Posts Tagged ‘calculated risk’

Yes, it’s a depression (cont’d)

7 August 2011

Get a load of this chart, from Calculated Risk. It shows job losses in the 11 U.S. recessions since 1948. Our Little Depression is in a class by itself:

Job losses in all U.S. recessions, 1948-2011


(Hat tip: James Fallows.) A few things to take away:

  1. The maximum decline (6.4%) of jobs in the current slump was the worst of any of these recessions.
  2. Even after 18 months of so-called recovery, the current employment decline (5%) is larger than the maximum decline in all but one of the other recessions.
  3. At this point after the start of every other recession (except, ominously, the previous one in 2001), it was over and employment had fully recovered its peak level.

Summing up: It has now been 43 months since the last employment peak, and employment is still down 5%, a bigger job loss than in every recession since 1950. By this time after every other postwar recession (but one) began, employment had fully recovered.

If this isn’t a depression, then economists and the media have redefined depression to mean “something that occurred in the 1930s.”

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“The food is terrible. And in such small portions.”

9 July 2009

“How dead is Keynes?” asked economist James Tobin in 1977, when Keynesian economics was starting to lose ground in economics departments to more theoretically elegant alternatives like new classical economics, and when the stagflation of the mid-1970s sapped many people’s confidence in Keynesian policy prescriptions. Tobin said Keynesian economics was still the best macroeconomic theory out there, and that standard Keynesian pump-priming remedies for recessions like deficit spending and monetary expansion still worked. True as those words might have been, however, Keynesian economics was not faring well in the court of public opinion, neither among academic economists nor among policymakers. Paul Volcker’s Federal Reserve invoked monetarism, not Keynesianism, in its draconian anti-inflationary policies of the early ’80s, and President Reagan, of course, sold his tax cuts as “supply side” economic policies designed to restore incentives to work and save.

It’s fair to say that nothing really did come along to supplant Keynesian economics on the policy front.  Even Reagan’s “supply side” tax cuts had most of their impact through traditional Keynesian channels — putting more money in people’s pockets for them to spend — than by influencing people to supply more labor or save more. The estimated impact on labor supply was meager. The personal saving rate actually fell (graph from Calculated Risk). And President Bush 43’s early 2001 tax rebates worked much the same way — though they weren’t enough to prevent the recession of that year, they did mitigate it. But it’s hard to imagine any Republican politician of the last 30 years announcing, as President Nixon once did, “I am now a Keynesian.” Even Democratic politicians seem less than eager to embrace Keynes.

Fast forward to President Obama’s and Congress’s $787 billion, two-year stimulus package. Republicans have been calling it a failure practically ever since the time the ink on the bill was dry, and the American public seems to be getting increasingly impatient with, if not skeptical of, the stimulus. Unemployment keeps creeping up, after all, most recently to 9.5%. Warnings about the country’s long-term debt problems, to which the stimulus makes some contribution (however overblown in some quarters), have become ever more dire. Andrew Leonard of Salon has a nice little update on the politics and economics of the stimulus, titled “Is the Obama economic rescue plan a failure?”

annie_hallLeonard, citing Barry Ritholtz of The Big Picture, says the real problem, contrary to Republican critics who say the stimulus is just worthless “spending” as if government purchases weren’t part of GDP (and as if tax cuts weren’t part of the stimulus, too), is not that the food is so bad but that the portions are too small:

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Deflation

17 June 2009

For all the talking heads’ bloviating about the massive inflation to come from current Fed policies and the spending stimulus, as well as the media’s eagerness to pronounce the recession over, you can be forgiven for not noticing that deflation has not exactly gone away.  The Bureau of Labor Statistics announced yesterday that over the past 12 months wholesale prices dropped 5 percent and today that over the same span consumer prices dropped 1.3%; the respective declines were the largest since 1949 and 1950.

I said a few months ago that I was not particularly worried about deflation, and I’m still not, as it seems mild by historical standards and because expansionary Fed policies are making sure that money-stock growth is strong.  But an awful lot of people have assumed away the recession and are now wringing their hands about the threat of inflation, and these data suggest both impulses are premature.*

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Another sign that we’re in a depression

16 March 2009

great_depression_2008Industrial capacity utilization is at its lowest level since 1982 (when we had double-digit unemployment), and down 11% from a year ago (when we were already in a recession).

Calculated Risk has the story; data are from the Federal Reserve.

Let us now praise famous bloggers

8 December 2008

Doris Dungey, “Tanta” of the excellent Calculated Risk blog, died at age 47.

As far as I know, she is the first financial blogger to get an obituary in The New York Times (30 November 2008).

(originally posted 3 December 2008 )