Tuesday, August 31, 2010

Links 8/31/2010

The Paradox of the Zero Bound – Hussman  The first intelligent discussion of why the yield curve might not work predicting recession in a Zero Interest Rate Policy environment, using Japanese data and data from America in the 1930s, when the relationship broke down.  I will revisit this issue in the next “animal spirits” update.

http://www.youtube.com/watch?v=pObxCXhf9-E&feature=channel  What GM is doing in China with SAIC.  Are you aware of the $60 billion China expo, themed “Better City, Better Life”?  Check it out.

Beware those who think the worst is past Carmen Reinhart and Vincent Reinhar (h/t yves).  These are the folks who have looked at what over-indebtedness does to economic growth across virtually all available data:  growth slows down.

However, “recessions” or business slumps in the classic sense are characterized by a failure of confidence and negative skewness of the growth rate.  The next failure of confidence does not appear to be imminent—not to say we can’t have a negative quarter of GDP growth here and there, as the forecast is for negligibly positive real growth into the next slump, which is going to be a doozy.

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