere debate (see some examples here and here). I think it's part ideological, and part methodological. I can't do much about the first (e.g., tax cuts good, spending on goods and services bad -- unless on defense; or alternatively "let the market adjust no matter how long it takes"). But at least I can lay out why reasons why there is disagreement on the size of the multipliers.
February 03, 2009
January auto sales
Dreadful as 2008 was for the U.S. automakers, 2009 is starting out even worse.
February 02, 2009
Budget Surplus? Tax Cut! Budget Deficit? Tax Cut! High Energy Prices? Tax Cut! Deep Recession? More Tax Cuts!
I see a pattern. For some people, the answer to every question is...a tax cut! From WSJ on 29 January:
There's a serious debate in this country as to how best to end the recession. The average recession will last five to 11 months; the average recovery will last six years. Recessions will end on their own if they're left alone. What can make the recession worse is the wrong kind of government intervention.
February 01, 2009
Links to a few items I found interesting on non-residential structure investment, the "bad bank" proposal, and separation of powers.