In the wake of global financial events, a couple of articles have caught my attention in terms of implications for the dollar. First was this Reuters account of a People’s Daily editorial, suggesting “diversification”. But it’s hard to discern the underlying message given the low signal to noise ratio in official publications. Today’s article in the IHT is a little more informative, not just about what’s going on in China but in Asia (where a lot of that “saving glut” was alleged to come from):
Author Archives: Menzie Chinn
Back to the Real Side of the Economy: Recession Watch
Only on a day like today does an over 1 percent decrease in industrial output move to third page. But this item (and this hilarious article h/t Economists View) reminded me to update the indicators used by the NBER BCDC are headed. Their trajectories are, in general, not too comforting.
Recessions and Output Gaps, Updated
In “Redefining Recession”, The Economist discusses some of the difficulties in interpreting the “R” word. Since the article juxtaposed output gaps against the conventional NBER definition, I thought this would be a good time to update my post on output gaps, using the latest GDP data, CBO estimates, augmented with the latest WSJ survey of forecasters.
Trade Deficit Reduction via Changes in Exports, Imports or Prices
Today’s July trade release was a little bit of a surprise, due to oil [0]; Haver covers the numbers. Calculated Risk discussed the release, and actually took the outcome as a fairly positive, albeit with some anxiety about whether exports will keep up the robust growth necessary to continue shrinking the deficit.
I want to focus on a couple of other aspects of the release which seem to make me worry a bit more.
Taylor Rules, Synchronized Recession and the Potential for Competitive Depreciation
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.
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.