Krugman: "I would not be surprised if GDP growth is positive in the second half of this year..."

[ProSense]

Green shoots and tea leaves

Beware the bumps

The crisis is over! Or so some are saying.

OK, a couple of things.

One is that even in the Great Depression, things didn’t head down all the time. The chart above, from Eichengreen and O’Rourke, shows world industrial production in months from the previous peak, in the Depression and in the current crisis. Notice that there were several upturns along the way; each of those could have been — and was! — heralded as the beginning of recovery.

Meanwhile, about those great numbers from Wells Fargo: remember, reported profits aren’t a hard number; they involve a lot of assumptions. And at least some analysts are saying that the Wells assumptions about loan losses look, um, odd. Maybe, maybe not; but you do have to say that it would be awfully convenient for banks to sound the all clear right now, just when the question of how tough the Obama administration will really get is hanging in the balance.

All that said, I would not be surprised if GDP growth is positive in the second half of this year, if only because of the inventory bounce. But I will be surprised if the unemployment rate actually turns down.

(Emphasis added)

Intersting!

U.S. recession to end in H2 but unemployment to rise: survey

[babylonsister]

1. Oh, noes! Who's channeling through Krugman?

This is sure to upset a lot of people around here! How could he?! ;)

[jefferson_dem]

2. He hath spoken. Let it be so.

n/t

[Arugula Latte]

3. Oh, lord. That scared me for a second. I first read it as "GOP growth."

:scared:

[BlooInBloo]

4. Phew. He started off with "no matter what happens, it proves me right"...

Thankfully he left a small out on the unemployment.

[apr09]

5. Krugman didn't say that

But I'm willing to be shown otherwise.

[Teaser]

24. win

.

[AtomicKitten]

37. CYA = hedging bets

keeps the flies off

[mkultra]

6. this is WORLD gdp not us

we are not in a depression as we have not seen a 10% or more decline in one quarter. Essentially, depression mode planning is not usable for our recession.

[ClarkUSA]

7. lol! What a CYA move.

[NJmaverick]

19. That was my take as well

Krugman is still trying to talk down the economy, while having to face the colossal blunder he has made. So he is trying to hedge his bets, by claiming even a turn around shows he was right. Paulie is about as intellectually dishonest as they come.

[earthside]

8. Duh.

Building a bomb contributes to GDP; replacing a totaled car contributes to GDP; leveling a mountain top for coal contributes to GDP; rebuilding after a tornado or earthquake or hurricane contributes to GDP.

Borrowing and creating trillions of dollars out of thin air and bailing out Wells Fargo and Citi and GM contributes to GDP.

GDP is one of the most flawed economic measurements there is.

So ... duh if GDP is positive later this year.

But, it is all phony and artificial. Until we bust-up some banks and mega-transnational monopolistic corporations ... and dump all these so-called 'free trade' agreements and rebuild our manufacturing base ... well, it is all a charade.

The only number that really counts (if you can figure out the true statistic) is the rate of unemployment.

[mkultra]

9. your ass backward

All growth in GDP drives employment. Thats why its considered by people with real economic knowledge to be the leading indicator. Perhaps you should gather the world economists together and correct their thinking.

Don't be afraid of the phantom dollar. It is what spurs economic growth. It creates real work. we are free from the gold standard and loving it.

[earthside]

10. Ah. Corporate Love ... So Sweet. n/t

[mkultra]

11. Ah. cognitive dissonance... so sweet.

Sorry to relay but the economy is important and it is turning. I guess you should start thinking of how you will recast your opinion when its found baseless.

[HughMoran]

23. I'M RIGHT AND YOUR A CORPORATIST APOLOGIZER IF YOU DISAGREE

It's no wonder that people are getting sick of some of the self-righteous critics here. What a filthy rotten simpleton way of brushing off criticism.

[Hello_Kitty]

25. Whereas no one does disdainful dismissiveness like corporatists

"You serfs just don't understand these complex economic issues." :eyes:

[mkultra]

32. dont sweat that guy

i read his blog, its kitty litter.

[HughMoran]

36. Meow

Can you tell my post was somewhat reactionary in nature - lol!

[mkultra]

39. hehe, not at all

:sarcasm:

[Canuckistanian]

18. You're right

http://en.wikipedia.org/wiki/Gross_domestic_product

Austrian economist critique – Criticisms of GDP figures were expressed by Austrian economist Frank Shostak.<4> Among other criticisms, he stated the following:

The GDP framework cannot tell us whether final goods and services that were produced during a particular period of time are a reflection of real wealth expansion, or a reflection of capital consumption.

He goes on:

For instance, if a government embarks on the building of a pyramid, which adds absolutely nothing to the well-being of individuals, the GDP framework will regard this as economic growth. In reality, however, the building of the pyramid will divert real funding from wealth-generating activities, thereby stifling the production of wealth.

Austrian economists are critical of the basic idea of attempting to quantify national output. Shostak quotes Austrian economist Ludwig von Mises:

The attempt to determine in money the wealth of a nation or the whole mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimension of the pyramid of Cheops.

[depakid]

12. "there were several upturns along the way; each of those could have been — and was! — heralded

-as the beginning of recovery."

Seems to me that's the take home message.

The potential (or probabability for) a double dip -or series of double dip recessions, as commodities prices rise and fall.

[mkultra]

14. drop the krugman koolaid

his chart is WORLD GDP. the US chart shows zero upticks until the recovery. Krugman is commonly full of shit when his guesses don't pan out.

[depakid]

15. Drop the juvenile knee jerk reactions

The likelihood of double dip recession has been discussed by a LOT of folks- for a number of reasons. Like the last one in 1980-82 -involving commodity price increases (and an attendant drop in the dollar) that destroys aggregate demand.

As the world is on a geophysical plateau of petroleum production- and since the recent dive in prices has led to decreased exploration, development and production capacity- steep price rises will accompany any economic expansion- which of course exacerbates the inflation many already expect to see during an uptick.

Thus, the 1980-82 scenario could well be what we're about to see.

In this instanc of course, there are other aggravating factors as well, such as the level of personal, commercial and government debt, the fall in perceptions of wealth and security (housing prices, 401k/s, etc) and the declining fiscal status of state governments.

btw: I use the term "juvenile" because all to many seem to view these matters in terms of "Rah, Rah, Rah go team! boosterism- as if this were some high school sporting event, rather than a situation requiring us to think critically about the facts and various pieces of analysis.

[Kurt_and_Hunter]

17. It's incredible, isn't it... like sports call-in radio

[Kurt_and_Hunter]

16. There were no upticks in the US between 1929 and 1933?

[Telly Savalas]

20. What dynamics existed in the other parts of the world then that don't exist in the U.S. today

which allowed them to have several upticks before full recovery?

Why is it impossible for this phenomena to occur in the U.S. now?

[mkultra]

26. well first off

let me say, good questions. I would say that while it is not impossible, there is no evidence to suggest it is likely. It is possible for us to tack up and then jump way down again. But there are no numbers or causes that would suggest otherwise. There where no uptick quarters before 1933 but perhaps some are perceiving the significant depth just after the passage of Smoot-Hawley which probably extended the depression by 3 years. Obama has been very careful to avoid language that might bring up the protectionist spectre thankfully.

As per the first question, i would point out that since the great depression was global, it ended for different countries at different times with each country enacting its own form of recovery measure. This is what contributes to the upticks in the global chart. Essentially, the global chart from the great depression is not of great us for prediction purposes.

I would also point out that the great depression was different in cause and depth than our current recession.

[berni_mccoy]

13. LOL Krugman Steals The Chart But not The Conclusion From Eichengreen and O'Rourke!

Their conclusion (they have much more in depth analysis and quite a different conclusion):

To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30.
The good news, of course, is that the policy response is very different. The question now is whether that policy response will work. For the answer, stay tuned for our next column.

Furthermore, that chart stops at JANUARY 2009, BEFORE Obama had a chance to apply a policy change.

[Telly Savalas]

21. I'm pretty certain Krugman would agree with the bolded part of that quote.

He's supportive of the general direction of Obama's fiscal policy. His main criticisms are that the stimulus wasn't big enough and that too much weight was placed on tax cuts.

From everything I've read I believe that he's right on the economics of this, but it should be noted that Krugman doesn't need to win 60 votes in the Senate to get his column printed.

[HughMoran]

22. Inside informaton from someone I'm close to says Wells Fargo has VERY conservative loan practices

This is from someone who data-mines this data to determine required reserves and risk analysis.

These numbers from Wells Fargo don't surprise me at all - in fact I expect them to be less effected by bad loans than most any other lender.

[mkultra]

27. Everyone in finance knows

that wells is a premium lender. They only make very careful loans and keep a much tighter reserve. Amazingly, they didnt take TARP money and turned a profit. shocking.

[HughMoran]

28. Yep

The premium data that they get for analysis proves this. Not sure why this surprises anybody?

[mkultra]

30. I think there are alot of confused people trying to keep up.

I don't think they understand that wells was not a bailout recipient and that the profit is tax payer money or some such nonsense. Seems kind right wing in tone.

[HughMoran]

33. Even Krugman and his linked in article writer can't seem to comprehend Wells

This is the crux of Krugman's linked in argument as to why he thinks Wells performance in basically smoke and mirrors:

"Historically, Wells has justified its lower reserves by maintaining a comparatively higher-quality loan book; can the same argument really be made now?"

My answer? I don't know. Do you Mr. Paul Jackson? Do you take Paul's assumptions and run with them Mr. Krugman?

An awful lot rests on this one assumption above - this is why I don't and never will believe economists, no matter how "great" their reputation.

[mkultra]

34. they have peaks and valleys

Just like what they study.

[HughMoran]

35. True. Since I'm not as knowledgeable as they are - how to know when they are on a peak versus valley

?

There is no way to know. I can only use my "gut instinct" common sense when I am not familiar with the subject matter.

In this case, I happen to know that other giants in the banking industry use Wells as a gauge of risk - i.e. "the benchmark". Granted, there are factors beyond good quality loans (like unemployment), but the banks even figure this into the equation. Wells won't even lend in economically risky states! I can't be so cavalier about their profit numbers as Krugman et al.

[scheming daemons]

29. Krugman is in full CYA mode.... Nobel prize or not, this "analysis" is worthless

He's making "predictions" and statements in such a way so that he can say he was right no matter what happens.

[mkultra]

31. lol, pretty funny huh

Heres my summary:


"Others say its over"
"I could still be right"
"the sky is falling"

[Occam Bandage]

38. Heh. After investing so deeply in failure, Krug's now pulling the Mother of All CYAs. nt