July 2010

Not ready for prime time: Some ideas on the relationship between gold and depressions

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Barry Eichengreen and Kevin H. O’Rourke have been updating us on the progress of this depression by comparing it to the big one, The Great Depression. Their original post, in April 6, 2009, captivated their audience.

One thing that struck me was that we might compare the two events to the totally overlooked depression of the 1970s – The Great Stagflation. The reason why this one is missing and, perhaps, lost from official economic history is that it did not look anything like how we expect a depression to look – at least by the accepted, albeit vague, standard of what constitutes a depression. For instance, as shown in the graph below, year over year Gross Domestic Product enjoyed an unbroken expansion during the entire period.

 

USGDPYOY - 1970-1980.jpg

Chart 1 (Source: Bureau of Economic Analysis)

Compare this performance to the contraction of GDP during the Great Depression

 

 USGDPYOY%20-%201929-1933.jpg

Chart 2 (Source: Bureau of Economic Analysis)

 

PPI for June 2010

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March Producer Price Index, or PPI for June 2010 came in at -0.5% from last month. Core PPI was -0.1%. May PPI was -0.3%. The original press release is on the BLS website. The reason for the drop is a -2.2% drop in food prices and a -0.5% in energy.

 

The graph below compares components of Core PPI (Finished goods minus food and energy).

 

Must Read Posts for July 14, 2010

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On The Economic Populist you might have noticed the right column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.

Sometimes though, one cannot say it better but miss those who did.

Must Read Post #1

The Big Picture overviews a Time magazine article that was not online, which shows lobbyists bought our government in 2009 for $3.49 billion dollars. Gee, that's about as cheap as Manhattan was in 1626 (60 guilders).

Must Read Post #2

A post close to the heart for we sure have been saying similar things. Naked Capitalism's guest piece, The G20 Plan for Prosperity – Rubber Bullets and Shredded Social Safety Net.

Must Read Post #3

The Atlantic Monthly investigates a new breed of debt collectors. Seems they are buying debt that either isn't legal or people don't even know about and doing some additional illegal things trying to squeeze some money out of these people.

Must Read Post #4

71% of Americans say we are still in recession

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I know that the narrative on Wall Street, and some places in Washington, is that the recession is over, but Main Street feels otherwise.

More than 7 out of 10 in the U.S. say the economy is mired in recession, and the country is conflicted over how to balance concerns over joblessness and the federal budget deficit, according to a Bloomberg National Poll.

The interesting thing about this story is how it is reported. For instance:

Just like the experts, Americans are torn about whether the federal government should focus on curbing spending or creating jobs, the poll conducted July 9-12 shows. Seven of 10 Americans say reducing unemployment is the priority.

70% to 28% isn't "torn". That's a clear and overwhelming majority. You don't find a more clear mandate in a democracy.

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Another poll that came out today shows similar pessimism from the public.

Three in four Americans now say the effects of the recession will last another two years or more. More than eight in 10 say the condition of the economy is bad, up five points from last month...

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