1. Should public sector jobs come first?: a symposium, including me.
2. Tim Duy's version of the recalculation story, recognizing a significant cyclical component as well.
4. What should I eat?, part II.
5. Can there be a market for used digital files?
6. Is Wikipedia making us stupid?, and other links from Michael Nielsen.
I always thought that exports (and imports) were more susceptible to recessions because durable/capital goods are very overrepresented in exports/imports and durable/capital goods are the first thing that people cut back on.
Following up on my above comment, isn’t one of the stories about this recession how much inventories were cut relative to drops in final sales? This would also tend to lead to a greater drop in exports/imports
you are right that imports /exports normally react much more to recessions than other economic variables, but this cycle the contraction was much larger than even this would lead one to expect.
I think the export collapse story can be explained fairly well by a breakdown of mutual trust. If I remember correctly from a class I took as an undergrad, then the following is true:
When you export a shipload of something you can’t be sure the guy at the other end is going to pay, so you make him go and get a letter of credit from the bank. Bank A (in the importing country) is then responsible to pay Bank B (in the exporting country). Given the nature of the ’08 crisis Bank B no longer trusted that Bank A would be able to pay, because nobody knows which banks were gonna fall; the interlocking contractual arrangements that were used now involved the guaranteeing parties’ guarantees being worthless.
Now I’m gonna go see if the linked paper agrees..
3. Those comments sound pretty good. And it’s an example of the limits of surface thinking. The government is to thank for the helter skelter response to the crisis. About all the government did a solid job of was crystallizing unpredictability.
Even if the failure of the companies was the proximate cause of the distrust and deleveraging, the government already has responsibility for bankruptcies. That these weren’t “banks” is just a smokescreen to cover their culpability. Who cares really if it is done through FDIC? How does that even matter?
Noone has ever said, that I’ve heard, that liquidations needs to be done like a Chinese fire drill. That is not the value-added of liquidation. CEOs are not more scared of a disorderly, catastrophic collapse and may very well be less stigmatized by it. And in light of everything they did do, they didn’t have ‘authority’ to unwind AIG, Bear Stearns and Lehman rationally without granting straight pass-thru payments to counterparties? Please.
So, if I’m right the government’s knee jerk interest rates, mark-to-market policy and the chaotic approach to policy, and an effective punishment of risk investment caused or at least catalyzed the scramble for balance sheet liquidity of the credit institutions. If you include the stability of commodities prices, I would bet that the average manufacturer has seen a contraction of his money supply. Contra most economists view, inflation is a grade of policy and we have inflation versus gold and everything else of intrinsic value. Thanks a bunch Ben et. al.!
Commodities prices versus S&P Index versus gold
http://finance.yahoo.com/echarts?s=GSC#chart5:symbol=gsc;range=ytd;compare=^gspc+gld;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Wiki is useful as a starting point (and it warns you when an article is incomplete or stands in need of development or accuracy). Trouble arises when you begin and end with Wiki: gives the idea of means and ends a new meaning.
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