June 26, 2009
Links for 2009-06-26
The Federal Reserve Bank of New York has put together some very useful timelines of the financial crisis, if you want a handy reference for what happened when in both the United States and around the world.
The BEA reported that disposable personal income increased 1.6% between April and May. In the absence of the stimulus cuts to personal taxes and increases in social benefit payments, the number would have been 0.2%. Real personal consumption expenditures were up 0.2% for the month, though that leaves the April-May average 0.1% below the January-March average. Calculated Risk, always your go-to source for these matters, sums it up this way:
Usually PCE and Residential Investment (RI) lead the economy out of recession, and right now both remain weak. As households increase their savings rate to repair their balance sheets, it seems unlikely that PCE will increase significantly any time soon.
Posted by James Hamilton at June 26, 2009 08:43 AMdigg this | reddit
Terrific stuff. The Fed timeline is really fantastic--unexpectedly user friendly.
Posted by: Steve Kopits at June 26, 2009 11:51 AM
in terms of the renewed propensity to save, my favorite tax-side approach to the next round of stimulus (yes, dream on, but we will surely need it), would be for the federal government to underwrite some form of state tax holiday, thereby dropping the prices of many goods (as far as the end user is concerned) sufficient to attract marginal consumer buying.
i mean, i believe that we are going to end up a few years out with a consumer sector that is a smaller part of the overall economy, but it doesn't all have to happen overnight.
Posted by: howard at June 26, 2009 03:50 PM
The BEA reported that disposable personal income increased 1.6% between April and May. In the absence of the stimulus cuts to personal taxes and increases in social benefit payments, the number would have been 0.2%.
Curious. Is it possible that "in the absence of the stimulus cuts to personal taxes [actually welfare redistribution of wealth] and increases in social benefit payments" that we would not have as severe a downturn and PCE would not be stagnated by investor fear that the government will confiscate their property?
Posted by: Anonymous at June 29, 2009 05:36 AM
No, it is not possible.
Hope that helps.
Posted by: kharris at June 29, 2009 10:23 AM
You should study the reaction of Parliment in the UK after the Napoleonic War. Reduced government spending, tax cuts, and a stable currency led to half a century of prosperity.
Then take a look at the Crisis of 1920-21 in the US. The decline was deeper than the Great Depression but only lasted 18 months because the government actually stayed out of it cutting spending, reducing wedges to transactions, and ultimately reducing taxes. The results the prosperity of the 1920s.
Not only is it possible, it has been inevitable everytime it is tried.
Monetary stimulus has a track record of utter failure from the French inflation of 1896, to Lincoln's greebacks during the Civil War, to FDRs debasement of the currency leading to the second Great Depression in 1937, to Nixon's Great Inflaton of the 1970s.
One definition of insanity is doing the same thing over and over expecting a different result. We sure have a not of insane people running the finances of our country.
Posted by: DickF at June 30, 2009 07:27 AM