How're we doing (Oct 2011 Edition)?

By -

The economy is still in a funk, way below its most 2008 peak. Look at Personal Income, with the effect of prices taken out (i.e. "real" personal income). The great Calculated Risk blog has a chart showing these values relative to the most recent "peak". This gives us a normalized view of how much Incomes are dipping.
By this measure, we see a  5% dip, unprecedented since the Great Depression (pre-1960 not shown). However, we have fully rebounded now -- at least by this one measure.

 One problem with this measure is that it includes "transfer payments". Since a government can borrow to pay welfare, let's subtract these payments and see what that looks like.
(Click here for original chart)
This second chart excludes transfer payments, and shows:

  • a larger (10%) dip
  • we have not fully rebounded

By this measure, we are half-way back to the peak. If we extrapolate the line upward, we'll probably be back to peak in 3 years or so.
(Click here for original chart)

 Importantly, we should not simply extrapolate that line upward. Some good economists are predicting a "double-dip" just around the corner. So, the line could turn back down, or it could slow, or it could flatten.

 Nevertheless, the good news is that we were down 10%, and though we might head back there again, a 10% shrinkage is far from the collapse of civilization. 

Comments

Post a Comment

Popular posts from this blog

Country Shares of World GDP

By -
Image
Here's a chart of world GDP, broken down by country share. ( HT: Carpe Diem ). Careful with the x-axis, it is not at all to scale! The basic idea is that India and China had large shares pre-industrial revolution, after which Europe rose. The U.S. shoots up, to over 40% of world GDP by 1950. Then, Japan begins to grow in the 1960s, and China in the 1980s. Suppose countries end up with GDPs proportionate to their populations. What would that picture look like? I've added a bar to the right, showing the break-down of world-population. Look at the U.S. squished down, with less that 400 million out of a world population of over 7,000 million. The biggest change is in the previously un-noticed 'rest of the world". If Africa, the Middle East and so on moved toward freedom, that could be the story of the century.  What if they do not? Here's a chart with a new assumption. Suppose the "rest-of-world" does not increase its relative s
Read more

von Mises on the Quantity Theory of Money

By -
Reading von Mises a while ago, I was surprised to see him speak against the Quantity theory of Money, but what he said made a lot of sense. A recent Facebook comment sent me back looking for the source, and I decided to blog a few choice quotes, because others may find it interesting. My summary of von Mises's position is as follows: The supply of money is an important factor in its value. This is the element of truth in the Quantity Theory However demand for money is the other factor. The quantity theory gives short shrift to demand for money. (One must look to individual decision-making processes and their objective context to understand the demand for money. One cannot start with the aggregate demand for money.) Even if supply were the only factor, it is wrong to assume the value of money will change in direct proportion to the change in supply It is also wrong to assume that an increase in supply of money changes all prices generally and similarly A good theory o
Read more

U.S. Economy: Federal Debt- How big is it?

By -
Image
( Updated: Dec 2012 ) Lots of numbers:  Trying to get a clear picture of U.S. government debt can be frustrating. The government owes: 60% of GDP : bonds owed to private entities , both foreign and domestic 100% of GDP : if we add bonds owed to the government-itself (e.g. Social Security "trust fund", Federal Reserve) 400%+ : if all Fed promises to social security and medicare recipients are met (they won't be) [Note: the GAO claims that adding another 2% (of payroll) to the current 13% payroll tax would keep social security funded for more than 70 years!] A snapshot: The U.S. government (officially) owes about US $16 trillion to the public, plus to the Fed, plus to the "trust funds".  The GDP of the U.S. is approximately $16 trillion. (Both these were about $15 Tr. last year.) To put this in perspective:  adding up the assets of everyone in the U.S. and subtracting liabilities, we get a "net worth" that adds up to about $ 64 trillion ($5
Read more