November 17, 2008
Triple "Ut-Oh": September Trade Release and the End of the Consumer of Last Resort
Brad Setser says "Ut-Oh", beating me to the punch on the September trade release, which showed US exports plunging. It's a post that Paul Krugman rightly expresses some angst upon reading. And now I'm going to add two more reasons to worry (not that I think Setser and Krugman aren't aware of these points).
Posted by Menzie Chinn at 09:48 PM permalink | Comments (8) | digg this | reddit
November 16, 2008
The anomalous fed funds market
Some further thoughts on the bizarre behavior of the interest rate that used to be the core instrument of U.S. monetary policy.
Continue reading "The anomalous fed funds market"
Posted by James Hamilton at 12:01 PM permalink | Comments (30) | digg this | reddit
November 14, 2008
Real Retail Sales
Here's a picture of 12-month percentage changes in real retail sales. Certainly unprecedented for the current series, not so much when including the previous (more volatile) discontinued series -- although you do have to go back to 1980 to see a bigger 12-month drop.
Continue reading "Real Retail Sales"
Posted by Menzie Chinn at 10:40 AM permalink | Comments (15) | digg this | reddit
November 13, 2008
Investment advice for a wild market
Your retirement nest egg might have lost 40% of its value since this summer and 10% the last 2 weeks. What should you do? Here's the advice I've been giving to friends who ask, as well as what I've been doing with my own portfolio.
Continue reading "Investment advice for a wild market"
Posted by James Hamilton at 11:01 AM permalink | Comments (85) | digg this | reddit
The Consumption Path under Certain Assumptions: Back of the Envelope Calculations
Suppose by 2009Q4, GDP is 0.13% below 2008Q3 levels, real equity wealth is 35.2% below end-June levels, and real nonequity wealth is 6% below end-June levels. Further assume that the real Fed Funds rate remains at 2008Q3 levels (-2.45%). Then, the conditional estimate of 2009Q4 consumption will be 2.16% below 2008Q3 levels. This implies a 3% y/y decline in consumption by 09Q3; the only comparable instance of such a decline is 1951Q3, when consumption declined y/y by 2.3% (all percent calculations in log terms).
Continue reading "The Consumption Path under Certain Assumptions: Back of the Envelope Calculations"
Posted by Menzie Chinn at 10:03 AM permalink | Comments (2) | digg this | reddit
November 11, 2008
Some Consumption Trends Reviewed
There's been a lot of talk about how consumption will fall in the future -- some of it added by myself [0]. I'm trying to fit some regressions now, to make some guesses about how consumption will move in the future, based on guesses about GDP and net wealth. I haven't got very far, but at the very least, I can share some interesting pictures. Figure 1 depicts nominal shares of services, services and nondurables, and total (i.e., adding in durables) consumption, over the 1967-2008 period.
Continue reading "Some Consumption Trends Reviewed"
Posted by Menzie Chinn at 11:27 AM permalink | Comments (22) | digg this | reddit
November 10, 2008
Update on FDIC guarantee fees
On Saturday I noted that details of the FDIC guarantees of fed funds implemented on October 14 could introduce a substantial wedge between the fed funds target and the effective fed funds rate. Rebecca Wilder argues that this could not be affecting the current effective fed funds rate due to details of the "opt out" provision. Here I provide some further discussion of this point.
Continue reading "Update on FDIC guarantee fees"
Posted by James Hamilton at 09:08 AM permalink | Comments (25) | digg this | reddit
November 09, 2008
China Acts
From Bloomberg:
China Announces 4 Trillion Yuan Economic Stimulus (Update2)
By Li Yanping and Chia-Peck Wong
Nov. 9 (Bloomberg) -- China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world's fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.
The funds, equivalent to almost a fifth of China's $3.3 trillion gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said today on its Web site. China will adopt a "pro-active fiscal policy" and pursue a "moderately loose" monetary policy, it said.
Posted by Menzie Chinn at 12:24 PM permalink | Comments (21) | digg this | reddit
November 08, 2008
The Economic Situation: Some Random Snapshots
The latest employment release was stunning, insofar as the NFP employment figure was far below consensus [0]. Net job loss was 240K, rather than 200K; moreover, September job loss was revised upward by 125K. In addition to Jim's assessment, some reaction is summarized here. The acceleration in net job loss is depicted in Figure 1.
Continue reading "The Economic Situation: Some Random Snapshots"
Posted by Menzie Chinn at 04:40 PM permalink | Comments (10) | digg this | reddit
The new, improved fed funds market
Yet another week of institutional changes that render all those nice macroeconomic texts and professors' lecture notes obsolete.
Continue reading "The new, improved fed funds market"
Posted by James Hamilton at 11:18 AM permalink | Comments (28) | digg this | reddit
A new one for the playbook
Via Hot Air, an interesting way to score a touchdown.
Continue reading "A new one for the playbook"
Posted by James Hamilton at 07:05 AM permalink | Comments (4) | digg this | reddit
November 07, 2008
A very weak employment report
More bad economic news arrived today from the Bureau of Labor Statistics.
Continue reading "A very weak employment report"
Posted by James Hamilton at 01:30 PM permalink | Comments (9) | digg this | reddit
November 05, 2008
Main Street Recession Watch: ADP Report on Employment
Further evidence that the small business segment of the economy is undergoing stress. From the ADP National Employment Report:
[Joel] Prakken added, "This month's employment loss was driven by the goods-producing sector which declined 126,000 during October, its twenty-third consecutive monthly decline. The manufacturing sector marked its twenty-sixth consecutive monthly decline, losing 85,000 jobs. These losses were compounded by an employment decline in the service-providing sector of the economy which fell by 31,000, the first loss in the serviceproviding sector recorded by the ADP Report since November of 2002."
"Large businesses, defined as those with 500 or more workers, saw employment decline 41,000, while medium-size companies with between 50 and 499 workers declined 91,000. Employment among small-size businesses, defined as those with fewer than 50 workers, declined 25,000. This is the first outright decline in small business employment reported by the ADP Report since November of 2002, and the largest percentage decline since the economy was emerging from recession in early 2002," said Prakken.
Continue reading "Main Street Recession Watch: ADP Report on Employment"
Posted by Menzie Chinn at 09:40 PM permalink | Comments (5) | digg this | reddit
Manufacturers report more bad news
A quick update on the October ISM report.
Continue reading "Manufacturers report more bad news"
Posted by James Hamilton at 06:00 AM permalink | Comments (4) | digg this | reddit
November 03, 2008
Another bad month for autos
To say that the U.S. auto sector continues to bleed may be an understatement. Maybe we should start talking about a severed artery.
Continue reading "Another bad month for autos"
Posted by James Hamilton at 07:31 PM permalink | Comments (31) | digg this | reddit
November 02, 2008
Fiscal Implications of the Candidates' Plans
I think now is the time to consider the fiscal implications of the candidates' budget -- and particularly tax -- plans, especially considering the revenue declines and outlays that will confront the next President. Indeed, I would say imminent revenue declines will place an even greater premium on sensible tax plans, and efficient use of Federal dollars. Figure 1 displays the budget surplus to GDP ratio, both actual and CBO baseline.
Continue reading "Fiscal Implications of the Candidates' Plans"
Posted by Menzie Chinn at 09:44 PM permalink | Comments (39) | digg this | reddit
October 31, 2008
More on Defense Spending
In my last post on the 08Q3 GDP release, I noted the remarkable contribution of defense spending. Here is a little more detail on the growth rates of defense spending on goods and services on a NIPA basis.
Continue reading "More on Defense Spending"
Posted by Menzie Chinn at 04:08 PM permalink | Comments (28) | digg this | reddit
October 30, 2008
Some Additional Observations on the 2008Q3 Advance GDP Release
If you went no further than noticing that the q/q annualized growth rate of -0.3% was faster than the -0.5 in the Bloomberg consensus, you might have taken this as good news. I'm not going to say it wasn't good news (relatively speaking), although negative growth makes the case for recession pretty good according to Jeff Frankel (who is on the NBER BCDC); see also RealTime Economics. However, there are some pretty interesting things that merit additional discussion.
Continue reading "Some Additional Observations on the 2008Q3 Advance GDP Release"
Posted by Menzie Chinn at 09:27 PM permalink | Comments (12) | digg this | reddit
Real GDP fell slightly in 2008:Q3
The Bureau of Economic Analysis reported today that U.S. real GDP fell at a 0.3% annual rate in the third quarter of 2008. That's the second quarter of negative real GDP growth out of the last four, and puts the cumulative annual growth since 2007:Q3 at an anemic 0.8%.
Continue reading "Real GDP fell slightly in 2008:Q3"
Posted by James Hamilton at 08:53 AM permalink | Comments (12) | digg this | reddit
October 29, 2008
Deflation risk
There are plenty of things to worry about in the current economic situation. But deflation isn't one of them.
Continue reading "Deflation risk"
Posted by James Hamilton at 07:26 AM permalink | Comments (136) | digg this | reddit
October 27, 2008
Pocketful of Multipliers (II): Options for Stimulus Packages
As the debate over the nature and size of a stimulus package wends its way through the Congress [0], [1], [2], I thought it would be useful to bring numbers into the debate, especially as we are considering fiscal stimulus in a time when the Bush Administration has constrained, by dint of previous profligacy, our options. In particular, I want to return to the issue of multipliers, discussed in nearly a year ago. Here, I want to provide a little more specificity, regarding the impact depending upon the type of outlays.
Continue reading "Pocketful of Multipliers (II): Options for Stimulus Packages"
Posted by Menzie Chinn at 09:54 PM permalink | Comments (31) | digg this | reddit
Further rate cuts needed
The Fed will probably vote for another 50-basis-point cut in the fed funds rate this week, bringing its target down to 1%. Here's why I think that would be a good idea.
Continue reading "Further rate cuts needed"
Posted by James Hamilton at 08:03 AM permalink | Comments (27) | digg this | reddit
October 25, 2008
The Federal Reserve's balance sheet
On Thursday, the Federal Reserve issued its weekly H.4.1 report, which provides details of the Fed's balance sheet. Once upon a time, this was one of the least interesting of the government's many releases of data. These days, it's become one of the most exciting.
Continue reading "The Federal Reserve's balance sheet"
Posted by James Hamilton at 08:19 AM permalink | Comments (63) | digg this | reddit
Yikes! Euro Area Edition
From the FT today:
Survey underlines grim outlook for eurozone
By Ralph Atkins in Frankfurt, Published: October 24 2008 11:23 | Last updated: October 24 2008 18:37
The eurozone economy contracted sharply in October as the global bank crisis slammed the brakes on business activity and blackened the outlook for the 15-country region, a closely watched survey indicated on Friday.
Continue reading "Yikes! Euro Area Edition"
Posted by Menzie Chinn at 08:18 AM permalink | Comments (11) | digg this | reddit
October 23, 2008
Middle Kingdom Malaise? The Latest Chinese GDP Figures
Monday's announcement that Chinese growth was decelerating was not surprising; that it decelerated to below the consensus of 9.7% growth to 9% (y/y) in 2008Q3 was a surprise. This was reflected in the headlines: "China growth rate slows sharply" (FT), "China less likely to buffer world crisis as its economy slows" (LA Times), "China's economy feels chill from global crisis" (AP). For detailed numbers, see Haver.
Continue reading "Middle Kingdom Malaise? The Latest Chinese GDP Figures"
Posted by Menzie Chinn at 02:17 PM permalink | Comments (9) | digg this | reddit
Brief questions and answers on the fiscal stimulus
No time to post much today, so I'll just pass along an interesting question and brief answer from the Econbrowser mail room.
Continue reading "Brief questions and answers on the fiscal stimulus"
Posted by James Hamilton at 09:32 AM permalink | Comments (16) | digg this | reddit
October 21, 2008
CRA and Fannie and Freddie as betes noire
There is so much chaff floating around about the roles of Fannie and Freddie and of the Community Reinvestment Act in the current crisis, despite the best efforts of economists like Jim Hamilton [0] [1], Mark Thoma and Janet Yellen, that it seems worthwhile to once again go through some of the arguments that have been forwarded.
From David Goldstein and Kevin G. Hall, "Private sector loans, not Fannie or Freddie, triggered crisis":
Federal Reserve Board data show that:
Continue reading "CRA and Fannie and Freddie as betes noire"
Posted by Menzie Chinn at 12:00 PM permalink | Comments (41) | digg this | reddit
From the FT: The European Economic Outlook
From Europe's Stormy Outlook:
Stormy conditions prevail across Europe's economies, blackening the outlook after the arrival of a full-blown banking sector crisis this month sent confidence plummeting and threatened widespread-economic damage.
Jean-Claude Trichet, European Central Bank president, warned late on Sunday on French television of a "strong slowdown".
The recent turmoil has hardened expectations that 2009 will see little, if any, growth across much of the Continent.
...
Continue reading "From the FT: The European Economic Outlook"
Posted by Menzie Chinn at 08:55 AM permalink | Comments (4) | digg this | reddit
October 20, 2008
Bailouts for commodity speculators
If automakers are lining up at the trough, why not Big Agra?
Continue reading "Bailouts for commodity speculators"
Posted by James Hamilton at 10:51 AM permalink | Comments (12) | digg this | reddit
![[image]](http://mowser.com/img?url=http%3A%2F%2Fwww.econbrowser.com%2Farchives%2F2005%2F11%2Fsad.gif)
(since 
