Monday’s announcement that Chinese growth was decelerating was not surprising; that it decelerated to below the consensus of 9.7% growth to 9% (y/y) in 2008Q3 was a surprise. This was reflected in the headlines: “China growth rate slows sharply” (FT), “China less likely to buffer world crisis as its economy slows” (LA Times), “China’s economy feels chill from global crisis” (AP). For detailed numbers, see Haver.
Author Archives: Menzie Chinn
CRA and Fannie and Freddie as betes noire
There is so much chaff floating around about the roles of Fannie and Freddie and of the Community Reinvestment Act in the current crisis, despite the best efforts of economists like Jim Hamilton [0] [1], Mark Thoma and Janet Yellen, that it seems worthwhile to once again go through some of the arguments that have been forwarded.
From David Goldstein and Kevin G. Hall, “Private sector loans, not Fannie or Freddie, triggered crisis”:
Federal Reserve Board data show that:
- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
- Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics. Continue reading
From the FT: The European Economic Outlook
From Europe’s Stormy Outlook:
Stormy conditions prevail across Europe’s economies, blackening the outlook after the arrival of a full-blown banking sector crisis this month sent confidence plummeting and threatened widespread-economic damage.
Jean-Claude Trichet, European Central Bank president, warned late on Sunday on French television of a “strong slowdown”.
The recent turmoil has hardened expectations that 2009 will see little, if any, growth across much of the Continent.
…
Rapid Downward Revisions in Expected Growth
…or: “Yikes!”
There have been plenty of accounts that have noted the growing anxiety over economic growth over the short to medium term. However, this forecast from Deutsche Bank, released last night, is quite sobering, especially when compared to forecasts released just two weeks ago.
High Frequency GDP Estimates: The Latest Read
…probably confirms one’s priors.
Credit Spreads and How Lax Is Monetary Policy?
All eyes have been on the housing market as the trigger for the financial crisis, but we’re all aware that there are other potential “triggers” for additional distress: auto loans and credit cards. In addition, spreads are not everything — levels of real interest rates matter as well.
The Nobel Prize in Economics to Paul Krugman
From the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel‘s description of Krugman’s scientific contributions:
Trade and Geography — Economies of Scale, Differentiated Products and Transport Costs
By the late 1980s, researchers had begun to integrate economies of scale into general equilibrium models of location and trade, thereby giving precision to the verbal analyses of earlier researchers and adding important new insights. In the resulting work, now commonly known as the new economic geography, economic geographers made use of the new tools, along with economists who took a renewed interest in the field. Several researchers took part in these developments, but the most influential contributions were made by Paul Krugman.
The Budget Deficit…and Macro Policies Going Forward
Let’s assume the Treasury, the Fed and the rest of the community of international financial policymakers are able to stabilize the financial system. What are the fiscal options available, given the borrowing and spending policies of the Bush Administration?
From Chowdhury and Huie, “Skyrocketing Issuance,” US Economics/Strategy Weekly (Deutsche Bank, 10 Oct.) (not online):
Treasury issuance is likely to increase to extraordinary
levels over the past year. There are 3 components to the
issuance picture. The first is the traditional federal budget,
which in fiscal year 2009 is likely to increase substantially
from the 2008 deficit of around $440 bn. The second are
the various Treasury rescue initiatives that involve buying
assets or equities; only the expected net cost will be
formally recorded on the budget, but the entire gross
spending amount will be added to the issuance
requirement. Finally, the Federal Reserve’s liquidity
facilities will also add to issuance, as the Fed no longer
has capacity to sell or lend the Treasuries in its portfolio;
instead, going forward it will rely on the Supplementary
Financing Program, where the Treasury issues bills and
deposits the proceeds at the Fed, to finance its lending
facilities. In total, we expect net issuance to rise to $3.3 tn
over the fiscal year.
Ex-oil Deficit Shrinks, but Exports Slow
Messages from the August Trade Release and the September Import/Export Price release.
The McCain and Obama Economic Advisers Debate
…at the UW-Madison. Ike Brannon spoke on behalf of the McCain-Palin campaign and Austan Goolsbee on behalf of the Obama-Biden campaign. Here’s the link to Proposals for Change (Adobe Flash required).