The GIIPS countries on the periphery of Europe are undertaking fiscal retrenchment that is largely self-defeating, because they have little choice given the structure of the eurozone’s governance, and Germany’s policy position. The United States, in contrast, is undertaking reducing government spending not because it has to, but because of an ideology that sees austerity as a convenient means of bludgeoning the opponents of a reasoned fiscal policy.
Options for Europe
This problem is not fixing itself.
Contractionary Fiscal Contraction, Quantified: European Edition
From Deutsche Bank, “Fighting the Clock,” Fixed Income (May 2012) [not online], some estimates of changes in structural balances, multipliers, and output impacts:
Peak oil and price incentives
Here I describe some interesting new research on modifying Hubbert’s model of peak oil to take into account the incentives for additional production that higher oil prices would be expected to bring.
The Wisconsin Macro Outlook
The Spring Wisconsin Economic Outlook has not yet been released (last year, I believe it was released in early/mid May), so I thought I’d take a look at what recent private sector forecasts indicated. Here is one graph of relative GDP trends from Chase’s State of the Wisconsin Economy, dated March 31.
Using natural gas
Here’s a promising story for the U.S. economy.
The Euro Zone Crisis: Political and Economic Perspectives
Back in late April, I participated in panel “Europe at the Crossroads: The Euro Crisis and the Future of European Integration” (video). There’re two graphs from my presentation I’d like to highlight, as they remain relevant even as the eurozone lurches into de facto recession [0].
Aggregate factors in the price of oil
It seems that no matter what financial series you look at, there’s a similar pattern of ups and downs over the last few years. I was curious to get a quick quantitative impression of how much of a contribution aggregate factors have been making to recent movements in the price of oil.
Some Thoughts on the Employment Release
The employment release for May has raised concern, and rightly so, amongst policymakers. Figure 1 shows that nonfarm payroll employment growth has tailed off to 0.6% m/m, and 0.9% on a three month basis (both annualized, in log differences). Other labor indicators from the household survey are slightly more positive.
Markets see bad news
May was a bad month for U.S. stocks. June started out worse, with the S&P500 on Friday down 9% from where it stood at the beginning of May. That puts us back about where we started the year in January, though still significantly above last fall’s lows.