While the track record of macroeconomic forecasting leaves much to be desired, it is natural to have an interest in the growth prospects of the global economy. Recently, Europe has been at the forefront of investor concern due to fiscal instability in Greece and other smaller European economies. There has even been talk of the disintegration of the Euro. Read this article for a link to the Financial Times “Economic Weather Map”
Shortly after 8:30 am this morning, cable news networks and web sites quickly reported the government’s initial estimate of 3.5% growth in Gross Domestic Product (GDP) for the third quarter of 2009. In terms of depth of reporting, most of these news stories on macroeconomic developments are similar to stories regarding company earnings. If your only source of information are the “headline numbers”, you will be left with a stream of data that is a mile wide and an inch deep. Read this article for more details on Q3 2009 GDP numbers.
Much of the response to the global economic crisis of the past two years has been based on the economic theories of John Maynard Keynes. No other economist of the past century has had such a profound influence on modern policy makers. The success or failure of the monetary and fiscal stimulus applied in the United States and elsewhere will depend on whether Keynesian policy prescriptions are effective.
Very few Americans have experienced an economic downturn as severe as the current recession. Although it is very possible that GDP will show a positive reading for the third quarter, hardly anyone expects the employment situation to improve significantly until 2011. It is very possible that unemployment will soon exceed the worst levels of the 1981-82 recession. In most economic downturns, consumers attempt to substitutecheaper private label “store brands” for brand name goods . The key question is whether the current “great recession” will produce more lasting effects in consumer behavior. Read this article for more details.
One of the interesting effects of the turmoil in financial markets since September involves the level of implied inflation expectations embedded within the market prices for Treasury Notes and Bonds. This is a very interesting development given the Federal Reserve’s accommodative monetary policy and the large deficit financed spending plans proposed by the Obama Administration. Read this post for more details.