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Ed Dolan's Econ Blog
Economic Follies of the 1960s Echo in the 2012 Presidential Campaign
The 2012 presidential campaign is gaining momentum. Both sides agree that the economy will be the central issue. Mitt Romney is promising to get unemployment down to 6 percent by the end of his first term and eventually to 4 percent. Barack Obama is hesitant to set a numerical target, having been burned doing that [...]
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United States
Expansionary Fiscal Contraction in Action (or Not)
The recession in the UK is even worse than first reported. Figure 1: UK annualized q/q GDP growth (chained 2008), calculated as log differences. Dashed line at 2010Q2 (new coalition government). Source: UK ONS. 2012Q1 growth is revised down from -0.1% (quarterly rate) to -0.3%. As I noted earlier [1], this should put (yet another) [...]
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Finance & Markets
FDIC Rule Change Ends Too Big to Fail
Lately, I have been thinking about exactly what it is that modern banking has evolved into. It is no longer about safety and security, instead focusing on speculation and trading. It has become impervious to the normal political process; it has consolidated to the point of being anti-competitive, with an enormous size advantage held by [...]
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United States
The Fed and the Fiscal Cliff
Ryan Avent has an ambitious post, in which he claims the Federal Reserve will resist proclaiming it has the tools to offset the fiscal cliff, should it even occur: The Fed could therefore proclaim to the world that will maintain aggregate demand growth (in the form of, say, nominal income growth) at all costs, and [...]
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United States
Housing: Permits, Starts, Completions
For the crowd who are still clinging to the RE recovery meme, have a gander at these charts. Note that there are more new permits than starts, and more new starts than completions: Been Down So Long It Looks Like Up to Thee (Not Me) Click to enlarge: ˜˜˜ ˜˜˜ All charts via Ron [...]
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United States
The Housing Recovery: An Update
Last December I wondered if the housing market was finally poised for a sustainable recovery after years of retreat. There were signs for thinking optimistically then and the latest numbers continue to suggest that mild growth will roll on. Comparing three key measures of housing activity through April on a year-over-year basis shows that the [...]
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United States
James K. Galbraith: We Told You So
James K. Galbraith is an economics professor at the University of Texas at Austin, where he holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations. He writes about economics for numerous publications. His latest book, “Inequality and Instability: A Study of the World Economy Just Before the Great Crisis” (Oxford University Press, 2012), is [...]
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United States
The Three Faces of Postcrisis Monetary Policy
The latest edition of the San Francisco Fed’s Economic Letter (written by Michael Bauer)has a nice review of the different channels through which the Fed’s Large Scale Asset Purchase (LSAP) programs—QE, or quantitative easing more popularly—are thought to work: “Central bank LSAPs potentially may affect interest rates through at least three channels. Notably, all three [...]
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Europe
Total Failure
With the crisis once again nipping at their heels, European policymakers accomplished exactly what was expected of them. Absolutely nothing. From the FT: European leaders put off any decisions on shoring up the region’s banks at a late-night summit on Wednesday despite rising concerns that instability in Greece was undermining confidence in the eurozone’s financial sector. Instead, [...]
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Geostrategy
Which Nations Will Make Wise Decisions Under Stress? Who Will Screw-Up and Fail?
Summary: A mark of successful people and nations is that they function well under stress. What’s the alternative? Magic! Here we look at some examples of the search for magical solutions seen in the US and Europe today. History suggests that the quality of a nation’s decision-making under stress has a large effect on its [...]
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United States
State Dependence and Fiscal Multipliers
Or, are there nonlinearities in the real (macro) world? Following up on Jim’s Sunday post on multipliers, I found this graph from the April IMF Fiscal Monitor of interest: Figure from IMF Fiscal Monitor, April 2012. The authors describe the results underpinning this graph thus: The model finds significant evidence that the impact of fiscal [...]
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Europe
Chart of the Day: The Grexit Decision Tree
The Financial Times has gone through the very useful exercise of creating a decision tree on what a Greek exit from the euro zone entails. I think the Europeans are now actively preparing for a Grexit because to not do so would be folly. But that doesn’t mean that they want Greece to be forced [...]
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Finance & Markets
Earth to Dimon: Banks Don’t Have a Right to Profit
Cross-posted from the New York Times Room for Debate… Preventing blow-ups like the JPMorgan “hedge” that bears no resemblance to any known hedge isn’t difficult. What makes preventing it difficult is that banks that exist only by virtue of state-granted charters — and more recently, huge transfers from the public — have persuaded public officials [...]
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Asia
Chinese Buyers Defer and Default
Reuters does a pretty good job of putting together this story on how a Chinese city saved a small state-owned firm from going bankrupt by bailing out the holders of its commercial paper in full. Bank loans remain uncertain! FT reported on its website on 20th May that some Chinese buyers of thermal coal and iron ore are deferring [...]
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Europe
Calm Before the Storm?
A relatively calm start to the week. Can it last? Almost certainly not. It will get worse before it gets better. A few themes popped since last Friday that are worth considering. First is that some calmer voices have come to the forefront, arguing that a Greek exit is not really all that likely. See [...]
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Peterson Institute for International Economics
Implementing Basel III in the European Union: A Deeply Flawed Compromise
By all accounts, EU member countries have for months been debating how to implement the minimum bank capital standards agreed under Basel III. Their arguments have unfolded as the EU works to complete its fourth Capital Requirements Directive (CRD4) and its Capital Requirements Regulation (CRR); (see Véron 2012). Three issues have been contentious: (i) whether [...]
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Geostrategy
The Unseen but Perhaps Decisive Grand Alignment of Nations
Summary: Yesterday’s post The end of the post-WWII world is not the end of the world discussed the large-scale processes at work now. Today we discuss the most astonishing — and seldom seen — aspect of these things. The problems of the many individual nations in crisis have received ample attention from experts. The two global dimensions of [...]
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United States
Fiscal Stimulus
My colleague UCSD Professor Valerie Ramey has an interesting new paper looking at the effects of higher government spending on GDP. Ramey (2012) approaches the question from a forecasting perspective. Suppose a certain event (examples of which are detailed below) causes you to revise your forecast of how high government spending is going to be [...]
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Finance & Markets
How Facebook Screwed Up Its Own IPO
What a piece of work is a man, how noble in reason, how infinite in faculties, in form and moving how express and admirable, in action how like an angel, in apprehension how like a god! the beauty of the world, the paragon of animals—and yet, to me, what is this quintessence of dust? Man [...]
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Europe
Turning Periphery Economies Around: Moving from Austerity to Economic Growth
The debate has finally moved forward. There is growing official acceptance that austerity policies have failed. Going forward, however, IMF forecasts show that Eurozone countries will continue to incur budget deficits into the future. All else equal, this means that public debt will continue to increase, year-by-year, particularly in periphery countries where budget deficits will [...]
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RGE Analysts
Ireland Should Vote Yes on the Fiscal Compact
With fewer than ten days to go until the Irish referendum on the fiscal compact, a huge percent of the population remains undecided about how they are going to vote. According to a recent opinion poll, 37% of respondents will vote in favour of the fiscal compact, 24% against it and 35% are undecided. While [...]
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Peterson Institute for International Economics
Endgame in Greece: Don’t Look for an Imminent ‘Grexit’
As the countdown toward a new Greek election heads toward June 17, most analysts predict an imminent Greek exit from the euro area. Almost anything can happen, but a few possibilities are worth considering. Any newly elected Greek government will have trouble implementing the current austerity program called for by euro leaders and the International [...]
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Peterson Institute for International Economics
Is Europe Ready for Banking Union?
Systemic fragility in the European banking sector predates the Greek fiscal crisis. It was revealed by the subprime/Lehman shock of 2007–08, and has never been properly addressed since then in spite of successive stress tests. In recent weeks, several senior policymakers have become more explicit on the need for a banking union—in other words, a [...]
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Nouriel Roubini's Global EconoMonitor
Bartiromo One on One with Nouriel Roubini: Trouble Ahead for Economy
From USA TODAY: Nouriel Roubini, co-founder of the economic strategy firm Roubini Global Economics in New York, is worried about the so-called fiscal cliff the United States is facing at year’s end. I caught up with Roubini to talk economics, Europe and that fiscal cliff. Our interview follows, edited for clarity and length. Q: Where [...]
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United States
Hoover on Austerity to Balance the Budget and Defend the Dollar in 1932
I have written quite a few posts highlighting the statements made by Herbert Hoover during his US presidency as he struggled with the economic contraction of the Great Depression (see posts tagged “Herbert Hoover“). The general tenor of Hoover’s comments and actions goes to redoubling efforts toward balancing the federal budget in order to bring [...]
