Beware of deficit hawks

Recently, deficit hawks have been pushing a nefarious line of argument that I need to debunk right here and right now. The line goes as follows: we need to spend government monies now to get the economy back on its feet. In a couple of years, we can signal all clear and then raise taxes on the middle class in order to reduce the deficit again, much as we did in

The recession has been confirmed – semi-officially

Robert Hall, the head of the National Bureau of Economic Research (NBER), which is the official arbiter of recession in the United States, has said the evidence is now “conclusive” that the U.S. is in recession. For me, that’s pretty much all she wrote — the recession has been confirmed. I have held that we

ISM Manufacturing Index plummets

If you were not convinced about the severity of the present recession in the United States before, then the ISM Manufacturing index data for October will serve as a wake-up call. The index plunged to the deep recessionary level of 38.9 where 50 is seen as the level separating expansion from recession. Just two months

Breaking down the Q3 GDP numbers

So the numbers are in and the U.S. economy shrank 0.3% n the third quarter. That is a low number, but it is better than expected. The U.S. economy looks like it is in recession based on these numbers. However, before we go away thinking that’s the answer, let’s dig a little deeper. I have

US GDP shrinks 0.3% in Q3

I won’t be able to comment here until later today when I will update this post. But I wanted to report that U.S. GDP shrank 0.3% in Q3, less than the 0.5% median forecast. Now, when it comes to government statistics like GDP, the devil’s in the details. One detail is the inflation deflator, which

Trashing cash

This morning in an e-mail exchange with Marshall Auerback, I questioned why the U.S. Dollar was rising so precipitously. I do understand much of this has to do with a need to refinance dollar-denominated borrowing by international financial institutions that have been unable to roll over their debt in the clogged credit markets. But, the magnitude of the rise is truly astonishing. I said “Dollar strength is very strange.”

Marshall understands that Dollar strength is not strange over the short-term because of liquidity needs. However, it was his analysis of Fed policy that I found most interesting. I will repeat it here

When is the next panic?

For those of you who have been following things, you know we have had three panics since the credit crisis began. The first was in August 2007. The 2nd after Bear Stearns collapsed and the third was creeping up after IndyMac and the GSE nationalization, but hit high gear after Lehman collapsed. In my estimation,

Anne Applebaum: “Political instability will follow economic instability like night follows day”

While I am markedly more upbeat of late about economic matters, I still harbor some deep concerns about the direction of both the global economy and resultant political stability. The Washington Post columnist Anne Applebaum has summed up my gravest fears about a global depression and its destabilizing effect on emerging market economies with this

US industrial production is very weak

The U.S. industrial production numbers for September came out at 9:15ET this morning and they were very weak. However, it should be noted that the numbers were very distorted by lost production due to two hurricanes. Nevertheless, industrial production data — along with recently released jobless claims and retail sales numbers — represent further evidence

The Economy’s Four Horsemen

Yesterday, I laid out some of my general thinking on the business cycle and the economy. Obviously, understanding the business cycle is important to economic forecasting and is, therefore, central to personal financial planning, general investing and business planning. Over the next few weeks, I will chart out a panoply of data sets for the

Back to the real economy

Now that policy makers worldwide have finally stepped in to stop the bleeding, we have had a relief rally of monumental proportions. Most global indices were deep into oversold territory, meaning that there was lots of pent-up demand for a turn to the upside. A big rally to the upside was baked into the cards.

Pro-cyclical and pro-secular

You have probably heard people bandy about the term pro-cyclical as it has become a key concept for economists as we enter a downturn. The crux of pro-cyclicality is that some things rise with an upswing, but fall with downswings — exacerbating swings in the business cycle. As I will explain, much of this is