Japan storms back on weak yen; Asia trembles Telegraph A E-P http://t.co/M8aF6iddOr must-read http://t.co/p1YpNDlfJa fujioka & mayger here
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United States Channel: Latest Posts
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Finance & Markets
The recession in pictorial context
If your head had not yet been turned by economic events, today’s startlingly weak employment report probably did the trick. Rather than repeat all the negative superlatives you are likely to hear, I’ll take the opportunity to step back and take in the current recession in a somewhat broader context. One way to look at this is to examine the trajectory of employment relative to December 2007 levels (when this recession began) and compare it with the average trajectory of relative employment in other recessions:
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Finance & Markets
Do you see what they see?
It is now official: On Monday the National Bureau of Economic Research (NBER) Business Cycle Dating Committee declared—or, perhaps more accurately, confirmed—that the U.S. economy began to contract in December of last year. Not that you probably missed it, as the announcement was ably covered at Businomics Blog, at Calculated Risk, at The Curious Capitalist, at Econbrowser, at Economist’s View, at Greg Mankiw’s Blog, at The Skeptical Speculator, at William Polley, among many other fine blogging locations.
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The Wilder View
Another record-setting employment report, but what record exactly?
The November employment report was nothing but treacherous. The monthly nonfarm payroll fell 533,000, and the decline was broad-based. The goods-producing industries slashed another 163k jobs, while service industries cut more , 370k, which alone exceeds the market’s expected decline in total nonfarm payroll , 300k.
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Finance & Markets
Shall We Call it a Depression Now?
Today’s employment report, showing that employers cut 533,000 jobs in November, 320,000 in October, and 403,000 in September — for a total of over 1.2 million over the last three months — begs the question of whether the meltdown we’re experiencing should be called a Depression.
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Finance & Markets
Crowding-Out and Crowding-In
`This description of crowding-out and crowding-in, and why crowding-in is likely to dominate in recessions, is from Baumol and Blinder’s principles text, Macroeconomics: Principles and Policy. The idea is that investment is a negative function of the interest rate and a positive function of income, i.e. I = I(r,y), where Ir<0 and Iy>0. Since an increase in government spending increases both r and y, and since each moves investment in the opposite direction, the net effect on investment (and hence future growth) depends upon which variable, r or y, has the largest impact on I. In a recession, a change in government spending does not have much impact on r, but it does have an effect on y so that the increase in government spending is likely to bring about an increase, not a decrease, in investment. Thus, unlike deficit spending near full employment, government spending in recessions can lead to higher growth rates in the future thereby alleviating concerns about the costs to future generations: -
Finance & Markets
The greatness of John Maynard Keynes, our only guide in this crisis
Judging from the comments on the FM site, most readers should carefully review these articles. I believe this crisis results from a paradigm crisis in Keynesian economics, as we reach the boundaries of his vision — specifically, the point at which aggregate private sector debt becomes a limiting factor for the economy’s growth. But however inadequate, Keynesian theory is all we have until another such genius comes along.
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The Wilder View
Today’s initial unemployment claims report not totally unexpected!
From CNNMoney.com, Jobless claims in surprise decline on December 4:
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Finance & Markets
Capital One buys Chevy Chase Bank: Another bailout freebie
I wrote a few weeks back about how your bailout money was being used for mergers and acquisitions to line bankers’ pockets instead of for making loans to desperate homeowners. After receiving $25 billion in bailout funds, Citigroup attempted to buy Chevy Chase Bank despite the fact it was near collapse. Luckily this deal was scuppered as Capital One has now acquired Chevy Chase, just as the Wachovia deal was canceled when Wells Fargo stepped in.
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Finance & Markets
The Bailout Paradox
As a condition of getting a federal bailout, the Big Three are promising, among other things, to cut costs. Among the costs to be cut will be jobs. This is paradoxical, since the reason Congress is considering bailing them out in the first place is to preserve jobs and avoid the social costs of large-scale job loss (unemployment insurance, lost tax revenues, pension payments that have to be picked up by the Pension Benefit Guarantee Corporation, and so forth) .
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Finance & Markets
Financial Limbo
Today is all about financial limbo. No, not the zombie-fied state of most global banks, or a state of non-being after dying in sin (an apt description of all too many funds these days.) It’s more a question of “how low can you go?”, the motto of the stick-clearing dance which saw its heyday ion the 1970′s.
