November 23, 2012
Business Insider has a very nice interview with Bill McBride, in which Bill explains why he is more optimistic about the economy than many others. And yes, the praise of Bill is all well deserved.
Posted by James Hamilton at November 23, 2012 06:13 AMdigg this | reddit
Bill may not be always right but he never makes emotionally or politically driven calls, which in itself is pretty rare on the Internet. Hi, Menzie.
Posted by: Johannes at November 23, 2012 12:43 PM
So he thought the economy was going to rebound in 07. I guess he is a Democrat. Sure hasn't worked out, has it?
Posted by: Rich Berger at November 23, 2012 02:59 PM
09. I forgot that Bush was president in 07.
Posted by: Rich Berger at November 23, 2012 05:21 PM
« Asinus asinum fricat »
In Europe the real estates markets are the same as in the USA,not a coincident economic indicator but to the contradictory a leading indicator. Real Estates markets are prosperous as everywhere be it California or in the Acores.
The quantitative are confirmed by the accurate statistical sample as published by the « chambre des notaires de Paris «
One should not be misguided by the profusion of billboards « for sale or for rent » prices are firm and so is demand Real estates agencies are prosperous. Advertising are in all languages Russian, Chinese ,Quatari, Brazilian, Spanish since they are dealing in Bricks and mortar. Walking around, in many capital districts of Europe is a peaceful exercise. After 9 Pm lights are switched off from Lisbon, Bruxelles to Paris as the urban population is working late and the children are still at school.
In light of above no wonder why few countries would reject banks supervisory control or the concept of bad banks or even the therapy of assets disposal.
Bloomberg "Italian Treasury officials rejected proposals to create a so-called bad bank to take non-performing loans off the books of the nation's lenders amid concern the plan would strengthen the link between sovereign and bank debt, said people with knowledge of the matter"
Posted by: ppcm at November 23, 2012 08:36 PM
Bill McBride's Calculated Risk is an excellent daily read among the increasingly partisan driven economics blogs. He lets the data do the talking and doesn't tend to selectively and routinely pick out bits of data to drive a political narrative. He's also not formally trained as an economist, but his objectivity and astute data collection and charting make him well respected, even among prominent economists.
Posted by: Tristan Bruno at November 24, 2012 07:29 AM
One may select two charts from monetary aggregates as provided by the Fed ST LOUIS.
M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts)
May add thanks to the data tool as provided M2 volatility or obtain through separate query M2 velocity.
One may suspect the same could be available with the ECB data warehouse but through several attempts it became dissuasive and time consuming.
In both accounts the velocity of money is deemer and deemer reflecting an anemic transaction flows when compared to GDP.
Posted by: ppcm at November 24, 2012 08:34 AM
Bill from CalculatedRisk was bullish on housing back in 2010, before it hit new all time low levels (in starts and price declines) again in 2011. And that bottom call in the spring of 2012 was only possible if the Fed continued Twist and began QE3. Let's not forget that the average on the 30 year fixed was in that 4.5-4.75% range in the summer of 2011 when the real estate market was cratering again, and that the Fed pushed it down to 3.75 by spring 2012 and down to 3.375% by fall and now to as low as 3.25% (or 3.125%) in November. It can't be hard to be temporarily bullish on housing and the things levered to it when rates are pushed down this far. And Bill would have been wrong had rates drifted back up in that 4.5% range, dead wrong.
Posted by: Lamont at November 24, 2012 10:53 AM
Lamont, you are probably right that Bill would have missed his call on the housing bottom in Spring 2012 if rates would have gone up substantially. But Bill has also continued to forecast no significant pressure in interest rates for the last few years. He also does not tend to forecast more than a couple years out - only about as far as data can be trended (such as with interest rates). I think with the housing bottom, he only called it a few months before.
Although he is among the most accurate, he is not infallible. For example, for a while, around 2009, he was predicting that the personal saving rate would increase "probably back to 8% or so". That never happened, briefly hitting 6% then trending back down. Still, a pretty good track record overall.
Posted by: Tristan Bruno at November 24, 2012 02:47 PM
I have read Calculated Risk every day for 5 years, and he deserves every bit of praise that he's getting. An interesting aspect of his famous objectivity is that sometimes he loses control and reveals himself to be pretty liberal and Keynesian. But overall his objectivity, accuracy, and good-natured style make him one of the jewels of the economics community.
Posted by: MacAuley at November 25, 2012 08:28 AM
He's not always right, and he doesn't claim to be. He just tries to make as much sense as he can out of what he sees, and he frequently more reasonable about it than most other pundit-types. But while we're on the topic, we should pour one out in memory of his late coblogger, Doris Dunget, aka Tanta. Her explications of the inner workings of the mortgage business were immmensely educational, a unique resource on the web.
Posted by: MacCruiskeen at November 25, 2012 03:04 PM
McBride is great when he is using his graphs. He is not so great when he is forecasting. His reason for believing that next year will be a good year is because state and local governments have dealt with their problem. Oh really? Growth never comes from government. Current tax increases are simply to fund current levels of spending. With no cuts in spending the current levels of taxation will hold and the productive sector will not expand beyond where it is today and there is a high probablity that tax rates are above the mid0point on the Laffer curve. That means that tax revenue will decline every time there is a tax cut. This is apparenetly something that the electorate doesn't understand and is destined to learn the hard way.
Posted by: Ricardo at November 26, 2012 11:01 AM
there is a high probablity that tax rates are above the mid0point on the Laffer curve
Citation notably missing.
Posted by: Malaclypse at November 26, 2012 04:13 PM
ricardo, can you back up anything that you stated in your comment? growth never comes from government? that is an idealogue type statement, taken on pure faith and not rooted in reality.
you cannot even draw the laffer curve, much less define in detail where you would be on such a curve. your statement is purely speculation. you just conveniently say we are located at a point which would reinforce your worldview-but again providing absolutely no proof.
marginal tax rates were much higher during the post war boom, as well as the clinton era, and the economy hummed along during those periods. bush jr cut the rates signficantly, and even with the benefit of a fed keeping rates very low, the economy sputtered along. these are simply observations of the data.
Posted by: observer at November 27, 2012 10:36 AM
Okay, I will spoon feed you.
Romer and Romer March 2007
Armed with our series of exogenous tax changes, we examine the effects of taxes on real output. In Section III we present baseline estimates of these effects using our new measure, and investigate whether the results differ from those derived using broader measures of tax changes. We find that exogenous tax increases have a large, rapid, and highly statistically significant negative effect on output.
Christina D. Romer February 27, 2009 White House Paper
THE CASE FOR FISCAL STIMULUS: THE LIKELY EFFECTS OF THE AMERICAN RECOVERY AND REINVESTMENT ACT
We found that the estimated effect of these changes is very large. A tax cut of 1% of GDP raises GDP by between 2 and 3% over the next three years.
Arthur B. Laffer, Stephen Moore, Jonathan Williams 2012
Rich States, Poor States
ALEC-Laffer State Economic Competitiveness Index
If a worker pays 15 percent of his income in payroll taxes, 25 percent in federal income taxes, and 5 percent in state income taxes, his $50,000 wage is reduced to roughly $27,500 after taxes. The lost $22,500 of income is the tax wedge, or approximately 45 percent of his gross pay.
...To illustrate the effects of the personal income tax (PIT), we compare the nine states without a personal income tax to the nine states with the highest marginal rates. Only nine states forgo a tax on earned income, but the record of the two groups accentuates the differences that result from different policies. The numbers in Table 2 are truly striking. When it comes to growing gross state product (GSP), the no PIT states have, on average, outperformed those states with the highest rates by 39.2 percent over the past decade. They have also outperformed the U.S. average by 25.6 percent. Additionally, not even one state in the high tax rate group performed as well as the average no PIT state.
Posted by: Ricardo at November 27, 2012 12:14 PM
Ricardo As several of us have pointed out ad nauseum, you have completely, totally, 100%, absolutely, positively misunderstood the Romer & Romer paper. Off by a mile. Not even close.
As to the tax example...well, it's about what I would expect from clowns like Laffer and Moore. You might want to relook those numbers. They don't even pass the laugh test. If you want to include the full payroll tax, then you also have to add it to wage bill. You don't apply a full 15% payroll tax rate against taxable income because half of the payroll tax is nominally paid by the employer. I have no problem with using the full 15% as representing the tax burden on labor because it comes from the wage bill; but if you want to count things that way then you also have to increase the nominal wage to reflect the full wage bill. Also, people making a gross salary of $50K do not pay $15K in state and federal income taxes, as your numbers imply. Taxes are paid on taxable income, not gross wages. The Laffer and Moore example is just stupid.
You also need to be more careful about the way you interpret state GDP data. First, a lot of the no income tax states have had big population increases, so even though GDP might have gone up, that does not mean per capita GDP did the same. Second, many of those no income tax states are the beneficiaries of federal government spending (disproportionately so) because they are the biggest pigs at the trough. Those federal dollars get counted in state GDP figures. Third, many of those no income tax states are mineral & oil wealth based, which means "earned income" is less of a part of that state's growth than unearned rent.
I currently live in a state with a very high income tax rate. At one time I lived in Texas, which does not have any income tax. Here's a life lesson: You get what you pay for. Texas is probably a great place to live if you're a rich oil man. For the rest of the universe it's a hellhole. I grew up in the Land of Lincoln and we were taught to worship Abraham Lincoln; but truth be told part of me wishes that Lincoln had lost the Civil War just so we could be rid of national embarrassments like Texas. With a little luck the Texas secession petition might have legs!
Posted by: 2slugbaits at November 27, 2012 03:48 PM