“With the passage of Cap and Trade there is a good chance that unemployment will be worse than 1933 by the end of 2010.”
So writes an Econbrowser reader. Well, anything can happen, but that is not the outcome I predict. Nor the CBO, EPA, and other informed analysts.
A “W” Recession?
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 IMF has released its estimates for 2009Q1 reserves (COFER data). Below I update and extend my recent post on the dollar as a reserve currency.
Summertime is conference season, especially for those of us who don’t live close to a major airport hub. The first conference I attended was the NBER’s International Seminar on Macroeconomics, co-organized by Lucrezia Reichlin and Ken West. The conference was broken up into several sections: Financial Crises, International Economic Puzzles, Exchange Rates and Financial Development. Lot’s of interesting papers, and plenty of stimulating discussion. I can’t do justice to the proceedings, but I can provide the summaries of the papers.
In my last post, I cited Jeff Frankel’s keynote speech from a recent Bank of Canada-ECB workshop. He also pointed to the end of “Exorbitant Privilege” and “Dark Matter”, and other arguments of American exceptionalism. I think we’ll see resounding evidence of this in Friday’s release of the US end-2008 Net International Investment Position (NIIP).
Here’s an update of US imports and export behavior. The trade collapse remarked upon a couple of months ago is still in play.
I’ve just come back from two weeks on the road, during which time I attended a couple of conferences. The first conference (NBER International Seminar on Macroeconomics) dealt with issues of exchange rates, reserve accumulation and financial crises (more on that later). The second one, a joint Bank of Canada-ECB workshop (not online), focused on exchange rates in the global economy. At the latter, Jeff Frankel delivered the keynote speech, entitled “On Global Currency Issues”, in which he outlined what’s “out” and what’s “in” in international finance (Powerpoint presentation here). One of the phenomena he concluded was no longer relevant was “the global saving glut”.
By Hiro Ito
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.
Time to review trends in reserves, against the backdrop of financial crisis, recession, and dollar gyrations. (I’ll try to be original, but Brad Setser has been more diligent than I in covering these issues over the past few months. [0] [1] [2])
A few observations:
This is a tough question to answer. But I can provide an answer of a mechanical sort. Consider how big the Chinese economy is, compared against the US, the Euro area and Japan.