Posts filed under “Financial Press”

Amity Shlaes Does Not Know What a Recession Is

According to Amity Shlaes, Phil Gramm is correct — there is no recession so just stop whining:

"Consider what happened this week. While speaking with the Washington Times, Gramm said that the country was not in a true recession but a "mental recession." He also said, "We have sort of become a nation of whiners" and "You just hear this constant whining, complaining about a loss of competitiveness, America in decline."

Gramm was right about the recession and stood by his recession comments on Thursday. A recession is two consecutive quarters in which the economy shrinks, and last quarter it grew. But no matter. Voters feel they are in a recession, and so they are, at least according to Campaign Econ."

Um, wrong.

First, let’s corrrctly define what a recession is: It is NOT two consecutive quarters of GDP contraction. What a recession actually is, according to the NEBR, the entity in charge of dating such things, is as follows: 

"A recession is a significant decline in economic activity spread across
the economy, lasting more than a few months, normally visible in real
GDP, real income, employment, industrial production, and
wholesale-retail sales.

A recession begins just after the economy
reaches a peak of activity and ends as the economy reaches its trough.
Between trough and peak, the economy is in an expansion. Expansion is
the normal state of the economy; most recessions are brief and they
have been rare in recent decades. As formally defined by the NBER, it is the "Peak to Trough decrease in business activity." 
-The NBER’s Recession Dating Procedure 

You will note that nowhere in that formal definition is there any discussion of consecutive quarters of negative GDP.

Let’s review: Phil Gramm is working hard at submarining John McCain’s Presidential campaign. Gramm says something that will very likely found to be incorrect — we won’t find out for quite sometime when the recession technically began, but its a good bet that its somewhere in the October 07 – February 08 period, based upon the definition above.

At the very least, what Gramm said was foolishly impolitic. Defending it via bad info is not only wrong, it is insulting to all those "whiners" dealing with food and energy inflation and asset deflation. Ms. Shlaes response is to defend Gramm via definition discarded long ago. (Well, its not like she’s an expert in economics or anything).

I guess she and Phil Gramm are two more Pervasive Pollyannas of Prosperity . . .

Smart move by Phil Gram:

While people are looking at this dumb comment — as well as his great work at UBS — the real fun won’t begin until they start investigating his work on the 2000 Commodities Futures Modernization Act . . .


Recessions Often Begin With Positive GDP Data   (May 2008)


Phil Gramm Is Right
Amity Shlaes
Washington Post, Saturday, July 12, 2008; A13

The NBER’s Recession Dating Procedure
October 21, 2003

Business Cycle Expansions and Contractions 
National Bureau of Economic Research

Bureau of Economic Analysis

Forgotten Man: A New History of the Great Depression (Hardcover)
by Amity Shlaes

Category: Economy, Financial Press, Politics

Why Barron’s Housing Cover Is So Terribly Wrong

New Home Completions, 1968-2008 click for ginormous chart Major New Home Building Housing expansions since 1968 are marked as a red horizontal line at bottom. They previously lasted 2-4 years (71-73; 76-79; 83-87) The most recent boom far exceeded all previous expansions, running form 1992 – 2003 — then exploding upwards for another 3 years…Read More

Category: Data Analysis, Financial Press, Real Estate, Valuation

Murdoch: ‘Very Bearish’ on Economy


News Corp. Chief Executive Officer Rupert Murdoch said
he is "very bearish” on the economy as food and energy prices rise for

Murdoch said he anticipates "another 12 months of hard slogging”
during a television interview from the Allen & Co. media conference
in Sun Valley, Idaho. He said the entertainment industry is "doing just
fine” so far.

"Every country in the world has serious food inflation and then of
course you’ve got the same thing with energy,” he said. "It’s really

click for video:

Media stocks have been overly penalized, Murdoch said. News Corp., based in New York, had dropped 30 percent this year before today on investor concern about a slowdown in advertising and the company’s MySpace social-networking Web site. Time Warner Inc., the biggest U.S. media company, had lost 16 percent, and No. 2 Walt Disney Co. is down 8.5 percent.

News Corp. Chief Says He’s `Very Bearish’ on Economy
Greg Miles and Gillian Wee
Bloomberg, July 10 2008

Category: Economy, Financial Press, Video

Read it here first: Implode-O-Meter Hits the NYT

Category: Credit, Financial Press, Real Estate

Another Not-Quite-a Linkfest

Category: Financial Press

Barron’s: Back in the Pool

Category: Contrary Indicators, Financial Press, Markets, Psychology

Economic Anxiety Disorder

Dana Milbank is brilliant:





The Economy? Words Fail Me.
Dana Milbank
Washington Post, July 4, 2008; A03


Category: Economy, Employment, Financial Press, Video

John Stossel is Utterly Clueless

Category: Financial Press, Markets, Psychology

Headline of the Day: Zimbabwe’s Million-Percent Inflation

Category: Financial Press, Inflation

Pervasive Pollyannas of Prosperity

David Leonhardt discusses a few items today which are regular discussion points here at TBP. My favorite lately is why the public is so much gloomier than the pundits: “Pundits have been scratching their heads about why the public mood is so grim. Last week, Barron’s called the drop in consumer confidence “difficult to figure.”…Read More

Category: Economy, Employment, Financial Press, Psychology