In my last post, I cited Jeff Frankel's keynote speech from a recent Bank of Canada-ECB workshop. He also pointed to the end of "Exorbitant Privilege" and "Dark Matter", and other arguments of American exceptionalism. I think we'll see resounding evidence of this in Friday's release of the US end-2008 Net International Investment Position (NIIP).

First, recall nearly two and a half years ago, I posted this figure...

Figure 1: Net International Investment Position, end-year (blue squares), and Cumulative Current Account balance on a NIPA basis (red line), as a ratio to GDP. NBER recession dates in gray shading. Sources: BEA International Investment Position release of June 2006, BEA NIPA release of October 2006, NBER, and author's calculations. Originally posted here

...and asked if "gravity can be defied?" At the time, I argued the answer was "no", and observed that NIIP reversion to

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Paul Kedrosky has observed that a statistical analysis (word cloud) of the American Economic Association session titles, or even of the papers, leads to the impression that the economics profession has been relatively uninterested in the ongoing financial and economic crisis. Unfortunately, this observation misses ignores the fact that session proposals are submitted a full eleven months ahead of the ASSA meetings. Think back to January 2008, and the terms ascribed to those who warned of a severe slowdown ("alarmist", etc.), and the whole discussion is cast in a different light.

Furthermore, the correlation between scheduled paper titles and actual is, shall we say, fairly loose. In any case, the main messages of the papers are usually discussed in the context of current events.

I'll illustrate this last point by discussing the only complete session I made it to (most of my time was spend interviewing job candidates): "The

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The dollar is on the rebound against the euro [0], [1]. The non-oil trade deficit is shrinking as a share of GDP [2]. Is this a replay of the 1980's adjustment process?

A month ago at a conference in Siena, Gian Maria Milesi-Ferretti outlined the similarities and differences between the two episodes cogently (while the presentation is not online, but some of the points are recapped in this speech by IMF DMD Lipsky, here). He summarized the changes in various macro aggregate in the upswing and the downswing of the dollar in the two episodes in two sets of figures.

A comparison with the 1980's: The dollar appreciation period A comparison with the 1980's: The dollar depreciation period

Milesi-Ferretti highlights the differences:

Adjustment in the 1980s

Helped by oil prices Large transfers in 1991 associated with first Gulf war

Current

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