Remember?
“Borrowing and spending by the public sector will crowd out investment and growth in the private sector.” Paul Ryan, “Path to Prosperity” (April 2012).
How Many Times Have the 10y2y and 10y3m Spreads Concurrently Broken the 1% and 0.5% Thresholds w/o Subsequent Recession?
If one uses a three year window, it’s three times: February, 1986, May 1995, September 1997. Three other times, a recession follows.
The last time around — when people were saying “this time is different” — was May 2005. Inversion occurred in February 2006 (and in November 2006, skepticism of impending recession). The recession is dated by NBER as starting in December 2007.
For additional discussion of the implications of a flattening yield curve, see Michael Klein’s EconoFact article, and (for cross country empirics) Chinn and Kucko (2015).
The US Petroleum Trade Balance
As oil prices start heading up, the usual questions arise regarding the macro implications. One view is that with the revolution in tight oil production, the US will experience less of a negative impact than before. This conclusion relies on a set of assumptions, possibly including the US being substantially less dependent on oil imports. Is this true?
Figure 1: US petroleum trade balance (blue), and negative of US petroleum imports (red). NBER defined recession dates shaded gray. Source: BEA, 2018Q1 advance release, NBER, author’s calculations.
If ZTE Sanctions Are Up For Grabs, What about Additional Section 301 Sanctions?
Economic policy uncertainty as measured by the Baker, Bloom and Davis index is elevated (again) due to trade policy.
Figure 1: US Economic Policy Uncertainty index (blue) and centered 7-day moving average (bold red). Source: policyuncertainty.com accessed 14 May 2018, and author’s calculations.
Mr. Trump’s Faux National Security-based Trade Policy (aka ZTE – WTF?)
or, Mr. Trump is a wimp
President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
Is California in Recession? (Part V)
Back in mid-December, Political Calculations asked if California was in recession. Following last week’s state-level GDP release for 2017Q4 and Philadelphia Fed indices from a week and a half ago — it’s likely no recession occurred, and is currently not occurring.
Guest Contribution: “The ECB’s Strong Euro Problem”
Today, we are fortunate to present a guest contribution written by Ashoka Mody, Charles and Marie Visiting Professor in International Economic Policy, Woodrow Wilson School, Princeton University. Previously, he was Deputy Director in the International Monetary Fund’s Research and European Departments.
The euro has appreciated 10 percent against the Swiss franc (CHF) over the past year. The U.S. dollar and the Japanese yen have not made similar gains vis-à-vis the franc. Tracking the franc’s movements relative to the major currencies gives an unusual window onto the deflation-fighting credentials of the world’s major central banks. It illustrates, in particular, the European Central Bank’s half-hearted efforts to fight the risk of price deflation. Financial markets have come to believe that the ECB will prematurely tighten monetary policy: hence, despite brief episodes of depreciation, the euro will tend to stay strong, hurting economic prospects in several eurozone member countries.
The Reagan Tax Cuts and Defense Buildup: Supply-Side Miracle or Keynesian Stimulus?
I keep on hearing about the supply-side miracle associated with the the Reagan era tax cuts. What do changes in estimated potential versus actual output suggest?
Figure 1: Year-on-year growth rate of real GDP (blue), and of potential GDP (red), calculated as 4th differences of logged values. Dashed lines at effective dates for Economic Recovery Tax Act of 1981 and Tax Reform Act of 1986. Source: BEA, CBO.
Is Xenophobia the Dominant Motivation in the WV Republican Electorate?
As widely noted, Republican Senate candidate Don Blankenship has recently (starting on May 3) verbally targeted “China people” and McConnell’s “China family”. I wondered whether such appeals to atavistic fears would work in 2018. Prediction markets seem to suggest the answer is “yes”.
Source: PredictIt, accessed 5/8 9AM Pacific.
As an economist, I do wonder how Senator McConnell has created “millions of jobs for China people”.
Guest Contribution: “The European Central Bank’s Lack of Accountability Has Consequences”
Today, we are fortunate to present a guest contribution written by Ashoka Mody, Charles and Marie Visiting Professor in International Economic Policy, Woodrow Wilson School, Princeton University. Previously, he was Deputy Director in the International Monetary Fund’s Research and European Departments.
The European Central Bank (ECB) was set up as the most independent of all central banks. Its independence also made it unaccountable. Freed from public accountability, the ECB’s decisions have been swayed by its management’s ideological preferences and by national interests. The consequence is that some eurozone countries are now subject to long-term deflation risk and are locked into a currency that is too strong for their economies.