Christina Romer's October 22, 2009 Testimony

Here is testimony by Christina Romer before the Joint Economic Committee on October 22, 2009:

http://jec.senate.gov/index.cfm?FuseAction=Hearings.HearingsCalendar&ContentRecord_id=6dd4483c-5056-8059-7664-1856ea0ee4e6

Readers of this blog will know that I don't agree with many of the statements and forecasts found in this testimony. However, I am calling attention to it because it has several notable passages, as well as forecasts.

Although we have heard similar statements from other economists, here is one such notable passage found beginning on the bottom of page 10:

"Leaving aside timing issues, the unemployment rate typically falls when GDP growth exceeds its normal rate of roughly two and a half percent per year and rises when GDP growth falls short of this pace. With predicted growth right around two and a half percent for most of the next year and a half, movements in the unemployment rate either up or down are likely to be small. As a result, unemployment is likely to remain at its severely elevated level."


SPX at 1079.60 as this post is written

Comparing The Great Depression To Our Current Economic Situation

In previous posts I have spoken of the comparisons between our current period of economic weakness and that of The Great Depression. Those posts were written on June 22 and June 15.

I would like to reiterate my view, seen in the above links, that although our current period of economic weakness does have similarities to that of The Great Depression, there are notable differences as well. To believe that both situations are very similar, and by acting accordingly, imperils our economic situation.

The reason I feel as if I need to reiterate these views is twofold. First, people in general seem fixated on the comparison. Second, two of perhaps the most influential economists of today (Paul Krugman and Christina Romer) recently had articles, found in the below links, in which they discuss our current situation in context of The Great Depression:

"That '30's Show" by Paul Krugman

http://www.nytimes.com/2009/07/03/opinion/03krugman.html?_r=1

"The Lessons of 1937" by Christina Romer

http://www.economist.com/businessfinance/displaystory.cfm?story_id=13856176

SPX at 879.34 as this post is written


Copyright 2009 by Ted Kavadas

My Thoughts on More Stimulus, Part IV

This is the fourth and last post (for now) with regard to my thoughts on the idea of further stimulus.

At this juncture, one is led to wonder "what if more stimulus is enacted?" What may be its potential size and composition? As seen in the following video interview of Christina Romer:

http://www.cnbc.com/id/15840232?video=1170636023&play=1

her view on the matter of additional stimulus is that "We'll do whatever it takes."

I found the "We'll do whatever it takes" phrase to be very interesting. First, do we, as a nation, know "what it will take?"

Second, this "We'll do whatever it takes" phrase naturally begs the question as to what, if any, limit there may be on the size of any additional stimulus efforts. Even if there is no presumable size constraint on additional stimulus efforts from a legislative perspective, might there be constraints imposed by such things as market reaction to additional indebtedness? As well, there are many other issues, of a complex nature, that would accompany further large-scale stimulus efforts.

Perhaps the most apropos way to end this series of posts on further stimulus is to say "Stay tuned." (lol)

SPX at 878.38 as this post is written



Copyright 2009 by Ted Kavadas