Does House Republican Resistance Make Sense for Their Constituency?.
From the Justin Fox, regarding House Republicans' plan:
...that of the House Republican Study Committee, seems to be a joke. It calls for a two-year suspension of the capital gains tax to "encourag[e] corporations to sell unwanted assets." But the toxic mortgage securities clogging up bank balance sheets are worth less now than when they were acquired. Meaning that no capital gains tax would be owed on them anyway. If you repealed the tax, banks would have even less incentive to sell them because they wouldn't be able use the losses to offset capital gains elsewhere. Seriously, where do these people come up with this stuff?
Eric Cantor, the Republican chief deputy whip, has a more reasonable-sounding if still pretty vague plan to insure more mortgages rather than buy mortgage securities. ....
I'm in agreement with Justin that guaranteeing even more mortgages won't be any better than the original Paulson plan.
My observation here is that the obstructionism of this group is either a manifestion of denial of reality, or a sheer indifference to the needs of their constituents -- to the extent that House Republicans purport to represent small business Main Street.
Peterson Institute for International Economics Joins the Blogosphere.
From the Peterson Institute comes the "Real Time Economics Watch". The latest posts are on how each crisis is different and yet the same [0], by Ted Truman, and the US/Japan parallels (or lack thereof) [1], authored by Adam Posen.
(The Peterson Institute doesn't call it a weblog, but it seems like one...)
Last Quarter's Fundamentals....
Weren't as strong as some of us thought.
I was surprised; so were market observers. From Bloomberg:
U.S. Economic Growth Slower Than Initially Estimated (Update2)
By Timothy R. Homan
Sept. 26 (Bloomberg) -- The U.S. economy expanded more slowly than previously estimated in the second quarter, showing consumer spending was weakening before the credit crisis intensified.
Gross domestic income and recessions.
The "final" values for 2008:Q2 GDP released by the Bureau of Economic Analysis on Friday were more disappointing than the earlier estimates. Still, the 2.8% annual growth rate for real GDP that we're now told characterized the second quarter doesn't sound like a recession. Or does it?
One measure that is being used to summarize the strain in financial markets is the TED spread. This is calculated as the gap between 3-month LIBOR (an average of interest rates offered in the London interbank market for 3-month dollar-denominated loans) and the 3-month Treasury bill rate. The size of this gap presumably reflects some sort of risk or liquidity premium. I was interested to break the TED spread down into identifiable components to try to get a better understanding of what may be responsible for its recent behavior.
Detroit gets in on the action.
With all the excitement in financial markets, I almost missed this story on the bailout for automakers.
Calculated Risk observes that we already know the values for a significant chunk of 2008:Q3 GDP. And it doesn't look good.
I was surprised by this item from the BBC:
Chinese trade surplus at new high
Wednesday, 10 September 2008
China's trade surplus hit a monthly record of $28.7bn (£16.28bn) in August as the gap with the US and Europe widened, despite weaker world demand.
Auto sales deteriorate further.
U.S. auto sales have been dismal for most of this year. And they just took a turn for the worse.
Reader Bruce Hall inquires why Econbrowser has not weighed in on the rescue debate. First, I'll observe there has been plenty of commentary on the web. But if compelled, then speaking only for myself, I think the members of Congress who voted against the plan the first time should, this time around, ask themselves this single question: "Do I Feel Lucky?" Those who are familiar with this quote will understand my meaning.
Updating euro-area GDP forecasts.
Here I relate some interesting new research on how to update economic forecasts with incoming daily data and the latest assessment of where things stand in Europe.
UCLA Professor Ed Leamer recently proposed four criteria for determining whether the economy is in recession, and concluded at the time of his study (two months ago) that the U.S. had not yet crossed that threshold. But this week's data might cause him to change his mind.
Are We Still Sure We're Not in a Recession? More on the Employment Situation.
I hate to pile on, perhaps in a repetitive fashion given Jim's post, but a mere three weeks ago, Donald Luskin was asserting "Things today just aren't that bad." And, pulling a comment out from mid-September, we have this definitive statement: "But in the final analysis let's just stick to facts. We are not in a recession."
Roundtable discussion on the financial crisis.
I participated on Friday with several other UCSD faculty members (including Nobel laureate Harry Markowitz) in a discussion about the current economic crisis. If you have RealPlayer, you can view the discussion here, though I recommend fast-forwarding to skip the first 8 introductory minutes to get to the actual discussion. If you just want my slides, I've posted them here.
How Bad Will the Downturn Be? Stylized Facts.
The IMF released several chapters of the World Economic Outlook; one chapter entitled Financial Stress and Economic Downturns provides some insights into the ramifications of the current financial turmoil.
Refresh.