« Hierarchy, altruism and gender | Main | Misunderstanding GDP forecasts »

November 29, 2008

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451cbef69e20105362ab270970c

Listed below are links to weblogs that reference The recession is not taking place:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

JimH

Please return to this post in the middle of next year, and do another post on whether or not there is a recession on. I think you may have a change of heart.

Bob B

"recession is a hyper-real phenomenon, a construct of abstract aggregate data"

Well, in London, it's been noticeable for many months this year that more shops were falling vacant and staying empty or reopening as charity shops and the evidence of falling house prices is clear enough. By reports, the percentage fall in London is steeper here than in all other regions except Northern Ireland and the Eastern region.

On my regular bus trips for groceries, I'm continually amazed at the capacity of markets to withstand so many fast food dispensaries, hairdressers and local convenience stores. Perhaps the fascinating insight in recent years has been the new pharmacy and optician chains sprouting new branches - probably due to population ageing.

The emptying office blocks around Canary Wharf is evident enough even if the surge in construction industry unemployment is less apparent to all except those who work in the industry. From all that I've read in the FT, the brunt of this recession is going to bear more heavily on London than on other regions. Perhaps that's as it should be - arguably, the fundamental cause of the recession is not so much toxic assets as toxic banks and bankers and, in London, there are an awful lot of financial institutions.

Steve Brown

You should get out more, fella.

Bob B

I'm not someone often inclined to agree with Mandelson but I think he's right about this:

"In an interview with the Guardian newspaper, the business secretary said it was impossible to predict how deep or painful the recession would be."
http://news.bbc.co.uk/1/hi/uk_politics/7756155.stm

Economists' models are calibrated on past trends and this recession is being caused and sustained by events and institutions which are uniquely different to previous recessions.

In Ye Olden Tymes alchemists sought to find the elixir of life and the means of transmuting base metals into gold. In recent times bankers have at last discovered the solution:

Try this from S&M's selection of Top Blogging by Richard Dale:

"The financial landscape is now dominated by huge financial conglomerates which markets will correctly perceive as being far too systemically sensitive to be allowed to fail. Hence the whole moral hazard issue is thrown into even sharper relief."
http://www.voxeu.org/index.php?q=node/2618

If loss laden and failing banks and hedge funds can't be allowed to fail for fear of bringing the whole financial system down then there's no remaining moral hazard and therefore no incentive upon bank CEOs and managers to maintain prudential banking. All that matters is whether they can get away with their next bonus payment.

One of the more challenging issues for academic economists and competition policy analysts is why British retail banks were among the most profitable in Europe, at least until recently.

Bob B

Is anyone surprised by this news?

"Chair of the Financial Services Authority (FSA) consumer panel Lord David Lipsey has resigned, stating the regulator has not supported its attempts to tackle consumer finance issues.

"In his resignation letter Lipsey, who has been chair for just six months, said: ‘I have sought to promote a significant change of role for the panel to tackle consumer financial services issues in a broader sense...This approach has not won the support of the FSA or of the panel as a whole.’"
http://www.citywire.co.uk/Adviser/-/news/regulation-training-and-competence/content.aspx?ID=322481

jameshigham

Of course, I won’t deny that some people are “really” losing their jobs. But as I say, this happens on a huge scale even in “good” macroeconomic times.

Theory versus practice, eh?

Bob B

"Theory versus practice, eh?"

That's rubbish. Just who is denying that thousands lose or change jobs in "normal" times?

What explains the rising unemployment rate, the failing banks, the emptying offices and shops and the falling house prices?

"The number of homes built in Britain this year will plunge to its lowest level since 1945 and plummeting construction activity is expected to lead to the loss of 100,000 jobs. The country's most senior housebuilders confirm that completions will be around 100,000, some 70,000 less than last year."
http://www.guardian.co.uk/business/2008/jun/15/construction.housingmarket

"PARIS (AFP) — Leading industrialised nations are now in recession and face a 'protracted' downturn, with the US, Japanese and eurozone economies likely to shrink next year, the OECD warned on Thursday."
http://afp.google.com/article/ALeqM5hWuimYFdl-AdHDulKsC5lgL3T-dA

phil

I would not draw too many conclusions from your Wii experience. In the end I ordered from Amazon in Germany.

Recession - you better believe it -job losses are quickening, pay cuts are commonplace and sentiment is low.

Bob B

IMO while some have gone into outright denial about the recession, for political reasons some others are trying to con the rest of us into believing there is no significant recession.

As best I can judge from surfing political blogs, many of those in the conning game also believed that Senator McCain with Governor Sarah Palin would be the best outcome for the recent US Presidential elections. The resounding win by Senator Obama was a great disappointment and for them his incoming economics team will prove to be a continuing irritant:
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=12685546

Obama's economic team evidently have little doubt about the looming recession.

Luis Enrique

I think your line on this is a (small?) abuse of the gross job destruction and creation data. For example, you're not thinking about the composition of that data. During normal times, thousands of people are working on jobs that they know will end (construction, IT projects, film industry etc.) they are PAYE and I think the end of their job shows up in the job destruction data. But the destruction of their job is anticipated, they often have the next job lined up in advance, and there is no real welfare cost. There are other similar points to be made, for example some of destroyed jobs in normal times are explained by indolence on the part of the worker.

In a recession the gross job destruction numbers might not move too much, but the composition changes. Far more hard working and competent people lose jobs that were thought to be permanent, and that has a much greater welfare cost. Pointing out that jobs are destroyed on a huge scale in normal times isn't comparing like with like.

Bob B

Absolutely!

"The OECD has endorsed the need for government spending in affected countries to boost growth, because it says that interest rate cuts are no longer effective.

"'Against a background of deep economic downturn, additional macroeconomic stimulus is needed,' it says."
http://news.bbc.co.uk/1/hi/business/7747757.stm

Want a laugh in these depressing times?

Try to imagine a conversation in the future about economic policy options between George Osborne, as Chancellor in a Cameroon government, and Tim Geitner, the US Treasury Secretary in an Obama administration or - better still - a converstaion with Larry Summers, the Director of the National Economic Council.

ROFL! [thumps floor in paroxyms of mirth]

I had to go and lie down to recover after that thought.

Bob B

Due apologies for the various typos above but I was laughing too much at the thought.

Surely, if he has any sense Cameron will drop George Osborne overboard.

Luis Enrique

I just don't understand this: "They are not efforts to improve the security of actual, real individuals."

How do you know the govt is not attempting to minimise loss of jobs? What doesn't that count as trying to improve job security of actual real individuals? People might not have felt safer after pre-budget, but that might be because they doubted its effectiveness, which is a different matter. To the extent it was effective, compared with counterfactual, it was decreasing the probability of those actual real individuals at the margin of employment will lose their jobs.

StephanieInCA

I think we were officially in a recession right about the time that people started wearing clothes made from their pets' fur: http://tinyurl.com/59sfnn

dearieme

"Obama's economic team evidently have little doubt about the looming recession.Q" Well, many of them played a large part in creating it.

Bob B

"Well, many of them played a large part in creating it."

C'mon. You've evidently missed that the Bush administration has been in control since January2001. The trouble was that he became obsessed with tax cuts and "the axis of evil". Remember the scale of Bush's tax cuts in 2001 and 2003?
http://krugman.blogs.nytimes.com/2008/01/14/bush-tax-cut-mythology/

Btw Paul Krugman has just won a Nobel prize for his contribution to economics and he's not on Obama's economic team.

"almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan [chairman of the Governors of the Federal Reserve Bank 1987-2006] admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

"'Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,' he told the House Committee on Oversight and Government Reform."
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?ref=todayspaper

Bob B

And try Kaletsky in Monday's Times on Bush's current US Treasury Secretary, Henry Paulson:
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article5263869.ece

Morgan

I wish Obama had spoken to Peter Schiff.

And, Chris, why are you as an empiricist citing Baudrillard in support of your case? Isn't he ultimately a Cartesian like most of his confreres?

Luis Enrique

Compare and contrast this post with that of Peggy Noonan covered here:

http://economistsview.typepad.com/economistsview/2008/12/i-blame-the-win.html

Bob B

"I wish Obama had spoken to Peter Schiff"

A quick bit of googling found this:

"Schiff adheres to the principles of the Austrian School of Economics and the Ludwig von Mises Institute."
http://en.wikipedia.org/wiki/Peter_Schiff

ROFL !!

Presumably, Schiff thinks the Bush administration, with the support of Congress, shouldn't have bailed out all those banks and other US financial institutions or nationalised AIG and instead should have let them sink into bankruptcy.

Of course, that really would have been the way of Free Market Capitalism.

Morgan

Schiff was also Ron Paul's economics advisor and has become something of an Internet hero because he called the crash ages before anyone did (via Andrew Sullivan):

http://fr.youtube.com/watch?v=2I0QN-FYkpw&eurl=http://andrewsullivan.theatlantic.com/

Perhaps he might have some ideas about the solutions too (though, yes, he might have advocated letting the banks go under).

Bob B

Frankly, few of us take the Austrian school seriously these days. Allowing a succession of banks to go under would risk a repeat experience of the deep US depression of the 1930s which was caused more by crashing banks than by the stockmarket crash of 1929.

As I've posted here before several times, Prof Goodhart and Roger Bootle were warning about the growing house-price buuble years before the 2005 election and they were ignored. Try this from 2002 for starters:

"CHARLES GOODHART, a former member of the Bank of England's monetary policy committee, warned yesterday that the Bank is failing to take sufficient account of the house price boom in setting interest rates.

"His warning comes amid growing fears among economists that house prices, fuelled by the lowest interest rates for 38 years, are getting out of control. Yesterday, new figures showed that homeowners are borrowing record amounts against the rising value of their homes. . . "
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2002/04/06/cngood06.xml

Again before the 2005 elections here, a string of policy think-tanks and economic commentators - such as the IFS and the Item Club - were warning about the black holes in successive budgets of Gordon Brown (in jargon, the structural deficits)

Btw from the Reuters news agency this morning:

"LONDON (Reuters) - Previously sceptical Labour Party backers are returning their support to Prime Minister Gordon Brown, an opinion poll showed on Tuesday, boosting Labour to almost level with its Conservative rival.

"A ComRes opinion poll for the Independent newspaper put Labour support at 36 percent, up five points on last month and catching up with David Cameron's Conservative Party, which lost 2 percent from last month's poll to score 37 percent support.

"The gap between the two main parties is the narrowest in any poll since January when an Ipsos MORI poll put Labour one point ahead, the Independent said."
http://uk.reuters.com/article/domesticNews/idUKTRE4B120020081202

If he has any sense, David Cameron will drop George Osborne, the shadow Chancellor, overboard soon.

DR

Everyone I know is getting laid off. Two major employers here have shut their doors, and a third cut staff by 30% (very bad sign).

Remember what Reagan said? "A recession is when your neighbor loses his job. A depression is when you lose yours." Guess you don't get out much, or know many people. The rot is spreading.

jameshigham

Bob B, to justify your:

That's rubbish. Just who is denying that thousands lose or change jobs in "normal" times?

.. you conveniently inserted "change" into the argument, thereby changing the argument completely. This is not what Chris said:

Of course, I won’t deny that some people are “really” losing their jobs. But as I say, this happens on a huge scale even in “good” macroeconomic times.

You really need to read things a bit more carefully, Bob and forget the sleight of hand.

Kimberli H

So they say its an economic down turn.... No doubt about that... but todays economy is still thriving! At least where I have traveled and live.

Sure some company are closing stores, yes numerous of people have lost their jobs... I believe the corporate guru's got greedy and now they are feeling the pain of it. The American people are the ones who suffer.
Is this another Y2K thing... Someone says something and shows a bit of proof and every body else is believing it?

I have been in business for quite sometime and this change in economy has boosted my business due to the fact that the American people are sick and tired of it and are ready to start their own businesses to become financially in charge of their own destiny. I hope that everyone doesn't read too much into the negatives of this economy and transition themselves to start seeing the positives in this economic system..... For every negative, there is a positive!

Kimberli H

So they say its an economic down turn.... No doubt about that... but todays economy is still thriving! At least where I have traveled and live.

Sure some company are closing stores, yes numerous of people have lost their jobs... I believe the corporate guru's got greedy and now they are feeling the pain of it. The American people are the ones who suffer.
Is this another Y2K thing... Someone says something and shows a bit of proof and every body else is believing it?

I have been in business for quite sometime and this change in economy has boosted my business due to the fact that the American people are sick and tired of it and are ready to start their own businesses to become financially in charge of their own destiny. I hope that everyone doesn't read too much into the negatives of this economy and transition themselves to start seeing the positives in this economic system..... For every negative, there is a positive!

Glenn Carver

Recession or no recession, people are conditioned to spend money this time of year. This could be the best time to ramp up marketing efforts to capture some of those disposable dollars.

The comments to this entry are closed.

Why S&M?

Blog powered by Typepad