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from Richard Koo Until 2008, the economics profession considered this kind of contractionary equilibrium (the world of $500) brought about by a lack of borrowers to be an exceptionally rare occurrence—the only recent example was the Great Depression, which was triggered by the stock market crash in October 1929 and during which the US lost 46 percent of nominal GNP in the process described above. Although Japan fell into a similar predicament when its real estate bubble burst in 1990, its...

from David Ruccio Narayana Kocherlakota, professor of economics at the University of Rochester and past president of the Federal Reserve Bank of Minneapolis, is right: in some ways, the 2007-08 was worse than the Great Depression.   It certainly has been worse for average households in the United States. Real median household income (the red line in the chart above) is still below what it was in 2007—and lower still from what it was even earlier, in 1999. But it hasn’t been a lost decade...

from Lars Syll Short-term weather forecasting is possible because most of the factors that determine tomorrow’s weather are, in a sense, already there … But when you look further ahead you encounter the intractable problem that, in non-linear systems, small changes in initial conditions can lead to cumulatively larger and larger changes in outcomes over time. In these circumstances imperfect knowledge may be no more useful than no knowledge at all. Much the same is true in economics and...

Possibly bottoming at much lower rates of growth: Still heading lower: Is the deceleration in borrowing reflecting a deceleration in spending?

from Jayati Ghosh Meetings of global leaders – such as recently occurred in the G20 meeting at Hamburg – increasingly have a ring of farce about them. The inability to come to agreement on pretty much anything of significance is leavened only by sideshows and media obsession with which global leader met with whom for how long, who sat in for which President at the “high table”, and similar trivia. Meanwhile, there is abject failure on the part of these leaders to recognize the pressing...

More than the entire gain in civilian employment seems to have been via part time work: Highlights The second half of the year opens on a strong note as nonfarm payrolls rose 209,000 in July, far above Econoday’s consensus for 178,000. The unemployment rate moved 1 tenth lower to 4.3 percent while the participation rate rose 1 tenth to 62.9 percent, both solid positives. And a very strong positive is a 0.3 percent rise in average hourly earnings though the year-on-year rate,...

from David Ruccio Back in April, Raumplan and Cascina Cuccagna organized an exhibit for Milan Design Week titled “Capitalism is Over.” The basic argument was that, while capitalism may have worked in the first few decades of the postwar period, during the “Golden Age” of capitalism—when “the demand for products and everyday objects rose to never before attained summits”—since the late 1970s, growth has slowed down and “following the neoliberal theories, governments promoted policies that...

Up nicely but not so good excluding aircraft orders, which are highly volatile: Highlights Factory orders surged 3.0 percent in June but were skewed higher by a more than doubling in monthly aircraft orders. Excluding transportation equipment, a reading that excludes aircraft, orders actually fell 0.2 percent in the month following a 0.1 decline in May and no change in April. June orders for capital goods (nondefense ex-aircraft) were also weak, unchanged in the month....

Meanwhile, in Australia: A LOCAL council has banned the construction of a synagogue in Bondi because it could be a terrorist target, in a shock move that religious leaders say has caved in to Islamic extremism and created a dangerous precedent. The decision, which has rocked the longstanding Jewish community in the iconic suburb, was upheld in court this week as the nation reeled from the alleged airline terror threat and debate raged over increased...