Quotulatiousness

November 10, 2013

Growth forecasts continue to over-estimate Canada’s actual economic progress

Filed under: Cancon, Economics — Tags: , , , , — Nicholas Russon @ 12:12

In Maclean’s, Debbie Downer Colin Campbell takes a survey of the state of Canada’s economy:

A key qualification for landing a job at the Bank of Canada, it seems, is an unfailing sense of optimism. In 2009, the bank forecast the economy would grow 3.3 per cent in 2011. It grew 2.5 per cent. In 2011, it said the economy would grow 2.9 per cent in 2013. It will likely be just 1.6 per cent. Now it says the economy will grow 2.3 per cent next year. How likely is that? The bank has consistently viewed the economy through rose-coloured glasses in recent years, perhaps believing its low-interest-rate policy will eventually bear fruit. Rates have been held at one per cent for three years now. But the economy seems only to be getting worse.

It grew 0.3 per cent in August, Statistics Canada said last week — mostly attributed to a familiar crutch, the oil business. Elsewhere, things aren’t looking up. A new TD Bank report said corporate Canada is “in a slump,” with profits down 16 per cent from their post-recession peak in 2011. Some observers point out that Canada is still doing better than Europe and Japan. But so are most countries that aren’t in a recession, from South Africa and New Zealand to Equatorial Guinea and Guatemala. After breezing through the recession, Canada is back to old habits: hoping its fortunes (i.e., exports) will rise along with America’s comeback. But the U.S., too, is back in a rut. Last week, the Federal Reserve said it would continue with its $85-billion-a-month bond-buying stimulus program.

With the economy sputtering, Ottawa has meanwhile remained preoccupied with fiscal restraint and balancing the budget within two years. So, with neither low interest rates nor government spending providing a boost, the outcome seems predictable: Official growth forecasts will look nice, but will keep missing the mark.

August 30, 2013

Economic Darwinism – you’re soaking in it

Filed under: Economics, Government — Tags: , , , — Nicholas Russon @ 09:19

Charles Hugh Smith on the next big financial crisis and the way we’ve carefully put the worst people in place to cope with it:

Brenton Smith (no relation) recently identified a key driver of the next financial crisis: Economic Darwinism. Just as natural selection selects for traits that improve the odds of success/survival in the natural world, Economic Darwinism advances people and policies that boost profits and power within the dominant environment.

As Brenton explains in his essay The One Phrase That Explains the Great Recession, “The Federal Reserve’s 20-year policy of easy money created an environment virtually assured to select bankers, bureaucrats, educators, and elected officials who least understood the consequences of a credit crisis.

In other words, a hyper-financialized environment of near-zero interest and abundant credit rewarded those people and policies that succeed in that environment. Once the environment changes from “risk-on” to “risk-off,” the people and policies in charge are the worst possible choices for leadership, as the traits that enable successful management of credit crises have been selected out of the leadership pool.

This has political as well as financial consequences. As Brenton noted in an email exchange, Economic Darwinism creates an “incestuous relationship between Wall Street and Washington D.C., where success on Wall Street leads to a career in D.C.” This is a self-reinforcing process, as all those who are unwilling to keep dancing during the risk-on speculative orgy are weeded out of both the financial and political sectors, while those who dance the hardest gain political power, which they use to keep the music playing regardless of the increasing risks or consequences to the nation.

June 6, 2013

IMF forced to admit that the Greek bailout “included notable failures”

Filed under: Economics, Europe — Tags: , , , , , — Nicholas Russon @ 08:58

In the Guardian, Larry Elliott, Phillip Inman and Helena Smith round up the IMF’s self-criticisms over the handling of the bailout package imposed on Greece:

In an assessment of the rescue conducted jointly with the European Central Bank (ECB) and the European commission, the IMF said it had been forced to override its normal rules for providing financial assistance in order to put money into Greece.

Fund officials had severe doubts about whether Greece’s debt would be sustainable even after the first bailout was provided in May 2010 and only agreed to the plan because of fears of contagion.

While it succeeded in keeping Greece in the eurozone, the report admitted the bailout included notable failures.

“Market confidence was not restored, the banking system lost 30% of its deposits and the economy encountered a much deeper than expected recession with exceptionally high unemployment.”

In Athens, officials reacted with barely disguised glee to the report, saying it confirmed that the price exacted for the €110bn (£93bn) emergency package was too high for a country beset by massive debts, tax evasion and a large black economy.”

Under the weight of such measures — applied across the board and hitting the poorest hardest — the economy, they said, was always bound to dive into an economic death spiral.

May 16, 2013

The causes of the “Great Recession” by Tyler Cowen

Filed under: Business, Economics, Government, USA — Tags: , , — Nicholas Russon @ 09:11

According to Professor Tyler Cowen, the Great Recession was caused by a number of different factors. Cowen outlines 4 distinct and complicated problems which led to the downturn:

• A drop in the aggregate demand (http://en.wikipedia.org/wiki/Aggregat…)
• A “horribly” performing banking sector
• Problems with monetary policy
• An increase in the “risk premium” (http://en.wikipedia.org/wiki/Risk_pre…)

Prof. Cowen explains why one economic model isn’t sufficient to explain the economic downturn. He shows how several different economic models can be used to explain both the cause and the effects of the recession.

March 5, 2013

China claims the shipbuilding title

Filed under: Business, China — Tags: , , , — Nicholas Russon @ 09:02

Strategy Page talks about the success of Chinese shipyards:

Last year South Korea lost its decade long battle with China to retain its lead in ship building. Because of a five year depression in the world market for shipping, South Korean ship exports fell 30 percent last year, to $37.8 billion. China, helped by government subsidies, saw ship exports fall only 10.3 percent, leaving China with $39.2 billion in export sales. The Chinese government has also been giving its ship builders lots of new orders for warships, which made its yards more profitable and better able to beat South Korea on price. The Chinese government also provides its ship builders with more loans, allowing the builders to offer better credit terms to customers. South Korea is still ahead of China in total orders for ships. As of last year South Korea had 35 percent of these orders versus 33.3 percent for China.

China has been helping its shipyards for over a decade and that has enabled Chinese ship builders to gradually catch up to South Korea and Japan. It was only four years ago, sooner than anyone expected, that China surpassed South Korea as the world’s largest shipbuilder in terms of tonnage. In late 2009, Chinese yards had orders for 54.96 million CGT of ships, compared to 53.63 million CGT for South Korea. Thus China had 34.7 percent of the world market. In 2000, South Korea took the lead from Japan by having the largest share of the world shipbuilding market.

CGT stands for Compensated Gross Tons. This is a new standard for measuring shipyard effort. Gross tons has long been used as a measure of the volume within a ship. CGT expands on this by adding adjustments for the complexity of the ship design. Thus a chemical tanker would end up with a value four times that of a container ship. China is producing far more ships, in terms of tonnage of steel and internal volume, than South Korea, mainly because a much larger portion of Chinese ships are simple designs. South Korea has, over the years, pioneered the design, and construction, of more complex ships (chemical, and Liquid Natural gas carriers.)

January 31, 2013

Blaming “austerity” for most recent slowdown

Filed under: Economics, Government, Media, USA — Tags: , , , , , — Nicholas Russon @ 09:47

David Harsanyi discusses the named (by the mainstream media) culprits for the unexpected drop in US fourth-quarter GDP:

So, U.S. consumer confidence unexpectedly plunged in January to its lowest level in more than a year. The U.S. economy unexpectedly posted a contraction in the fourth quarter of 2012 — for the first time since the recession — “defying” expectations that economic growth is in our future.

If the economy were as vibrant as President Barack Obama has told us it is, a belt tightening in a single sector of government surely wouldn’t be enough to bring about “negative growth.” But one did. Unexpectedly. No worries, though. Pundits on the left tell us that this contraction was good news — possibly the best contraction in the history of all contractions. The White House blamed Republicans and, I kid you not, corporate jet owners because — well, who else? But mostly, the left is bellyaching about the end of temporary military spending and a brutal austerity that’s enveloped a once great nation.

There’s a small problem with that argument. There is no austerity. In the fourth quarter of 2012, Washington spent $908 billion, which was $30 billion more than it spent in the last quarter of 2011 and nearly $100 billion more than it spent in the third quarter of 2012. Taxpayers took on another $400 billion in debt during the quarter. If this is poverty, can you imagine what robust spending looks like?

As always, for “austerity” to take the blame, there’d actually have to have been some austerity to start with. The US government certainly hasn’t been practicing austerity over the last four years.

January 30, 2013

American fourth quarter GDP down 0.1%

Filed under: Economics, Military, USA — Tags: , , — Nicholas Russon @ 10:29

The optimistic folks at Business Insider assure us that the unexpectedly bad number for the US fourth quarter hides some good news:

People will be stunned to see that today’s GDP report went negative for Q4… the first negative print since The Great Recession.

But the report isn’t that bad. In fact it was arguably good.

For one thing, most of the collapse was due to a stunning fall in military spending. That’s not good for GDP, but it doesn’t reflect the real underlying strength of the economy.

And it’s mostly due to war drawdown. That’s a good thing for everyone!

January 15, 2013

“You kids are screwed”

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas Russon @ 00:01

Feeling optimistic about the future? Bryan Goldberg is here to slap that silly optimistic grin off your face:

Hey kids, you’ve all read “The Hunger Games,” right? Almost all young people have read the best-selling books or seen the Hollywood movie about Katniss Everdeen, a smart and ambitious young lady whose life prospects are diminished by historical events that predate her. What little hope she has is seemingly reduced to nil when a bunch of old people drop her into an arena and force her to fight with her fellow children in a battle royale to the death.

But that’s just fiction, right? Your loving parents and grandparents would never screw up their world and then throw you kids under the bus…or would they?

Actually, they already have.

Last week, the economics blog Calculated Risk ran a chart that tells a pretty compelling story. To an economist, this chart means that the magnitude and duration of the 2007 recession’s impact on unemployment outpaces that of any prior post-war recession. To young people, it simply means this…

You kids are screwed.

In fact, teenagers today probably aren’t old enough to remember the “Dot Bomb” recession of twelve years ago. But even at its peak, that really bad recession did not reach a level of unemployment that matched the one we are still currently experiencing. With the Federal Reserve losing its appetite for quantitative easing, the last bullet in their holster, and both political parties deciding to half-ass the fiscal policy debate, it’s safe to say that…

You kids are really screwed.

Pay careful attention to Lesson No. 4: it’s even more important than you think it is.

H/T to Jon, my former virtual landlord, for the link.

December 1, 2012

Tyler Cowen and Andrew Coyne on The Great Stagnation

Filed under: Economics, Media, Technology, USA — Tags: , , , , — Nicholas Russon @ 09:35

Tyler Cowen discusses his book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better. Andrew Coyne (National Post) presents a rebuttal and the pair discuss Cowen’s thesis focusing on issues of productivity, innovation and government policy (moderated by Wendy Dobson).

August 13, 2012

After five years, the Great Recession still shows little sign of ending

Filed under: China, Economics, Europe, USA — Tags: , , — Nicholas Russon @ 09:02

For your daily dose of doom, here’s Ambrose Evans-Pritchard at the Telegraph:

The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression.

[. . .]

The original trigger for the Great Recession has since faded into insignificance. America’s house price bubble — modest by European or Chinese standards — has by now entirely deflated. Warren Buffett is betting on a rebound. Fannie and Freddie are making money again.

Five years on it is clear that subprime was merely the first bubble to pop, a symptom not a cause. Europe had its own parallel follies. Britons were extracting almost 5pc of GDP each year in home equity by the end. Spain built 800,00 homes in 2007 for a market of 250,000. Iceland ran amok, so did Latvia and Hungary. The credit debacle was global. If there was an epicentre, it was Europe’s €35 trillion banking nexus.

[. . .]

A study by Stephen Cecchetti at the Bank for International Settlements concludes that debt turns “bad” at roughly 85pc of GDP for public debt, 85pc for household debt, and 90pc corporate debt. If all three break the limit together, the system loses its shock absorbers.

“Debt is a two-edged sword. Used wisely and in moderation, it clearly improves welfare. Used imprudently and in excess, the result can be disaster,” he said.

July 9, 2012

US recovery from the recession still more theory than reality

Filed under: Economics, USA — Tags: , — Nicholas Russon @ 07:54

Greg Mankiw has a graphical refutation of any claim that the United States has actually seen any recovery from the Great Recession of 2008:

At best, you’d have to call that a “stabilization”, but not a “recovery”.

June 23, 2012

The real ending to Krugman’s favourite example, the Capitol Hill babysitting co-op

Filed under: Economics, Government, Humour — Tags: , , , — Nicholas Russon @ 08:32

Tim Harford recounts the tale of the Capitol Hill babysitting co-op, which Paul Krugman is very fond of using as an example to support his economic prescriptions, but he includes the part that Krugman tends to ignore … the ending:

One of the most renowned parables in economics is that of the Capitol Hill babysitting co-operative. It became famous because of Paul Krugman, a winner of the Nobel memorial prize in economics and a pugnacious columnist for The New York Times.

Long, long ago (the 1970s) in a town far, far away (Washington, DC) there was a babysitting co-op with a problem. The 150 or so families in the co-op, mostly congressional staffers, shared babysitting duties and kept track of who was owed babysitting, and who was owing, with a system of “scrip” – tokens good for a half-hour’s sitting.

Thanks to an administrative misstep, the co-op ended up short of tokens. Most families wanted more, as a buffer in case they had a run of social engagements, and so most families wanted to stay in and sit for others. Of course, if everyone wants to babysit, nobody goes out, and that means nobody babysits either. The co-op suffered a demand-led depression: there was no shortage of people willing to supply babysitting services, but because of a failure of monetary policy, this potential supply was not called into play. [. . .]

Two-and-a-half cheers, then, for Krugman. But something has been nagging at me ever since I read the original story of the Capitol Hill babysitting co-op, published in 1977 by Joan and Richard Sweeney. Paul Krugman’s most recent retelling does not mention how the original story ends: the co-op prints too much scrip, inflationary pressures spring up and are suppressed, and the co-op seizes up again because nobody wants to stay at home babysitting. Krugman is right when he says that economies sometimes suffer from problems that have technical solutions. Perhaps he is too quick to suggest that those technical solutions are simple.

But let me look for compromise. The babysitting co-op was ruined because it was run, incompetently, by a bunch of Capitol Hill lawyers. In this respect I think we can all agree that it remains an important cautionary tale.

June 21, 2012

Canada’s recession, in one Tweet

Filed under: Cancon, Economics, Europe, USA — Tags: , , — Nicholas Russon @ 12:16

June 8, 2012

A Gen-X lament: “none of these “experts” … even agree on when we were born”

Filed under: Media, Randomness — Tags: , , — Nicholas Russon @ 09:46

By any reckoning, I just missed being in Gen-X, as the earliest date anyone seems to use is 1961 (so my sister is a Gen X’er, but I’m a very-very-very-late boomer, apparently). In spite of that, most of my friends seem to identify much more with Gen X than the plutocratic fat cats of the early Baby Boom generation. Kathy Shaidle explains the three biggest myths about Generation X:

… the term “Generation X” was popularized by our contemporary Douglas Coupland’s titular 1991 novel. (And Coupland swiped his title from the name of Billy Idol’s old pop-punk band; my fellow ex-punk Kinsella should know that, too.)

There are lots of things “great minds” got wrong about Generation X since they started writing and worrying about them. (I mean, us.)

After Coupland’s novel — about over-educated, underemployed pop culture addicts who’ve formed an ad hoc “family” of friends – swept the planet, countless “consultants” (including, briefly, Coupland himself) started marketing themselves as experts on my demographic.

These consultants made a whole lot of money, keynote-speaking to job-for-life CEOs about why we Gen-Xer’s were all so broke and unemployed.

And the most irritating (and yeah, ironic) thing is, none of these “experts” (“X-perts”?) even agree on when we were born.

[. . .]

The takeaway for pundits and other “experts” is:

“Generation X” isn’t synonymous with “young people today.”

I’m gonna be 50 soon. Dammit.

[. . .]

Like the Y2K “experts” who came after them, all those demographic gurus and futurists who got rich theorizing about Generation X ended up looking pretty foolish. (But never had to give their money back.)

When we Gen-Xers were trying to get our first jobs out of college or high school, we did indeed contend with an economy burdened by a triple-feature of double digit horrors: inflation, unemployment and interest rates were all way over 10%.

We blamed those damn yuppie Baby Boomers. They’d beaten us to all the good jobs and were never gonna give them up.

(In the same way hippies had used up all the safe-ish drugs and free sex, and left us with crack and AIDS.)

May 31, 2012

QotD: A plague on both your houses!

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas Russon @ 00:02

Protestations from the Obama side that this is all just proof that recession/depression was so much worse than any of us knew that it’s a goddamn great and good thing that Obama is helming the ship of state because if it had been one of those idiot Republicans like George W. Bush we wouldn’t have had bailouts and a stimulus that was too small to really effect the economy — even smaller than the $150 billion tax thingamajig that Bush tried in early 2008 that was really pathetic because we now know that even Obama’s $800 billion attempt was obviously too small christ it should have been two or three or even four times bigger and for god’s sake can’t we just prepare for the alien invasion that Paul Krugman — he won a Nobel Prize so just shut up already! — says will create enough of a multiplier effect to finally restart the economy and screw the debt because we’ll have thousands of years to pay that down, especially now that thank Zardoz we’ve got universal health care that will be awesome if the d-bags on the SCOTUS don’t FUBAR it and Dodd-Frank means there won’t be any fraud or dumb lending!

And of course the Republicans will counter with: See, none of this would have happened if we’d only followed George W. Bush’s disastrous big-government spending ways and expansion of major entitlements and a defense buildup because sharia law is taking over whole hamlets in Oklahoma and our plan to increase annual spending over the next decade by just $1 trillion is so much better than the Prez’s to spend $2 trillion more, especially after increasing federal outlays by 60 percent or more over the previous decade when we controlled things is exactly the tonic the economy needs right now! But seriously folks, what do you expect when you let gay marriage happen? No economy can recover from that!

Nick Gillespie, “Is the Obama Recovery Over? Or Has it Not Really Started Yet?”, Hit and Run, 2012-05-30

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