Comments on: Double dip recession and the perverse math of GDP reporting http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: flow5 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57873 flow5 Mon, 28 Dec 2009 14:46:00 +0000 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57873 The solution to our immediate economic problem is to lower the remuneration rate on excess reserves. To revive the economy in the longer-term, we need to execute the same policy as pursued in the housing crisis of 1966 -which was a credit phenomenon). The solution to our immediate economic problem is to lower the remuneration rate on excess reserves. To revive the economy in the longer-term, we need to execute the same policy as pursued in the housing crisis of 1966 -which was a credit phenomenon).

]]> By: flow5 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57872 flow5 Mon, 28 Dec 2009 14:30:00 +0000 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57872 It's more perverse than you state. You can use monetary flows (MVt) or our means-of-payment money, times its rate of turnover, to compare (using the first derivative) to real-output, inflation, or nominal gdp. It works fine, but like you state, its deceptive. However you can be much more precise. The rates-of-change in (MVt) should always be measured with the same length of time as the specific economic lag (as its influence approaches its maximum impact (not date range); as demonstrated by the clustering on a scatter plot diagram), and not to any of our federal government agencies’ weekly, monthly, quarterly, or annual statistics. I.e., contrary to economic theory, and Milton Friedman, monetary lags are not “long and variable”. The lags for monetary flows (MVt), i.e. proxies for (1) real-growth, and (2) inflation, are historically, always, fixed in length. However the FED's target, nominal gdp, varies widely. You can't construct a time series without comparable figures. The FED certainly has not been cooperative in supplying comparable figures. If the catalogue of facts and their measurements (1) don’t correlate, (2) consistently compare, or (3) conclusively prove; the validity of a one’s arguments (theory), then there is a higher probability that the FED’s data is wrong, rather than the time series, or the theory supporting it. I.e., Real-output spikes in Jan., bottoms in May, and the economy finally reverses in Oct. Increasing rates of inflation expectations will stop at the end of Mar. The markets are going to struggle through this It’s more perverse than you state. You can use monetary flows (MVt) or our means-of-payment money, times its rate of turnover, to compare (using the first derivative) to real-output, inflation, or nominal gdp. It works fine, but like you state, its deceptive.

However you can be much more precise. The rates-of-change in (MVt) should always be measured with the same length of time as the specific economic lag (as its influence approaches its maximum impact (not date range); as demonstrated by the clustering on a scatter plot diagram), and not to any of our federal government agencies’ weekly, monthly, quarterly, or annual statistics.

I.e., contrary to economic theory, and Milton Friedman, monetary lags are not “long and variable”. The lags for monetary flows (MVt), i.e. proxies for (1) real-growth, and (2) inflation, are historically, always, fixed in length. However the FED’s target, nominal gdp, varies widely.

You can’t construct a time series without comparable figures. The FED certainly has not been cooperative in supplying comparable figures.

If the catalogue of facts and their measurements (1) don’t correlate, (2) consistently compare, or (3) conclusively prove; the validity of a one’s arguments (theory), then there is a higher probability that the FED’s data is wrong, rather than the time series, or the theory supporting it.

I.e., Real-output spikes in Jan., bottoms in May, and the economy finally reverses in Oct. Increasing rates of inflation expectations will stop at the end of Mar. The markets are going to struggle through this

]]> By: Jason http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57868 Jason Mon, 28 Dec 2009 06:59:00 +0000 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57868 There's nothing perverse about this math. If it was at all possible, the administration would have thrown all 800 billion into the first 4 quarters. The point is to help the private sector pick itself up. If that happens, none of this math would matter because the overall growth would be positive, with the growth in the private sector outstripping the fall in stimulus. If it doesn't happen, we may need more stimulus, but that would be evident even if we didn't go through any of this math. There’s nothing perverse about this math. If it was at all possible, the administration would have thrown all 800 billion into the first 4 quarters.

The point is to help the private sector pick itself up.

If that happens, none of this math would matter because the overall growth would be positive, with the growth in the private sector outstripping the fall in stimulus.

If it doesn’t happen, we may need more stimulus, but that would be evident even if we didn’t go through any of this math.

]]> By: Edward Harrison http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57867 Edward Harrison Mon, 28 Dec 2009 05:19:00 +0000 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57867 Demandside, we ignore nothing there at all. We all agree that fiscal stimulus will have a positive effect in jump starting private spending - the main reason both Krugman and I argued for stimulus in January, by the way. Nevertheless, that stimulus' impact will be more muted in future than many might believe - as Krugman demonstrates. Demandside, we ignore nothing there at all. We all agree that fiscal stimulus will have a positive effect in jump starting private spending – the main reason both Krugman and I argued for stimulus in January, by the way.

Nevertheless, that stimulus’ impact will be more muted in future than many might believe – as Krugman demonstrates.

]]> By: demandside http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57866 demandside Mon, 28 Dec 2009 03:44:00 +0000 http://www.creditwritedowns.com/2009/12/double-dip-recession-and-the-perverse-math-of-gdp-reporting.html#comment-57866 Now Krugman and you ignore the purported aim of stimulus, to generate private spending and "jump start" the economy via the multiplier. The multiplier effect is not included in this table. I'm not defending that angle, just making a note that the theory of TTT (targeted, timely and temporary) has not changed with the change of name to "Recovery and Redevelopment," and it's supposed to generate spending going forward. The multiplier has been hosed down, I think, by private debt and insecurity. What is needed is something that will restart investment, and that is not a two-year plan, but a twenty-year plan. I think we have some climate change or infrastructure problem here somewhere that could provide actual productive opportunities for investment. Or maybe we should restart housing. Yeah, that's it. Or seriously, maybe we should look at stopping the huge negative stimulus from collapsing state and municipal budgets. Now Krugman and you ignore the purported aim of stimulus, to generate private spending and “jump start” the economy via the multiplier. The multiplier effect is not included in this table. I’m not defending that angle, just making a note that the theory of TTT (targeted, timely and temporary) has not changed with the change of name to “Recovery and Redevelopment,” and it’s supposed to generate spending going forward.

The multiplier has been hosed down, I think, by private debt and insecurity. What is needed is something that will restart investment, and that is not a two-year plan, but a twenty-year plan. I think we have some climate change or infrastructure problem here somewhere that could provide actual productive opportunities for investment.

Or maybe we should restart housing. Yeah, that’s it.

Or seriously, maybe we should look at stopping the huge negative stimulus from collapsing state and municipal budgets.

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