The IMF released an update to it’s World Economic Outlook yesterday.
IMF Gloomy on Growth, Sees Rising Inflation Threat
- Global economic growth to slow significantly in second half of 2008.
- Rising energy, commodity prices have boosted inflationary pressure
- Need to adapt to shift in purchasing power from commodity users to producers
I was shocked by today’s report that the high school dropout rate in California has reached 24%.
The President’s press conference yesterday was meant to buttress consumer and investor confidence. I will leave it to others to evaluate whether he was successful in this endeavor [0]. I will also ignore his disingenuous remarks concerning how allowing drilling offshore and in ANWR [1] would somehow affect gasoline prices today in a noticeable manner, and focus instead on his repeated emphasis on the fact that the economy is still growing (although he never mentioned at what pace).
Some thoughts about the role played by the GSEs in the run-up in mortgage debt and house prices.
My previous post regarding government statistics elicited a lot of commentary, with a tremendous amount of vitriolic commentary directed at the current approach to calculating the CPI. Rather than provide more of my own thoughts on what constitutes an appropriate mix of theory and pragmatism, I will quote from the author whose work I had to read in graduate school, W. Erwin Diewert. From his entry in the 1998 Journal of Economic Perspectives which had a symposium on the Boskin commission report:
I see much to like about this.
How did we get into this mess, and how do we get out of it?
As of 2008Q1, wholly 100% of the increase in the trade deficit since 2001Q4 is accounted for (in a mechanical sense) by the increase in the value of oil imports.
And the dollar share of reserves appears to continue its decline.
Or, is the model for explaining why macro data sometimes appear so counter to intuition best explained by willful deception (Iraq and WMDs), incompetence (the FEMA response to Katrina), or prosaic (resource constraints)? The casual reader might think I’m overstating the extreme hypotheses, but there is, after all, a whole website devoted to the proposition of conspiracy:
Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.
By Jeffrey Frankel
Today, we’re fortunate to have Jeff Frankel, Harpel Professor at Harvard’s Kennedy School of Government, as a guest blogger. His blog is here.
The possibility that some Gulf states, particularly the UAE, might abandon their long-time pegs to the dollar is getting increasing attention (from Martin Feldstein and Brad Setser, for instance). It makes sense. The combination of high oil prices, rapid growth, a tightly fixed exchange rate, and the big depreciation of the dollar against other currencies (especially the euro, important for Gulf imports) was always going to be a recipe for strong money inflows and inflation in these countries. The economic dynamism — most striking in Dubai — is admirable and fascinating, but also now clearly indicative of overheating. Indeed inflation, as predicted, has risen alarmingly. Among other ill effects, it is producing unrest among immigrant workers. An appreciation of the dirham and riyal is the obvious solution.