For all the talk we do around here about our unsustainable Empire of Debt, certain events are still startling. Not surprising, but startling.

Take, for instance, the sentence that greeted me when I opened my morning e-mail briefing from the Financial Times:

China urged the United States to spare no effort to stabilise its economy and financial markets to help avert a global recession

I mean, really: For an older Gen-X’er who came of age during Ronald Reagan’s “Morning in America,” whose twentysomething salad days were the era of the “sole superpower,” this is jarring stuff indeed, no matter how much awareness I had on an intellectual level that it was all hokum. Seriously, the headlines I’ve been accustomed to seeing my whole adult life have been about the United States “urging” other countries to “spare no effort” to do such-and-such.

And then you bore into the meat of the story

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The typical Econbrowser reader might not be surprised at the NBER decision -- but some others will. From a May 2008 WSJ article:

"The data are pretty clear that we are not in a recession," Council of Economic Advisers Chairman Edward Lazear told a meeting of editors and reporters from the Wall Street Journal and Dow Jones Newswires.

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"I would be very surprised if the NBER, looking back at this period, would date this as a recession," Mr. Lazear said. There are even indications that revised first-quarter estimates would be slightly stronger than 0.6%. "The optimists seem to have been closer to right on that than the pessimists," he said.

Just to reiterate, that quote is from May 2008.

Here's a picture of GDP and gross domestic income (as suggested by Jim in this post, and noted in the BCDC announcement).

Figure 1: Gross domestic product (blue), and ...

div align="justify"The system of quasi-fixed exchange rates that dates back to the Nixon era, and which itself was an evolution of the gold standard span class="blsp-spelling-error" id="SPELLING_ERROR_0"Bretton/span Woods regime agreed in 1944 (which couldn't survive the 1960's spike in Vietnam war inspired US inflation), has become unsustainable. In the original gold standard regime (fixed exchange at $35 for an ounce), the capacity of the US to issue dollars to the world was strictly limited, as was the capacity to run up deficits. A key factor driving financial crises is extreme trade imbalances between nations; debt gets accumulated partly as a result of financing a trade deficit. For smaller countries, a vicious spiral can ensue which ends in recourse to the IMF. In 1944, the US was the world's biggest creditor, and imposed a system that placed the whole burden of maintaining the balance of trade on deficit nations; there would ...

Once again, I am flattering an entry with a picture taking here in Switzerland where I am currently entertaining courses at HEC Lausance. As you can see, it is a beautiful place and also, as it were, very interesting with respect to tail fume patterns from the enormous amount of airplanes moving back and forth over le Lac Léman (middle of Europe remember!). Posting is slim I know, but so unfortunately is time; I can assure that it is not out of lack of enthusiasm to write and opinion on current events.

Moving on to the topic du jour it is interesting to observe wow fast things sometimes change. We need not go back more than 5-6 months to observe how hawkish central banks across the economic edifice were busy scrambling to raise rates in order to quell inflationary pressures. Most notably, the

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The OECD has just released its forecasts. This follows the recent updated IMF forecasts. Growth is evaporating the industrial countries. What is to be done?

Figure 1: From visualization of OECD Economic Outlook 84 [link]. Blue is negative growth, darkest blue is -9.335%; orange is positive growth, most orange is +9.335%. White is zero; gray is "no forecast". Table from press conference for the release of OECD Economic Outlook 84 (25 November 2008). Table from IMF WEO Update (November 6, 2008).

With the industrial economies, representing a very large chunk of world GDP, all colored varying shades of blue and entering a period of slowdown, it seems like we need to think not only about macro policy in the US, but also abroad (and what those policies mean for the US).

There is

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U.S. stocks posted the biggest two-day rally since 1987, rising over 13%.  That coming after the Obama announcement of his Treasury Secretary choice on Friday and the weekend announcement of over $300 billion for the  Citi bailout, and in spite of Bloomberg’s calculation of total rescue costs over $7.4 trillion.

The two-day rise is certainly impressive, but it is not yet a trend reversal.

If you believe this is a blip and one more head feint in a larger down movement, the chart below will support that view.

If you think the last two days may be the beginning of a new bull market or a major bear market rally with legs, wait a while for a clear and sustained penetration of the general 850-900 area for the S&P 500 (roughly SPY 85-90) before risking capital.

Not only does the chart need more confirmation

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Now this is a very interesting question, isn't it? The only honest answer I can give is that I don't know, and indeed I haven't the faintest idea. The government of Latvia (the Baltic state which is currently most rife with "rumours" about imminent devaluations) works in its own wondrous ways, and neither we (nor Latvia's citizens) have any idea at all how they plan to lift their country out of the deepest depression they have experienced in many a long year.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SRQ9-7COE2I/AAAAAAAALWc/3VxjefQe-0s/s1600-h/latvia+GDP.png"img id="BLOGGER_PHOTO_ID_5265902015511139170" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 200px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SRQ9-7COE2I/AAAAAAAALWc/3VxjefQe-0s/s320/latvia+GDP.png" border="0" //abr /br /What I do know is that, economically speaking,the present situation is simply unsustainable, and something is going to have to be done. Indeed the country's government is in talks with both the IMF and the EU Commission about this very topic as I write. My ...

by Edward Hugh: Barcelonabr /br /blockquote“Happy families are all alike; every unhappy family is unhappy in its own way”br /Tolstoy/blockquotebr /Well this strongis/strong an interesting little fable of modern family life, even if all the families involved may not be ones which many of my readers would normally wish to belong to.br /br /As is now reasonably well know Russian private oil company Lukoil is currently making a bid for the shares in Spanish energy company Repsol which are owned by the deeply indebted Spanish property company Sacyr Vallhermosa.br /br /Shares in what is Spain's fifth biggest builder, and which currently occupies the somewhat ignominious position of being Spain's worst-performing stock this year, jumped the most in two years last Thursday (20 November) on reports they were about to sell their 20 percent stake in Repsol YPF to the Russian oil company OAO Lukoil. Sacyr, which said last week it ...

Last Thursday, I had the opportunity to participate in a panel on Global Economic Crisis: The Untold Stories, sponsored by the Center for World Affairs and the Global Economy (WAGE). I was tasked with surveying the impact on the economy outside the borders of the United States -- in 20 minutes.

Here's the link to my presentation, but I reproduce one of the key slides here:

Figure 1: Growth rates of real goods and services exports (y/y), by country group. Source: IMF, WEO Oct. 2008 database; Nov. 6 WEO update.

What's of greatest interest to me is how rapidly estimates of emerging market and LDC export growth were revised downward, going from the October to November projections. This only reinforces my view that the US slowdown will have a disproportionate impact on world trade given the drastic change in the role of the

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Iceland today (Thursday) secured nearly $11 billion in loans from the International Monetary Fund (IMF) and other nations. The bailout will help the island nation stabilize its currency and recapitalize its banks, but it will also saddle its tiny population with a huge debt burden.

The IMF will lend Iceland $2.1 billion, and Finland, Sweden, Norway and Denmark will loan $2.5 billion to help the country re-float its currency and shore up its banking sector.

The Icelandic krona, or crown, has lost about 70% of its value since the nation’s financial crisis first began. The government put restrictions on currency trade as it wrestled with the crisis, however one of the stipulations of the IMF loan is that Reykjavik once again float its currency. Once it does, it’s likely that there will be a “massive currency outflow,” Iceland’s central bank said.

The krona, which traded at 176 against the euro

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