For about two years I'm writing about Kondratieff wave. This theory must be familiar to any inquiring mind, essentially it boils down to the huge credit cycle that takes a generation to build and unwind.
My posts posts on the topic are organized in this table of content: Kondratieff wave.
While my previous postings were made in an attempt to abstract the theory to the extend it works equally well for any advanced economy it just doesn't work this way. The cycle is the most pronounced in few economies, like USA, Japan and soon to be China, while other countries are synchronizing in "sympathy" with the one of them.
Bloomberg has an exclusive story on how bond vigilantes are using the markets as a protest trying to play a game of economic chicken with the administration to reduce the deficit.
For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.
Often times, non-economists attribute much more confusion to the ideas of Keynesian economics than is really the case. Take for example the idea of smoothing out business cycles. Anyone who's ever tried to keep to an exercise regime understands the concept intuitively. The fancy graph way of making the case looks like this:
The idea here is simple. The black line is the boom and bust cycle that characterizes un-managed markets. The red line is what happens when the government or private actors step in to manage the economy to smooth out these business cycles. Note that while at any one point, the black line may show a much higher rate of growth than the red over the long run, it ends higher.
Some of you may remember when Jake DeSantis quit AIG and gave his bonus to charity. It sounded a little like a self-serving PR event at the time, but it did put AIG in a less evil light.
Insurance giant AIG is trying to seize a $490 million charitable endowment -- and claw back $27 million it already awarded to New York charities -- to pay executive bonuses, The Post has learned.
The endowment, called Starr International Foundation, is run by former AIG chairman Hank Greenberg, and has given millions to the Sept. 11 Memorial and Museum, Citymeals and other local groups.
As Calculated Risk points out, economic cycles typically run in an order. The first portions of the economy to turn positive are typically personal consumption expenditures and residential investment -- even during the recession. Afterward, investment in durable goods such as equipment and software. Finally, after the recession (in terms of GDP bottom), unemployment and non-residential investment.
In April, Leading Economic Indicators surged 1% as 8 out of the 10 turned positive or at least neutral. With May over, let's take a preliminary look at what those indicators might show.
States hit hardest by the recession received only a few of the government's first stimulus contracts, even though the glut of new federal spending was meant to target places where the economic pain has been particularly severe.
USA Today reviewed details in the Federal Procurement Data System and this is what they found:
The Baseline Scenario blog has some interesting insights into U.S. Treasury Secretary Geithner's upcoming China trip.
So what should we expect from Geithner’s upcoming China trip?
Not much.
China refuses to talk politely about its exchange rate and rebuffs all sensible diplomatic initiatives on this front – they have held the IMF at bay for nearly 2 years on this exact issue. The rhetoric is that their fiscal stimulus will bring down their current account surplus without need for significant exchange rate appreciation. This is smokescreen.
The TRADE Act, or Trade Reform, Accountability, Development and Employment (TRADE) Act, will soon be introduced in the Senate this session. One of the key elements in this bill, beyond our usual labor and environmental standards is an analysis of the economic impact of each trade agreement on the United States and most importantly it's workforce.
Public Citizen is launching a grassroots campaign to alert the general public of this bill and contact their representatives to get it passed. They have also written up a one page fact sheet.
Here is Lori Wallach with her request for help to get this legislation passed and (finally) signed into law:
Brad Delong "hoists the jolly roger" posting a pdf of an entire speech given by Jacob Viner, one of the original economics professors at the Chicago School. He needn't have done so, since the essence of Viner's argument (that deficit spending + deliberately-caused inflation was the correct way to fight the Great Depression) has already been discussed within the realm of fair use by others. The brain-teaser is, who is the person who cites Viner approvingly? Here's the quote:
Even more pertinent is a talk Viner delivered in Minneapolis on February 20, 1933, on 'Balanced Deflation, Inflation, or More Depression' (Viner 1933). While agreeing with Robbins on the harm done by wage and price rigidity, and in particular by the Hoover Administration pressure against wage reductions, he also spoke vigorously against letting the cure take its course:
'We have already had three years of patient waiting, probably three years too much. It is arguable that even dangerous remedies now threaten less risk of disaster than does continuance of inaction.'
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