In several past posts, I've been taken to task for using the CBO measure of the output gap (and the associated measure of potential GDP) [0] [1]. Some criticize the false sense of certainty that is provided by the official measures, since they are known to be revised as data comes in. Some criticize the measures on the basis the fact that the statistical methodologies (Hodrick-Prescott, Band-Pass) are divorced from a formal economic model. Some criticize the concept of potential GDP derived from a production function approach (i.e., thinking about the economy as one big production function associated with one big firm...). Arnold Kling's recent critique centers upon the idea that output is not homogenous, and we need different types of capital (and by extension labor) when the desired composition of output changes. Yet another -- not entirely unrelated -- perspective argues that when relative prices change

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At times like these, when emotions are running high in the markets, it pays to take a few steps back ... look at the charts ... and put the markets into perspective. This is especially true today, with so much bad news out there ... with so many threats to your wealth ... and so much confusion, even amongst experts. Indeed, the onslaught of nightmarish news about the U.S. economy continues to hit financial markets around the world like a Category 5 hurricane. But through it all, please keep the following in mind: Major fundamental trends do NOT change overnight. The mortgage, debt, and real estate crises in the U.S. are not over, not by a long shot. Martin and Mike are on top of these markets like sharpshooters. Follow their wisdom on these ...