Dollar poses dilemma for Bric countries: China, Russia and, to a lesser extent, Brazil have expressed a desire to see the dollar one day replaced as the world's main trading currency.
U.S. credit card defaults rise to record in May: – U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's (BAC.N) lending portfolio, in another sign that consumers remain under severe stress.
Full Version: Economic and Financial News
Headlines:
US to reveal banking reform plans (BBC News)
New rules put Fed in hot seat (Financial Times)
In huge change, Obama to strip Fed of credit card oversight (McClatchy)
Japan Government Upgrades Econ Assessment For 2nd Straight Month (WSJ)
California's credit rating may get cut further (Los Angeles Times)
Study Finds Prices for Crops Eases (NYT)
State of the global economy:
The recession tracks the Great Depression
Martin Wolf, Financial Times, June 16, 2009 The great likelihood is that the world economy will need aggressive monetary and fiscal policies far longer than many believe. That is going to be make policymakers - and investors - nervous, writes Martin Wolf.
MBA: Mortgage Applications Decrease
Calculated Risk, June 17, 2009 The Purchase Index is now at the level of the late '90s.
Re-regulating finance:
The three steps to financial reform
George Soros, Financial Times, June 16, 2009 While markets are imperfect, regulators are even more so. Not only are they human, they are also bureaucratic and subject to political influences, therefore regulations should be kept to a minimum, writes George Soros.
Sen. Warner Proposes 'Systemic Risk Council'
Sudeep Reddy, Real Time Economics, June 16, 2009 Sen. Mark Warner (D., Va.) today suggested that making the Fed the nation's systemic risk regulator would put too much power in the hands of one institution.
Regulatory Reform For Finance: Three Views
Simon Johnson, The Baseline Scenario, June 17, 2009 There are three views on who exactly is behind financial regulatory reform package that will be officially presented Wednesday lunchtime.
The Three Essentials of Financial ReformRobert Reich, June 16, 2009 1. Stop bankers from making huge, risky bets with other peoples' money. 2. Prevent any bank from becoming too big to fail. 3. Root out three major conflicts of interest.
Feds Call for Consumer Financial Protections
Phil Mintz and Theo Francis, BusinessWeek, June 16, 2009 The White House is proposing a new agency that will have broad powers to regulate financial products offered to consumers.
Policy prescriptions for recovery:
Europe will need to raise taxes in harmony
Matti Vanhanen, Financial Times, June 16, 2009 Parallel measures would help all of Europe: tax competition risk would be reduced and public finances of individual countries would improve, writes Matti Vanhanen.
How Stimulating Is Stimulus?
Lee E. Ohanian, Forbes, June 17, 2009 Not very. (Sorry, Paul Krugman.)
What Monetary Policy Cannot Do
Casey B. Mulligan, Economix, June 17, 2009 Was Milton Friedman right? Or did Mr. Bernanke's shift stimulate the housing market?
Punditry:
Decline of the American male
David Zincenko, USA Today, June 17, 2009 The recession has been particularly unkind to men and has larger implications for their health, safety and well-being. The Obama administration should address this disparity.
Talking energy with Tyler Cowen
Free Exchange, Economist.com, June 16, 2009 There isn't a better sceptic around than Tyler Cowen, so as a supporter of the Waxman-Markey energy bill making its way through Congress, I was intrigued to see his updated list of thoughts on American energy policy.
Economy
Federal Reserve May See Independence Dented by `Democratic Accountability' The Federal Reserve is likely to lose independence on one of its broadest lending tools and have governance of its regional banks questioned as lawmakers engage in the most sweeping overhaul of financial rules in decades.
King Says U.K. Banks May Need Further Capital to Finance Economic Recovery Bank of England Governor Mervyn King said Britain’s banking system may need to raise more capital to finance the economic recovery as officials keep printing money.
U.S. Consumer Prices Rise Less Than Forecast; Annual Drop Most in 60 Years The cost of living in the U.S. fell over the last 12 months by the most in six decades, easing concern that government efforts to revive the economy will lead to an immediate outbreak of inflation.
Fed Considers Using FOMC Statement to Suppress Rate-Increase Speculation Federal Reserve officials are considering whether to use next week’s policy statement to suppress any speculation they’re prepared to raise interest rates as soon as this year.
U.K. Unemployment Less Than Forecast, Bank of England Says Slump Easing U.K. unemployment rose less than economists forecast in May and the Bank of England said the risk of a deeper slump has receded, the latest evidence to indicate the economy is past the worst.
Obama Vows Tougher Wall Street Regulation, Says Unemployment to Reach 10% President Barack Obama offered stern words for Wall Street and a prediction of 10 percent U.S. unemployment even as he said the “engines” of an economic recovery have begun to turn.
Euro-Area Exports Drop 1.3% as Companies Cut Back to Weather Global Slump Euro-area exports declined the most in three months in April, signaling global demand remained weak as companies curtailed investments and production to weather the worst recession in more than six decades.
Norwegian Central Bank Unexpectedly Cuts Benchmark Interest Rate to 1.25% Norway’s central bank cut the benchmark interest rate for the seventh time in eight months as the world’s fifth-largest oil exporter battles a trade-related recession and rising joblessness.
Switzerland Cuts 2009 Economic Forecast for Second Time as Exports Dwindle The Swiss government cut its 2009 economic forecast for a second time this year after the worst global recession in more than six decades eroded exports.
Fed Gets No Requests for First TALF Loans to Buy Commercial-Mortgage Debt The Federal Reserve received no requests from investors for loans to buy new commercial mortgage-backed securities under an emergency program aimed at reducing borrowing costs and reviving U.S. economic growth.
Federal Reserve May See Independence Dented by `Democratic Accountability' The Federal Reserve is likely to lose independence on one of its broadest lending tools and have governance of its regional banks questioned as lawmakers engage in the most sweeping overhaul of financial rules in decades.
King Says U.K. Banks May Need Further Capital to Finance Economic Recovery Bank of England Governor Mervyn King said Britain’s banking system may need to raise more capital to finance the economic recovery as officials keep printing money.
U.S. Consumer Prices Rise Less Than Forecast; Annual Drop Most in 60 Years The cost of living in the U.S. fell over the last 12 months by the most in six decades, easing concern that government efforts to revive the economy will lead to an immediate outbreak of inflation.
Fed Considers Using FOMC Statement to Suppress Rate-Increase Speculation Federal Reserve officials are considering whether to use next week’s policy statement to suppress any speculation they’re prepared to raise interest rates as soon as this year.
U.K. Unemployment Less Than Forecast, Bank of England Says Slump Easing U.K. unemployment rose less than economists forecast in May and the Bank of England said the risk of a deeper slump has receded, the latest evidence to indicate the economy is past the worst.
Obama Vows Tougher Wall Street Regulation, Says Unemployment to Reach 10% President Barack Obama offered stern words for Wall Street and a prediction of 10 percent U.S. unemployment even as he said the “engines” of an economic recovery have begun to turn.
Euro-Area Exports Drop 1.3% as Companies Cut Back to Weather Global Slump Euro-area exports declined the most in three months in April, signaling global demand remained weak as companies curtailed investments and production to weather the worst recession in more than six decades.
Norwegian Central Bank Unexpectedly Cuts Benchmark Interest Rate to 1.25% Norway’s central bank cut the benchmark interest rate for the seventh time in eight months as the world’s fifth-largest oil exporter battles a trade-related recession and rising joblessness.
Switzerland Cuts 2009 Economic Forecast for Second Time as Exports Dwindle The Swiss government cut its 2009 economic forecast for a second time this year after the worst global recession in more than six decades eroded exports.
Fed Gets No Requests for First TALF Loans to Buy Commercial-Mortgage Debt The Federal Reserve received no requests from investors for loans to buy new commercial mortgage-backed securities under an emergency program aimed at reducing borrowing costs and reviving U.S. economic growth.
U.S. Initial Jobless Claims Rise; Drop in Benefit Rolls Signals Turnaround The number of Americans receiving claims for unemployment benefits dropped for the first time since January, adding to evidence the job market is starting to thaw.
World Bank Lifts China GDP Growth Forecast to 7.2%, Says Stimulus Adequate The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.
British Retail Sales Drop in May as King Highlights `Protracted' Recovery U.K. retail sales unexpectedly dropped in May for the first time in three months and Bank of England Governor Mervyn King said the economic recovery may be sluggish as banks ration credit.
Swiss National Bank Leaves Rate Unchanged, Pledges `Firm Action' on Franc The Swiss National Bank left its benchmark interest rate unchanged and said it will continue to take “firm action” to prevent any appreciation of the franc as it battles the threat of deflation.
Fed Will Fight Loss of Authority Over Consumer Loans in Obama's Blueprint Federal Reserve officials will oppose the Obama administration’s proposal to strip the central bank of its powers to protect consumers from predatory lending.
Posen Says U.S. Economy Is `Bouncing Back,' Predicts a W-Shaped Recovery The U.S. economy is “bouncing back” but still faces a “bumpy ride” out of the recession, said Adam Posen, who will become a Bank of England policy maker in September.
King Says British Banks May Need More Capital to Finance Economic Recovery Bank of England Governor Mervyn King said Britain’s banking system may need to raise more capital to finance the economic recovery as officials keep printing money.
Darling Signals Rift With Brown, Saying U.K. Must Take Action to Curb Debt Chancellor of the Exchequer Alistair Darling, signaling a clash with Prime Minister Gordon Brown over spending, said the U.K. government must make tough decisions to curb the budget deficit.
Italian Employers Say Economic Recovery to Start in 2010 on Higher Exports The Italian economy, in its worst recession in more than three decades, will return to growth next year as external demand begins to offset the effects of the global financial crisis, employers’ lobby Confindustria said.
Obama's Financial Overhaul Receives Wary Reception From Bankers, Lawmakers The Obama administration’s overhaul of financial-industry rules faces a lobbying assault on Capitol Hill, as lawmakers question the Federal Reserve’s role and bankers say the plan may hinder economic growth.
Britain Fights EU Banking Regulation Plans, Insists on National Control Britain will fight proposals today to lash London’s banks to European Union oversight, deepening the EU divide over how to prevent future financial shocks.
World Bank Lifts China GDP Growth Forecast to 7.2%, Says Stimulus Adequate The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.
British Retail Sales Drop in May as King Highlights `Protracted' Recovery U.K. retail sales unexpectedly dropped in May for the first time in three months and Bank of England Governor Mervyn King said the economic recovery may be sluggish as banks ration credit.
Swiss National Bank Leaves Rate Unchanged, Pledges `Firm Action' on Franc The Swiss National Bank left its benchmark interest rate unchanged and said it will continue to take “firm action” to prevent any appreciation of the franc as it battles the threat of deflation.
Fed Will Fight Loss of Authority Over Consumer Loans in Obama's Blueprint Federal Reserve officials will oppose the Obama administration’s proposal to strip the central bank of its powers to protect consumers from predatory lending.
Posen Says U.S. Economy Is `Bouncing Back,' Predicts a W-Shaped Recovery The U.S. economy is “bouncing back” but still faces a “bumpy ride” out of the recession, said Adam Posen, who will become a Bank of England policy maker in September.
King Says British Banks May Need More Capital to Finance Economic Recovery Bank of England Governor Mervyn King said Britain’s banking system may need to raise more capital to finance the economic recovery as officials keep printing money.
Darling Signals Rift With Brown, Saying U.K. Must Take Action to Curb Debt Chancellor of the Exchequer Alistair Darling, signaling a clash with Prime Minister Gordon Brown over spending, said the U.K. government must make tough decisions to curb the budget deficit.
Italian Employers Say Economic Recovery to Start in 2010 on Higher Exports The Italian economy, in its worst recession in more than three decades, will return to growth next year as external demand begins to offset the effects of the global financial crisis, employers’ lobby Confindustria said.
Obama's Financial Overhaul Receives Wary Reception From Bankers, Lawmakers The Obama administration’s overhaul of financial-industry rules faces a lobbying assault on Capitol Hill, as lawmakers question the Federal Reserve’s role and bankers say the plan may hinder economic growth.
Britain Fights EU Banking Regulation Plans, Insists on National Control Britain will fight proposals today to lash London’s banks to European Union oversight, deepening the EU divide over how to prevent future financial shocks.
Headlines:
Some Lawmakers Question Expanded Reach for the Fed (New York Times)
US groups face regulatory revamp (Financial Times)
Overhaul Leaves Rating Agencies Largely Untouched (New York Times)
Canadian Consumer Prices Record Unexpected Annual Rise in May (Bloomberg)
UK Retail Sales, Mortgage Lending Decline (Wall Street Journal)
World Bank raises China 2009 growth forecast (Associated Press)
Michigan jobless rate is highest in decades (Detroit Free Press)
Obama's financial regulation plan:
Obama's Financial Plan, Round One Theo Francis and Jane Sasseen, BusinessWeek, June 17, 2009 The combatants are set to battle over Obama's proposals for the Fed, how to regulate products like mortgages and credit cards, and much more.
Don't Rush Regulatory Reform
Robert R. Bench, Forbes, June 18, 2009 Ten thoughts in response to the president's blueprint.
Down the wrong road
Spencer Bachus, USA Today, June 18, 2009 Obama's plan keeps taxpayers on the hook for Wall Street's bad bets.
Too Big to Fail, or Succeed Peter Wallison, Wall Street Journal, June 18, 2009 Everyone will want to become big enough to enjoy 'systemic risk' protection.
Should the systemic risk regulator be the Fed? Tyler Cowen, Marginal Revolution, June 18, 2009 Assuming we are going to do it, I think it has to be the Fed, whether we like it or not.
Too Big To Fail, Politically
Simon Johnson, The Baseline Scenario, June 18, 2009 The problem was: a relatively small number of troubled banks were so large that their failure could imperil both our financial system and the world economy.
The Defanging of Obama's Regulation Plan
Simon Johnson, Economix, June 18, 2009 It's a long wish list, but intense and nontransparent financial sector lobbying already ensured that four out of the five sets of measures are unlikely to have any lasting positive impact.
Congress and the IMF:
Congress' Chance To Change The IMF
Peter Bujari and Joanne Carter, Forbes, June 18, 2009 If rich countries eschew the Fund's policies, why should poorer nations have to follow them?
Congress and the IMF's Power Grab
Judy Shelton, Wall Street Journal, June 18, 2009 There are better ways to promote international economic stability.
US macro:
America should also look to its fiscal health
Kenneth Rogoff, Financial Times, June 17, 2009 Higher taxes to pay for healthcare are likely to reduce US growth, making it far more difficult to escape the debt trap, says Kenneth Rogoff.
Report: State Personal Income Tax Cliff Diving
Calculated Risk, June 18, 2009 California isn't the worst, but the state relies heavily on income taxes.
Today's balance of payments release was overshadowed ...
Brad Setser, Follow the Money, June 18, 2009 The BEA now thinks that official inflows are a lot higher than they used to be.
State of the global economy: The BRICs: An Analysis
Nouriel Roubini, Forbes, June 18, 2009 What is the outlook for Brazil, Russia, India and China?
Green Green Shoots of Home
Willem Buiter, Maverecon, June 17, 2009 The upshot is: the glass is definitely half empty - or half full. Let me explain.
The housing bubble:
"Unlearned Lessons"
Mark Thoma, Economist's View, June 17, 2009 Did the false belief that land suitable for building houses was becoming scarce help to drive the housing bubble?
Headlines:
Billionaire Financier Stanford Surrenders to FBI (Washington Post)
US Unemployment Benefit Rolls Fall; Claims Rise (Bloomberg)
US Fed Advisory Committee Splits Over Credit-Card Fees (CNNMoney.com)
Is the Fed wearing so many hats it can't do its main job? (McClatchy)
Senate quick to attack Geithner reforms (Financial Times)
A Credit Squeeze for Small Business Owners (New York Times)
EU 'risks lagging US on regulation' (Financial Times)
IMF May Revise Up Growth Forecast for 2010: Lipsky (CNBC.com)
Re-regulating finance:
Out of the Shadows Paul Krugman, New York Times, June 18, 2009 President Obama's plan for financial reform basically punts on the question of how to keep what went wrong from happening again.
We Need Greater Global Governance Peter Mandelson, Wall Street Journal, June 19, 2009 The crisis reveals the weakness of nation-based regulation.
Is This The Beginning of the End of Free Checking?
Kelly Evans, Real Time Economics, June 18, 2009 In April, a tiny startup launched with a crazy idea: to offer checking accounts that aren't free - they cost $19.95 a month.
TARP for Regulators!
James Kwak, The Baseline Scenario, June 19, 2009 After AIG, Citigroup, Bank of America, and General Motors, the administration has decided that all the existing regulators are Too Big to Fail - except for the Office of Thrift Supervision, which must play the role of poor Lehman Brothers in this saga.
Geither's Plan to Have a Reform Plan Skewered by Senate
Yves Smith, Naked Capitalism, June 19, 2009 What amounted to a statement of principles and a very few stakes in the ground from Timothy Geithner on financial reform got a largely hostile reaction from Congress.
Fiscal and monetary policy:
Honesty is the best fiscal policy
Martin Wolf, Financial Times, June 18, 2009 Cuts in real spending are as inevitable under Labour as under the Tories. The only question is where they might fall, says Martin Wolf.
Taxes And The Crisis
Bruce Bartlett, Forbes, June 19, 2009 The origin of the recession and a call for action.
Krugman's Liquidity Claptrap
Alan Reynolds, Forbes, June 19, 2009 The laureate gets his history wrong.
Money talks:
One Third of the Prices within the CPI Fell Last Month
Mark Thoma, Economist's View, June 18, 2009 Is Greg Mankiw correct to say that deflation worries are overstated?
Interest in Gold and Inflation
Carter Dougherty, Economix, June 18, 2009 If you see headlines about gold, that must mean inflation is on the way, right?
I am pretty sure China didn't sell Treasuries in April (or May, for that matter)
Brad Setser, Follow the Money, June 19, 2009 The fall in China's recorded Treasury holdings in April has attracted a fair amount of attention. Too much, in my view.
What is needed for a lasting recovery
Olivier Blanchard, Financial Times, June 18, 2009 The world is more risky than US consumers thought. Stock and housing prices can go down, and go down a lot, says Olivier Blanchard.
Spending, Home Sales in U.S. Probably Rose as Consumers Gained Confidence Consumer spending in the U.S. probably rose in May for the first time in three months and home sales increased as Americans became more confident the recession will end this year, economists said before reports this week.
Merkel Says German Economy Near Bottom, Won't Recover Quickly, AP Reports Chancellor Angela Merkel said the slumping German economy has nearly hit bottom and will unlikely recover quickly, the AP reported, citing a speech she made in Berlin.
Unemployment Surpassing 10% Spreads Across U.S., Risking Economic Recovery More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.
EU Sees `Sustainable' Recovery Signs, Rules Out Further Stimulus Measures European Union leaders spotted the first signs of a “sustainable economic recovery” from the worst recession since World War II and started planning to roll back budget deficits piled up to combat the financial crisis.
Colombia Central Bank Cuts Lending Rate to 4.5% to Boost Shrinking Econom Colombia’s central bank cut its benchmark rate by the smallest amount in five months in a bid to spur growth without sparking inflation, and said it doesn’t see additional rate changes in the “near future.”
Mexico Cuts Benchmark Interest Rate to 4.75% to Support Shrinking Economy Mexico’s central bank cut its benchmark interest rate for a sixth consecutive month in a bid to bolster the country’s flagging economy, and said it would soon stop lowering borrowing costs.
Obama Says Proposed Agency Will Protect Consumers From Deceptive Lenders President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.
Bank of Israel May Hold Interest Rate at Record-Low 0.5% as Economy Slides The Bank of Israel will probably hold its benchmark interest rate at a record low tomorrow as the economy contracts and inflation slows.
Norwegian Economy Showing Signs Recovery, Finance Minister Halvorsen Says Norway is showing signs of recovering from its first recession in two decades as the biggest fiscal stimulus plan in more than 30 years rekindles consumer demand, Finance Minister Kristin Halvorsen said.
U.K. Spending Money Increases for Families With Jobs After BOE Rate Cuts U.K. families unaffected by job losses have enjoyed a 25 percent increase in spending money in the past year after mortgage costs and energy bills fell, Ernst & Young said.
Former BOE Official Gieve Says Moral Hazard for Banks Threatens Next Cycle Former Bank of England Deputy Governor John Gieve said government bailouts of banks have created “moral hazard” which threatens the next economic cycle as the current financial crisis shows some signs of abating.
Merkel Says German Economy Near Bottom, Won't Recover Quickly, AP Reports Chancellor Angela Merkel said the slumping German economy has nearly hit bottom and will unlikely recover quickly, the AP reported, citing a speech she made in Berlin.
Unemployment Surpassing 10% Spreads Across U.S., Risking Economic Recovery More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.
EU Sees `Sustainable' Recovery Signs, Rules Out Further Stimulus Measures European Union leaders spotted the first signs of a “sustainable economic recovery” from the worst recession since World War II and started planning to roll back budget deficits piled up to combat the financial crisis.
Colombia Central Bank Cuts Lending Rate to 4.5% to Boost Shrinking Econom Colombia’s central bank cut its benchmark rate by the smallest amount in five months in a bid to spur growth without sparking inflation, and said it doesn’t see additional rate changes in the “near future.”
Mexico Cuts Benchmark Interest Rate to 4.75% to Support Shrinking Economy Mexico’s central bank cut its benchmark interest rate for a sixth consecutive month in a bid to bolster the country’s flagging economy, and said it would soon stop lowering borrowing costs.
Obama Says Proposed Agency Will Protect Consumers From Deceptive Lenders President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.
Bank of Israel May Hold Interest Rate at Record-Low 0.5% as Economy Slides The Bank of Israel will probably hold its benchmark interest rate at a record low tomorrow as the economy contracts and inflation slows.
Norwegian Economy Showing Signs Recovery, Finance Minister Halvorsen Says Norway is showing signs of recovering from its first recession in two decades as the biggest fiscal stimulus plan in more than 30 years rekindles consumer demand, Finance Minister Kristin Halvorsen said.
U.K. Spending Money Increases for Families With Jobs After BOE Rate Cuts U.K. families unaffected by job losses have enjoyed a 25 percent increase in spending money in the past year after mortgage costs and energy bills fell, Ernst & Young said.
Former BOE Official Gieve Says Moral Hazard for Banks Threatens Next Cycle Former Bank of England Deputy Governor John Gieve said government bailouts of banks have created “moral hazard” which threatens the next economic cycle as the current financial crisis shows some signs of abating.
Headlines:
Key US Dollar Libor Rate Heads Lower (Wall Street Journal)
Obama defends Fed as overseer on systemic risk (Reuters)
Oil falls to near $68 as optimism on economy wanes (AP)
World Bank Cuts Forecast for Developed Economies (New York Times)
Housing Eludes Recovery as Job Losses, Foreclosures Climb (Bloomberg)
Fed plans repo markets revamp (Financial Times)
Hiring to Rebound in 2010: US Manufacturing Survey (CNBC.com)
Regulation at home and abroad:
A thin outline of regulatory reform
Clive Crook, Financial Times, June 21, 2009 The Obama administration's proposals for US financial regulation are pretty good, as far as they go. The problem is they do not go far enough. A crisis of this order demands big new ideas, and the leadership to push them through. If not now, when? asks Clive Crook.
Japan serves up valuable minimalist lesson
Peter Tasker, Financial Times, June 21, 2009 In stark contrast to conventional wisdom now in the US and UK, Tokyo concluded that it needed less financial regulation, not more, writes Peter Tasker.
How to Get The Fed Out Of Its 'Box'
Frederic S. Mishkin, Wall Street Journal, June 22, 2009 A commitment to fiscal discipline could enable expansionary monetary policy.
America's economic future:
Bulldozing our cities may wreck our future
Gregory Rodriguez, Los Angeles Times, June 22, 2009 Back-to-nature plans may make financial sense, but are they in society's best interest?
Welfare in a Bad Way
Robert J. Samuelson, Washington Post, June 22, 2009 America has promised its citizens more than it can deliver.
What will drive future growth? Tyler Cowen, Marginal Revolution, June 22, 2009 There are two key questions I ask in a downturn: what will boost aggregate demand? and what will cause a better matching of the particular components of C and I?
Transportation and infrastructure:
Gasoline prices and consumer sentiment
James Hamilton, Econbrowser, June 21, 2009 How much are the recent increases in gas prices likely to weigh down American consumers?
Give Obama A Bank
Michael Maiello, Forbes, June 22, 2009 The private sector has failed us, so it's time to give the government its own bank for infrastructure.
View from the surplus economies:
Berlin weaves a deficit hair-shirt for us all
Wolfgang Münchau, Financial Times, June 21, 2009
The balanced-budget law is economically illiterate, but universally popular - Germans see debt in terms of morals, not economics. It is also last thing the eurozone needs right now, says Wolfgang Münchau.
The good and bad news in the World Bank's China Quarterly
Brad Setser, Follow the Money, June 21, 2009 China has, in effect, adopted its own version of credit easing. It just works through the balance sheets of the state banks rather than through the balance sheet of the central bank.
China's savings problem and the consumption constraint
Michael Pettis, China Financial Markets, June 20, 2009 I am still trying to work out the implications for China of a rise in US household savings, but here is how I see it.
State of U.S. metro economies:
LA, NY, San Francisco, Boston, Seattle, Detroit: Real Prices and the Unemployment RateCalculated Risk, June 21, 2009 Yesterday I posted a comparison of national real house prices and the unemployment rate. Today I'm posting the comparison for various cities.
6/22/2009
States Turning to Last Resorts in Budget Crisis
- New York Times 6/22/2009
Recovery's Missing Ingredient: New Jobs
- Washington Post 6/22/2009
Housing Eludes Recovery as Job Losses, F-C's Climb
- Bloomberg 6/22/2009
Families Struggle as Job Losses Hit Home
- Tennessean 6/22/2009
'Vultures' Circling Commercial Properties
- San Diego Union-Tribune 6/22/2009
1/4 of US Companies Ending 401(k) Dollars
- Philadephia Inquirer 6/22/2009
Supplier Struggles Threaten Automakers
- Detroit Free Press 6/22/2009
Condo Dwellers Finding Empty Buildings
- Miami Herald 6/22/2009
Cash-Strapped Sending Belongings to Auction Block
- Daily News 6/22/2009
The Wine's Still Flowing, But from Cheaper Bottles
- Orlando Sentinel 6/22/2009
Bad Economy Dampens Celebrations for July 4th
- New York Times
States Turning to Last Resorts in Budget Crisis
- New York Times 6/22/2009
Recovery's Missing Ingredient: New Jobs
- Washington Post 6/22/2009
Housing Eludes Recovery as Job Losses, F-C's Climb
- Bloomberg 6/22/2009
Families Struggle as Job Losses Hit Home
- Tennessean 6/22/2009
'Vultures' Circling Commercial Properties
- San Diego Union-Tribune 6/22/2009
1/4 of US Companies Ending 401(k) Dollars
- Philadephia Inquirer 6/22/2009
Supplier Struggles Threaten Automakers
- Detroit Free Press 6/22/2009
Condo Dwellers Finding Empty Buildings
- Miami Herald 6/22/2009
Cash-Strapped Sending Belongings to Auction Block
- Daily News 6/22/2009
The Wine's Still Flowing, But from Cheaper Bottles
- Orlando Sentinel 6/22/2009
Bad Economy Dampens Celebrations for July 4th
- New York Times
[b]Headlines: [/b]
[b]Oil Trades Little Change Amid Concern Recession Will Take Time (Bloomberg) Wall Street Pulls Back - How Deep Will Losses Go? (CNBC.com)
US may drop tax case against UBS: report (MarketWatch)
In Tough Times, Companies Coddle Their Regulars (Wall Street Journal)
Despite Law, Job Conditions Worsen in China (New York Times)
Pessimistic executives cash out of shares (Financial Times)
The economic reckoning: [/b]
[b]No Such Thing as a Free Lunch, Revisited
Edward L. Glaeser, Economix, June 23, 2009 The events of the past 18 months have led many, both in and out of academia, to doubt the "Efficient Markets Hypothesis."
What Next For The Global Crisis?
Simon Johnson, The Baseline Scenario, June 22, 2009 The official view is that a rare and unfortunate accident occurred in the fall of 2008...The second view, of course, is rather more skeptical regarding whether we are really out of crisis in any meaningful sense.
Yes Virginia, there was an international financial crisis in 2007 and 2008
Brad Setser, Follow the Money, June 23, 2009 Now that the markets have lost a bit of their froth, it seems fitting to note just how sharply trade - and private financial flows - have contracted over the past year.
The Overrated Unwinding Brian S. Wesbury and Robert Stein, Forbes, June 23, 2009 There's too much pessimism in David Brooks.
Fixing finance:
Why all regulatory roads lead to the Fed
Frederic Mishkin, Financial Times, June 22, 2009 Given the importance of the financial stability goal and the fact that some institution must play the role of the systemic regulator, the Fed is the obvious choice, writes Frederic Mishkin.
Fed Meeting Tuesday and Wednesday
Calculated Risk, June 23, 2009 No one expects a rate change this week, but a few investors expect a rate increase by August.
A Fairer Credit Card? Priceless
Ryan Bubb and Alex Kaufman, New York Times, June 22, 2009 Based on an examination of credit union cards, evidence suggests that the credit card act is likely to bring about moderate, and even positive, changes.
Recession and recovery: [/b]
[b]Why The Left Is Questioning Its Hero
Joel Kotkin, Forbes, June 23, 2009 What if the "green shoots" of economic recovery turn out to be crabgrass instead?
Staffing Group: U.S. Payrolls To Expand Three Months After Temp Turnaround
Sudeep Reddy, Real Time Economics, June 22, 2009 When temp employment turns around, the rest of the job market is supposed to flip as well.
FRBSF: Fighting Downturns with Fiscal Policy
Mark Thoma, Economist's View, June 22, 2009 The effectiveness of tax cuts depends, in part, on how hard the recession hits household balance sheets.
World Bank Report Bearish on Recovery
Brian Hoyt, Crisis Talk (World Bank), June 22, 2009 The annual Global Development Finance report was released today by the World Bank, and it forecasts a 2.9% drop in global GDP in 2009. [/b]
[b]Oil Trades Little Change Amid Concern Recession Will Take Time (Bloomberg) Wall Street Pulls Back - How Deep Will Losses Go? (CNBC.com)
US may drop tax case against UBS: report (MarketWatch)
In Tough Times, Companies Coddle Their Regulars (Wall Street Journal)
Despite Law, Job Conditions Worsen in China (New York Times)
Pessimistic executives cash out of shares (Financial Times)
The economic reckoning: [/b]
[b]No Such Thing as a Free Lunch, Revisited
Edward L. Glaeser, Economix, June 23, 2009 The events of the past 18 months have led many, both in and out of academia, to doubt the "Efficient Markets Hypothesis."
What Next For The Global Crisis?
Simon Johnson, The Baseline Scenario, June 22, 2009 The official view is that a rare and unfortunate accident occurred in the fall of 2008...The second view, of course, is rather more skeptical regarding whether we are really out of crisis in any meaningful sense.
Yes Virginia, there was an international financial crisis in 2007 and 2008
Brad Setser, Follow the Money, June 23, 2009 Now that the markets have lost a bit of their froth, it seems fitting to note just how sharply trade - and private financial flows - have contracted over the past year.
The Overrated Unwinding Brian S. Wesbury and Robert Stein, Forbes, June 23, 2009 There's too much pessimism in David Brooks.
Fixing finance:
Why all regulatory roads lead to the Fed
Frederic Mishkin, Financial Times, June 22, 2009 Given the importance of the financial stability goal and the fact that some institution must play the role of the systemic regulator, the Fed is the obvious choice, writes Frederic Mishkin.
Fed Meeting Tuesday and Wednesday
Calculated Risk, June 23, 2009 No one expects a rate change this week, but a few investors expect a rate increase by August.
A Fairer Credit Card? Priceless
Ryan Bubb and Alex Kaufman, New York Times, June 22, 2009 Based on an examination of credit union cards, evidence suggests that the credit card act is likely to bring about moderate, and even positive, changes.
Recession and recovery: [/b]
[b]Why The Left Is Questioning Its Hero
Joel Kotkin, Forbes, June 23, 2009 What if the "green shoots" of economic recovery turn out to be crabgrass instead?
Staffing Group: U.S. Payrolls To Expand Three Months After Temp Turnaround
Sudeep Reddy, Real Time Economics, June 22, 2009 When temp employment turns around, the rest of the job market is supposed to flip as well.
FRBSF: Fighting Downturns with Fiscal Policy
Mark Thoma, Economist's View, June 22, 2009 The effectiveness of tax cuts depends, in part, on how hard the recession hits household balance sheets.
World Bank Report Bearish on Recovery
Brian Hoyt, Crisis Talk (World Bank), June 22, 2009 The annual Global Development Finance report was released today by the World Bank, and it forecasts a 2.9% drop in global GDP in 2009. [/b]
Federal Reserve Leaves Bond Purchases Unchanged, Says Inflation `Subdued' The Federal Reserve refrained from increasing its $1.75 trillion bond-purchase program, said the pace of economic contraction is slowing and predicted inflation will remain “subdued for some time.”
U.S. Durable Goods Orders Unexpectedly Climb in Sign Recession Is Easing Orders for U.S. durable goods unexpectedly jumped in May, a sign companies are gaining confidence the recession is easing.
Treasury's Allison Says Economy, Financial System Improving on Lower Risk The U.S. economy and financial system are improving amid declining credit-market risk, according to the head of the Treasury Department office overseeing the $700 billion rescue fund.
Buffett Says U.S. May Need Second Stimulus Package as Unemployment Climbs Billionaire investor Warren Buffett said the U.S. may need a second economic stimulus package as unemployment is poised to continue rising.
OECD Raises Economic Outlook for First Time in Two Years on U.S. Recovery The Organization for Economic Cooperation and Development raised its forecast for the economy of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing.
Japan Export Slump Deepens, Casting Doubt on Recovery From Worst Recession Japan’s export slump deepened in May, casting doubt on the nation’s growth prospects as the economy struggles to emerge from its worst postwar recession.
ECB to Lend Banks $621 Billion in First 12-Month Auction to Unlock Markets The European Central Bank said it will lend banks 442 billion euros ($621 billion) for 12 months, the most it has ever allotted in an auction, as it steps up efforts to unblock credit markets in the 16-nation euro region.
Britain's Path Out of Recession May Be `Long, Hard Slog,' BOE's King Says Bank of England Governor Mervyn King said Britain’s recovery from the worst recession in a generation will be slow and “uncertain.”
IMF Says Irish Banks' Losses May Amount to EU35 Billion as Economy Slumps Ireland’s banks face losses of as much as 35 billion euros ($49 billion) through 2010 as the economy shrinks at an “unprecedented” pace, according to the International Monetary Fund.
New Zealand' Economy Probably Contracted at Slower Pace as Recession Eases New Zealand’s economy probably contracted at a slower pace in the first quarter, adding to signs the nation will emerge from the worst recession in more than three decades by the end of this year.
Taiwan May Leave Interest Rate Unchanged Amid Signs of Recovery in Exports Taiwan’s central bank may keep its benchmark interest rate unchanged today on signs the export- dependent economy will recover as the global recession abates.
U.S. Durable Goods Orders Unexpectedly Climb in Sign Recession Is Easing Orders for U.S. durable goods unexpectedly jumped in May, a sign companies are gaining confidence the recession is easing.
Treasury's Allison Says Economy, Financial System Improving on Lower Risk The U.S. economy and financial system are improving amid declining credit-market risk, according to the head of the Treasury Department office overseeing the $700 billion rescue fund.
Buffett Says U.S. May Need Second Stimulus Package as Unemployment Climbs Billionaire investor Warren Buffett said the U.S. may need a second economic stimulus package as unemployment is poised to continue rising.
OECD Raises Economic Outlook for First Time in Two Years on U.S. Recovery The Organization for Economic Cooperation and Development raised its forecast for the economy of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing.
Japan Export Slump Deepens, Casting Doubt on Recovery From Worst Recession Japan’s export slump deepened in May, casting doubt on the nation’s growth prospects as the economy struggles to emerge from its worst postwar recession.
ECB to Lend Banks $621 Billion in First 12-Month Auction to Unlock Markets The European Central Bank said it will lend banks 442 billion euros ($621 billion) for 12 months, the most it has ever allotted in an auction, as it steps up efforts to unblock credit markets in the 16-nation euro region.
Britain's Path Out of Recession May Be `Long, Hard Slog,' BOE's King Says Bank of England Governor Mervyn King said Britain’s recovery from the worst recession in a generation will be slow and “uncertain.”
IMF Says Irish Banks' Losses May Amount to EU35 Billion as Economy Slumps Ireland’s banks face losses of as much as 35 billion euros ($49 billion) through 2010 as the economy shrinks at an “unprecedented” pace, according to the International Monetary Fund.
New Zealand' Economy Probably Contracted at Slower Pace as Recession Eases New Zealand’s economy probably contracted at a slower pace in the first quarter, adding to signs the nation will emerge from the worst recession in more than three decades by the end of this year.
Taiwan May Leave Interest Rate Unchanged Amid Signs of Recovery in Exports Taiwan’s central bank may keep its benchmark interest rate unchanged today on signs the export- dependent economy will recover as the global recession abates.
Initial Unemployment Claims in U.S. Unexpectedly Rise by 15,000 to 627,000 The number of Americans filing claims for unemployment benefits unexpectedly rose last week and the total number receiving payments increased, indicating the labor market may take longer to stabilize.
Fed Douses Speculation on Bonds, Urges Investors to `Relax' on Inflation Federal Reserve officials, encouraged by signs the recession is easing, doused speculation they will pump more money into the economy to hold down interest rates, while indicating they’re not ready to begin a retreat.
U.S. Economy Shrank at 5.5% Pace Last Quarter as Housing, Investment Slid The U.S. economy shrank at a 5.5 percent annual rate in the first quarter, reflecting declines in inventories, housing and business spending that have since eased.
China's Central Bank Pledges to Keep the Money Flowing as Economy Recovers China’s central bank pledged to keep pumping money into the financial system to support a recovery in the world’s third-biggest economy.
Roth Signals New Swiss `Aggressiveness' in Action to Curb Franc's Advance The Swiss National Bank is attempting to put a “line in the sand” with its first intervention in the foreign-exchange market in more than a decade after previous attempts to weaken the franc failed.
Italian June Business Confidence Rises Seven-Month High as Demand Gains Italian business confidence rose to a seven-month high in June, adding to signals in Europe that the worst recession in half a century may ease later this year.
IMF Says Irish Banks' Losses May Amount to EU35 Billion as Economy Slumps Ireland’s banks face losses of as much as 35 billion euros ($49 billion) through next year as the economy shrinks at an “unprecedented” pace, the International Monetary Fund said.
Taiwan Keeps Interest Rate Unchanged at 1.25% on Signs of Global Recovery Taiwan’s central bank kept its interest rate unchanged for a second straight meeting on signs the economy will recover from its record contraction.
Buffett Says U.S. May Need Second Stimulus Package as Unemployment Climbs Billionaire investor Warren Buffett said the U.S. may need a second economic stimulus package as unemployment is poised to continue rising.
IMF Raises Australian Growth Forecast, Picks 0.5% Contraction During 2009 Australia’s economy will shrink less than forecast this year and grow at more than double the anticipated pace in 2010, helped by stimulus measures, the International Monetary Fund said.
Brown Backs Down on Pensions Boost for U.K. Lawmakers as Authority Wanes Prime Minister Gordon Brown backed down on a plan to increase taxpayer funding for the pensions of British lawmakers on the eve of a vote in the House of Commons, an indication that his authority is slipping away.
Fed Douses Speculation on Bonds, Urges Investors to `Relax' on Inflation Federal Reserve officials, encouraged by signs the recession is easing, doused speculation they will pump more money into the economy to hold down interest rates, while indicating they’re not ready to begin a retreat.
U.S. Economy Shrank at 5.5% Pace Last Quarter as Housing, Investment Slid The U.S. economy shrank at a 5.5 percent annual rate in the first quarter, reflecting declines in inventories, housing and business spending that have since eased.
China's Central Bank Pledges to Keep the Money Flowing as Economy Recovers China’s central bank pledged to keep pumping money into the financial system to support a recovery in the world’s third-biggest economy.
Roth Signals New Swiss `Aggressiveness' in Action to Curb Franc's Advance The Swiss National Bank is attempting to put a “line in the sand” with its first intervention in the foreign-exchange market in more than a decade after previous attempts to weaken the franc failed.
Italian June Business Confidence Rises Seven-Month High as Demand Gains Italian business confidence rose to a seven-month high in June, adding to signals in Europe that the worst recession in half a century may ease later this year.
IMF Says Irish Banks' Losses May Amount to EU35 Billion as Economy Slumps Ireland’s banks face losses of as much as 35 billion euros ($49 billion) through next year as the economy shrinks at an “unprecedented” pace, the International Monetary Fund said.
Taiwan Keeps Interest Rate Unchanged at 1.25% on Signs of Global Recovery Taiwan’s central bank kept its interest rate unchanged for a second straight meeting on signs the economy will recover from its record contraction.
Buffett Says U.S. May Need Second Stimulus Package as Unemployment Climbs Billionaire investor Warren Buffett said the U.S. may need a second economic stimulus package as unemployment is poised to continue rising.
IMF Raises Australian Growth Forecast, Picks 0.5% Contraction During 2009 Australia’s economy will shrink less than forecast this year and grow at more than double the anticipated pace in 2010, helped by stimulus measures, the International Monetary Fund said.
Brown Backs Down on Pensions Boost for U.K. Lawmakers as Authority Wanes Prime Minister Gordon Brown backed down on a plan to increase taxpayer funding for the pensions of British lawmakers on the eve of a vote in the House of Commons, an indication that his authority is slipping away.
U.S. Consumer Spending Rises, Incomes Jump on Government Stimulus Checks Consumer spending rose for the first time in three months in May as incomes jumped by the most in a year, a sign that government efforts to revive the economy may be starting to pay off.
China Calls for World Reserve Currency, Says IMF Should Manage Some Funds China’s central bank renewed its call for a new global currency and said the International Monetary Fund should manage more of members’ foreign-exchange reserves, triggering a decline in the U.S. dollar.
Japan's Consumer Prices Fall a Record 1.1%; Economy Succumbs to Deflation Japan’s consumer prices fell at a record pace in May, adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession.
Bank of England Says Financial System Vulnerable to Further Wave of Shocks The Bank of England said financial institutions’ losses from the crisis have left them vulnerable to another wave of shocks, including the risk that the economy will stay mired in recession.
Bernanke Grilling May Undermine Plan to Give Fed Powers Over Systemic Risk Chairman Ben S. Bernanke’s grilling by legislators over Federal Reserve conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. may reduce the odds the central bank will win new powers in a regulatory overhaul.
China Industrial Companies' Profits Fall More Slowly on Stimulus Spending Chinese industrial-company profits fell at a slower pace as commodity prices declined from a year earlier and a 4 trillion yuan ($585 billion) stimulus package boosted demand.
New Zealand's Economy Shrinks 1% in First Quarter, Extending Recession New Zealand’s economy shrank for a fifth straight quarter as consumers and businesses cut spending, extending the worst recession in more than three decades.
Surging American Savings Rate Reduces Dependence on China as Growth Slows Saks Fifth Avenue is cutting orders 20 percent after posting losses in the last four quarters. Kia Harris says some customers at the Washington shoe store where she works are buying one pair rather than three.
South Asia's `Historic Elections' May Spur Economic Integration in Region South Asia’s “historic elections” in the past 18 months have advanced democracy in the region and may spur economic integration, said Sheel Kant Sharma, secretary general of the South Asian Association for Regional Cooperation.
U.K. Lenders Should Rely Less on Credit Rating Firms, Bank of England Says Banks should reduce their dependence on external credit-rating companies and improve their own risk assessment procedures, the Bank of England said in its Financial Stability Report today.
China Calls for World Reserve Currency, Says IMF Should Manage Some Funds China’s central bank renewed its call for a new global currency and said the International Monetary Fund should manage more of members’ foreign-exchange reserves, triggering a decline in the U.S. dollar.
Japan's Consumer Prices Fall a Record 1.1%; Economy Succumbs to Deflation Japan’s consumer prices fell at a record pace in May, adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession.
Bank of England Says Financial System Vulnerable to Further Wave of Shocks The Bank of England said financial institutions’ losses from the crisis have left them vulnerable to another wave of shocks, including the risk that the economy will stay mired in recession.
Bernanke Grilling May Undermine Plan to Give Fed Powers Over Systemic Risk Chairman Ben S. Bernanke’s grilling by legislators over Federal Reserve conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. may reduce the odds the central bank will win new powers in a regulatory overhaul.
China Industrial Companies' Profits Fall More Slowly on Stimulus Spending Chinese industrial-company profits fell at a slower pace as commodity prices declined from a year earlier and a 4 trillion yuan ($585 billion) stimulus package boosted demand.
New Zealand's Economy Shrinks 1% in First Quarter, Extending Recession New Zealand’s economy shrank for a fifth straight quarter as consumers and businesses cut spending, extending the worst recession in more than three decades.
Surging American Savings Rate Reduces Dependence on China as Growth Slows Saks Fifth Avenue is cutting orders 20 percent after posting losses in the last four quarters. Kia Harris says some customers at the Washington shoe store where she works are buying one pair rather than three.
South Asia's `Historic Elections' May Spur Economic Integration in Region South Asia’s “historic elections” in the past 18 months have advanced democracy in the region and may spur economic integration, said Sheel Kant Sharma, secretary general of the South Asian Association for Regional Cooperation.
U.K. Lenders Should Rely Less on Credit Rating Firms, Bank of England Says Banks should reduce their dependence on external credit-rating companies and improve their own risk assessment procedures, the Bank of England said in its Financial Stability Report today.
Headlines:
Madoff faces sentencing in court (BBC News)
Paper Avalanche Buries Plan to Stem Foreclosures (New York Times)
Oil watchdog cuts demand forecasts (Financial Times)
China Allows Trade Settlement in Yuan in Hong Kong (Bloomberg)
China's Banks Warned on Loan Risks (Wall Street Journal)
Japan industrial output rises for third month (MarketWatch)
Romer 'More Optimistic' on Recovery: Report (CNBC.com)
Re-regulating finance:
Regulating banks calls for attack on inertia
John Gieve, Financial Times, June 28, 2009 Banks and regulators are in constant discussion and negotiation and tend to develop shared views and shared misjudgments, writes John Gieve.
Panics 'R' Us! Robert J. Samuelson, Washington Post, June 29, 2009 The Obama administration's financial 'reforms' won't prevent future crises.
President Obama's Financial Reform Package Gary Becker, The Becker-Posner Blog, June 28, 2009 My overall grade for the plan is no higher than a B-, and perhaps as low as a C.
Financial Regulatory Reform Richard Posner, The Becker-Posner Blog, June 28, 2009 The fundamental failings include prematurity, one-sidedness, and overambitiousness.
The housing bust:
See how global crash hits home John McCarron, Chicago Tribune, June 29, 2009 Mr. Secretary, if you want to check out the state of affordable housing in Chicago, you had better check out the 6300 block of South Rockwell Street.
How many Homeowners Sold to Rent at the Peak?
Calculated Risk Blog, June 28, 2009 The number of occupied rental units bottomed in Q2 2004, and has increased by 3.8 millions units since then.
Central banking policy and politics:
Central banking as partisan politics
Willem Buiter, Maverecon, June 27, 2009 As long as the financial stability role of central banks remained in the background, the notion of central bank independence appeared to have something to recommend it.
The Fed must reassure markets on inflation
Martin Feldstein, Financial Times, June 28, 2009 The immediate challenge is to reassure investors about both the risks of inflation and the projected growth of fiscal deficits, writes Martin Feldstein.
A Tangled Policy Web
Tim Duy, Fed Watch, June 28, 2009 Incoming data continues to confirm an emerging period of relative economic tranquility following the financial storm of 2008...But incoming data also point to America's sustained and perplexing dependence on foreign capital inflows - a dependence that suggests an underlying economic vulnerability that has yet to be addressed.
The state-federal fiscal relationship:
Bail Out California
Michael Maiello, Forbes, June 29, 2009 Rescue the Golden State, but demand the governor's head.
In a Crisis, Rethinking Fiscal Federalism
Harold Pollack and Ed Kilgore, Economix, June 29, 2009 It's fun to ponder the local flora and fauna, but the real problems lie underneath: the frayed partnership between states and the federal government.
Policymakers, the view from overseas:
Germany and France need to sing in tune
Wolfgang Münchau, Financial Times, June 28, 2009
Debates over fiscal approaches aside, it is probably not a good idea for the two largest members of the eurozone to move in opposite directions, writes Wolfgang Münchau.
Basic rules helped China sidestep bank crisis
Liu Mingkang, Financial Times, June 28, 2009 Chinese regulators want firewalls between commercial banks, their controlling shareholders and their non-banking subsidiaries, in order to prevent risk contagion, writes Liu Mingkang.
Save The World From Peter Mandelson
John Tamny, Forbes, June 29, 2009 The interventionist U.K. business secretary couldn't be more wrong.
Madoff faces sentencing in court (BBC News)
Paper Avalanche Buries Plan to Stem Foreclosures (New York Times)
Oil watchdog cuts demand forecasts (Financial Times)
China Allows Trade Settlement in Yuan in Hong Kong (Bloomberg)
China's Banks Warned on Loan Risks (Wall Street Journal)
Japan industrial output rises for third month (MarketWatch)
Romer 'More Optimistic' on Recovery: Report (CNBC.com)
Re-regulating finance:
Regulating banks calls for attack on inertia
John Gieve, Financial Times, June 28, 2009 Banks and regulators are in constant discussion and negotiation and tend to develop shared views and shared misjudgments, writes John Gieve.
Panics 'R' Us! Robert J. Samuelson, Washington Post, June 29, 2009 The Obama administration's financial 'reforms' won't prevent future crises.
President Obama's Financial Reform Package Gary Becker, The Becker-Posner Blog, June 28, 2009 My overall grade for the plan is no higher than a B-, and perhaps as low as a C.
Financial Regulatory Reform Richard Posner, The Becker-Posner Blog, June 28, 2009 The fundamental failings include prematurity, one-sidedness, and overambitiousness.
The housing bust:
See how global crash hits home John McCarron, Chicago Tribune, June 29, 2009 Mr. Secretary, if you want to check out the state of affordable housing in Chicago, you had better check out the 6300 block of South Rockwell Street.
How many Homeowners Sold to Rent at the Peak?
Calculated Risk Blog, June 28, 2009 The number of occupied rental units bottomed in Q2 2004, and has increased by 3.8 millions units since then.
Central banking policy and politics:
Central banking as partisan politics
Willem Buiter, Maverecon, June 27, 2009 As long as the financial stability role of central banks remained in the background, the notion of central bank independence appeared to have something to recommend it.
The Fed must reassure markets on inflation
Martin Feldstein, Financial Times, June 28, 2009 The immediate challenge is to reassure investors about both the risks of inflation and the projected growth of fiscal deficits, writes Martin Feldstein.
A Tangled Policy Web
Tim Duy, Fed Watch, June 28, 2009 Incoming data continues to confirm an emerging period of relative economic tranquility following the financial storm of 2008...But incoming data also point to America's sustained and perplexing dependence on foreign capital inflows - a dependence that suggests an underlying economic vulnerability that has yet to be addressed.
The state-federal fiscal relationship:
Bail Out California
Michael Maiello, Forbes, June 29, 2009 Rescue the Golden State, but demand the governor's head.
In a Crisis, Rethinking Fiscal Federalism
Harold Pollack and Ed Kilgore, Economix, June 29, 2009 It's fun to ponder the local flora and fauna, but the real problems lie underneath: the frayed partnership between states and the federal government.
Policymakers, the view from overseas:
Germany and France need to sing in tune
Wolfgang Münchau, Financial Times, June 28, 2009
Debates over fiscal approaches aside, it is probably not a good idea for the two largest members of the eurozone to move in opposite directions, writes Wolfgang Münchau.
Basic rules helped China sidestep bank crisis
Liu Mingkang, Financial Times, June 28, 2009 Chinese regulators want firewalls between commercial banks, their controlling shareholders and their non-banking subsidiaries, in order to prevent risk contagion, writes Liu Mingkang.
Save The World From Peter Mandelson
John Tamny, Forbes, June 29, 2009 The interventionist U.K. business secretary couldn't be more wrong.
Headlines:
Madoff Faces Harsher Imprisonment Than Corporate Predecessors (Bloomberg)
Eurozone inflation turns negative (BBC News)
Justices Rule That States Can Press Bank Cases (New York Times)
Taiwan opens door for Chinese investment (Washington Post)
UK economy shrinks most in 50 years (Financial Times)
Oil companies bid for Iraq's oil fields (Financial Times)
Treasury Set to Unveil PPIP; Ross, GE Capital Participate (CNBC.com)
Taxes and budget:
We'll Need to Raise Taxes Soon
Roger C. Altman, Wall Street Journal, June 30, 2009 Expect Congress to seriously consider a value-added tax.
The deficit as political football
Free Exchange, Economist.com, June 30, 2009 It's important to note that this is a long-run budget problem.
California May Resort to IOUs
Christopher Palmeri, BusinessWeek, June 29, 2009 If Schwarzenegger and the Democrat-controlled legislature can't come to terms by July 2, funds for the aged, the jobless, and the disabled will be on hold
The economic reckoning:
Did Homeowners Cause The Great Recession?
Joel Kotkin, Forbes, June 30, 2009 Welcome to the new feudal age.
Should We Pop Bubbles?
Mark Thoma, Economist's View, June 30, 2009 Guillermo Calvo and Rudy Loo-Kung argue that the benefits of bubbles almost always outweigh their costs (and thus there's no need for regulation to prevent them).
State of the US economy:
Auto Sales Expected to be near 10 Million SAAR in June
Calculated Risk Blog, June 29, 2009 But before everyone gets all Green Shootie... This graph shows light vehicle sales since the BEA started keeping data in 1967.
$70 Oil, but Where's the Demand?
Kelly Evans, Real Time Economics, June 29, 2009 Rising oil prices - the great villain of 2008 - are back, but this time markets are cheering.
Economics:
Climate, trade, Obama
Paul Krugman, The Conscience of a Liberal, June 29, 2009 The truth is that there's perfectly sound economics behind border adjustments related to cap-and-trade.
China's loan growth isn't boosting my confidence in China's "green shoots"
Michael Pettis, China Financial Markets, June 30, 2009 I would argue that new lending in 2009, running at 2 to 3 times the new lending over the same period in 2008, is not at all normal and is very unlikely to be healthy.
A sound funeral plan can prolong a bank's life
Anil Kashyap, Financial Times, June 29, 2009 Current arrangements are akin to forcing the Pentagon to go to war without ever being able to simulate a war game, writes Anil Kashyap.
Punditry:
Pork -- it's for everyone, including Obama
Jonah Goldberg, Los Angeles Times, June 30, 2009 The president's 'solutions' to the economic crisis amount to spending as much as possible for as long as possible.
King does not have a monopoly of wisdom
Philip Stephens, Financial Times, June 29, 2009 The governor's impatience with contrary opinion does not recommend the transfer of still more authority to the Bank of England, writes Philip Stephens.
Economy
U.K. GDP Dropped 2.4% in First Quarter in Biggest Contraction Since 1958 The U.K. economy shrank more than previously estimated in the first quarter in the biggest contraction since 1958 as the recession choked industries from construction to services.
European Consumer Prices Record First Annual Decline as Energy Costs Fall European consumer prices recorded their first annual decline this month as energy costs fell and the economic slump pushed unemployment to a 10-year high.
`Bundesbank Colossus' Loses Ability to Dictate ECB Rate as Weber Weakened Germany’s Bundesbank, which once dictated interest rates for a continent, is losing influence to smaller nations as the European Central Bank tries to reverse the worst recession since World War II.
German Recession Pushes Unemployment 3.5 Million, Highest Level Since 2007 German unemployment rose to the highest since 2007 in June as falling demand and rising bankruptcies forced companies to cut jobs.
Japan's Jobless Rate Rises to Five-Year High, Spending Jumps on Stimulus Japan’s unemployment rate rose to a five-year high in May, while household spending unexpectedly advanced as the government distributed cash to help lift the economy out of its worst postwar recession.
European Private-Sector Loan Growth Was Slowest on Record in May, ECB Says Loans to households and companies in Europe grew at the slowest pace on record in May as the recession crimped demand for debt and prompted banks to tighten credit standards.
Bernanke's `Green Shoots' Remark Takes Over Lexicon, If Not U.S. Economy The current recession has created at least one growth industry: use of the phrase “green shoots.”
Home Prices in Major U.S. Cities Probably Dropped as Foreclosures Mounted Home prices in 20 major metropolitan areas probably fell in April at about the same pace as in prior months as foreclosures climbed, economists said ahead of a report today.
Swiss Recession Worsened This Quarter as Exports Slumped, Leuthard Says Switzerland’s recession probably deepened in the second quarter after the economy contracted at the fastest pace in almost 15 years in the previous three months, Economy Minister Doris Leuthard said.
Taiwan Opens 100 Industries to Chinese Funds to Bolster Island's Growth Taiwan will allow Chinese investment in 100 industries and projects, helping the island’s economy to benefit from the warmest cross-strait relations in 60 years.
Romania Reduces Main Interest Rate to 9% to Bolster Economy in Recession Romania’s central bank lowered its main interest rate and minimum reserve requirement as a loan shortage cut jobs, shut factori
U.K. GDP Dropped 2.4% in First Quarter in Biggest Contraction Since 1958 The U.K. economy shrank more than previously estimated in the first quarter in the biggest contraction since 1958 as the recession choked industries from construction to services.
European Consumer Prices Record First Annual Decline as Energy Costs Fall European consumer prices recorded their first annual decline this month as energy costs fell and the economic slump pushed unemployment to a 10-year high.
`Bundesbank Colossus' Loses Ability to Dictate ECB Rate as Weber Weakened Germany’s Bundesbank, which once dictated interest rates for a continent, is losing influence to smaller nations as the European Central Bank tries to reverse the worst recession since World War II.
German Recession Pushes Unemployment 3.5 Million, Highest Level Since 2007 German unemployment rose to the highest since 2007 in June as falling demand and rising bankruptcies forced companies to cut jobs.
Japan's Jobless Rate Rises to Five-Year High, Spending Jumps on Stimulus Japan’s unemployment rate rose to a five-year high in May, while household spending unexpectedly advanced as the government distributed cash to help lift the economy out of its worst postwar recession.
European Private-Sector Loan Growth Was Slowest on Record in May, ECB Says Loans to households and companies in Europe grew at the slowest pace on record in May as the recession crimped demand for debt and prompted banks to tighten credit standards.
Bernanke's `Green Shoots' Remark Takes Over Lexicon, If Not U.S. Economy The current recession has created at least one growth industry: use of the phrase “green shoots.”
Home Prices in Major U.S. Cities Probably Dropped as Foreclosures Mounted Home prices in 20 major metropolitan areas probably fell in April at about the same pace as in prior months as foreclosures climbed, economists said ahead of a report today.
Swiss Recession Worsened This Quarter as Exports Slumped, Leuthard Says Switzerland’s recession probably deepened in the second quarter after the economy contracted at the fastest pace in almost 15 years in the previous three months, Economy Minister Doris Leuthard said.
Taiwan Opens 100 Industries to Chinese Funds to Bolster Island's Growth Taiwan will allow Chinese investment in 100 industries and projects, helping the island’s economy to benefit from the warmest cross-strait relations in 60 years.
Romania Reduces Main Interest Rate to 9% to Bolster Economy in Recession Romania’s central bank lowered its main interest rate and minimum reserve requirement as a loan shortage cut jobs, shut factori
6/29/2009
Pact Allows HK Firms to Settle Trade in Yuan
- Wall Street Journal 6/29/2009
Rising Nat'l Debt Raises Prospects of Inflation
- USA Today 6/29/2009
Housing in Peril as Obama Fails to Get Breakthrough
- Bloomberg 6/29/2009
Paper Avalanche Buries Plan to Stem F'closures
- New York Times 6/29/2009
U.S. Credit Scores Take a Big Dive
- Orlando Sentinel 6/29/2009
Personal Bankruptcies Surge in So Cal.
- Los Angeles Times 6/29/2009
Tightening Credit Squeezes Small-Biz Owners
- Chicago Tribune 6/29/2009
New Grads Having to Lower Their Expectations
- Charlotte Observer 6/29/2009
Fading Small-Town Auto Dealers Leave Big Void
- Dallas Morning News 6/29/2009
Struggling Cities Cancel July 4th Fireworks
- Los Angeles Times 6/29/2009
Wild West Group Wrangles With Economy
- Arizona Republic
Pact Allows HK Firms to Settle Trade in Yuan
- Wall Street Journal 6/29/2009
Rising Nat'l Debt Raises Prospects of Inflation
- USA Today 6/29/2009
Housing in Peril as Obama Fails to Get Breakthrough
- Bloomberg 6/29/2009
Paper Avalanche Buries Plan to Stem F'closures
- New York Times 6/29/2009
U.S. Credit Scores Take a Big Dive
- Orlando Sentinel 6/29/2009
Personal Bankruptcies Surge in So Cal.
- Los Angeles Times 6/29/2009
Tightening Credit Squeezes Small-Biz Owners
- Chicago Tribune 6/29/2009
New Grads Having to Lower Their Expectations
- Charlotte Observer 6/29/2009
Fading Small-Town Auto Dealers Leave Big Void
- Dallas Morning News 6/29/2009
Struggling Cities Cancel July 4th Fireworks
- Los Angeles Times 6/29/2009
Wild West Group Wrangles With Economy
- Arizona Republic
OCC and OTS: Prime Delinquencies Surge in Q1 by CalculatedRisk on 6/30/2009 11:21:00 AM
From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for First Quarter 2009
Click on graph for larger image.
We're all subprime now!
Note: "Approximately 14 percent of loans in the data were not accompanied by credit scores and are classified as "other." This group includes a mix of prime, Alt-A, and subprime. In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available."
This report covers about two-thirds of all mortgages. There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans. However, there are now significantly more prime loans than subprime loans seriously delinquent. And prime loans tend to be larger than subprime loans, so the losses from each prime loan will probably be higher.
The second graph shows foreclosure activity.
Newly initiated foreclosures picked up in Q1.
Completed foreclosures declined (because of the foreclosure moratorium), and foreclosures in process surged to 844 thousand.
Note that short sales are essentially irrelevant.
From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for First Quarter 2009
This OCC and OTS Mortgage Metrics Report for the first quarter of 2009 provides performance data on first lien residential mortgages serviced by national banks and federally regulated thrifts. The report provides a comprehensive picture of mortgage servicing activities of most of the industry's largest mortgage servicers, covering approximately 64 percent of all mortgages outstanding in the United States and incorporating information on all types of mortgages serviced, including subprime mortgages. The report covers more than 34 million loans totaling more than $6 trillion in principal balances and provides information on their performance from the beginning of 2008 through the end of the first quarter of 2009.Much of the report focuses on modifications and recidivism, but this report also shows far more seriously delinquent prime loans than subprime loans (by number, not percentage).
Negative trends continued for mortgage data for the first quarter of 2009, but with some hopeful signs on the modification front. Continued economic pressures, including rising levels of unemployment and a continuing decline in property values, resulted in an increased number of seriously delinquent mortgages and newly initiated foreclosure actions. The first quarter data also showed a relatively greater increase in seriously delinquent prime mortgages compared with other risk categories and a higher number of foreclosures in process across all risk categories as a variety of moratoria on foreclosures expired during the first quarter of 2009.
Click on graph for larger image.We're all subprime now!
Note: "Approximately 14 percent of loans in the data were not accompanied by credit scores and are classified as "other." This group includes a mix of prime, Alt-A, and subprime. In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available."
This report covers about two-thirds of all mortgages. There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans. However, there are now significantly more prime loans than subprime loans seriously delinquent. And prime loans tend to be larger than subprime loans, so the losses from each prime loan will probably be higher.
The second graph shows foreclosure activity.
Newly initiated foreclosures picked up in Q1.
Completed foreclosures declined (because of the foreclosure moratorium), and foreclosures in process surged to 844 thousand.
Note that short sales are essentially irrelevant.
Headlines:
US planned layoffs fall to 15-month low in June (Reuters)
Downturn in Euro-Zone Manufacturing Eases (Wall Street Journal)
Muted Recovery Seen in Asia, With a Long Way to Go (New York Times)
Cities Grow at Suburbs' Expense During Recession (Wall Street Journal)
Shiller Sees 'Improvement' in Rate of Home-Price Drop (Bloomberg)
AIG Offers Shareholders Little Hope for Recovery (New York Times)
Citi raises card rates on millions (Financial Times)
California Misses Budget Deadline, Readies "IOUs" (CNBC.com)
Fixing finance: The cautious approach to fixing banks will not work
Martin Wolf, Financial Times, June 30, 2009 The financial system had to be rescued from its own mismanagement of risk. This is not going to be changed by external supervision, which would be like moving the regulatory deckchairs on the deck of the Titanic. It is going to be changed only by fixing incentives, writes Martin Wolf.
Tightening capital rules could increase risk-taking
Takafumi Sato, Financial Times, June 30, 2009 A single set of regulations mechanically applied might compel all banks to adopt aggressive business models, writes Takafumi Sato.
Too Bernanke To Fail?
Holman W. Jenkins, Jr., Wall Street Journal, July 1, 2009 There is no practical solution to "too big to fail," and no alternative to the Fed's ability to print money to ease potentially destabilizing financial panics.
The Two Sides of the Balance Sheet
James Kwak, The Baseline Scenario, June 30, 2009 The quiet death of the PPIP represents the latest swing of the pendulum between the two sides of the balance sheet.
State of the US economy: Keep Americans In Their Homes
Shari B. Olefson, Forbes, June 30, 2009
It's The Second Half - So Where's The Recovery?
Kelly Evans, Real Time Economics, July 1, 2009 Calls for a "second-half" recovery have been a common theme of this recession - and so far, have only underscored the degree to which forecasters underestimated the magnitude of this downturn.
Monetary and fiscal policy:
Britain has sunk itself deep into a fiscal black hole
John Kay, Financial Times, June 30, 2009 Even if economic recovery is rapid, there would still be a large deficit. At least half the current deficit will need to be eliminated by cuts in expenditure and increases in taxes, writes John Kay.
Investors Will Help Determine the Next Inflation
Casey B. Mulligan, Economix, July 1, 2009 The easy monetary policy at the end of 2008 has set up our economy for inflation, but the timing depends in part on how investors behave.
The savings glut. Controversy guaranteed.
Brad Setser, Follow the Money, June 30, 2009 It is quite possible to believe that the buildup of vulnerabilities that led to the current crisis was a product both of a rise in savings in key emerging markets...and policy failures in the U.S. and Europe.
The economic reckoning:
California: A Dream Decimated
Harold Meyerson, Washington Post, July 1, 2009 A state that uninvests in the present and has no vision for the future.
Debt is capitalism's dirty little secret
Ben Funnell, Financial Times, June 30, 2009 We should redouble our efforts to increase productivity through innovation and the creation of new markets, writes Ben Funnell.
Wall Street's Toxic Message Joseph Stiglitz, Vanity Fair, June 2009 Disillusioned developing nations may well turn their backs on the free market, warns Nobel laureate Joseph E. Stiglitz, posing new threats to global stability and U.S. security.
Manufacturing in U.S. Shrinks at Slower Pace in Sign Recession Is Easing Manufacturing in the U.S. shrank at the slowest pace since August 2008 and pending sales of existing homes advanced for a fourth month, underscoring signs the economy began to stabilize in the second quarter.
Construction Spending in U.S. Decreases 0.9%, More Than Forecast for May Spending on U.S. construction projects fell in May for the fourth time in five months, a sign that a rebound from the housing recession will be slow to develop.
China Manufacturing Expands a Fourth Month Amid Stimulus, Record Lending China’s manufacturing expanded for a fourth month as a 4 trillion yuan ($585 billion) stimulus plan and record bank lending revive the world’s third-largest economy.
Japan Tankan Signals Business Spending Cuts May Impede Economy's Recovery Japan’s recovery from its worst postwar recession may lose momentum as companies cut investment and job losses undermine consumer spending.
U.K. Manufacturing Index Rose to 13-Month High in June As Recession Eased A U.K. index of manufacturing rose more than economists forecast in June to show the smallest contraction in more than a year, evidence that the recession is easing.
Fed May Keep Rates Near Zero for Years in `Serious' Recession, Yellen Says Federal Reserve Bank of San Francisco President Janet Yellen said the prospect that policy makers will leave the benchmark U.S. interest rate near zero for the next several years is “not outside the realm of possibility.”
Fed E-Mails May Chill Bank Regulation After Breach of `Ironclad' Secrecy Former U.S. bank regulators warned that lenders and supervisors may share less information with each other in day-to-day dealings after lawmakers released dozens of confidential Federal Reserve e-mails.
Vietnam Reports Faster Growth, as Asian Economic Figures Show Improvement Vietnam’s economic growth accelerated in the second quarter, buoyed by construction activity, amid indications of a broader regional recovery.
Latvia Government May Have to Trim Deficit by 2012, Draft EU Document Says The European Commission may give Latvia a deadline of 2012 to bring its budget deficit under the European Union limit, according to a draft commission document.
Ex-BOE's Lomax Says Crisis Isn't Over, U.K. Economy Recovery May Be Bumpy Former Bank of England Deputy Governor Rachel Lomax said that the U.K. hasn’t yet escaped the worst economic slump in a generation.
Danish Banks Seek to Borrow $12 Billion From Government to Bolster Capital Denmark’s government received applications from banks seeking to draw $12 billion of state funds made available to replenish capital and encourage lending in the Nordic country.
Construction Spending in U.S. Decreases 0.9%, More Than Forecast for May Spending on U.S. construction projects fell in May for the fourth time in five months, a sign that a rebound from the housing recession will be slow to develop.
China Manufacturing Expands a Fourth Month Amid Stimulus, Record Lending China’s manufacturing expanded for a fourth month as a 4 trillion yuan ($585 billion) stimulus plan and record bank lending revive the world’s third-largest economy.
Japan Tankan Signals Business Spending Cuts May Impede Economy's Recovery Japan’s recovery from its worst postwar recession may lose momentum as companies cut investment and job losses undermine consumer spending.
U.K. Manufacturing Index Rose to 13-Month High in June As Recession Eased A U.K. index of manufacturing rose more than economists forecast in June to show the smallest contraction in more than a year, evidence that the recession is easing.
Fed May Keep Rates Near Zero for Years in `Serious' Recession, Yellen Says Federal Reserve Bank of San Francisco President Janet Yellen said the prospect that policy makers will leave the benchmark U.S. interest rate near zero for the next several years is “not outside the realm of possibility.”
Fed E-Mails May Chill Bank Regulation After Breach of `Ironclad' Secrecy Former U.S. bank regulators warned that lenders and supervisors may share less information with each other in day-to-day dealings after lawmakers released dozens of confidential Federal Reserve e-mails.
Vietnam Reports Faster Growth, as Asian Economic Figures Show Improvement Vietnam’s economic growth accelerated in the second quarter, buoyed by construction activity, amid indications of a broader regional recovery.
Latvia Government May Have to Trim Deficit by 2012, Draft EU Document Says The European Commission may give Latvia a deadline of 2012 to bring its budget deficit under the European Union limit, according to a draft commission document.
Ex-BOE's Lomax Says Crisis Isn't Over, U.K. Economy Recovery May Be Bumpy Former Bank of England Deputy Governor Rachel Lomax said that the U.K. hasn’t yet escaped the worst economic slump in a generation.
Danish Banks Seek to Borrow $12 Billion From Government to Bolster Capital Denmark’s government received applications from banks seeking to draw $12 billion of state funds made available to replenish capital and encourage lending in the Nordic country.
Headlines:
June Unemployment Rate Is Seen Rising to 9.6% (CNBC.com)
Moody's Strips Ireland Of Aaa Government-Bond Ratings (Wall Street Journal)
ECB holds rates at record low, to take stock of actions (Reuters)
Eurozone Jobless Rate Highest Since May 1999 (RTT News)
Data give signs of global recovery (Financial Times)
F.D.I.C. to Issue Rules for Private Equity Deals (New York Times)
The auto industry:
Fuel Standards Are Killing GM
Alan Reynolds, Wall Street Journal, July 2, 2009 A higher gas tax is a better way to get green cars on the road.
No rebound for autos
James Hamilton, Econbrowser, July 1, 2009 Autos are worth watching as one sector where economic growth could resume first. But despite what others are saying, I don't believe that it's happening yet.
Cap-and-trade:
Will The Global Warming Bill Cool The Global Economy?
Nouriel Roubini, Forbes, July 2, 2009 Assessing the effects of cap-and-trade.
The New Energy Politics E.J. Dionne Jr., Washington Post, July 2, 2009 Two House Democrats test whether the 'new politics' apply to climate change.
State of the US economy:
Youth-Magnet Cities See Population Growth in Recession
Conor Dougherty, Real Time Economics, July 1, 2009 Youth-magnet cities such as Portland, Ore., and Austin, Texas, have seen their population growth accelerate in the recession, another indication that the young and educated have remained among the more mobile Americans in the recession.
One graph to rule them all ...
Brad Setser, Follow the Money, July 1, 2009 If I had to pick a single graph to explain the evolution of the United States' balance of payments - and thus, indirectly, the entire story of the world's macroeconomic "imbalances" - this would be it.
Housing data really is encouraging
Free Exchange, Economist.com, July 1, 2009 It's not really correct to say that we're still talking about an astonishing rate of collapse.
Punditry:
Why so precious when your town is failing?
Jonathan Guthrie, Financial Times, July 1, 2009 Many residents would be better off moving. But the resulting furore demonstrated that it is well-nigh impossible to discuss the fate of declining settlements maturely, writes Jonathan Guthrie.
Madoff's sentence is necessary and rare
John Gapper, Financial Times, July 1, 2009 The 71-year-old fraudster's conduct was indefensible and he deserved what he got, writes John Gapper. But the case was unusual. The question is whether Bernard Madoff's spectacular sentence should become the benchmark for future cases of corporate fraud. I think not.
An Emerging Split That Matters: Treasury vs. the National Economic Council
Simon Johnson, Economix, July 2, 2009 There are increasing indications that Mr. Summers's economic council and Mr. Geithner's Treasury are not exactly on convergent paths.
June Unemployment Rate Is Seen Rising to 9.6% (CNBC.com)
Moody's Strips Ireland Of Aaa Government-Bond Ratings (Wall Street Journal)
ECB holds rates at record low, to take stock of actions (Reuters)
Eurozone Jobless Rate Highest Since May 1999 (RTT News)
Data give signs of global recovery (Financial Times)
F.D.I.C. to Issue Rules for Private Equity Deals (New York Times)
The auto industry:
Fuel Standards Are Killing GM
Alan Reynolds, Wall Street Journal, July 2, 2009 A higher gas tax is a better way to get green cars on the road.
No rebound for autos
James Hamilton, Econbrowser, July 1, 2009 Autos are worth watching as one sector where economic growth could resume first. But despite what others are saying, I don't believe that it's happening yet.
Cap-and-trade:
Will The Global Warming Bill Cool The Global Economy?
Nouriel Roubini, Forbes, July 2, 2009 Assessing the effects of cap-and-trade.
The New Energy Politics E.J. Dionne Jr., Washington Post, July 2, 2009 Two House Democrats test whether the 'new politics' apply to climate change.
State of the US economy:
Youth-Magnet Cities See Population Growth in Recession
Conor Dougherty, Real Time Economics, July 1, 2009 Youth-magnet cities such as Portland, Ore., and Austin, Texas, have seen their population growth accelerate in the recession, another indication that the young and educated have remained among the more mobile Americans in the recession.
One graph to rule them all ...
Brad Setser, Follow the Money, July 1, 2009 If I had to pick a single graph to explain the evolution of the United States' balance of payments - and thus, indirectly, the entire story of the world's macroeconomic "imbalances" - this would be it.
Housing data really is encouraging
Free Exchange, Economist.com, July 1, 2009 It's not really correct to say that we're still talking about an astonishing rate of collapse.
Punditry:
Why so precious when your town is failing?
Jonathan Guthrie, Financial Times, July 1, 2009 Many residents would be better off moving. But the resulting furore demonstrated that it is well-nigh impossible to discuss the fate of declining settlements maturely, writes Jonathan Guthrie.
Madoff's sentence is necessary and rare
John Gapper, Financial Times, July 1, 2009 The 71-year-old fraudster's conduct was indefensible and he deserved what he got, writes John Gapper. But the case was unusual. The question is whether Bernard Madoff's spectacular sentence should become the benchmark for future cases of corporate fraud. I think not.
An Emerging Split That Matters: Treasury vs. the National Economic Council
Simon Johnson, Economix, July 2, 2009 There are increasing indications that Mr. Summers's economic council and Mr. Geithner's Treasury are not exactly on convergent paths.
Treasury Debt-Purchase Plan May Be Smaller Than Anticipated at $20 Billion The U.S. Treasury Department may begin its program to spur purchases of mortgage-backed securities from banks with about $20 billion in public and private money, down from as much as $100 billion when it was announced in March, two people familiar with the matter said.
Trichet Sets Policy `Cruise Control' as ECB Urges Banks to Drive Recovery European Central Bank President Jean- Claude Trichet is urging the region’s banks to play their part in generating an economic recovery.
European Service Industry Contracts at Faster Pace as Unemployment Climbs Europe’s service industry contracted at a faster pace in June as rising unemployment damped consumer spending.
U.K. Services Expanded for Second Month in June in Sign Economy Recovering U.K. service industries from law firms to consultancies grew in June for a second month, suggesting Britain may be starting to emerge from recession.
China's Zeng Peiyan Urges More Supervision of Reserve-Currency Countries Former Chinese Vice Premier Zeng Peiyan highlighted the nation’s concern at the risks posed by a global financial system dominated by the dollar, urging more oversight of countries issuing reserve currencies.
Indonesia Says Room for Further Rate Cuts Limited After Eighth Reduction Indonesia’s central bank said room for reducing borrowing costs further is “limited” after cutting its benchmark interest rate for an eighth straight month.
Australia Facing `Full Brunt' of Global Recession as Exports, Lending Drop Australia’s economy, which has so far skirted the global recession, may stall after reports showed exports dropped to a 14-month low, bank lending fell and home- building approvals declined by the most since 2002.
China's Zhou Sees Problems Boosting Consumer Spending to Balance Economy China’s central bank governor Zhou Xiaochuan said boosting the nation’s consumer spending to redress global imbalances is “easier said than done.”
Tamaki to Head Japanese Foreign-Exchange Policy; Mikuniya to Oversee Banks Japan appointed a new top currency official and financial regulator in a regular reshuffle that strategists say is unlikely to result in a major shift in the government’s currency and banking policies.
Mukherjee May Increase Spending on the Poor in Indian Government's Budget India’s Finance Minister Pranab Mukherjee may increase spending on power, roads and aid to the poor in next week’s budget to bolster growth in Asia’s third- largest economy.
China Implements `Grand Scheme' for Bigger Yuan Role, Ex-IMF Official Says China’s call for a new world reserve currency is part of a “grand scheme” to reduce the dollar’s dominance and increase the yuan’s role, said a former senior International Monetary Fund official.
Trichet Sets Policy `Cruise Control' as ECB Urges Banks to Drive Recovery European Central Bank President Jean- Claude Trichet is urging the region’s banks to play their part in generating an economic recovery.
European Service Industry Contracts at Faster Pace as Unemployment Climbs Europe’s service industry contracted at a faster pace in June as rising unemployment damped consumer spending.
U.K. Services Expanded for Second Month in June in Sign Economy Recovering U.K. service industries from law firms to consultancies grew in June for a second month, suggesting Britain may be starting to emerge from recession.
China's Zeng Peiyan Urges More Supervision of Reserve-Currency Countries Former Chinese Vice Premier Zeng Peiyan highlighted the nation’s concern at the risks posed by a global financial system dominated by the dollar, urging more oversight of countries issuing reserve currencies.
Indonesia Says Room for Further Rate Cuts Limited After Eighth Reduction Indonesia’s central bank said room for reducing borrowing costs further is “limited” after cutting its benchmark interest rate for an eighth straight month.
Australia Facing `Full Brunt' of Global Recession as Exports, Lending Drop Australia’s economy, which has so far skirted the global recession, may stall after reports showed exports dropped to a 14-month low, bank lending fell and home- building approvals declined by the most since 2002.
China's Zhou Sees Problems Boosting Consumer Spending to Balance Economy China’s central bank governor Zhou Xiaochuan said boosting the nation’s consumer spending to redress global imbalances is “easier said than done.”
Tamaki to Head Japanese Foreign-Exchange Policy; Mikuniya to Oversee Banks Japan appointed a new top currency official and financial regulator in a regular reshuffle that strategists say is unlikely to result in a major shift in the government’s currency and banking policies.
Mukherjee May Increase Spending on the Poor in Indian Government's Budget India’s Finance Minister Pranab Mukherjee may increase spending on power, roads and aid to the poor in next week’s budget to bolster growth in Asia’s third- largest economy.
China Implements `Grand Scheme' for Bigger Yuan Role, Ex-IMF Official Says China’s call for a new world reserve currency is part of a “grand scheme” to reduce the dollar’s dominance and increase the yuan’s role, said a former senior International Monetary Fund official.
Naught for the Naughts? by CalculatedRisk on 7/02/2009 04:00:00 PM
On the '00s (the "Naughts") ...
Employment Dec 1999: 130.53 million
Employment Jun 2009: 131.69 million
A gain of just 1.16 million. What are the odds that the economy loses another 1.16 million jobs over the next 6 months? Pretty high. That would mean no net jobs added to the economy for the naughts: Naught for the Naughts!
And for the stock market?
S&P 500, Dec 31, 1999: 1469.25
S&P 500, July 2, 2009: 897.29
Equity investors wish they went Naught for the Naughts.
Click on graph for larger image in new window.
The first graph shows the S&P 500 since 1990.
The dashed line is the closing price today.
The S&P 500 is up almost 33% from the bottom (221 points), and still off almost 43% from the peak (668 points below the max).
This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".
Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.
On the '00s (the "Naughts") ...
Employment Dec 1999: 130.53 million
Employment Jun 2009: 131.69 million
A gain of just 1.16 million. What are the odds that the economy loses another 1.16 million jobs over the next 6 months? Pretty high. That would mean no net jobs added to the economy for the naughts: Naught for the Naughts!
And for the stock market?
S&P 500, Dec 31, 1999: 1469.25
S&P 500, July 2, 2009: 897.29
Equity investors wish they went Naught for the Naughts.
Click on graph for larger image in new window.The first graph shows the S&P 500 since 1990.
The dashed line is the closing price today.
The S&P 500 is up almost 33% from the bottom (221 points), and still off almost 43% from the peak (668 points below the max).
This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".
Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.
<h3 class="post-title entry-title"> Another Involuntary Landlord and Summary </h3> by CalculatedRisk on 7/02/2009 08:48:00 PM
A little sublease space in D.C.
Click on photo for larger image in new window.
Photo Credit: a reader in dc
Taken today, July 2, 2009.
Employment
Here is a repeat of one of the graphs this morning:
This graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).
The current recession is now the 2nd worst recession since WWII in percentage terms - and also in terms of the unemployment rate (only early '80s recession was worse).
And a few posts:
Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate
Unemployment: Stress Test Scenarios, Diffusion Index, Weekly Claims
Employment-Population Ratio, Part Time Workers, Hours Worked
From Paul Krugman on wages: Smells like deflation
<li> The FDIC reports seven bank failures (a weekly high for this cycle).
<li> Personal Bankruptcy Filings increase 40% in June (YoY)
<li> Hotel RevPAR off 17.4%
<li> Naught for the Naughts? Just an observation ...
On the '00s (the "Naughts") ...
Employment Dec 1999: 130.53 million
Employment Jun 2009: 131.69 million
A gain of just 1.16 million. What are the odds that the economy loses another 1.16 million jobs over the next 6 months? Pretty high. That would mean no net jobs added to the economy for the naughts: Naught for the Naughts!
A little sublease space in D.C.Click on photo for larger image in new window.
Photo Credit: a reader in dc
Taken today, July 2, 2009.
Employment
Here is a repeat of one of the graphs this morning:
This graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).The current recession is now the 2nd worst recession since WWII in percentage terms - and also in terms of the unemployment rate (only early '80s recession was worse).
And a few posts:
Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate
Unemployment: Stress Test Scenarios, Diffusion Index, Weekly Claims
Employment-Population Ratio, Part Time Workers, Hours Worked
From Paul Krugman on wages: Smells like deflation
<li> The FDIC reports seven bank failures (a weekly high for this cycle).
<li> Personal Bankruptcy Filings increase 40% in June (YoY)
<li> Hotel RevPAR off 17.4%
<li> Naught for the Naughts? Just an observation ...
On the '00s (the "Naughts") ...
Employment Dec 1999: 130.53 million
Employment Jun 2009: 131.69 million
A gain of just 1.16 million. What are the odds that the economy loses another 1.16 million jobs over the next 6 months? Pretty high. That would mean no net jobs added to the economy for the naughts: Naught for the Naughts!
Personal Bankruptcy Filings increase 40% in June (YoY) by CalculatedRisk on 7/02/2009 02:57:00 PM
From Bloomberg: Consumer Bankruptcy Filings Rose 36.5% in First Half, ABI Says (ht Ron)
Click on graph for larger image in new window.
This graph shows the non-business bankruptcy filings by quarter.
Note: Quarterly data from Administrative Office of the U.S. Courts, Q1 and Q2 2009 based on monthly data from American Bankruptcy Institute.
The quarterly rate is close to the levels prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. There were over 2 million bankruptcies filed in Calendar 2005 ahead of the law change.
The American Bankruptcy Institute is predicting over 1.4 million new bankruptcies by year end - I'll definitely take the over!
From Bloomberg: Consumer Bankruptcy Filings Rose 36.5% in First Half, ABI Says (ht Ron)
U.S. consumers made 675,351 bankruptcy filings in the first half, a 36.5 percent increase from a year ago, according to the American Bankruptcy Institute.The monthly rate slowed in June (from May), but monthly ups and downs are not unusual for this data.
June filings by consumers totaled 116,365, up 40.6 percent from the same period in 2008 ...
Click on graph for larger image in new window.This graph shows the non-business bankruptcy filings by quarter.
Note: Quarterly data from Administrative Office of the U.S. Courts, Q1 and Q2 2009 based on monthly data from American Bankruptcy Institute.
The quarterly rate is close to the levels prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. There were over 2 million bankruptcies filed in Calendar 2005 ahead of the law change.
The American Bankruptcy Institute is predicting over 1.4 million new bankruptcies by year end - I'll definitely take the over!
Employment-Population Ratio, Part Time Workers, Hours Worked by CalculatedRisk on 7/02/2009 10:33:00 AM
A few more graphs based on the (un)employment report ...
Employment-Population Ratio
Click on graph for larger image in new window.
This graph show the employment-population ratio; this is the ratio of employed Americans to the adult population.
Note: the graph doesn't start at zero to better show the change.
The general upward trend from the early '60s was mostly due to women entering the workforce. As an example, in 1964 women were about 32% of the workforce, today the percentage is close to 50%.
This measure is at the lowest level since the early '80s and shows the weak recovery following the 2001 recession - and the current cliff diving!
Part Time for Economic Reasons
From the BLS report:
Not only has the unemployment rate risen sharply to 9.5%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is at 9.0 million.
Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million. That is the equivalent of about 9.3 million today, so population adjusted this isn't quite a record - but close.
Average Weekly Hours
From the BLS report:
The average weekly hours has been declining since the early '60s, but usually falls sharply during a recession. As the BLS noted, average weekly hours in June was at the lowest level since the series began in 1964.
Note: the graph doesn't start at zero to better show the change.
Several analysts follow this series to look for the end of a recession. Usually companies increase the work week before they start hiring, so the average weekly hours increases as a recession ends. Something to watch ...
Earlier employment posts today:
Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.
<li>Unemployment: Stress Test Scenarios, Diffusion Index, Weekly Claims
A few more graphs based on the (un)employment report ...
Employment-Population Ratio
Click on graph for larger image in new window.This graph show the employment-population ratio; this is the ratio of employed Americans to the adult population.
Note: the graph doesn't start at zero to better show the change.
The general upward trend from the early '60s was mostly due to women entering the workforce. As an example, in 1964 women were about 32% of the workforce, today the percentage is close to 50%.
This measure is at the lowest level since the early '80s and shows the weak recovery following the 2001 recession - and the current cliff diving!
Part Time for Economic Reasons
From the BLS report:
The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 9.0 million. Since the start of the recession, the number of such workers has increased by 4.4 million.Note: "This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs."
Not only has the unemployment rate risen sharply to 9.5%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is at 9.0 million.Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million. That is the equivalent of about 9.3 million today, so population adjusted this isn't quite a record - but close.
Average Weekly Hours
From the BLS report:
In June, the average workweek for production and nonsupervisory workers on private nonfarm payrolls fell by 0.1 hour to 33.0 hours--the lowest level on record for the series, which began in 1964.
The average weekly hours has been declining since the early '60s, but usually falls sharply during a recession. As the BLS noted, average weekly hours in June was at the lowest level since the series began in 1964.Note: the graph doesn't start at zero to better show the change.
Several analysts follow this series to look for the end of a recession. Usually companies increase the work week before they start hiring, so the average weekly hours increases as a recession ends. Something to watch ...
Earlier employment posts today:
Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.
<li>Unemployment: Stress Test Scenarios, Diffusion Index, Weekly Claims
Unemployment: Stress Test Scenarios, Diffusion Index, Weekly Claims by CalculatedRisk on 7/02/2009 09:25:00 AM
Note: earlier Employment post: Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate. The earlier post includes a comparison to previous recessions.
Stress Test Scenarios
Click on graph for larger image in new window.
This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).
This is a quarterly forecast: the Unemployment Rate in Q2 was higher than the "more adverse" scenario.
Note also that the unemployment rate has already exceeded the peak of the "baseline scenario".
Diffusion Index
Here is a look at how "widespread" the job losses are using the employment diffusion index from the BLS.
The BLS diffusion index is a measure of how widespread changes in employment are. Some people think it measures the percent of industries increasing employment, but that isn't quite correct.
From the BLS handbook:
Before September, the all industries employment diffusion index was close to 40, suggesting that job losses were limited to a few industries. However starting in September the diffusion index plummeted. In December, the index hit 20.5, suggesting job losses were very widespread. The index has recovered since then, but declined slightly in June to 28.6, suggesting job losses are still widespread.
The manufacturing diffusion index fell even further, from 40 in May 2008 to just 6 in January 2009. The manufacturing index is still very low in June (13.9) indicating widespread job losses.
Initial Weekly Unemployment Claims
The DOL reports on weekly unemployment insurance claims:
This graph shows weekly claims and continued claims since 1971.
Continued claims decreased to 6.70 million. This is 5.0% of covered employment.
The four-week average of weekly unemployment claims decreased this week, and is now 43,500 below the peak of 12 weeks ago. There is a reasonable chance that claims have peaked for this cycle.
However the level of initial claims (over 614 thousand) is still very high, indicating significant weakness in the job market.
Note: earlier Employment post: Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate. The earlier post includes a comparison to previous recessions.
Stress Test Scenarios
Click on graph for larger image in new window.This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).
This is a quarterly forecast: the Unemployment Rate in Q2 was higher than the "more adverse" scenario.
Note also that the unemployment rate has already exceeded the peak of the "baseline scenario".
Diffusion Index
Here is a look at how "widespread" the job losses are using the employment diffusion index from the BLS.
Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.
BLS, June Employment Report
The BLS diffusion index is a measure of how widespread changes in employment are. Some people think it measures the percent of industries increasing employment, but that isn't quite correct.From the BLS handbook:
The diffusion indexes for private nonfarm payroll employment are based on estimates for 278 industries, while the manufacturing indexes are based on estimates for 84 industries. Each component series is assigned a value of 0, 50, or 100 percent, depending on whether its employment showed a decrease, no change, or an increase over a given period. The average (mean) value is then calculated, and this percent is the diffusion index number.Think of this as a measure of how widespread the job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.
Before September, the all industries employment diffusion index was close to 40, suggesting that job losses were limited to a few industries. However starting in September the diffusion index plummeted. In December, the index hit 20.5, suggesting job losses were very widespread. The index has recovered since then, but declined slightly in June to 28.6, suggesting job losses are still widespread.
The manufacturing diffusion index fell even further, from 40 in May 2008 to just 6 in January 2009. The manufacturing index is still very low in June (13.9) indicating widespread job losses.
Initial Weekly Unemployment Claims
The DOL reports on weekly unemployment insurance claims:
In the week ending June 27, the advance figure for seasonally adjusted initial claims was 614,000, a decrease of 16,000 from the previous week's revised figure of 630,000. The 4-week moving average was 615,250, a decrease of 2,750 from the previous week's revised average of 618,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending June 20 was 6,702,000, a decrease of 53,000 from the preceding week's revised level of 6,755,000.
This graph shows weekly claims and continued claims since 1971.Continued claims decreased to 6.70 million. This is 5.0% of covered employment.
The four-week average of weekly unemployment claims decreased this week, and is now 43,500 below the peak of 12 weeks ago. There is a reasonable chance that claims have peaked for this cycle.
However the level of initial claims (over 614 thousand) is still very high, indicating significant weakness in the job market.
Employment Report: 467K Jobs Lost, 9.5% Unemployment Rate by CalculatedRisk on 7/02/2009 08:30:00 AM
From the BLS:
Click on graph for larger image.
This graph shows the unemployment rate and the year over year change in employment vs. recessions.
Nonfarm payrolls decreased by 467,000 in June. The economy has lost almost 5.7 million jobs over the last year, and 6.46 million jobs during the 18 consecutive months of job losses.
The unemployment rate rose to 9.5 percent; the highest level since 1983.
Year over year employment is strongly negative.
The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).
For the current recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).
However job losses have really picked up over the last 9 months (4.4 million jobs lost, red line cliff diving on the graph), and the current recession is now the 2nd worst recession since WWII in percentage terms - and also in terms of the unemployment rate (only early '80s recession was worse).
This is another weak employment report ... more soon.
From the BLS:
Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.
Click on graph for larger image.This graph shows the unemployment rate and the year over year change in employment vs. recessions.
Nonfarm payrolls decreased by 467,000 in June. The economy has lost almost 5.7 million jobs over the last year, and 6.46 million jobs during the 18 consecutive months of job losses.
The unemployment rate rose to 9.5 percent; the highest level since 1983.
Year over year employment is strongly negative.
The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).For the current recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).
However job losses have really picked up over the last 9 months (4.4 million jobs lost, red line cliff diving on the graph), and the current recession is now the 2nd worst recession since WWII in percentage terms - and also in terms of the unemployment rate (only early '80s recession was worse).
This is another weak employment report ... more soon.
Headlines:
Judge OKs sale of good assets to new GM (Detroit Free Press)
Swings in Oil Price Hobble Forecasting (New York Times)
Bank of Japan says economic slump easing (AFP)
China officials call for displacing dollar, in time (Reuters)
Wall Street gears up to trade California IOUs (Financial Times)
Bank of America Topples UBS as World Wealth Manager (CNBC.com)
India to Boost Spending to Spur Growth (New York Times)
The federal and state budgets:
Say No To Paygo
John Tamny, Forbes, July 6, 2009
It will make reforming government spending impossible.
Fattening the Beast Fred Hiatt, Washington Post, July 6, 2009 Obama's Twist on a GOP Budget Strategy
Off-balance-sheet federal liabilities
James Hamilton, Econbrowser, July 5, 2009 Just how much has the U.S. government promised to pay?
Little Hoovers, Part-Time Employment, and Me
James Kwak, The Baseline Scenario, July 6, 2009 Since most states' fiscal years end on June 30, some of the effects of this belt-tightening should be hitting right about now.
Public Pensions Cook the Books
Andrew G. Biggs, Wall Street Journal, July 6, 2009 Some plans want to hide the truth from taxpayers.
Fixing finance:
Liquidity injections alone are not enough
Wolfgang Münchau, Financial Times, July 5, 2009
Stimulus measures by a central bank, however large, cannot restore health to the banking sector in a sufficiently short period of time if the underlying problem is lack of solvency, writes Wolfgang Münchau.
Goldman, Barclays Using Newfangled CDOs to Offload Bad Bank Assets
Yves Smith, Naked Capitalism, July 6, 2009 You gotta love the attempt at rebranding established technology.
Recession and recovery:
We do not need a second stimulus plan
Bruce Bartlett, Financial Times, July 5, 2009 There may be a few "shovel-ready" projects that could be started immediately, but the vast bulk of public works projects take a long time to be economically effective, writes Bruce Bartlett.
Economists Out to Lunch Robert J. Samuelson, Washington Post, July 6, 2009 One intriguing subplot of the economic crisis is the failure of most economists to predict it.
The He-conomy: Do Men Take Too Many Risks?
Nancy Folbre, Economix, July 6, 2009 It sounds like a hiccup, but the term he-conomy pops into my mind while reading about the so-called he-cession - a term devised to emphasize that men are bearing the brunt of job losses this year.
Punditry:
The Power Of The Top 1%
Michael Maiello, Forbes, July 6, 2009 The debate over income inequality is about democracy, not economics.
Pay More, Drive Less, Save the Planet Gabriel Roth, Wall Street Journal, July 6, 2009 To fight climate change, Washington wants you to take a bus.
Headlines:
Automakers' Swift Cases in Bankruptcy Shock Experts (New York Times)
UK Manufacturing Hits 17-Year Low (Wall Street Journal)
Yen, Dollar Rise as Risks to Global Recovery Spur Safety Demand (Bloomberg)
Moody's puts Brazil rating on review for upgrade (Reuters)
US Should Plan 2nd Fiscal Stimulus: Govt Adviser (CNBC.com)
CFTC prepares crackdown on speculators (Financial Times)
State of the US economy:
Yes, The Jobs Losses Hurt ...
Brian S. Wesbury and Robert Stein, Forbes, July 7, 2009 ... But the recovery is still on track.
Who Killed California's Economy?
Joel Kotkin, Forbes, July 7, 2009 There are five suspects, from the governor to the constituents themselves.
Teens Lose Out Amid Scarce Summer Jobs
Sara Murray, Real Time Economics, July 6, 2009 The unemployment rate for 16 to 19-year-olds climbed to 24% in June, the latest Labor Department data shows - more than double the national 9.5% unemployment rate.
In Housing, Even Hindsight Isn't 20-20
Edward L. Glaeser, Economix, July 7, 2009 Does the relatively bright news mean that the housing market is starting hit bottom?
Jobless Recoveries and Structural Change
Arnold Kling, EconLog, July 7, 2009 My thesis is that unemployment is more persistent when the layoffs come from structural change rather than from excess inventories.
Economics:
How Obama could introduce a petrol tax
Michael Levine and Mark Roe, Financial Times, July 6, 2009 A petrol tax, though politically dangerous, is the best way for the US to fight climate change. Drivers can be won over if the Obama administration develops intelligent rebates, write Michael Levine and Mark Roe.
The Dollar: It's an Overhang, not a Hangover
Mark Dow, Follow the Money, July 6, 2009 "Stories" that drive the dollar abound. They are usually easy to explain and intuitively appealing. Most of them turn out to be wrong.
The Fed Makes A Bid
Simon Johnson, The Baseline Scenario, July 7, 2009 Released on July 3rd (a federal holiday), and buried inside the Washington Post on Saturday: An important speech (from June 26th) by the New York Fed's controversial President, William C. Dudley.
Punditry:
The problem with unions
Dennis Byrne, Chicago Tribune, July 7, 2009 Public employee unions have become the deadly enemy of Chicago's commonweal.
Popular rage is the only brake on top pay
Michael Skapinker, Financial Times, July 6, 2009 Shareholders have too frequently been caught up in the manias of the moment, along with everyone else, writes Michael Skapinker.
Automakers' Swift Cases in Bankruptcy Shock Experts (New York Times)
UK Manufacturing Hits 17-Year Low (Wall Street Journal)
Yen, Dollar Rise as Risks to Global Recovery Spur Safety Demand (Bloomberg)
Moody's puts Brazil rating on review for upgrade (Reuters)
US Should Plan 2nd Fiscal Stimulus: Govt Adviser (CNBC.com)
CFTC prepares crackdown on speculators (Financial Times)
State of the US economy:
Yes, The Jobs Losses Hurt ...
Brian S. Wesbury and Robert Stein, Forbes, July 7, 2009 ... But the recovery is still on track.
Who Killed California's Economy?
Joel Kotkin, Forbes, July 7, 2009 There are five suspects, from the governor to the constituents themselves.
Teens Lose Out Amid Scarce Summer Jobs
Sara Murray, Real Time Economics, July 6, 2009 The unemployment rate for 16 to 19-year-olds climbed to 24% in June, the latest Labor Department data shows - more than double the national 9.5% unemployment rate.
In Housing, Even Hindsight Isn't 20-20
Edward L. Glaeser, Economix, July 7, 2009 Does the relatively bright news mean that the housing market is starting hit bottom?
Jobless Recoveries and Structural Change
Arnold Kling, EconLog, July 7, 2009 My thesis is that unemployment is more persistent when the layoffs come from structural change rather than from excess inventories.
Economics:
How Obama could introduce a petrol tax
Michael Levine and Mark Roe, Financial Times, July 6, 2009 A petrol tax, though politically dangerous, is the best way for the US to fight climate change. Drivers can be won over if the Obama administration develops intelligent rebates, write Michael Levine and Mark Roe.
The Dollar: It's an Overhang, not a Hangover
Mark Dow, Follow the Money, July 6, 2009 "Stories" that drive the dollar abound. They are usually easy to explain and intuitively appealing. Most of them turn out to be wrong.
The Fed Makes A Bid
Simon Johnson, The Baseline Scenario, July 7, 2009 Released on July 3rd (a federal holiday), and buried inside the Washington Post on Saturday: An important speech (from June 26th) by the New York Fed's controversial President, William C. Dudley.
Punditry:
The problem with unions
Dennis Byrne, Chicago Tribune, July 7, 2009 Public employee unions have become the deadly enemy of Chicago's commonweal.
Popular rage is the only brake on top pay
Michael Skapinker, Financial Times, July 6, 2009 Shareholders have too frequently been caught up in the manias of the moment, along with everyone else, writes Michael Skapinker.
G-8 Won't Try to Implement Exit Strategies Until Economic Recovery Assured Group of Eight leaders said they will delay reversing stimulus measures until an economic recovery is assured and will each decide on their own exit strategies.
IMF Predicts Stronger 2010 Global Rebound After 2009 Economic Contraction The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
Democrats Split on Second Stimulus as Unemployment Climbs, Deficit Soars Democrats who control the levers of power in Washington are divided over whether to push for more deficit spending to end the recession and stem job losses, complicating the possibility of a second stimulus bill.
Bank of Japan May Extend Emergency Lending as Companies Struggle to Borrow The Bank of Japan may extend its emergency-credit programs as soon as next week as policy makers await evidence that banks are increasing lending to companies.
Germany May Shake Off Recession as Factories Begin to Ramp Up Production Germany may be shaking off its worst recession since World War II as factories ramp up production to meet rising export orders.
China's New Lending Surged in June, Fueling Concerns Bad Loans Will Rise China’s new lending surged almost fivefold in June from a year earlier, increasing concern that attempts to revive the world’s third-largest economy will lead to bad debts and asset bubbles.
Geithner Urges Congress to Act on Rules Revamp, Lawmakers Debate Fed Role Treasury Secretary Timothy Geithner urged lawmakers to quickly pass legislation enacting President Barack Obama’s overhaul of U.S. financial rules, as Democrats pushed back on plans to expand the Federal Reserve’s powers.
IMF Predicts Stronger 2010 Global Rebound After 2009 Economic Contraction The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
Democrats Split on Second Stimulus as Unemployment Climbs, Deficit Soars Democrats who control the levers of power in Washington are divided over whether to push for more deficit spending to end the recession and stem job losses, complicating the possibility of a second stimulus bill.
Bank of Japan May Extend Emergency Lending as Companies Struggle to Borrow The Bank of Japan may extend its emergency-credit programs as soon as next week as policy makers await evidence that banks are increasing lending to companies.
Germany May Shake Off Recession as Factories Begin to Ramp Up Production Germany may be shaking off its worst recession since World War II as factories ramp up production to meet rising export orders.
China's New Lending Surged in June, Fueling Concerns Bad Loans Will Rise China’s new lending surged almost fivefold in June from a year earlier, increasing concern that attempts to revive the world’s third-largest economy will lead to bad debts and asset bubbles.
Geithner Urges Congress to Act on Rules Revamp, Lawmakers Debate Fed Role Treasury Secretary Timothy Geithner urged lawmakers to quickly pass legislation enacting President Barack Obama’s overhaul of U.S. financial rules, as Democrats pushed back on plans to expand the Federal Reserve’s powers.
Headlines:
Swiss to stop UBS handing over data in US tax row (Reuters)
OPEC: World will need less of its crude (Houston Chronicle)
Oil falls near $62 on recovery doubts (Associated Press)
Staggering Budget Gap and a Reluctance to Fill It (New York Times)
Google launches OS - calls out Microsoft (CNNMoney.com)
US bank capital changes opposed (Financial Times)
Draft G8 Statements Don't Mention Currency Changes (CNBC.com)
Stimulating debate:
Stimulus: Where's the $787 Billion? Theo Francis and Elise Craig, BusinessWeek, July 7, 2009 Administration officials insist that it takes time to dole out money properly, which explains why so little has been spent so far.
An Ill-Timed and Ill-Targeted Stimulus
Casey B. Mulligan, Economix, July 8, 2009 Construction data over the last couple of years supports the view that federal spending would never provide much "stimulus," in part because it was doomed to be ill-timed and ill-targeted.
Will Reducing Government Spending Derail The Recovery?Lee E. Ohanian, Forbes, July 8, 2009 Lessons from the 1937-38 Depression.
Waiting for the stimulus 'oomph' Doyle McManus, Los Angeles Times, July 8, 2009 The debate over whether the 5-month-old plan is working is still a little premature, but that hasn't stopped economists and politicians from jumping into the fray. The most urgent reason: jobs.
Fixing finance:
Our banks are beyond the control of mere mortals
John Kay, Financial Times, July 7, 2009 We would be wiser to look for a simpler banking system, more resilient to human error and inevitable misjudgments, writes John Kay.
Why Big Capital Markets Players Are Unmanageable
Yves Smith, Naked Capitalism, July 8, 2009 John Kay comes perilously close to nailing a key issue in his current Financial Times comment, "Our banks are beyond the control of mere mortal" in that he very clearly articulates the problem very well but then draws the wrong conclusion.
Let's Treat Borrowers Like Adults
Todd Zywicki, Wall Street Journal, July 8, 2009 The problems with a financial products safety panel.
Still Skeptical About Banks
James Kwak, The Baseline Scenario, July 7, 2009 The general view is that we may have seen an end to bank panics for this cycle...but we may not have, and we may come to regret not taking stronger measures now.
The fiscal position:
Here comes the next fiscal crisis
Alan J. Auerbach and William G. Gale, Los Angeles Times, July 8, 2009 Without action by policymakers, an increasing imbalance between federal spending and revenues will produce a dangerous deficit.
A New York Solution for Bailing Out California
Henry Rowen, Wall Street Journal, July 8, 2009 In 1975, a Control Board cut spending, controlled the cash.
Global trade and economic development:
What India must do if it is to be an affluent country
Martin Wolf, Financial Times, July 7, 2009 What would need to change if India were to become an advanced economy in one generation? The answer is: a great deal. But one thing is clear: after the performance of the past three decades, the goal is not laughable, writes Martin Wolf.
Rich nations must act on free trade
William Rhodes, Financial Times, July 7, 2009 The danger of retaliation against trade limits, leading to an ever more threatening spiral, is now the gravest risk, says William Rhodes.
Re-colonise the Bottom Billion?
Free Exchange, Economist.com, July 7, 2009 Mr Collier's interventionism is growing more audacious by the moment.
RMB 1.5 trillion in new Chinese lending - can we turn this thing off?
Michael Pettis, China Financial Markets, July 8, 2009 This is the third biggest month in history, and of course all three of them occurred this year.
Headlines:
BOE key rate unchanged, maintains asset plan (MarketWatch)
White House unhappy with IMF limits in US spending bill (Reuters)
Swiss ready to seize UBS data to stifle Washington (AP)
Cities Lose Out on Road Funds From Federal Stimulus (New York Times)
IMF says world is pulling out of recession (Financial Times)
Poorer Nations Reject a Target on Emission Cut (New York Times)
Retail Sales Miss the Mark as Consumers Curb Spending (CNBC.com)
Treasury's toxic-asset plan turns out smaller than expected (McClatchy)
Fixing finance:
Big banks look to rainmakers again
John Gapper, Financial Times, July 8, 2009 Investment banks are hitting back at boutiques by giving top performers the status they crave, as the growing complexity of deals means more seasoned advisers are needed, writes John Gapper. But don't expect it to last.
Systemic Risk and the Fed
Robert C. Pozen, Wall Street Journal, July 9, 2009 It is a mistake to give the central bank vast new regulatory powers.
Bank Shot
Noam Scheiber, The New Republic, July 8, 2009 The hidden rifts on Wall Street present Obama with his best chance to regulate the banks.
America's recession and recovery:
Keep the money flowing to stave off deflation
Tim Congdon, Financial Times, July 8, 2009 The start of quantitative easing in March coincided with an abrupt improvement in nearly all economic indicators, writes Tim Congdon.
Brown Manure, Not Green Shoots
Nouriel Roubini, Forbes, July 9, 2009 The jobs situation is even worse than the headlines.
Do We Need a Second Stimulus?
Edward P. Lazear, Wall Street Journal, July 9, 2009 A more troubling question is why so little is being spent from the first.
Innovation can give America back its greatness
Jeff Immelt, Financial Times, July 8, 2009 Competitiveness will be renewed by rebuilding manufacturing, exports and technology, not through protectionism, writes Jeff Immelt.
Europe and the G-8:
"Will Europe's Economies Regain Their Footing?"
Mark Thoma, Economist's View, July 9, 2009 Kenneth Rogoff on the prospects for recovery in Europe.
Europe: The Biggest Loser?
Brian Hoyt, Crisis Talk (World Bank), July 8, 2009 The IMF just released a revised survey of its global economic outlook, which is generally less pessimistic than the one it originally released in April, particularly for GDP growth in 2010. There is one obvious exception amidst this "optimism": Europe.
What the G-8 Won't AchieveSimon Johnson, Economix, July 9, 2009 It has been a long time since a G-7 or G-8 summit meeting achieved anything substantial.
Economics:
Depression Era Unemployment RateCalculated Risk Blog, July 9, 2009 The surge in unemployment in 1937 was related to an attempt to unwind the monetary and fiscal stimulus policies, with disastrous results for employment.
Punditry:
Proposition 13 isn't the problem
Joel Fox, Los Angeles Times, July 9, 2009 When times get tough, the property tax measure comes under attack, but it's no boogeyman.
GM Gets a Second Chance
Paul Ingrassia, Wall Street Journal, July 9, 2009 With a clean balance sheet and lower costs, it may yet succeed.
May Wholesale Inventories Fall, 9th Straight Drop
- Philadelphia Inquirer 7/9/2009
Congress Reignites US Stimulus Debate
- Financial Times 7/9/2009
Small Businesses Forgoing Raises Again
- Arizona Republic 7/9/2009
GM’s Nightmare Shows Perils for Closing Factories
- Bloomberg 7/9/2009
Layoff Fears Keep Buyers Out of Homes
- Detroit Free Press 7/9/2009
Frank Proposes Home Loan Plan for Jobless
- Boston Globe 7/9/2009
Commercial Real Estate Owners Struggling
- Los Angeles Times 7/9/2009
Univisión Struggles to Overcome Recession
- Miami Herald 7/9/2009
June Rains, Penny Pinching Dampen Retail Sales
- Reuters 7/9/2009
Ballparks' Filled With All-You-Can-Eat Fare
- Denver Post
- Philadelphia Inquirer 7/9/2009
Congress Reignites US Stimulus Debate
- Financial Times 7/9/2009
Small Businesses Forgoing Raises Again
- Arizona Republic 7/9/2009
GM’s Nightmare Shows Perils for Closing Factories
- Bloomberg 7/9/2009
Layoff Fears Keep Buyers Out of Homes
- Detroit Free Press 7/9/2009
Frank Proposes Home Loan Plan for Jobless
- Boston Globe 7/9/2009
Commercial Real Estate Owners Struggling
- Los Angeles Times 7/9/2009
Univisión Struggles to Overcome Recession
- Miami Herald 7/9/2009
June Rains, Penny Pinching Dampen Retail Sales
- Reuters 7/9/2009
Ballparks' Filled With All-You-Can-Eat Fare
- Denver Post
Russian Central Bank Cuts Refinancing Rate by Half Percentage Point to 11% Russia’s central bank cut its main interest rates for the fourth time in less than three months after the economy contracted 10.2 percent through May and government spending failed to reverse the decline.
China's Exports Tumble for Eighth Month as Global Recession Cuts Demand China’s exports fell for an eighth month as the global recession cut demand, highlighting the economy’s dependence on stimulus spending to revive growth.
U.K. Producer Prices Drop Most Since 2001 as Recession Defeats Inflation U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
U.S. Economy on `Cusp of Stabilization' as Growth Forecasts Are Increased The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed.
G-8's Economic Dominance Faces Challenge From China, India, South Africa Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
China's World-Record Currency Reserves May Top $2 Trillion for First Time China’s foreign-exchange reserves probably topped $2 trillion for the first time, drawing attention to the difficulty the government faces in finding places to invest the world’s largest holdings.
French Industrial Output Rises Unexpectedly For First Time in Nine Months French industrial production unexpectedly increased for the first time in nine months in May, adding to signs that Europe is starting to pull out of its worst recession since World War II.
Congressional Panel, Treasury Clash Over Valuation of U.S. Bank Warrants The U.S. Treasury has sold warrants it obtained from rescued banks for about two-thirds of what they are worth, a group overseeing the federal bailout said.
Trade Deficit in the U.S. Probably Widened in May Amid Higher Oil Prices The U.S. trade deficit probably widened in May for a third month as higher oil prices boosted the bill for imports, while exports declined amid a global recession, economists said before reports today.
Loss Of `Animal Spirits' May Prolong U.S. Recession, Roubini, Shiller Say The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
World Bank Says Indonesia Likely to Emerge as `Winner' From Global Slump Indonesia’s economy is set to emerge a “winner” after avoiding the worst of the global financial crisis, the World Bank’s country director said.
China's Exports Tumble for Eighth Month as Global Recession Cuts Demand China’s exports fell for an eighth month as the global recession cut demand, highlighting the economy’s dependence on stimulus spending to revive growth.
U.K. Producer Prices Drop Most Since 2001 as Recession Defeats Inflation U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
U.S. Economy on `Cusp of Stabilization' as Growth Forecasts Are Increased The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed.
G-8's Economic Dominance Faces Challenge From China, India, South Africa Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
China's World-Record Currency Reserves May Top $2 Trillion for First Time China’s foreign-exchange reserves probably topped $2 trillion for the first time, drawing attention to the difficulty the government faces in finding places to invest the world’s largest holdings.
French Industrial Output Rises Unexpectedly For First Time in Nine Months French industrial production unexpectedly increased for the first time in nine months in May, adding to signs that Europe is starting to pull out of its worst recession since World War II.
Congressional Panel, Treasury Clash Over Valuation of U.S. Bank Warrants The U.S. Treasury has sold warrants it obtained from rescued banks for about two-thirds of what they are worth, a group overseeing the federal bailout said.
Trade Deficit in the U.S. Probably Widened in May Amid Higher Oil Prices The U.S. trade deficit probably widened in May for a third month as higher oil prices boosted the bill for imports, while exports declined amid a global recession, economists said before reports today.
Loss Of `Animal Spirits' May Prolong U.S. Recession, Roubini, Shiller Say The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
World Bank Says Indonesia Likely to Emerge as `Winner' From Global Slump Indonesia’s economy is set to emerge a “winner” after avoiding the worst of the global financial crisis, the World Bank’s country director said.
Unemployment and GDP by CalculatedRisk on 7/11/2009 05:50:00 PM
The WSJ Real Time Economics blog mentioned Okun's law yesterday (a relationship between changes in GDP and unemployment): Job Losses Outpace GDP Decline (ht Bob_in_MA)
Click on graph for larger image.
This graph shows the quarterly change in real GDP (annualized) vs. the change in unemployment rate. The red markers are for 2008 and Q1 2009.
Usually the trend line is drawn as linear, but I made it a 2nd order polynomial here.
The red markers are above the trend line, but within the normal scatter.
For Q2 the unemployment rate increased 1.2% (from Q1, quarterly average), and the annualized real GDP change will probably be in the -1% to -2% range - so that is also above the trend (a larger than expected change in unemployment based on the change in real GDP).
Okun's law is just a general relationship, and the relationship appears to have changed over time (as mentioned in the WSJ).
Note: the graph shows the quarterly change in real GDP annualized (the way it is reported by the BEA each quarter). In the WSJ post, they mentioned "a 2% [or 3%] decrease in output for every 1% increase in unemployment". A 2% decrease in quarterly output would be reported by the BEA as over 8% annualized for the quarter.
The WSJ Real Time Economics blog mentioned Okun's law yesterday (a relationship between changes in GDP and unemployment): Job Losses Outpace GDP Decline (ht Bob_in_MA)
In a research note, [Alliance Bernstein economist Joseph] Carson says job losses in prior downturns have been roughly proportional to the decline in gross domestic product. But in the current recession, the proportion of jobs lost is running about a third greater than the drop in real GDP.
The correlation between GDP growth and unemployment is called Okun's Law, after the late economist Arthur Okun who documented it in the 1960s. But the numerical relationship that Okun estimated – and other economists have since refined – has broken down. His original estimate suggested about a 3% decline in GDP for every 1% increase in unemployment. Before joining the Fed, Ben Bernanke, working with Andrew Abel, figured more recent suggested about a 2% decrease in output for every 1% increase in unemployment.
Click on graph for larger image.This graph shows the quarterly change in real GDP (annualized) vs. the change in unemployment rate. The red markers are for 2008 and Q1 2009.
Usually the trend line is drawn as linear, but I made it a 2nd order polynomial here.
The red markers are above the trend line, but within the normal scatter.
For Q2 the unemployment rate increased 1.2% (from Q1, quarterly average), and the annualized real GDP change will probably be in the -1% to -2% range - so that is also above the trend (a larger than expected change in unemployment based on the change in real GDP).
Okun's law is just a general relationship, and the relationship appears to have changed over time (as mentioned in the WSJ).
Note: the graph shows the quarterly change in real GDP annualized (the way it is reported by the BEA each quarter). In the WSJ post, they mentioned "a 2% [or 3%] decrease in output for every 1% increase in unemployment". A 2% decrease in quarterly output would be reported by the BEA as over 8% annualized for the quarter.
alifornia IOU Update by CalculatedRisk on 7/11/2009 01:41:00 PM
From the SF Gate: State leaders talking again - budget woes go on
And from Controller John Chiang yesterday: Controller Releases Year-End Cash Figures
From the SF Gate: State leaders talking again - budget woes go on
California's fiscal crisis continued unabated Friday with most major banks refusing to cash the state's IOUs starting today, the state controller delaying $4 billion in payments to public schools ...And Felix Salmon has a nice chart on who gets paid cash, and who gets IOUs: California: The haves and have-nots
State Controller John Chiang and state Superintendent of Instruction Jack O'Connell said $4 billion in payments to local school districts that were supposed to go out on Friday will be delayed until July 30. The move will conserve cash for the state, which has been issuing IOUs since July 2. ...
As of Friday morning, the state controller had mailed 101,930 IOUs covering more than $389 million in payments, said Hallye Jordan, a spokeswoman for Chiang.
And despite a plea from state Treasurer Bill Lockyer that banks extend their Friday deadline to accept the IOUs, most refused to do so.
Citibank agreed to a one-week extension, while Bank of the West said it will accept IOUs until further notice. The banks that rejected extension requests include Bank of America, Wells Fargo, JPMorgan Chase and Union Bank ...
And from Controller John Chiang yesterday: Controller Releases Year-End Cash Figures
"California continues to pay for its history of unbalanced budgets. The State spent $10.4 billion more than it collected last year alone, and is now without enough cash to cover all of its payment obligations," said Chiang.Many other states have serious budget problems too.
"Our major sources of revenue have continued their trend downward, leaving no viable option but to craft a new budget that recognizes California's recovery has yet to begin."
Personal income taxes in June were $987 million below (-18.0%) estimates in the May Revision, and sales taxes were short by $154 million (-5.8%). Corporate taxes were $1.31 billion above estimates (41.2%). Corporate taxes in May and June were boosted by a surge of payments from corporate taxpayers hoping to avoid a new State penalty.
The State started the fiscal year with a $1.45 billion cash deficit, which grew to $11.9 billion on June 30, 2009. Borrowed money from special funds provided enough cash to fund State operations through June 30. The Controller faced a large cash shortfall at the end of July, forcing his office to begin issuing registered warrants or "IOUs" to any General Fund payment that was not protected by the State Constitution, federal law, or court decision. Without IOUs, the State would have run out of cash and begun missing those protected payments at the end of July.
While updated cash projections show that IOUs will preserve enough cash to make those protected payments through September, the cash shortfall in October will endanger the State's ability to make those payments.
Retail Sales in U.S. Probably Rose, Factory Slump Eased as Recession Waned Retail sales in the U.S. probably increased in June for a second straight month and factory production fell at a slower pace as the recession abated, economists said before reports this week.
Obama Says Economic Stimulus `Worked as Intended,' Urges Public Patience President Barack Obama said his $787 billion stimulus bill “has worked as intended” as he pushed back against Republican criticism that his recovery program has failed to rescue the economy.
Consumer Sentiment in U.S. Falls More Than Forecast on Rising Joblessness Sentiment among U.S. consumers, whose spending is critical to an economic recovery, dropped in July after four months of gains as unemployment approached 10 percent.
Israeli Inflation Probably Accelerated in June on Commodity, Housing Costs Israel’s inflation rate probably rose in June, the first increase in three months, as global commodity prices and housing costs increased, a survey showed.
Geithner Says Pace of Economic Decline in U.S. Has `Slowed Dramatically' Treasury Secretary Timothy Geithner said that while the pace of decline in the U.S. economy has “slowed dramatically,” there are still “enormous challenges.”
G-8's Economic Dominance Faces Challenge From China, India, South Africa Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
China's World-Record Currency Reserves May Top $2 Trillion for First Time China’s foreign-exchange reserves probably topped $2 trillion for the first time, drawing attention to the difficulty the government faces in finding places to invest the world’s largest holdings.
U.K. Producer Prices Drop Most Since 2001 as Recession Defeats Inflation U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
Congressional Panel, Treasury Clash Over Valuation of U.S. Bank Warrants The U.S. Treasury has sold warrants it obtained from rescued banks for about two-thirds of what they are worth, a group overseeing the federal bailout said.
El-Erian Says Geithner Shares `A' With Bernanke for Effort, `B' for Result Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., gives Timothy Geithner and Ben S. Bernanke an “A” for their efforts to revive credit markets.
World Bank Says Indonesia Likely to Emerge as `Winner' From Global Slump Indonesia’s economy is set to emerge a “winner” after avoiding the worst of the global financial crisis, the World Bank’s country director said.
Obama Says Economic Stimulus `Worked as Intended,' Urges Public Patience President Barack Obama said his $787 billion stimulus bill “has worked as intended” as he pushed back against Republican criticism that his recovery program has failed to rescue the economy.
Consumer Sentiment in U.S. Falls More Than Forecast on Rising Joblessness Sentiment among U.S. consumers, whose spending is critical to an economic recovery, dropped in July after four months of gains as unemployment approached 10 percent.
Israeli Inflation Probably Accelerated in June on Commodity, Housing Costs Israel’s inflation rate probably rose in June, the first increase in three months, as global commodity prices and housing costs increased, a survey showed.
Geithner Says Pace of Economic Decline in U.S. Has `Slowed Dramatically' Treasury Secretary Timothy Geithner said that while the pace of decline in the U.S. economy has “slowed dramatically,” there are still “enormous challenges.”
G-8's Economic Dominance Faces Challenge From China, India, South Africa Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
China's World-Record Currency Reserves May Top $2 Trillion for First Time China’s foreign-exchange reserves probably topped $2 trillion for the first time, drawing attention to the difficulty the government faces in finding places to invest the world’s largest holdings.
U.K. Producer Prices Drop Most Since 2001 as Recession Defeats Inflation U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
Congressional Panel, Treasury Clash Over Valuation of U.S. Bank Warrants The U.S. Treasury has sold warrants it obtained from rescued banks for about two-thirds of what they are worth, a group overseeing the federal bailout said.
El-Erian Says Geithner Shares `A' With Bernanke for Effort, `B' for Result Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., gives Timothy Geithner and Ben S. Bernanke an “A” for their efforts to revive credit markets.
World Bank Says Indonesia Likely to Emerge as `Winner' From Global Slump Indonesia’s economy is set to emerge a “winner” after avoiding the worst of the global financial crisis, the World Bank’s country director said.
Japan Needs to Consider Diversifying Reserves, Opposition's Nakagawa Says Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.
Singapore Economy Probably Emerged From Recession as Manufacturing Gained Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the Southeast Asian nation emerge from its worst recession since independence in 1965.
Bonello of Malta Says ECB `Satisfied' With Current Rates, Policy Settings European Central Bank council member Michael Bonello said the bank is “satisfied” with its current policy settings, indicating it’s in no rush to change interest rates or expand its asset-purchase program.
Bernanke May Explain Exit Strategy From Fed's Biggest Monetary Expansion Federal Reserve Chairman Ben S. Bernanke probably will show how the central bank will exit the biggest monetary expansion in history when he reports to Congress next week, economists said.
Obama's Stimulus Money Starts Flowing to Projects as Jobless Await Results David Oneglia was looking at the likelihood of layoffs at his construction company. Then he landed a contract funded by the federal stimulus program to repair roads and bridges on Connecticut’s Merritt Parkway.
Japan Government Says Economy Is `Picking Up,' Raises View for Third Month The Japanese government said the economy is “picking up,” raising its assessment for a third month as stimulus measures prop up household spending and demand from abroad improves.
Commercial Construction in U.S. to Fall by 16% as Jobs, Spending Disappear Construction spending on offices, retail centers and hotels is likely to fall 16 percent this year and 12 percent in 2010, more than previously forecast, the American Institute of Architects said.
Sri Lanka's Central Bank Leaves Benchmark Interest Rate Unchanged at 11% Sri Lanka kept its benchmark interest rates unchanged, waiting to see if three reductions in borrowing costs this year are enough to stoke an economic revival after the end of almost three decades of civil war.
People's Bank of China Pledges to Strengthen Monetary, Credit Management China’s central bank pledged to do more to guide loan growth as a record expansion in credit adds to the risks of asset bubbles and bad debts.
Argentine CPI Data Overhaul Pits Fernandez Against New Opposition Congress Argentine President Cristina Fernandez de Kirchner’s first showdown with the opposition- controlled congress may be over inflation data.
Polish Political Storm Whirls Round the Issue of Central Bank Independence The row between Poland’s top two politicians over the central bank deepened yesterday when Piotr Kownacki, head of President Lech Kaczynski’s office, said a government plan to make the bank help the state budget violates the constitution.
Singapore Economy Probably Emerged From Recession as Manufacturing Gained Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the Southeast Asian nation emerge from its worst recession since independence in 1965.
Bonello of Malta Says ECB `Satisfied' With Current Rates, Policy Settings European Central Bank council member Michael Bonello said the bank is “satisfied” with its current policy settings, indicating it’s in no rush to change interest rates or expand its asset-purchase program.
Bernanke May Explain Exit Strategy From Fed's Biggest Monetary Expansion Federal Reserve Chairman Ben S. Bernanke probably will show how the central bank will exit the biggest monetary expansion in history when he reports to Congress next week, economists said.
Obama's Stimulus Money Starts Flowing to Projects as Jobless Await Results David Oneglia was looking at the likelihood of layoffs at his construction company. Then he landed a contract funded by the federal stimulus program to repair roads and bridges on Connecticut’s Merritt Parkway.
Japan Government Says Economy Is `Picking Up,' Raises View for Third Month The Japanese government said the economy is “picking up,” raising its assessment for a third month as stimulus measures prop up household spending and demand from abroad improves.
Commercial Construction in U.S. to Fall by 16% as Jobs, Spending Disappear Construction spending on offices, retail centers and hotels is likely to fall 16 percent this year and 12 percent in 2010, more than previously forecast, the American Institute of Architects said.
Sri Lanka's Central Bank Leaves Benchmark Interest Rate Unchanged at 11% Sri Lanka kept its benchmark interest rates unchanged, waiting to see if three reductions in borrowing costs this year are enough to stoke an economic revival after the end of almost three decades of civil war.
People's Bank of China Pledges to Strengthen Monetary, Credit Management China’s central bank pledged to do more to guide loan growth as a record expansion in credit adds to the risks of asset bubbles and bad debts.
Argentine CPI Data Overhaul Pits Fernandez Against New Opposition Congress Argentine President Cristina Fernandez de Kirchner’s first showdown with the opposition- controlled congress may be over inflation data.
Polish Political Storm Whirls Round the Issue of Central Bank Independence The row between Poland’s top two politicians over the central bank deepened yesterday when Piotr Kownacki, head of President Lech Kaczynski’s office, said a government plan to make the bank help the state budget violates the constitution.
Geithner to reassure Gulf allies on dollar assets Reuters - Ulf Laessing, Glenn Somerville - 2 hours ago RIYADH/LONDON (Reuters) - Treasury Secretary Timothy Geithner will seek to reassure Gulf Arab states this week that US dollar assets they hold in large quantities remain a strong investment.
US Treasury's Geithner To Discuss Finance Rules With UK Leaders Wall Street Journal
Can Treasury Geithner Convince Investors That Their US Assets Are ...
US Treasury's Geithner To Discuss Finance Rules With UK Leaders Wall Street Journal
Can Treasury Geithner Convince Investors That Their US Assets Are ...
Headlines:
Turkey, EU countries sign gas pipeline deal (Philadelphia Inquirer)
US, Swiss ask for delay in UBS secrecy case (Associated Press)
Geithner to reassure Gulf allies on dollar assets (Reuters)
For Goldman, a Swift Return to Lofty Profits (New York Times)
Australia Calls in China's Ambassador Over Rio's Hu (Wall Street Journal)
US mulls tax on rich to pay for healthcare (Financial Times)
Obama Team Sees Jobs Growth in Health, Environment (CNBC.com)
The new economic reality:
Divorce and hard times
Gregory Rodriguez, Los Angeles Times, July 13, 2009 Economic woes often cause marital splits, right? Well, not so fast.
Boiling the Frog
Paul Krugman, New York Times, July 12, 2009 It's difficult to get people to do what it takes to head off a catastrophe foretold. And now, both the economic and the environmental frogs are sitting still while the water gets hotter.
The Consequences of Big Government
Robert J. Samuelson, Washington Post, July 13, 2009 Without anyone much noticing, our national government is on the verge of a massive permanent expansion.
Fixing finance:
Don't Shoot the Speculators
L. Gordon Crovitz, Wall Street Journal, July 13, 2009 They predict prices, not set them.
Elitist Protection Consumers Don't Need Peter J. Wallison, Washington Post, July 13, 2009 Are consumers "protected" when they are denied the opportunity to buy products and services that are available to others?
Waiting For The Big Push: Selling The Consumer Protection Agency For Financial Products
Simon Johnson, The Baseline Scenario, July 13, 2009 How does the administration's effort compare, then vs. now?
Firms and innovation:
Chrome vs. Bing vs. You and Me
Robert X. Cringely, New York Times, July 12, 2009 In the Microsoft-Google war, consumers and innovation both lose.
What Detroit Can Learn From Silicon Valley
Andrew S. Grove, Wall Street Journal, July 13, 2009 Vertically integrated production is a thing of the past. Will the auto industry's new overseers catch on?
Economics:
The Reinventive City
Edward L. Glaeser, Forbes, July 13, 2009 New York remains rich in the ultimate resource: human capital.
Second Stimulus Debate: Geithner vs. Krugman and Delong
Calculated Risk, July 12, 2009 My guess is another stimulus package is coming - but the Obama Administration is in a political bind and they will have to wait a few more months.
Money Monopoly
Mark Thoma, Economist's View, July 13, 2009 Marshall Auerback says California is challenging the federal monopoly on money creation.
Punditry:
The Organic Market
Tamar Jacoby, Forbes, July 13, 2009 Not just for apples and pears, but the natural way to fix immigration too.
Pensions benefit taxpayers
Gerald W. McEntee, USA Today, July 13, 2009 Public pensions offer good value for taxpayers.
- Fallen Angels: More Companies Are Being Cut to 'Junk' Status
Ratings on 15 companies worldwide were cut to junk status in June, the third-highest total since at least 1987, as weak economies, the housing slump and heavy debt took a toll, Standard & Poor's said. - Banks Stronger But Outlook Is Clouded by Jobs: Whitney
- Berkshire Hathaway's 'Price Is Right': Barron's
- Warren Buffett Retreating from 'Risky Business'
- Madoff on the Move, Shipped to Unknown Prison
- Haute Cuisine's New Face: The Big Mac Extra Value Meal
- Ryan Seacrest Signs $45 Million 'Idol' Deal
- Ex-Stanford CFO's Plea Sets Up Fight with Former Boss
- Microsoft Takes on Google with Free Office Programs
- Sotomayor Confirmation Likely Despite GOP Attacks
- GM's Bob Lutz Takes Over Auto Maker's Ad Image
What Will Walll Street Look Like In 2015? - Luigi Zingales, City Journal
Wall Street Takes Arrogance to New Level - Bob Herbert, New York Times
The 5 Major Questions Facing Wall Street - David Weidner, MarketWatch
How Can We Be So Optimistic? - Brian Wesbury & Robert Stein, FT Advisors
9 Reasons the Economy Isn't Improving - Mortimer Zuckerman, U.S. News
The Zero Percent Tax Rate Solution - Peter Ferrara, Wall Street Journal
Debt Is the Real Evil - Nassim N. Taleb & Mark Spitznagel, Financial Times
CIT Is Not Too Big to Fail - Dean Foust & Theo Francis, Business Week
Why Healthcare Reform Might Make It Affordable - Jonathan Cohn, TNR
Where the New Deal Went Wrong - Harold Cole & Lee Ohanian, Milken Inst.
Tracking the Path of Government Stimulus - David Lynch, USA Today
Health of Jobs and Buffett Is No One's Business - Matthew Lynn, Bloomberg
Don't Buy Into Brown and Sarkozy's Oil Speculations - John Tamny, RCM
Oil's Surge Reignites Speculation Debate - Steven Mufson, Washington Post
Wall Street Takes Arrogance to New Level - Bob Herbert, New York Times
The 5 Major Questions Facing Wall Street - David Weidner, MarketWatch
How Can We Be So Optimistic? - Brian Wesbury & Robert Stein, FT Advisors
9 Reasons the Economy Isn't Improving - Mortimer Zuckerman, U.S. News
The Zero Percent Tax Rate Solution - Peter Ferrara, Wall Street Journal
Debt Is the Real Evil - Nassim N. Taleb & Mark Spitznagel, Financial Times
CIT Is Not Too Big to Fail - Dean Foust & Theo Francis, Business Week
Why Healthcare Reform Might Make It Affordable - Jonathan Cohn, TNR
Where the New Deal Went Wrong - Harold Cole & Lee Ohanian, Milken Inst.
Tracking the Path of Government Stimulus - David Lynch, USA Today
Health of Jobs and Buffett Is No One's Business - Matthew Lynn, Bloomberg
Don't Buy Into Brown and Sarkozy's Oil Speculations - John Tamny, RCM
Oil's Surge Reignites Speculation Debate - Steven Mufson, Washington Post
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