The comments below were provided by Peter Greene of Fusion IQ.

In the midst of the longest and deepest, post World-War II recession, America’s financial position relative to the rest of the world has deteriorated sharply. Three decades of massive trade deficits have turned the United States from the world’s top lender into the world’s largest debtor and as a result has made it dependent on the whims of so-called emerging nations, laden with huge foreign currency reserves, to finance the bailout of Wall Street Oligarchs, and President Barack Obama’s social programs.

Foreigners own roughly half of the US government’s publicly traded debt, or $3.47-trillion, representing nearly 25% of the size of the US economy - the highest level in history. If foreign lenders were to significantly reduce their purchases of US Treasury notes, without even dumping their current holdings, US long-term interest rates could zoom higher

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The U.S. news media has convinced many investors that oil consumption is falling because of the global recession. While that may be true, it’s a disservice to millions of investors because production is declining at a pace that’s actually three times faster. And that suggests higher oil and gasoline prices in coming months - perhaps as much as 50% - 70% higher, or more - particularly if a U.S. economic recovery is truly in the offing. To really see what I’m talking about, let’s start with a close look at consumption. I’m asked about this frequently in my global wanderings, most recently at the Las Vegas Money Show last week. For months we’ve been hearing about a drop in global demand. It’s a popular story and one that sounds credible: After all, it seems logical to assume that during economic chaos, consumers and businesses alike will ...

Here I provide some more background on the relation between oil price increases and economic recessions.

When I first began working on my Ph.D. dissertation in 1980, I was intrigued by the fact that the oil embargo of 1973-74 and the collapse in Iranian oil production after the revolution in 1978 were both followed by global recessions. But when I called attention to the fact there had been a sharp increase in the price of oil prior to 6 of the 7 postwar U.S. recessions up to that point, the general response was one of skepticism.

By the time I was presenting evidence of this relation at various seminars in 1981-82, the Iran-Iraq War had produced yet another shock to world oil markets and the NBER declared that the U.S. experienced a new recession immediately on the heels of the previous downturn, meaning that the evidence had now become that

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In a follow-up on my earlier post, I'd now like to discuss the second part of my paper, Causes and Consequences of the Oil Shock of 2007-08, which I presented today at a conference at the Brookings Institution. Here I'll review the role that the oil price shock may have played in causing the economic recession that began in 2007:Q4.

My paper uses a number of different models that had been fit to earlier historical episodes to see what they imply about the contribution that the oil shock of 2007-08 might have made to real GDP growth over the last year. The approaches surveyed include Edelstein and Kilian (2007), who examined the detailed response of various components of consumer spending, Blanchard and Gali (2007), who studied the extent to which the contribution of oil shocks has significantly decreased over time, my 2003 paper, which

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Japan’s exports plunged by 45.7 percent year on year in January, producing a record trade deficit, as recessions in the U.S. and Europe, and a sharp downturn in China crushed demand for the country’s machinery, cars and electronics. A drop of this size is truly staggering. “People are coming to realize that Japan is in deep trouble,” said Hiroshi Shiraishi, an economist at BNP Paribas Securities Japan Ltd. in Tokyo. “Considering what’s happening on the export side, and the implications that has for the domestic economy, the yen is clearly not a buy.” Japan's trade balance was sent deep into red territory driven, of course, by the 45.7% fall in overall exports to 3.48 trillion yen. As can be seen in the chart below, the ...

by Edward Hugh: Barcelonabr /br /Well last week Kazuo Momma, head of the Bank of Japan’s research and statistics department, warned that Japan’s economy now faced an “unimaginable” contraction, and today we can begin to see just what the unimaginable might look like, since the preliminary data are for fourth quarter GDP are now out. What we find is when we come to stare the unimaginable in the face is that Japan’s economy contracted by 3.3 per cent in the three months to December when compared with the previous quarter, effectively the country’s worst economic performance in 35 years.br /br /On an annualised basis, gross domestic product declined at a rate of 12.7 per cent, a number which perhaps better than any other highlights the depth and severity of a slump that has surely now dispelled all those early hopes that the global economy might be able to shrug off …

This is the first in what I'm planning will be a series of posts discussing the contribution that the energy price spike of 2008 made to our present economic difficulties. In this first installment, I revisit a very interesting research paper on the response of consumer spending to energy price increases written by Lutz Kilian (Professor of Economics at the University of Michigan), and Paul Edelstein (Senior Economist for Decision Economics). I first brought this paper to the attention of Econbrowser readers in the spring of 2007. I thought now would be a good time to take a look at how well the equations in Edelstein and Kilian's paper can describe what we saw happen in the later part of 2007 and first half of 2008.

Edelstein and Kilian summarized the historical correlations between energy prices and economic activity in terms of

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Falling gasoline prices will provide some stimulus to the economy. But how much?

Americans consumed 142 billion gallons of gasoline last year. That means that when gasoline prices rose $1/gallon last spring, if consumers and fuel-using businesses had not reduced the quantity of gas they purchased, they would have had to reduce other expenditures by $142 billion. That's a bigger negative shock to spending power than the $90 billion that the federal government was trying to put back into consumers' hands through last spring's fiscal stimulus.

The run-up in gasoline prices hurt the economy not just by reducing consumers' spending power. The abrupt drops in spending on key sectors of the economy exerted significant effects of their own. As higher gas prices caused consumers to shun Detroit's gas guzzlers, U.S. production of motor vehicles and parts fell by 15% between 2007:Q4 and 2008:Q3 (BEA

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Clarium CapitalClarium Capital Hedge Fund Tracker NotesThe following piece on Vision Capital Advisors is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund research please see our Hedge Fund Tracker Tool.Here is a detailed 13F Holdings Analysis on Clarium Capital ManagementThe New York State Common retirement Fund invested $5 million in Clarium Capital’s Global Macro Fund. The deal was completed in March 2008 and will be part of the Retirement Fund’s Absolute Return Strategy.Clarium’s LP Fund fell 13% in August largely due to its bets against the dollar. The Fund is still ...

August auto sales were less dismal than July. But don't uncork the champagne quite yet.

The New York Times reports:

Domestic sales declined by 15.5 percent in August compared with the previous year, the fifth consecutive month of double-digit declines, despite some relief in recent weeks on gas prices.

I like to look at these data using graphs like the ones below, to help distinguish seasonal and cyclical factors from trend. (By the way, Econbrowser remains the only site on the web, to my knowledge, where you will find the auto data displayed this way.) You can make year-on-year comparisons by looking across entries within any given set of columns, and see month-to-month changes by looking across groups of columns.

Data source: Wardsauto.com

Sales of light trucks (which includes SUVs) manufactured in North America were clobbered this summer, and August 2008 was down

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