I don’t usually read Bill Kristol’s column, but once in a while, my eyes get caught by a headline (that’s the difference between reading online and “on paper”), and I’ll check out what he has to say. The other day, I read his column “Admit we don’t know” on the current economic crisis that, while not in my mind “wrong”, seemed puzzling to me. Pay attention to the last paragraph (highlighted in bold).
Author Archives: Menzie Chinn
Synchronized Recession, Synchronized Stimulus?
The OECD has just released its forecasts. This follows the recent updated IMF forecasts. Growth is evaporating the industrial countries. What is to be done?
Chinn and Collender on the Obama Stimulus Plan
I discussed current economic conditions and the prospects for the Obama stimulus plan on Kerri Miller’s “Midmorning” show on Minnesota Public Radio today. Capital Gains and Games‘ Stan Collender was also speaking. Here’s a link to the audio.
GDP Prospects: Mean Estimates Fall and Dispersion Increases
One of the points that all the panelists at last Thursday’s event sponsored by WAGE (“The Global Economic Crisis”) agreed on was how quickly the macroeconomic situation has deteriorated. I wanted to see if one could quantify the rapidity with which growth prospects have changed. Here is one perspective, showing the mean forecast from the October and November WSJ surveys of forecasters.
The Global Economic Crisis: Propagation to the Rest of the World
Last Thursday, I had the opportunity to participate in a panel on Global Economic Crisis: The Untold Stories, sponsored by the Center for World Affairs and the Global Economy (WAGE). I was tasked with surveying the impact on the economy outside the borders of the United States — in 20 minutes.
The Progress of the Financial Crisis in One Picture: Mortgages, Flight to Safety, Credit Lock
Markus Brunnermeier provides an excellent summary graph of the financial crisis, told in “spreads”.
Triple “Ut-Oh”: September Trade Release and the End of the Consumer of Last Resort
Brad Setser says “Ut-Oh”, beating me to the punch on the September trade release, which showed US exports plunging. It’s a post that Paul Krugman rightly expresses some angst upon reading. And now I’m going to add two more reasons to worry (not that I think Setser and Krugman aren’t aware of these points).
Real Retail Sales
Here’s a picture of 12-month percentage changes in real retail sales. Certainly unprecedented for the current series, not so much when including the previous (more volatile) discontinued series — although you do have to go back to 1980 to see a bigger 12-month drop.
The Consumption Path under Certain Assumptions: Back of the Envelope Calculations
Suppose by 2009Q4, GDP is 0.13% below 2008Q3 levels, real equity wealth is 35.2% below end-June levels, and real nonequity wealth is 6% below end-June levels. Further assume that the real Fed Funds rate remains at 2008Q3 levels (-2.45%). Then, the conditional estimate of 2009Q4 consumption will be 2.16% below 2008Q3 levels. This implies a 3% y/y decline in consumption by 09Q3; the only comparable instance of such a decline is 1951Q3, when consumption declined y/y by 2.3% (all percent calculations in log terms).
Some Consumption Trends Reviewed
There’s been a lot of talk about how consumption will fall in the future — some of it added by myself [0]. I’m trying to fit some regressions now, to make some guesses about how consumption will move in the future, based on guesses about GDP and net wealth. I haven’t got very far, but at the very least, I can share some interesting pictures. Figure 1 depicts nominal shares of services, services and nondurables, and total (i.e., adding in durables) consumption, over the 1967-2008 period.