When I discuss Lost Decades I always stress the fact that the “s” denotes the plural. Figure 1 shows that a decade and a half in, the trajectory of output has been noticeably depressed since 2001Q1.
Supply Chains and the Future of Globalization in the Wake of the Tōhoku Earthquake and Tsunami
I was sitting in a briefing recently, where I heard how US GDP would be measurably affected by the floods in Thailand –- specifically through the shutdown of production of key auto parts. [0] That reminded me of the supply-chain-propagated impact of events nine months earlier, following the earthquake and tsunami in Japan. Here’s the trade-related part of the assessment from my colleague Isao Kamata’s article in the La Follette Policy Report, “The Great East Japan Earthquake: A View on Its Implication for Japan’s Economy”:
$7.77 trillion in secret Federal Reserve loans to banks?
I have been looking into the claim recently made by any number of internet sites (for example, here’s one of the many hundreds, if you insist on a link) that the Federal Reserve made $7.77 trillion in secret loans to banks. The claim is outrageously inaccurate, as I explain below.
Consumption: Distinguishing between Keynesian and Permanent Income Motivations, and Deleveraging
One of the startling things about consumption behavior is that, despite the burst of spending surrounding the holiday season, per capita consumption in 2011Q3 has only re-attained the levels of 2008Q3. Various explanations have been forwarded, ranging from the failure of Keynesian economics [0], to the decline in income prospects or higher income uncertainty, or to the decline in observed net worth [1] (deleveraging, in certain interpretations).
Current economic conditions
The U.S. economy experienced disappointingly weak growth in the third quarter. Data coming in during the last week suggest that the fourth quarter is starting out a little better. But it doesn’t look to me as much better as some accounts in the financial press might lead you to believe.
The November Employment Situation
Some good news, but it all has to be put in perspective. As Mark Thoma points out, 120,000 jobs is about what is needed to keep unemployment from rising. In addition, the drop in the unemployment rate was driven largely by the drop in the participation rate, not the rise in employed. That’s going to be greater relevance if the extension of unemployment benefits is further blocked (in other words, there are offsetting employment effects from UI, as discussed in this rejoinder to Mulligan). More discussion at Izzo/WSJ RTE. I’m going to focus on data from the establishment survey.
Thoughts on Europe, November 2010 and December 2011
Back in November of last year, when Jeff Frieden and I were putting the finishing touches on Lost Decades, we wrote:
Many countries with foreign debts in their own currency reduce their real debt burden by allowing their currency to drop in value, so that foreigners get repaid in less-valuable currency. But Greece and the other PIIGS cannot pursue this option on their own, for they share the euro with other countries, including some of the countries to which they owe money. Given this dynamic, investors and others worried that the European Central Bank would be forced to allow euro-zone inflation to rise — and perhaps even to allow the euro to depreciate — in order to alleviate some of the pain and suffering caused by its members’ debts.
Central banks augment currency swap capabilities
The U.S. Federal Reserve, European Central Bank, and central banks of Canada, England, Japan, and Switzerland today announced a coordinated monetary action that could provide added assistance to interbank lending in the event of a further deterioration in global financial markets. Here I offer some thoughts on what the action signifies.
“The first thing we do, let’s kill all the beancounters.”
(With apologies to Shakespeare). Or, how political discourse in America is becoming more like that in Greece.
I’ve been away in Europe for much of the last few weeks, and have heard plenty about the euro crisis (and US fiscal paralysis). And while I think the comparisons often made between the Greek and American fiscal situations are overstated (different debt-to-GDP ratios and trajectories, and critically very different arrangements with respect to central banks), in one way — namely the way in which Greece managed to enter into EMU, and to hide its debt to GDP ratio — the US could become more like Greece, if some in the political sphere have their way. From the FT:
Worries continue
If you’re prone to worry about where the economy’s headed, last week’s developments weren’t very reassuring.