What was your vote, 2cents?
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What was your vote, 2cents?
None of the above. Recession that lasts well into 2011. The housing burst isn't halfway through as we have another coming along with commercial real estate bubble burst. We're in recession, easily, to 2011, probably 2013. Depends. We'll have to see who gets elected in 2012. Seriously doubt Obama gets a second term.
Is there a way to see how I voted? I don't remember.
What Took You So Long?
As predicted, there’s a fair bit of kvelling over the fact that payrolls last month finally recovered the almost nine million jobs lost in the GR (great recession). The figure below, by my CBPP colleague Chad Stone, shows the comeback, but more important from the perspective of this post, the pronounced difference in length it took to get the jobs back (seeEPI’s Heidi Shierholz as to why just getting back to zero ain’t the goal).
Why so long? I’ll tick off all the reasons I can think of, in rough hierarchical order (again, as I see them—I don’t have any metrics here), and I suggest readers add any I’ve left out to comments.
–When you’re down so far, it takes longer to come up: The picture clearly shows the role of the depth of the hole in the job market in the GR relative to milder downturns. In fact, eyeballing slopes, you can see that the rate of job growth in this recovery is about the same as the last one. When you’re filling holes at the same rate, it will take longer to fill a deeper hole.
–Policy mistakes: See Krugman, but the aggressive turn to austerity (budget cuts in the face of weak demand), the failure to recognize unique inflation dynamics at the “zero-lower-bound” (including the need for negative real interest rates), and most importantly the refusal to continuing plying fiscal stimulus, are perhaps the best answers to the question of this post.
And depth of the hole is no excuse. If anything, that was a reason to do more. You wanted your policy makers to look at the figure below when jobs were at their trough in early 2010 and conclude: “we’re going to need to significantly beat the slope of the last recovery or else we risk not breaking new ground until…um…as late as May of 2014!” And I can assure that some of your policy makers, or at least their economists, were saying something much like that at the time.
In this regard, political dysfunction is an important part of the answer to “why so long…”
–Unique factors regarding the housing bubble, the wealth effect, balance sheets, etc: One meme here is that busts that result from the collapse of finance are always more protracted than those that result from a supply shock, be that shock exogenous—a disruption in the supply of a key input like oil—or endogenous—the Fed slams on the monetary brakes to prevent overheating.
Meh…I don’t doubt for a second that the loss of trillions in wealth from the bursting of the housing bubble was a factor in the depth of the downturn. We’re a 70% consumer-spending economy and that’s a huge downshift in the wealth effect. Nor do I doubt that debt bubbles are more pernicious and long-lasting than mark-to-market equity bubbles. Banks can’t play extend-and-pretend in the latter case, for example, and deleveraging, risk aversion, the “Minsky moment” (flip from under-pricing to over-pricing risk)—they’re all real factors that made the GR tougher to grow out of than many of its predecessors.
But—and this is my biggest punchline of the downturn, my “what-did-you-learn-Dorothy?” insight— every freakin’ one of these problems was known and was movable by better policy. Mostly temporary fiscal stimulus to offset the demand contraction of the negative wealth effect, but also debt reduction (cramdowns, principle reduction) to clear out that channel as well.
–Trade deficits: The fact that we went into the downturn with large negative trade imbalances meant we went in with a major drag on domestic labor demand, well before the collapse (trade deficit/GDP in ’06 and ’07: -5.5% and -4.9%, historically very big numbers). That means we jumped into a deep hole with a heavy anvil around our neck.
–Inequality: The expansion began in the second half of 2009, but the fact that what growth we’ve generated has gone mostly to the top has likely played a role, again through the consumer spending channel.
–Hysteresis: Or as I like to mellifluously describe it, “once you bend the trend, it’s hard to mend.” See here for details, but once all the factors above were working to slow growth, cyclical problems from the recession became structural ones in the recovery. This is most clearly seen in our depressed labor force participation rate, but the fact of large and persistent gaps in output, jobs, and wage growth this late in the expansion are equally visible forms of proof.
–Global interconnectedness: The fact that so many other economies weakened along similar time frames to our own also made it tougher to more quickly recover. There was a period in there somewhere when practically every advanced economy was talking about export-led growth, the arithmetic of which doesn’t quite work (somebody’s got to import).
I’m sure there’s more but I’ve got other stuff to do. I’ll add other entries as they bubble up. And sure, it’s fun to make lists, but the point is to learn from our mistakes. Or, at least that would be the point if we were capable of doing so.
http://jaredbernsteinblog.com/wp-con...yrollsback.png
http://jaredbernsteinblog.com/what-took-you-so-long/
more boutons sloppy seconds
As Krugman so correctly predicted, it will take a full 10 YEARS to recover to ABOVE 0-pt employment as seen in the non-red lines above.
And as has been repeated everywhere, the growth in national wealth has gone almost totally to the top few %, while most of the 99% have seen declines in income and wealth.
Krugman isn't a soothsayer, particularly for saying what more or less everyone (including a lot of nobodies on this board) said six-plus years ago: that this recovery would be sluggish and slow in comparison to others
Krugman so correctly predicted is still true.Quote:
Originally Posted by Winehole23
Did anybody else point out recovery from FINANCIAL-cause recession is always longer?
US has a Lost Decade like Japan has.
HUGE policy mistakes (fed govt austerity) and WILLFUL fuckups, obstruction, LYING by the Repugs, 1%/VRWC trying keep the economy screwed to beat Obama and the Dems.
widely remarked on at the time and in these pages. you were too busy listening to your own echo, as usual.
(echo chamber of one)
You can't say you hate banks and then praise Krugman who is a spokesperson for them.Quote:
Originally Posted by boutons_deux
:lol Krugman's position towards the banksters is well-known, no secret.Quote:
Originally Posted by angrydude
A good case can be made that we are headed into a Japanese style deflation.
Does this put anything into perspective:
http://i181.photobucket.com/albums/x...ps51b00789.png
Reagan sucked?
Doesn't make sense. Op shows no understanding of basic economics.
yeah, St Ronnie sucked, and as just another Useful Idiot for the VRWC, fucked America real good.Quote:
Originally Posted by Spurminator
Remember Republican Austerity?
It's amazing just how nonchalant economists are about the fact that the GDP for the 1st quarter came in negative. Economic contractions are a rare event outside of recessions, so someone should be concerned, if only to just be different.
They've all written it off to bad weather, as if snowstorms in January are something no one could have predicted. These are the same guys who predicted +3% growth just a few months earlier.
A 4% miss isn't a marginal event. It isn't even in the same ballpark! What I find most interesting is that it hasn't occurred to any economist that their pathetic miss at predicting the economy might have a more obvious reason - austerity measures pushed through by the Republican Congress.
In late December the GOP cut off unemployment benefits for 1.3 million people. That number has since increased to 3 million. That cut the GDP by at least 0.2%.
In early February another 850,000 people had their food stamps cuts. More food stamps cuts happened in March.
And these are just the latest austerity measures pushed through by Congress.
http://images.dailykos.com/images/90...png?1403459592So why don't economists consider these cuts worth mentioning, while January blizzards are? It's interesting that the IMF felt it necessary to recommend the U.S. raise its minimum wage- the opposite of austerity. Why does this matter? Because if the drastic drop in GDP was from austerity and not from winter weather, then the drop in GDP wasn't a "one-off" event. It means Q2 is going to be dramatically lower than expectations as well. As will Q3 and Q4.attribution: None Specified
http://images.dailykos.com/images/90...jpg?1403462054If the cause of the economy's drop was from austerity, then every single economic forecast you have read is wrong, and wrong in a very big way.attribution: None Specified
This means that asset values are overpriced across the board. Only after the fact are economists beginning to drop their economic growth projections.
12:07 PM PT: Economists also failed to anticipate the housing slowdown which started late last year.
Only now are they adjusting their forecasts.
The Mortgage Bankers Association yesterday lowered its forecast for combined new and existing home sales in 2014 to 5.28 million -- a decline of 4.1 percent that would be the first annual drop in four years. The group also cut its prediction on mortgage lending volume for purchases to $595 billion, an 8.7 percent decrease and the first retreat in three years.
Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs.
Besides the enormous impact that would have on the economy, the reasons for the contraction in housing are even more ominous.
“The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said....
“Winter weather explanations are valid, but they’re not endless,” said Hastings of Global Hunter. “When prices go up too much in an environment where families can’t pay them, the rally cancels itself out.”
Which means the housing market rally has literally topped out and won't be coming back any time this year. I seriously doubt that the economic forecasts have accounted for that.
http://www.dailykos.com/story/2014/0...y?detail=email
San Antonio SA/Austin Corridor, and Austin real estate market are still smokin hot.
Food prices are going through the roof. Beef is crazy. I know a guy that ran a truckload of steers across the scales last week and got $3.25 a pound. That's hair, bones, guts and all.
Good news is Russian wheat harvest is strong and wheat prices are down so if you have to eat cheerios instead of hamburger it will still be cheap.
What did you not understand? Looks like my prediction was spot on.Quote:
Originally Posted by Th'Pusher
Yes it is....in the 'more desirable' parts of town there is very little new home construction, and the homes that are being build are well into the 300K and beyond....rents are anywhere from 2.3k to 3.2K...Quote:
San Antonio SA/Austin Corridor, and Austin real estate market are still smokin hot.
If there is something I would have added it would have been to slash FICA taxes.Quote:
Originally Posted by 2centsworth
I Was actually referring to m>s's stupid cartoon, not sure why I said OP in my response. But while you're patting yourself on the back for a "spot on" prediction, I'll add that government only exacerbated unemployment especially at state levels, we did not see a steady devaluation of the dollar, and the tide was turned without any of your recommendations.Quote:
Originally Posted by 2centsworth
I didn't suggest the government would exacerbate. I predicted they would stem it and peaking at 10% Bingo!Quote:
Originally Posted by Th'Pusher
How did the dollar do against the other major sovereign currency.Quote:
we did not see a steady devaluation of the dollar,
Not true. The government focused on reviving the stock market using some of what I suggested and by using QE.Quote:
and the tide was turned without any of your recommendations.