In yesterday’s FT, “All in this together” assessed the possibility of a roughly synchronized downturn in the world’s major economies, with the United States, ironically enough, suffering the smallest hit. This brings up all sorts of interesting questions regarding exchange rates, if one believes that Taylor rules define monetary policy making to some degree, and that interest differentials affect exchange rates.
Author Archives: Menzie Chinn
Palin, on the Ongoing Financial Crisis
In response to the largest de facto nationalization in US history, we have this example of Governor Palin’s comprehension of this issue (ABC News):
Saturday in Colorado Springs, Colo., Alaska Gov. Sarah Palin said, “The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help.”
Three Pictures from the August Employment Situation Release
The employment situation release seems like old news, and Jim has already teased out some of the most important aspects in his post. However, I thought a little more context would be useful, given that some observers still think a recession can be avoided. From the White House economy fact sheet (accessed 9/7/08):
On September 5, 2008, the Bureau of Labor Statistics released new jobs figures for August. Nonfarm payroll employment decreased by 84,000 jobs in August, and the unemployment rate rose to 6.1 percent. While these numbers are disappointing, what is most important is the overall direction the economy is headed. Last week, the economy posted a strong gain of 3.3 percent at an annual rate in the second quarter, led by growth in consumer spending, exports, and a well-timed and appropriately sized stimulus package. This level of growth demonstrates the resilience of the economy in the face of high energy prices, a weak housing market, and difficulties in the financial markets. Orders for durable goods have been rising in recent months. In addition, productivity growth over the past four quarters has been strong at 3.4 percent — above the averages for each of the past three decades over the course of the Administration.
See as well [1].
Corporate tax policy, budget deficits and the capital stock in a neoclassical model of investment
Or, What would be the net effect on investment of the McCain tax plan?
Extending JGTRRA and EGTRRA under the CBO’s March 2008 Baseline
There are many moving parts to McCain’s budget policy (see McCain site on the economy, [0]), so I can only undertake a partial analysis. That being said, extension of JGTRRA and EGTRRA is the most concrete, and easy to score, component, exactly because the CBO has already done it.
Figure 1 depicts the impact of making permanent the Bush tax cuts of 2001 and 2003, relative to the March 2008 CBO baseline.
Why Does It Feel Like a Recession?
The preliminary GDP release today provided a number of surprises. The first surprise was not that GDP was higher than the advance release (given the June trade figures reported earlier this month), but rather that at 3.3% it exceeded the 2.8% (SAAR) of the consensus [0]. The second surprise is that the reduction in imports comprises an even larger proportion of the overall growth.
The Dollar and the Trade Deficit: How Does Productivity Fit In?
Why is the trade deficit, even taking out oil, so large when the dollar is so weak? Maybe some insights can be gleaned from productivity measures.
A Different Look at the Labor Market
Over the past few months, I’ve heard that, while job creation is insufficient to keep unemployment rates constant, job losses have not been consistent with recession. More recently, we’ve heard a slight modification on this “talking point”. Commenting on the August 1 labor market release, WSJ RealTime Economics notes:
So far this year, the economy has shed nearly half a million jobs — hardly a sign of strength.
But it could have been much worse. In testimony before a congressional panel Friday, Bureau of Labor Statistics Commissioner Keith Hall noted that the last two recessions had resulted in 1.5 million lost jobs. “Economic growth is not strong enough to support job growth,” he told legislators, but he added that relative to the last set of official recessions, job losses this time around “have not been as severe.”
Consumer Inflation: What Do Alternate Measures Say, and Why
What to make of the different measures of inflation being faced by consumers?
Drilling Offshore to Affect World Oil Prices… and Other Tales from the Iraq-Pakistan Border [0]
Various individuals have argued for drilling in the Outer Continental Shelf (OCS) as a means to affect the price of oil. This is true despite this recent assessment by the Department of Energy’s Energy Information Administration, the Federal Government’s nonpartisan analytical group on energy issues. From Annual Energy Outlook related analyses (June 2007):