A strong 2014Q2 GDP report came out today, registering in at 4% annualized real GDP growth. This is good news and could mean that soon Americans will have more means for reducing debt burdens, but it is worth looking at it in the context of the full recovery. Much of the recovery data was also …
A month ago, we compared the recovery from the Great Recession to the recovery after every recession since 1950. It looked pretty bad. Real GDP growth for 2014q1 was revised downward today to -3.0% on an annualized basis. Yes, our reading of Table 1.1.3 of NIPA shows -3.0%, not -2.9%. Here is real GDP indexed to the …
A concern that we highlighted in yesterday’s post is that the only way the U.S. economy can generate significant consumer spending is through aggressive lending to borrowers with low credit scores, eventually wrecking their credit and forcing them to struggle to repair their credit. Here is more evidence supporting that view. In the chart below, we plot …
Census retail sales for May came out today, and they missed the consensus forecast slightly on the downside. But there is another pattern that may be more concerning. Let’s take a closer look at what has been going on with household spending. First, new auto purchases have been an important driver of household spending for …
It seems crazy to have such a heated debate on facts that are so easily measurable. Here we use the SCF from 1992 to 2010 to show the pretty unambiguous rise in wealth inequality in the United States. The housing boom hid the rise in inequality to some degree, but the crash in house prices …
The central argument we make in our book is that the housing bust in combination with excessive household debt burdens were the key drivers of the economic downturn. Failure to more adequately address the housing disaster was the greatest policy mistake made in the Great Recession. One way to see the scars of the housing bust is …
Sorry we’ve been busy with the book, but will get back to posting soon. Here are some book-related links in case you’ve missed them: New York Times: The Case Against the Bernanke-Obama Financial Rescue Economist Free Exchange: The Opposite of Insurance Paul Krugman (NYT): Springtime for Bankers Book Interview on RT Boom/Bust Washington Post: Why Tim …
Paul Krugman has an excellent column this morning hitting many of the same themes we discuss in our new book. As he puts it: In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the …
In the face of large-scale economic shocks, enforcing debt contracts places an unbearable burden on debtors, who cut back their spending and send the entire economy into deep recession. One of the main arguments we make in our new book is that debt forgiveness makes a lot of sense when the economy experiences a large-scale negative shock that …
The end of 2011 and early 2012 was one of the most stressful periods in modern European history. Even the otherwise composed German chancellor Angela Merkel was brought to tears. At issue was the very survival of European Union which had once again gone into a recession, and financial markets were seriously doubting the viability of the …
