Archive for February 14th, 2009

$6 billion pile-up

14 February 2009

Real GDP kind of did fall 5% last quarter, just as consensus forecasts had it and worse than the official drop of 3.8%.  This story’s a couple weeks old (been busy), but just as the latest unemployment numbers are much worse than they look, the fact that the actual (annualized) drop was “only” 3.8% is actually a sign of weakness, not strength. The NYT and other sources noted that a big reason for the discrepancy was a surprise increase in unsold inventories.

What struck me was the item in the Commerce Department news release that showed that the inventory pile-up actually accounted for all of the discrepancy.  It was 1.3% percent of GDP, i.e., the entire difference between the 3.8% drop in GDP, and the 5.1% drop in “real final sales of domestic product.”

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Turning Japanese?

14 February 2009

Yesterday’s NYT continues the paper’s excellent coverage of the financial crisis with Hiroko Tabuchi’s article “In Japan’s Stagnant Decade, Cautionary Tales for America.” Notable quote:

‘“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”’

When someone from the American Enterprise Institute says it’s time to nationalize, then it’s probably time for policymakers to show a little openness to it (e.g., “only as a last resort,” “we’re not ruling out anything”).

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