Saturday, May 28, 2011

Brad DeLong on the Economic Outlook

I enjoy Brad DeLong economic papers. He gets too down in the bushes on politics for my taste (OK, I'm a dilettante while he's a pro, he can name names, I can only vaguely identify political positions).

Here's a post where he looks at the Q2 growth figures for the US:
Time to PANIC!!: Second-Quarter Real GDP Growth Looks Slow Enough to Put No Upward Pressure at All on the Employment-to-Population Ratio

by J. Bradford DeLong

Click to Enlarge

Time to push the panic button.

Macroeconomic Advisers is revising their tracking forecast of real GDP growth in the second quarter. It now looks as though, come July 1, that there will have been no gap-closing in the six quarters since the start of 2010.

That means that it is:
  • Time for Quantitative Easing III...

  • Time for pulling more spending from the future forward into the present, and pushing more taxes from the present back into the future...

  • Time to use Fannie and Freddie to (temporarily) nationalize mortgage finance and fix the ongoing foreclosure crisis...

  • Time for a weaker dollar...
DeLong knows that his call for action will be ignored. Sadly, the politicians in the US has spent the last two years worried about a sudden breakout of inflation so they have announced that no more stimulus is possible. Instead the "little people" will just have to suck it up and pay the price for Wall Street's sins. Yes, as it has always been, the people at the bottom pay for the excesses of the rich and greedy.

And... here is a bit from another post by Brad DeLong:
Learned Helplessness and Macroeconomic Policy

Duncan Black:
Eschaton: 16 Months Since The Pivot: It's been about 16 months since the White House geniuses started talking about deficits instead of stimulus or jobs, leading us into the insane conversation we're having now. Next job report comes out one week from today. Last one had unemployment at 9.0%.

As I understood it back at the start of 2009, the pivot from fighting the recession to restoring stability to U.S. long-run public finances was supposed to come when recovery was well-established and we could see 7.5% unemployment approaching--or when worry about the state of America's public finances was causing long-term real Treasury interest rates and inflation premia to spike.
But that was not the White House's plan. I don't know what the White House's plan was. I don't know what the White House's plan is. It doesn't seem to involve the most obvious and practical steps--recess-appointments to the Federal Reserve Board who will advocate QE III and Treasury communications to shape expectations of the value of the currency.
Sadly Obama and his government are out fighting ghosts and creatures of overheated imagination while "the little people" live with blighted lives of unemployment, under-employment, stuck in bad job situations, fighting banks that want to foreclose on their homes, etc. I thought, back in 2008, that Obama as a "community organizer" understood the needs of the people. I failed to realize that he "understood" the needs of Wall Street and the billionaires even better.

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