Crash

Recently I’ve been finding all I’ve learned about economics turned on its head. As someone recently graduated from a university undergraduate program, I am not too far removed from economic abstraction. How economics should work, an ideal if you will.  Real world effects either confirm or confuse what’s been learned in the classroom. One such effect is to see how two accepted economic models react to a recession. On one side, we have the microeconomic model of the firm and it’s pathway to success, and on the other, the macroeconomic model of growth of a domestic economy. I accepted both of these models from lesson one. Now I see how one can work against another.

A Recession Fallout (Nuclear Winter?)

Credit Card Fallout?

If you really want to think about how scary this recession will be, consider this: Everything individuals and families were doing with their credit cards and homes, businesses were doing on a much larger level. Cheap credit pervaded every facet of the economy. From Construction to the Federal Government, expansion was fuelled by credit. Credit through low interest bonds, finance companies, and government debt selling. So how much of this credit-fuelled bubble is going to be around after this is all over? After this heavy recession and possible depression, how many companies will be left?

Money Supply Blues

Up up and away!

As I hear more and more about this economic crisis, the pundits and politicians’ voice begin to merge and it becomes a sort of white noise. There isn’t much sense to be made out of most the reports, so as a statistician I prefer to look at data and see what the real story is. Data sometimes lies, but to be frank it lies a lot less than politicians and businessmen scrambling to keep their jobs. I went to the Bureau of Labor Statistics (BLS) website for some graphic interpretations of various economic data. As I had said back in March, the United States is in a recession, perhaps the worst in a very long time. But what does the data say about this? Inflation is currently at 3.7%, not much different from last year. The unemployment rate (6.7%) increases every month, but we’re still nowhere near where we were in 1982 when the rate was around 10 percent. What really worries me is not the labor indicators, it’s the monetary indicators. Check out the latest data and you will see what worries me.

In Defense of Capitalism

In a recent opinion piece in the Washington Post columnist E.J. Dionne lays the economy’s woes at the feet of capitalism. From the article I believe Dionne is saying that a more governmental redistribution program would alleviate our suffering from this most recent credit crisis. I was most shocked to find that most Washington Post readers agreed with his critique of the system of capitalism. Many readers agreed with Dionne that the New Deal had gotten us out of the Great Depression, and a more active governmental role in today’s economy would make us better off. This shows a flawed understanding of the capitalist system. Although I don’t have many readers, I would feel amiss if I didn’t defend this system against such misunderstood attacks.

A new recession?

I just got my monthly update from the Bureau of Economic Analysis on the GDP. Apparently, growth is still positive (0.9%). This means that we still are technically not in a recession, and my guess is that we won’t be, barring some unknown shock. The worst of the housing crisis is over, despite the Case-Shiller housing index indicating still-falling home prices. Although these prices are still falling, this is a long overdue correction. Home prices are falling slower now, which indicates a near-bottom. If housing prices at this point haven’t caused negative growth, I’m not sure what will. With the world as global as it is, one must ask: is this piddly growth the new recession?