Guardian.co.uk: Greece's economy deeper in recession than forecast• Second-quarter GDP in Greece estimated to have fallen by 3.5% year-on-year • Record jump in Greek unemployment prompts that crisis could intensify social unrest, August 12, 2010
Greece's recession deepened more than expected in the second quarter of 2010 after the country was rocked by its financial crisis and a series of government measures to slash public debt.
Investment dropped and public spending slumped in the three months to June as Greek politicians battled to regain the confidence of financial markets and meet the conditions of a multibillion-euro bailout from the European Union and International Monetary Fund.
There was also a fresh warning sign that the economic crisis could further intensify social unrest, after a record jump in unemployment. The crisis has already led to widespread industrial action and public protests.
With the fiscal squeeze only just starting, Greece is expected to remain mired in recession for the rest of this year. read more
Keywords: Greece, Greek Crisis
Keywords: Sovereign Debt, Debt Crisis, Debt and Growth
Keywords: US Economy, Fed Policy
In his recent NYT editorial, US Treasury Secretary Timothy Geithner proclaimed:
Even the surge in imports, which lowered the rate of increase of G.D.P., actually reflects healthy and growing American demand.
I imagine that he must then be thrilled by today's trade report, which revealed the trade deficit swelled by $7.9 billion on the back of an explosion of imports. Analysts were quick to note that the new figures will contribute to another downward revision to the already disappointing Q2 GDP report: read more
Keywords: US Trade Deficit, US GDP, US Recession, Double Dip
Keywords: Nouriel Roubini, Deflation, China Growth
The U.S. economy has a "significant likelihood" of entering a double-dip recession if the government doesn't step in to help the unemployed, economist Robert Shiller told MarketWatch News Break on Wednesday. read more
Keywords: US Economy, Unemployment, Douple Dip
Keywords: China, Growth in China
For many, corruption and political cronyism are seen as an inevitable part of Greek politics. This column argues that the same could have been said in the 1970s about Hong Kong, now a beacon of low corruption. Hong Kong managed this turnaround by appointing a non-elected governor accountable to the UK government. Greece could achieve the same by calling on the EU and start counting the benefits. read more
Keywords: Federal Reserve Board, Policy Effectiveness
Certain hedge fund managers, crowding analysts and alleged economic exports predicted the death of the Euro just weeks ago. Let's see whether the current revival is sustainable...
Keywords: Euro, Dollar, Exchange Rate
The Federal Reserve will meet on Tuesday faced with a pivotal decision about whether to abandon its presumption that the economy is gradually picking up steam and begin to consider new steps to keep the recovery from sputtering out. read more
Keywords: Federal Reserve Board, Deflation
"Every dime of government spending pleases some in-built constituency. Once legislators give money away (that is, spend tax monies), it is much harder subsequently to take the spending back.
Here is an excerpt about the "boom and bust cycle" of government spending:
Whether it is public employees, government agencies, trade unions (teachers, fire, police, etc.), pensioners, or particular businesses and industries benefitting from government largesse, each constituency or special interest has its sacred cows of government spending. In times of plenty — such as cheap-money-induced economic booms — when the government's tax take is bountiful, each constituency fights for additional appropriations to be directed to their favored cause, whether it is new spending programs, special tax credits for social-welfare causes, or pseudo-economic purposes. In times of dire fiscal conditions, each constituency fights vehemently to oppose a loss of their share of seized private property.
This difficulty of reducing government spending is aggravated by the boom-and-bust cycle itself. In times of plenty, it is easy for politicians (who are spending someone else's money anyway) to budget new, ongoing spending programs lauded by the special interests — on top of what are clearly extraordinary and one-time boosts in tax take. When the bust occurs and taxes dry up, not only do legislators have to bring ongoing spending into alignment with ongoing tax revenue, but they must also undo the extraordinary additions to spending that were approved during the boom — with the attendant fiscal pain and inevitable public backlash."
Keywords: Government Spending, Fiscal Programms
Keywords: Innovation, Progress
Keywords: China Model, Chinese Economy, Experts debate the China Model
Keywords: US Economy, Jobs Report, US Recovery
Vox posted an interview with Raghuram Rajan of the University of Chicago, who talks to Romesh Vaitilingam about his new book ‘Fault Lines’, in which he outlines the deep systemic problems in the world economy that threaten further financial crises:
Keywords: US Economy, Inequality, Excessive Stimulus
Discussing the changes the Fed needs to make in monetary policy, with Lyle Gramley, former Fed governor president and William Ford, former Atlanta Fed president.
Keywords: US Economy, US Inflation, US Deflation, US Job Report
Edmund Phelps about structural problems of the US economy:
Here is an excerpt:
"...The officials’ prescription is to stimulate that demand, for as long as it takes, to facilitate the recovery of an otherwise undamaged economy — as if the task were to help an uninjured skater get up after a bad fall. The prescription will fail because the diagnosis is wrong. There are no symptoms of deficient demand, like deflation, and no signs of anything like a huge liquidity shortage that could cause a deficiency.......
"....The worst effect of focusing on supposedly deficient demand is that it lulls us into failing to “think structural” in dealing with long-term problems. To achieve a full recovery, we have to understand the framework on which our broad prosperity has always been based.
First, high employment depends on a high level of investment activity — business expenditures on tangibles like offices and equipment, and also training for new or existing employees, and development of new products.
Sustained business investment, in turn, rests on innovation. Business cannot wait for discoveries in science or the rare successes in state-run labs. Without cutting-edge products and business methods, rates of return on a great many investments will sag. Furthermore, innovation creates jobs across the economy, for entrepreneurs, marketers and buyers. State-led technology projects do not."
Paul Krugman is heavily opposing Edmund Phelp's statement that there are no symptons of defficient demand in the US:
The consumer price index as measured by the Bureau of Labor Statistics does hardly leave any room for discussion regarding the question of defficient demand. There is such a problem in the US!
Nevertheless, Phelp's input regarding the need for innovation is highly valuable. Predictable government, creating an entrepreneur friendly frameword is a key pre-requisite for heavy private investment and thus a sustainable recovery of the US economy!
Keywords: Defficient Demand, Innovation and Investment, Short Term versus Long Term Stimulus
Once more an outstanding article by Kenneth Rogoff:
As the United States and European economies continue to struggle, there is rising concern that they face a Japanese-style “lost decade.” Unfortunately, far too much discussion has centered on what governments can do to stimulate demand through budget deficits and monetary policy. These are key issues in the short term, but, as every economist knows, long-run economic growth is determined mainly by improving productivity. read more on Project Syndicate
Keywords: Economic Stimulus, Productivity, Policy Uncertainty
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