Martin Feldstein has recently raised the possibility that we might experience a relapse into recession (a beautiful symmetrical W), with the next dip in 2010. In my view, this means (1) we should have opted for a bigger and better composed stimulus package, and (2) the timing of expenditures in the stimulus package might not be as problematic as many commentators have indicated. From Bloomberg:
]]>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.
And via Craig Newmark, earn $11 a day by working in hell.
]]>Today, we're fortunate to have Hiro Ito, Associate Professor of Economics at Portland State University as a guest blogger.
In my last posting, I introduced a recent paper coauthored with Menzie Chinn and Joshua Aizenman (UC, Santa Cruz) on the "trilemma," or "impossible trinity" -- a country simultaneously may choose any two, but not all, of the three goals, monetary independence, exchange rate stability and financial integration.
]]>A few observations: