Unit Roots

Greg Mankiw is drawing fire and rousing the ire of Professors Krugman and Delong.  I have a small light to shine on this in support of Mankiw, so let's have him go first:

So when I read the CEA's forecast analysis, this sentence jumped out at me:

a key fact is that recessions are followed by rebounds. Indeed, if periods of lower-than-normal growth were not followed by periods of higher-than-normal growth, the unemployment rate would never return to normal.

That is, according to the CEA, because we are now experiencing below-average growth, we should raise our growth forecast in the future to put the economy back on trend in the long run. In the language of time-series econometrics, the CEA is premising its forecast on the economy being trend stationary.

However, Mankiw goes on to explain that sometimes a recession is the prelude to something worse, not just the downturn before the revival:

In the CEA document, Table 2 shows growth rates immediately after recessions end. It demonstrates that growth is higher than normal in most of the recoveries. Is this evidence against the hypothesis that Campbell and I advanced?

I don't think so. The problem is that those numbers start at the end of the recessions, and we do not know when the recession will end. In other words, if God came down and told us the exact date the current recession was going to end, my forecast subsequent to that date would be for higher than normal growth. But absent that divine intervention, there is always some chance the recession will linger (remember the Great Depression), and an optimal forecast has to give some positive probability weight to that scenario as well. The forecast should be an unconditional expectation, not an expectation conditional on a particular end date for the recession.

Arnold Kling offers an alternative and cogent summary of a tricky mathematical puzzle:

In terms of the current situation, suppose that the economy is down because people are postponing the purchases of cars and other goods out of fear. That would be a trend-stationary story, because it suggests a nice rebound when people get over their fear. On the other hand, suppose that the economy is down because we accumulated the wrong types of physical capital (houses) and human capital (skills in mortgage securitization). That is a unit-root type problem. Yes, the economy will start growing again at some point, but that misallocation of physical and human capital is a permanent loss. We are not going to make up for it with some above-normal growth.

Brad DeLong sighs:

Mankiw is here arguing that the Obama administration's forecast is too high, and so forecasts future deficits that are smaller than the deficits are in fact likely to be. Mankiw is arguing that future economic growth is likely to be just average--that there will be no post-recession catch-up during which growth is faster than average.

Whether an unexpected fall in production is followed by faster than average catch-up growth depends what kind the fall in production is. A fall in production that does not also change the unemployment rate will in all likelihood be permanent. A fall in production that is accompanied by a big rise in the unemployment rate will in all likelihood be reversed. You have to do a bivariate analysis--to look at two variables, output and unemployment. You cannot do a univariate analysis and expect to get anything useful out.

Guess what kind of unexpected fall in production we are experiencing right now?

That an unemployment rate higher than normal is likely to be followed by a period when unemployment falls sharply is sure. On average, we expect half of deviations of unemployment from its average value to be erased over the next two years:

Prof. DeLong then flaunts his mastery of the medium by embedding two charts, both of which suggest that high unemployment today is followed by robust GDP growth over the next eight quarters.  But wait!  Mankiw responds:

Brad infers from this cloud of points that higher unemployment typically points to more rapid subsequent growth.

There is not enough information presented for me to know whether to agree with Brad's inference. My guess is that this regression line (at least I presume it is a regression line) is completely driven by the few observations in the upper right, which are probably all from the Reagan-era boom that followed the 1982 recession. It looks like if you take out that one episode, the relationship would largely disappear. I would be curious to see the statistical significance of the regression, using the relevant serial correlation corrected standard errors (I believe that 8 lags would be needed, given the overlapping data). If I am right that what we have here is an uncorrelated cloud plus the Reagan boom, then I would not expect a high level of statistical significance for this relationship.

Far be it from me to suggest that Mankiw peeked; he may simply live and breathe these stats like others know baseball.  But whatever the explanation he seems to be correct - I dredged up quarterly unemployment and GDP growth from 1960 to the present and attempted to mimic the DeLong chart with and without the Reagan years.  The Reagan recovery following 1981-1982 is highlighted and does seem to drive the result:

FINGERS CROSSED:

Let's end with a chortle - isn't it nice to see Krugman and DeLong relying on the Regan-era tax cut fueled boom to justify the Obama-era recovery plan?

START HERE:  With any luck this will be the relevant Excel file.   Download GDPvUnemploy

Here are the BLS and BEA websites for the primary data.

I CAN HEAR KRUGMAN NOW:  Who knew Krugman was such a Reagan fan?  I can hear him now: "Mr. President, if ever the economy is down, I want you to tell the guys to tax one for the Gipper".  OK, maybe not...

[END OF THREAD]

Comments

[Matt]

these clowns are talking us right into a depression. One of the issues with the current crisis is that most people have not experienced hard times and do not have the emotional or intellectual backgrounds to understand that the business cycle has long and short cycles and then deal intelligently with the phenomenon. To "Remain Calm", as Kevin Bacon put it in Animal House is the first step.

Unfortunately, the sine waves of several cycles have converged, deepening the downturn. Most past depressions were short (1 year - 18 months). However, what we are seeing now is the herd sensing something more deeply ominous and reacting on a visceral level. Companies are closing factories and laying off employees because there no business and no confidence. This is a self fulfilling spiral downwards.

Where government has failed is that they have continued with the old ways of taxing and spending and then talked the economy down for their own political purposes. Sending such a hypocritical message is what the economy emphatically does not need at present.Markets sense BS and react accordingly.

Programs to promote manufacturing, business, mining, and agriculture are what are needed. Government doled jobs are a net drain on the economy. Private sector jobs generate the tax revenues to pay for government. There is a fundamental disconnect in Washington and Sacramento on these basic economic principles. I'm not sure if it's because they were so poorly educated or that they are purposely driving the bus off a cliff to engineer a socialist government. I am tending to more and more believe the latter.

[bgates]

In the language of time-series econometrics, the CEA is premising its forecast on the economy being trend stationary.

In the language of roulette, the CEA is premising its forecast on "It's gotta come up red. The last five were black. It's gotta come up red!"

[MikeS]

Yep. Sometimes stuff happens and sometimes not so much.

What got my attention was this line from Kling, "...but that misallocation of physical and human capital is a permanent loss." I wonder if investments in community (organizer) stabilization and swamp mouse security would fit into the misallocation category.

[pucca]

Where are the linear regression analyses with and without the 81/82 data?

[DebinNC]

Since Obama is able to count the number of jobs he's saved, can he also count the number of jobs he aborted?

[Charlie (Colorado)]

Pucca, well you might ask, seeing as DeLong didn't trouble to actually make one. By eyeball, it's pretty clear that the ex-81-82 data is going to have a very low coefficient of correlation, but with luck I can mangle the data with R tonight....

[Ignatz Ratzkywatzky]

Seems to me the Delong analysis is rather overly broad generally. Surely each recovery is unique and policy has some relevance to the strength of each one. Averaging all recoveries will necessarily mask the deleterious effects of weak ones (and whatever policies or conditions may have caused its weakness) with the salutary effects of any strong one.
Seems to me if you're going to argue about the particular likelihood of any recovery's strenght you would need to search for the most similar previous examples not some one-size-fits-all generalization. That's the kind of statistical legerdemain we've come to expect of climate science.
It cannot be that economists are lousy (or opportunistic) statisticians as well, can it?

[clarice]

It's a good thing i didn't sit next to bgates in exonomics class, we'd both have been thrown out for disruption--what a crock this debate is..They forgot the recipe includes eye of newt.

[clarice]

eConomics of course.Though with Krugman maybe it is eXonomics.

[Rick Ballard]

Tom Maguire,

Thanks for providing the Excel sheet data to match the chart. For any others playing "this one looks like that one", here's the NBER list of setbacks.

I would note that playing with unemployment numbers without reference to workforce demographics seems a bit bizarre. The BLS has been tuning down total work force growth for at least 2-3 years in recognition of lower numbers available in the entering cohort. That's going to have an effect in a year or two in terms of replacements for those forced into early retirement.

[RichatUF]

Ignatz-

Seems to me if you're going to argue about the particular likelihood of any recovery's strenght you would need to search for the most similar previous examples not some one-size-fits-all generalization. That's the kind of statistical legerdemain we've come to expect of climate science.

The recession daters at the NBER (and Obama cronies) had to use some enHansenments to date the recession to Dec 2007 to fully blame the Bush Administration for both the US and global downturn. Isn't looking at the recent past to predict the near future akin to astrology?

I would think that the substantial tax bite coming in energy, communications, and health care would change the mix of incentives sufficently so that a model based from the 73-75 recession recovery or 81-82 recession recovery wouldn't be applicable.

So confused.

[Charlie (Colorado)]

Folks, I let Greg Mankiw know about this, he's looking linked this post. In the mean time, someone has done the R runs I would have done; they're appended to the Krugman bet post

[Ignatz Ratzkywatzky]

Rich,

Isn't looking at the recent past to predict the near future akin to astrology?

That's what the mutual fund disclaimers seem to indicate, although they say it with a wink and a nod. Kind of like DeLong.

I would think that the substantial tax bite coming in energy, communications, and health care would change the mix of incentives sufficently so that a model based from the 73-75 recession recovery or 81-82 recession recovery wouldn't be applicable.

Concur. Seems more akin to 1930 or 1937, unfortunately.
The present age calls for, of all things, another Harding to slash taxes AND spending. I doubt the hour will produce the man; so far all it's produced is a pea and thimble prodigy in short pants.

[Pat Curley]

Is there any doubt whatsoever that if these were projections a Republican administration were making that Krugman and DeLong would blast them as overly rosy?

[bio mom]

Our hope and change president in action: From NRO this afternoon:

'Attack Rush' Strategy: Confirmed [Guy Benson]

Over the past month, I've raised suspicions here about the nature of lefty attacks on Rush Limbaugh, suggesting they may be emanating directly from the West Wing.

Citing a Politico story that detailed daily phone calls among White House Chief of Staff Rahm Emanuel, CNN "analysts" James Carville and Paul Begala, and former Clinton operative/ABC host George Stephanopoulos, I theorized that this miniature left-wing fraternity had made a conscious decision to try to isolate Rush by annointing him the leader of the GOP.

Today (as mentioned below by Kevin) Jonathan Martin confirms the theory:

If Limbaugh himself were to coin a phrase for it, he might call it Operation Rushbo – an idea that started out simply enough but quickly proved to be deeply resonant by a rapid succession of events, say Democrats inside and outside the West Wing.

The seeds were planted in October after Democracy Corps, the Democratic polling company run by Carville and Greenberg, included Limbaugh’s name in a survey and found that many Americans just don’t like him.

“His positives for voters under 40 was 11 percent,” Carville recalled with a degree of amazement, alluding to a question about whether voters had a positive or negative view of the talk show host.

Paul Begala, a close friend of Carville, Greenberg and White House Chief of Staff Rahm Emanuel, said they found Limbaugh’s overall ratings were even lower than the Rev. Jeremiah Wright, Obama’s controversial former pastor, and William Ayers, the domestic terrorist and Chicago resident who Republicans sought to tie to Obama during the campaign...

...Liberals quickly realized that trying to drive a wedge between congressional Republicans and Limbaugh was unlikely to work, and their better move was to paint the GOP as beholden to the talk show host...

...By February, Carville and Begala were pounding on Limbaugh frequently in their appearances on CNN.

Neither Democrat would say so, but a third source said the two also began pushing the idea of targeting Limbaugh in their daily phone conversations with Emanuel.

Conversations and email exchanges began taking place in and out of the White House not only between the old pals from the Clinton era but also including White House senior adviser David Axelrod, Deputy Communications Director Dan Pfeiffer, Press Secretary Robert Gibbs and Woodhouse.

Now Obama's campaign manager, David Plouffe, has jumped into the fray, advancing the meme-du-jour in the Washington Post:

"The 2008 election sent many messages. At the top: Americans wanted to turn the page on the politics of division and partisan pettiness, and they wanted a government — and country — that would put the middle class first.

Watching the Republicans operate this past month, it would appear that they missed that unmistakable signal.

Instead, Rush Limbaugh has become their leader."

This is remarkable. The White House, surely with the president's blessing (after all, he fired the first shot at Rush), has mounted an all-out PR assault against a single private citizen. Liberals often fret about vast right-wing conspiracies designed to take down Democrats. Yet here we have a genuine left-wing conspiracy with the aim of undermining the GOP's image by intentionally, artificially building up the profile of one of their harshest critics.

Once Rush's perceived usefulness to them has run its course, they'll need a new bogeyman. Rush, meanwhile, won't be going away, nor will he lay off the president. That, perhaps, will be the moment when America is reintroduced — boldly and swiftly, as the president loves to say — to the Fairness Doctrine.

Stay tuned, America. This isn't over.

03/04 01:41 PM

[Tom Maguire]

Where are the linear regression analyses with and without the 81/82 data?

As Charlie notes, Mankiw has results in an update

Update: Phil Rothman of East Carolina University was nice enough to email me the regression results. For the entire sample, the regression yields an R-bar-squared of 11 percent, and a t-statistic of 3.5. For the sample leaving out 8 quarters of the Reagan boom, the coefficient is smaller, the R-bar-squared is 5 percent, and the t-statistic is 2.1.

I had gotten similar results - an R-Squared of 12.7% with Reagan included and 5.7% without. The t-stat for the coefficient went down when Reagan was dropped but was greater than 2 in each case.

[kim]

Short of outrageous credit extensions like in our recent orgy, I don't think any recovery is going to be explosively robust. There are a lot of sadder Budweiser girls out there.
===============================

[Pofarmer]

Why is it so important for these guys to destroy Limbaugh? I mean, really, he has no real direct, or more likely even indirect, political power. What strings does he pull? He excercises no control, has no policy making functions, no yes/no vote. And yet the party of "It's Patriotic to dissent and disagree" wants to destroy ANY critic.

They're coming for the second ammendment folks, and that is bad. The second ammendment was to PROTECT US FROM THE POLITICIANS, make no mistake about it. I don't know from where or when the call will come, but there seems to be a growing realization out there that this administration doesn't want to go away, and doesn't care about public opinion. Something was said at the gun store this morning(they still don't have any .380 Auto) about Ammunition registration, and numbering, and the young gal working the counter(19) said, "Oh, they'll never do that, it'll put the ammunition industry out of business, it will be so expensive." I just replied "I imagine that is the point." They aren't worried about business, they aren't worried about the economy, they want control.

Somebody get me some tinfoil.

[Rick Ballard]

So it's 1933-37 - all we have to fear is Obama himself.

It's not '33-'37 though. The high unemployment in the '30s was driven in large part by the completion of the mechanization of agriculture. This time Obama is the big driver. I'm confident that he will be able to exceed FDR in job destruction by a rather wide margin.

[Pofarmer]

So, doesn't that Regression pretty much prove that Reagan did the right thing?

[Pofarmer]

And

Pagination still sucks.

[Rick Ballard]

"Prove" is as tough in economics as it is in climatology. Mankiw's offer to make a wager with 'Red' Krugman indicates the appropriate level of disbelief to apply to the CEA forecast.

They're blowing more smoke than Pinatubo.

[bio mom]

If you feel you need to distract the nation by going after a private citizen who is just a talk show host then you are truly immature and unsure of yourself. That is the impression I get from all of this. Obama has always struck me as a little boy trying to play grown up and now president. This fits right into that impression. And to use Begala and Carville of all creepy people when you have already become the president is an embarassment for the Democrats and this president (at least it should be). They are in constant campaign mode there. They know nothing else. This country is in big trouble with this little boy in the White House.

[Extraneus]

In the USSR, unemployment was effectively eliminated in the 1930s, and led to significant growth in the 1940s. Prior to this, monthly food rations per adult worker increased markedly, except for that of rye bread, which was unfortunately reduced by half.

The Soviet communist growth strategy, following Marxian doctrine, was based on high rates of investment and a rapid buildup of capital stock. High rates of investment come at the expense of lower shares of consumption, sacrificed at the beginning in exchange for hopes of abundance in the future. Central planning, state ownership, and the dictatorship of the proletariat were the necessary tools needed to impose such sacrifices. Next the regime mobilized the maximum possible number of able-bodied men and women to the labor force.

So it seems unemployment eventually does go down after a period of high rates of government investment, leading to an increase in economic growth.

[Ignatz Ratzkywatzky]

Rick,

The high unemployment in the '30s was driven in large part by the completion of the mechanization of agriculture.

Perhaps, but I'm convinced it was maintained by FDR's labor and price fixing policies.
There was a recent, very compelling paper on this put out not too long ago. Very hard to refute, seemed to me. Sorry don't have time to look it up, putting a new floor in the basement.

[glenda]

Pofarmer: That IS the point. Let's hope the message gets out. Only the deranged left look to Krugman for answers--this would be a good message for Rush's program.

I, for one, think begala, carville, podesta, axelofevil, et al, are going to regret their "great idea" to throw poop on Rush--they will be the one's steppin' n it and smelling! If they are resorting to this so soon, their private polling has got to be telling them to go dirty, early and often.

[Ignatz Ratzkywatzky]

Yeah, if it was recent I guess it wasn't too long ago. Doh.

[Enlightened]

"This country is in big trouble with this little boy in the White House"

And his even littler brain behind the curtain - the Ballerina Rahmbini.

[Tom Maguire]

So, doesn't that Regression pretty much prove that Reagan did the right thing?

Hmm. One might argue that the causes of the 1981/2 recession were better known (e.g., the Fed really did raise interest rates to squeeze inflation), and hence the cure was more likely to produce results. Sort of a "We broke it, we can fix it" notion.

In the current crise, one wonders just what the problem is - clearly we have gone way past a sub-prime meltdown and the problem has gone global, but if all financial assets are worthless what's a Fed to do? And if we don't know what's wrong, maybe that means we don't know how to fix it, either. Or maybe not - you don't need to know what, specifically, a person is choking on to know that the Heimlich maneuver is the right percentage play.

[glenda]

BF(Ignatz)..don't be so hard on yourself :)

[Porchlight]

Ignatz, I think you might be thinking of this one:

FDR's policies prolonged Depression by 7 years, UCLA economists calculate

This is a UCLA news release, not the actual journal article, but I can probably get the full text if anyone's intersted.

[Sue]

Ref John Edwards...I must admit, I laughed out loud. And felt guilty. ::sigh::

[Sue]

Tom,

I would really like to know what was going on in September 2008 that caused even Bush to panic.

[bgates]

OT, MayBee is killing over at Tapper's blog. Somehow I can't type a sentence in his comment box without sounding drunk, but MayBee...

Oh, just go look.

[kim]

Sue, there was a two hour, half a trillion dollar run on the banks. I don't know why it can't be figured out where that came from. I, of course, suspect our favorite 'S' villain.
========================================

[Charlie (Colorado)]

You know, I don't think going after Rush is going to be a great plan.

Consider: he has 20+million people listening to him every day for probably in excess of an hour, he isn't running for anything, and he's not constrained to be nice or collegial; he doesn't have to live with thee folks. He also accounts for probably (ROM) billion dollars in revenue to Clear Channel and the radio stations that syndicate him; you can expect a BIG fight if they try to shut him down.

Similarly, on the ammunition thing, there are good reasons why Pelosi so immediately responded to Holder's trial balloon.

Look at the election results again; Ears only won by 6 percent, and many of the D's who won in Congrefs won by small margins in otherwise historically Republican districts.

Most Americans don't agree with a Fairness Doctrine and 20 million Rush fans, with a billion dollars at risk behind them, are not a target any pol should take on lightly. A competent Administration would realize that.

Of course if we had one of those we wlouldn't be having this discussion.

[Charlie (Colorado)]

I would really like to know what was going on in September 2008 that caused even Bush to panic.

Sue, we know that. We discussed it at length then, and if you follow the real wonky sources, there are plenty of people confirming what we were saying: the AIG, Lehmann, and Bear things, along with the collapse of the market in mortgage-backed securities and derivatives based on them, along with mark-to-market accounting (and, I increasingly think, the elimination of the uptick rule) caused a massive credit crisis, as indicated by, eg, the ridiculous LIBOR rates. And just as we were saying then, the issue there was that it really could have caused sudden paycheck bouncing and massive multiple bankruptcies.

The problems that followed from that are still hurting, but it was like trying to get down from the top of the Empire State Building: running down the stairs hurts, but it hurts a lot less then falling from the top.

[Rick Ballard]

"In the current crise, one wonders just what the problem is -"

I blame education. The average person just isn't coming out of high school knowing how to apply simple Black Scholes differential equations to vanilla RMBS, CMBS, CDO, and CDS products in order to take advantage of valuation discrepancies in real market time.

[DrJ]

*snort*

[Charlie (Colorado)]

Kim, you know, that half-trillion dollar run story is around a lot, based on Kanjorski's statements. Only problem is, it didn't actually happen:

With the Kanjorski Meme still spreading (see Ben Smith, Andrew Leonard, Moldbug, and more), I think I'm finally able to squash it with some hard figures: there never was a $500 billion outflow from any asset class in the space of a couple of hours or even weeks, and the Fed never shut down or froze any money-market accounts. ....

[Kanjorski is] talking about anonymous newspaper reports and vague "conversations" and anonymous Wall Street "friends", and basically asking Paulson to confirm his suspicions. Which, naturally, Paulson doesn't do, because the suspicions weren't actually true. That said, however, Paulson's being-polite-to-the-Congressman answer doesn't explicitly say that Kanjorski's numbers are false.

Sorry.

[Matt]

How can the networks and media claim to have any credibility left if they continue to put what seem to be known conspirators on the air?

Doesn't this feed the fears of every free speech advocate in the country? The lack of ethics is truly amazing, but more importantly the lack of good judgment by management will result in further economic damage to their shareholders property.

[kim]

Well, thanks Charlie. I guess that explains why we can't figure out who precipitated that run.
=======================================

[glenda]

Thanks, Charlie...and "Hey!"

[ben]

OT and not to gossip monger or anything, but supposedly Silky has fessed up to a bouncing baby girl.....via Ace...

[Tom Maguire]

Re the September panic - recently there was a newspaper story in which some Congressman described the briefing given to Congressional leaders by Bernanke/Paulson in Sept that led to the TARP. The briefing was apocalyptic but I can't remember any details. (Groan - And I thought I posted on it, too.)

[kim]

It's a wise father who knows his own daughter.
========================================

[Jane]

Elliott,

I'm running in and out - but a huge thank you until I can say it more properly!

[Rick Ballard]

"The briefing was apocalyptic but I can't remember any details."

Geez, I remember something about something like that too... The guys name started with K or J I think.

[Pofarmer]

How can the networks and media claim to have any credibility left if they continue to put what seem to be known conspirators on the air?

Better yet, how can any claim of non-bias still exist?

[Greg Ransom]

Notice how the "rigorous" math does so much to clarify matters. NOT.

Note well that the "quants" on Wall Street were being mathematically "rigorous" and
"scientific" in the sense of "state of the art" economics.

Fact: the math does more to mislead these economists about real phenomena than in does to help them understand anything.

[Boatbuilder]

My impression from what little I can stand hearing from Obama is that to him, the economic world contains 3 kinds of people: Plutocrats, Government, and Clients of the Government.
Plutocrats are rich and don't deserve to be--they are to be punished and their wealth given to the Government, whose job it is to distribute what't left of it (after Government is properly and sufficiently established and compensated in appropriate splendor) to the Clients (as in "welfare clients"--a term I thought absurd when I first heard it, but what do I know). The Educrats are part of Government, of course.
I get no sense that he even imagines that people who work at non-governmental white-collar jobs exist--let alone power the economy and pay most taxes. Nothing he has said about "job-creation" leads me to think that he believes that legitimate "jobs" come from any source but the government--all other work relationships are tainted by the illegitimacy of the power of the employer.
It is almost pure, comic-book Marxism. The only reason he gets away with it is that nobody can believe that he is that stupid, or that America really elected a Marxist as its President.

[clarice]

I have to say I find BOTH the Edwards' loathesome creatures.

[Jane]

RULE 12: Pick the target, freeze it, personalize it, and polarize it."

That's the point of going after Rush, as it was about Sarah and Jindal and anyone else who looks like a threat.

And everytime I hear about it happening, I'm going to recite rule #12 just so they know that I know.

[Greg Ransom]

DeLong is a certified moron. As Kling points out (picking up a point I made on his blog) labor is heterogeneous and a computer programmer for a home builder given a shovel to make bike paths isn't going to generate the same wealth before and after.

But DeLong is modeling "labor" as a single homogenous "variable":

"A fall in production that is accompanied by a big rise in the unemployment rate will in all likelihood be reversed. You have to do a bivariate analysis -- to look at two variables, output and unemployment. You cannot do a univariate analysis and expect to get anything useful out."

Utterly brain dead.

Keynesians like DeLong do the same thing with capital. It isn't a massively heterogeneous multiplicity of different length time streams of productive processes. It's a letter "K" in a phony math construct, representing nothing.

And DeLong-style brain death is now in control of the U.S. economy.

[Greg Ransom]

Note well that Krugman worked for Reagan as a staffer for the CEA -- and Krugman produced a forecast of economic growth for the CEA radically underestimating the Reagan recovery.

The one great thing about his boom & bust is that Krugman's reputation is being destroyed both inside and outside of the economics profession.

[Barry Dauphin]

The 81-82 data more than doubles the R. Surely, a Nobel economist can recognize something interesting about the data, considering that the intent is to do "data-driven" analysis, without examining the specific decisions at each time period.

[ben]

"I have to say I find BOTH the Edwards' loathesome creatures."

Yeah, remember when Elizabeth wrote this on Daily Kos:

"Because of a recent string of hurtful and absurd lies in a tabloid publication, because of a picture falsely suggesting that John was spending time with a child it wrongly alleged he had fathered outside our marriage, our private matter could no longer be wholly private.

The pain of the long journey since 2006 was about to be renewed.

John has spoken in a long on-camera interview I hope you watch. Admitting one’s mistakes is a hard thing for anyone to do, and I am proud of the courage John showed by his honesty in the face of shame."

Wrongly alleged...courage and honesty...

[Rick Ballard]

"And DeLong-style brain death is now in control of the U.S. economy."

Nah. The consumer is still running the economy. That was kinda noticeable by the rejection of the UAW/DemYugo Widowmakers last month. I agree with you completely as to DeLong being a very well credentialed moron with a Modern Times view of capital and labor that is as stale (and Stalinist) today as it was in 1936.

I wonder when he will come up with the bright idea of forcing consumers to buy Widowmakers in order to keep UAW Dem clients drawing checks? Better hurry - rust never rests.

[edh`]

Without the incentives of the Reagan era to stimulate the recovery's pace, and the scheduled phase-out of the "stimulus," are we looking at a possible double-dip recession here?

Obama will certainly own that one.

[Sue]

Charlie,

I don't think we really know what happened in September 2008.

[Matt]

Barry;

that was doo doo driven analysis.....key semantic error there....

[Ignatz Ratzkywatzky]

Better yet, how can any claim of non-bias still exist?

The claim of non bias only exists in the same sense that Gloria Swanson was ready for her closeup.
We all know it's crazy but we're supposed to nod our heads and hope we're not the sap who ends up floating in the pool.

[Rick Ballard]

edh,

Captain Zero's It's Midnight in America message seems to be resonating throughout the economy. I'd say he owns the sick puppy right now. It has to go up in order to dip again.

Now, with competent leadership there is no reason for the economy not to go up. No reason at all. Unfortunately, Captain Zero - Progressive Hero will never make it to the "competent leadership" group.

[Enlightened]

OT - Personally I find Gibbs detestable.

[Barry Dauphin]

Matt

Following Krugman, I guess we should invest in fertilizer... he never runs out of any.

[Charlie (Colorado)]

Tom, Rick, are you sure that's not the same Kanjorski thing I linked?

Greg, unfortunately math is the tool for understanding these things.

[Charlie (Colorado)]

I don't think we really know what happened in September 2008.

Well, you could.

[Ignatz Ratzkywatzky]

I don't think we really know what happened in September 2008.

Well we do know that Lehman went bankrupt and that Reserve Primary then broke a buck because they had 7 or 800 million in Lehman paper. And I believe something arond $30 billion was redeemed from it in a couple of days. What the total was for all MM funds I don't know.

[Rick Ballard]

Charlie,

Just adding a pinch of Fe.

[Jim Miller]

Well, Krugman did work for Reagan, though he hasn't said much about his experiences in the Reagan administration lately.

[MayBee]

Wow, bgates. I do not deserve that.
xoxoxo

[Charlie (Colorado)]

Ignatz, if you follow the link I posted back, there's a good story about it. It turned out to be a couple of hundred billion total, and it was over several days.

Just adding a pinch of Fe.

Irony?

[MayBee]

Posted by: Boatbuilder | March 04, 2009 at 05:26 PM

Yes! That's how I see it. Thanks for putting it into words.

[Sue]

Igantz,

Something other than what was on the surface spooked too many people that aren't normally easily spooked. I don't think we know the entire story. Yet.

[Rick Ballard]

Sue,

Are you asking "If they knew it was a house of cards, why did they let Lehman go while "saving" AIG?"

[Ignatz Ratzkywatzky]

Ignatz, if you follow the link I posted back, there's a good story about it.

Thanks Charlie. Figured there was info there, but like I said earlier I'm putting a new floor in my basement so my time is limited and I only post when my back gets tired or I hit my thumb.

[Sue]

Rick,

I think there is more to the story.

[Rick Ballard]

Charlie,

Yeah. I found the sequence amusing. TyphusPad was probably hiding your response from Tom. Was there another flight of fantasy aside from Kanjorski's involving the MM?

Maybe we could start a "Who's paying off Felix Salmon?" rumor to counter his rebuttal.

[Enlightened]

Well I think Kanjorski was probably, and understandably so, alarmed by Paulson's erratic behavior. Perhaps he mistakenly associated the FDIC secret list of 117 banks in danger, and 100 banks expected to go under to the tune of 800 billion, with an actual bank run. I honestly believe Kanjorski believes what he said he was told. Since he has been on the Financial Services Comittee for most of his career, I'm guessing he's no idiot on financial crises.

It looks like a lot of things were coming to a head in Sept. '08 - Paulson panicked, and was most definitely throwing out numbers here, there and everywhere.

I wonder when we can see a Truth Committee on the September 2008 Bailout.

LUN

[Sue]

Enlightened,

They could start with Chuck Schumer. He apparently knew something that he couldn't keep to himself.

[DebinNC]

boatbuilder: Nothing he has said about "job-creation" leads me to think that he believes that legitimate "jobs" come from any source but the government--all other work relationships are tainted by the illegitimacy of the power of the employer.

Very insightful, bb. I bolded "legitimate" because that stuck out to me.

[glasater]

Wasn't Schumer running his big bazoo on a bank--Midland?--defaulting at that period of time?

That didn't help.

[bad]

Yes, you do, Maybee. You are logical, wellspoken and extremely well informed. You don't insult or use labels. You raised the level of discussion at Tapper to something resembling real discussion.

You totally rock!! (even if I pretend I don't know whether you are he/she)

[glasater]

Hey Sue--Great minds and all:-)

[Ignatz Ratzkywatzky]

Since he has been on the Financial Services Comittee for most of his career, I'm guessing he's no idiot on financial crises.

No doubt correct. He's probably had a hand in creating two or three by now.

[Sue]

Schumer started the run on IndyMac in late June.

[Enlightened]

Funny how Kanjorski was right about alot in that statement, except the dollar amount, and when the run allegedly took place. And boy is he ever so quiet now.

So whats the deal with these rich guys putting up to $50 million (insured) into 500 different banks? How many transfers would it take to scare the FDIC or Paulson right about then (Sorry Charlie, I suck at math in a big way) Or is this just nothing?

"Promontory Interfinancial Network LLC, an Arlington, Virginia-based company founded in 2002 by former federal officials --including some from the FDIC itself -- has figured out how to help wealthy clients insure as much as $50 million each by putting their money into separate accounts at 500 different banks."

[Claude Hopper]

Economy recover? It ain't gonna happen soon. The Woodstock "if it feels good do it" generation has hit the wall. Their casual attitude toward saving for the future has suddenly caught up with them. What little cash they put aside is diminished. They aren't about to spend their future income on the high life now. So by being miserly they will single handedly prolong the recession and coming depression.

[MayBee]

xxoox,bad (my hero)

[Enlightened]

And why are these 500 banks seemingly immune to this "Bank Crisis"???? When everyone is allegedly "bank running" or trying to keep some banks, even the FDIC afloat, why did these 500 banks geared towards the rich go unscathed???

I had more coffee. Bad move.

[Greg Ransom]

Charlie, a misused tool is a danger to everyone. You don't do a colonoscopy with a shovel.

Most economists routinely misuse mathematics -- read some Hayek to learn how. Hint, the central causal element in economics is entrepreneurial learning in the context of changing relative prices and local conditions -- and you can't EVER put that into math. You are a moronic Wall Street crashing "quant" if you try.

Hint #2, you can't use math to "predict" and "model" social phenomena the way you can with simple 2 variable physical phenomena.

When an economists talks of their "model of the economy" or of "hypothesis testing" their "economics", get our gun and protect your money.

Using the Marvel Comic model of science used by the bad philosophers who be economists in the universities, Darwinian biology would never have been developed and would still not count as science.

Don't kid yourself, these "economists" are misusing math. Again, read some Hayek and learn.

Charlie wrote:

"Greg, unfortunately math is the tool for understanding these things."

[Barry Dauphin]

Well, Krugman did work for Reagan, though he hasn't said much about his experiences in the Reagan administration lately.

Mr. Krugman, tear down your gall!

[Hyphenated American]

As Michele Obama said - "America is a mean country". And now her husband is trying to turn this country into France. So, it's fair to say - why should anyone expect American economy to perform better than France, with its stagnant GDP and huge unemployment?

[Charlie (Colorado)]

Enlightened, what you're saying is that Kajorski was right about when the run happened, how much it involved, how long it took, and, oh, let's just also mention that he claimed the Fed had frozen the redemptions.

So what he was right about was that some people took a good bit of money out of money markets, but wrong about everything that made it a story.

As to the other, it takes 10,000 $50 millionses to make $500 billion. Is it possible? I suppose. The notion that there were 10,000 people who (a) had $50 million they wanted to keep as cash, who were (b) sufficiently risk-averse that they wanted to go to that much trouble to have it all FDIC-insured, (c) weren't involved enough in their money to pay someone to make 500 saving accounts, and (d) then all panicked on the same day and decided to take it out of their FDIC-insured accounts, thereby forcing hundreds of banks to withdraw money from the money markets in the amount of $500+ billion, seems pretty incredible.

[Charlie (Colorado)]

Greg, what do you have to offer besides math? Chicken bones and bamboo rattles?

[clarice]

bad, maybee, could you please take that stuff outside?

Not that there's anything wrong with that.

[Pagar]

It is almost pure, comic-book Marxism. The only reason he gets away with it is that nobody can believe that he is that stupid, or that America really elected a Marxist as its President.

Every time one hears "no one can really believe" in relation to Marxists, How many remember the greatest snow job Castro ever pulled?

Fidel Castro is not only NOT a communist --he's a strong ANTI-Communist fighter! And he's ready to help us in the hemisphere's anti-communist fight!" That was the CIA's expert on Latin American Communism, Gerry Drecher, after meeting with Castro on his Fidel's U.S. rock tour in April 1959. Drecher was preparing to share America's most sensitive intelligence with Fidel Castro--until he was dissuaded in the nick of time by some of his subalterns who somehow listened to some "Cuban exile right-wing-Batistiano crackpots!"

"Don't worry. We've infiltrated Castro's group in the Sierra. Castro and Che Guevara have no affiliations with any Communists whatsoever." That was the CIA's Havana chief, Jim Noel, when the already alarmed U.S. ambassador to Cuba in late 1958, (Republican) Earl T. Smith, asked Noel about reports he'd been getting from insistent "Cuban right-wing Batistiano crackpots!""

Castro knew exactly what he was back then and today. Obama knows exactly what he is, and William Ayers and his friends have done a superb job of making sure no one notices they are exactly the same.

[Greg Ransom]

Read a book, Charlie. And re-read what I said.

I'm talking about the MISUSE of mathematics.

Maybe you can do a Google search for the definition of "misuse".

A little very bit of math and logic does the bulk of the explanatory work in economics -- that's just a fact.

Most economists routinely misuse math. I stand by that statement. Only a moron would infer that this statement implies that math doesn't have a role to play in economics.

You aren't a moron, are you Charlie?

Charlie wrote:

"Greg, what do you have to offer besides math? Chicken bones and bamboo rattles?"

[TCO]

How are you little commies doing? Hope you enjoy your crap sandwich. I TOLD YOU SO!!!

Have fun with that Paulson-Bush-'bama rescue from the recession. HA! You all need an enema.

[clarice]

This is how crazy Geithner is:
US Treasury secretary attacks oil, gas tax breaks
Thu Mar 5, 2009 3:18am IST Email | Print | Share| Single Page[-] Text [+] By Tom Doggett

WASHINGTON, March 4 (Reuters) - U.S. oil and natural gas producing companies should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming, U.S. Treasury Secretary Timothy Geithner told Congress on Wednesday.

It was one of the sharpest attacks yet on the oil and gas industry by a top Obama administration official, reinforcing the White House stance that new U.S. energy policy will focus on promoting renewable energy sources like wind and solar power and rely less on traditional fossil fuels like oil as America tackles climate change.