Macroeconomic Patterns and Stories

3540463887......Page 1
Contents......Page 9
Part I: Introduction......Page 17
1. Introduction: We Are Pattern-Seeking, Story-Telling Animals......Page 18
1.1 Advice: Do Both Patterns and Stories......Page 20
1.2 We Can Also Analyze......Page 22
1.3 Pictures, Words, and Numbers: In that Order......Page 24
1.4 Analytical Thinking: I think I Can Help......Page 25
1.5 What Now?......Page 26
1.7 Data Sources......Page 27
1.8 Appendix: Statistical Science Is Severely Limited in Its Applicability......Page 28
1.9 Conclusion......Page 31
Part II: Four Key Variables: Growth, Unemployment, Inflation and Interest Rates......Page 32
2.1 Definitions......Page 33
2.2 What Does Real GDP Look Like?......Page 42
Appendix: The Index Number Problem and Chain Indexes......Page 49
Appendix: The Seasonal in GDP Is Very Large......Page 50
3.1 HowMight GDP BeMeasured?......Page 53
3.2 How Is GDP ActuallyMeasured?......Page 56
3.3 How Big Are the Components: C, I, G, X –M?......Page 58
Appendix: A Better Way to Treat Imports and Exports......Page 63
4.1 Labor Market Surveys......Page 65
Appendix: Which to Rely on: Business-Reported Payroll Jobs or Household-Reported People-at-Work......Page 76
5. Inflation and Interest Rates......Page 79
5.2 The Consumer Price Index (CPI)......Page 80
5.3 Two Views of Inflation......Page 81
5.4 Interest Rates on Short-Term US Government Securities......Page 84
5.5 The Real Interest Rate: The Price of Durability and the Compensation for Waiting......Page 86
5.6 Interest Rates on Long-Term US Government Securities and Monetary Policy......Page 88
5.7 What Determines the Shape of the Yield Curve?......Page 96
Appendix: Q and A from BLS Web Site Regarding the CPI......Page 100
Appendix: Risk Characteristics of Bonds......Page 102
Summary......Page 104
6.1 Regression Toward the Mean......Page 105
6.2 Forecasting and Regression Toward the Mean......Page 108
6.3 Persistence, Momentum......Page 110
6.5 Stories that Help to Understand the Numbers......Page 113
Part III: A Recession Symptoms......Page 115
7. Unwanted Idleness: Recessions and Recoveries......Page 116
7.1 Worker Idleness: Unemployment......Page 117
7.2 Capital Idleness: Capacity Utilization in Manufacturing......Page 120
7.3 Work Intensity: Hours per Week in Manufacturing......Page 121
7.4 Five Episodes: Normal Growth, Sputters, Spurts, Recessions and Recoveries......Page 122
8.1 Recession Comparisons: Employment and Output......Page 124
8.2 Idleness......Page 128
8.3 Other Indicators......Page 131
8.4 Numbers......Page 134
9. Who Struggles and Who Does Well in Recessions?......Page 136
9.1 Job Losses in Recessions Affect Some Sectors More than Others......Page 137
9.2 Many Sectors Lose Profits in Recessions......Page 146
Part III: B Recession Stories......Page 149
10. Idleness Stories......Page 150
10.1 How Do Economists Explain Unwanted Idleness?......Page 151
10.2 Broken Relationships......Page 154
10.3 Soaking the Rich When Times Are Bad......Page 157
10.4 Making Do with the Old Car......Page 160
10.5 A Pyrrhic Victory of Hope Over Reason......Page 161
Appendix: Supply and Demand Models of Unemployment......Page 163
11. Cycle Stories......Page 165
11.1 The Harrod-Samuelson Multiplier-Accelerator Model......Page 168
11.2 Some Acceleration Facts......Page 170
11.3 The Supply Chain Bull-Whip......Page 172
11.4 Rush to Exploit New Ideas......Page 174
11.5 Ponzi Schemes and Asset Bubbles......Page 180
Part III: C Recession Early Warning Signs......Page 182
12. Clues: Temporal Ordering of Components of GDP......Page 183
12.1 Help from Sherlock Holmes......Page 184
12.2 Contributions to GDP Growth......Page 185
12.3 Average Temporal Orderings: It\'s a Consumer Cycle, Not a Business Cycle......Page 191
12.4 Eight Consumer Cycles, a Disarmament Downturn, and an Internet Rush Comeuppance......Page 194
12.5 Housing False Positives and False Negatives......Page 203
12.6 A Story of the Consumer Cycle: Our Collective Bipolar Disease......Page 204
12.7 Numbers, If the Pictures Are Not Enough......Page 205
Appendix: Normal Contributions in Three Episodes......Page 209
13.1 Components of the Leading Indicator Index......Page 211
13.2 Forget that Expectations Variable......Page 213
13.3 Only a Few of Those Components Predict Oncoming Recessions......Page 215
13.4 Combining the Components into an Overall Index......Page 219
Appendix: Description of Leading Indicators......Page 222
Part III: D Recession Causes......Page 225
14.1 Post Hoc Ergo Propter Hoc......Page 226
14.2 Cause = Intervention......Page 228
14.3 There Are Many Roadblocks in the Way of Causal Inferences......Page 230
14.4 Use Biological, Not Mechanical Metaphors......Page 233
15. In Search of Recession Causes......Page 237
15.1 What Are We Looking for?......Page 238
15.2 Fiscal Policy Seems to Both Cause and Prevent Recessions......Page 241
15.3 The Causal Path Through Houses and Cars......Page 245
Weakness in Exports Has Not Caused US Recessions......Page 264
Part IV: Expansions: With and Without Spurts......Page 266
16. The Life Cycle of US Expansions: Sputters and Spurts......Page 267
16.1 Production and Employment During Expansions......Page 268
16.2 What Caused the Spurts?......Page 278
Appendix: Presidents and Fed Chairmen......Page 284
Part V: The Longer Run: Savings, Investment, Government Borrowing, Foreign Lending and Your Home......Page 285
17.1 The NIPA Definition of Savings: It Is Not What You Think......Page 286
17.2 Do We Save Enough?......Page 291
17.3 Another Important Accounting Identity: Savings = Investment......Page 294
17.4 Crowding Out, Ricardian Equivalence, or Twin Deficits in the 1990s?......Page 300
18.1 Government Purchases of Goods and Services Are Not as Great as You Think......Page 301
18.2 It\'s Transfers......Page 302
18.3 An Accounting Scandal to Rival Enron: Phantom Assets Created by Government Borrowing......Page 307
18.4 The Outstanding Federal Debt Is Great Enough to Be Worrisome......Page 309
18.5 The Real Effect of the Federal Deficit: Trickle-Down Social Responsibilities......Page 310
19. The External Deficit and the Value of the Dollar Hu\'s in Charge?......Page 315
19.1 An Important Accounting Identity: The Current Account = The Capital Account......Page 316
19.2 What Determines the Value of the Dollar and the External Deficit?......Page 320
19.3 How Can the US External Deficit Close?......Page 325
20.1 Household Assets and Liabilities......Page 331
20.2 It Is Not Real Until You Realize It......Page 334
20.3 What Determines the Price and What Determines the Value of Your Home?......Page 337
20.4 Some Realities of a Very Imperfect Ownership Market: The Very Persistent Gap Between Values and Prices......Page 345
Appendix: Homework re the LA Market......Page 351
Appendix: Home Ownership Data from the Survey of Consumer Finances......Page 352
Appendix: Rents or Asset Prices in the CPI?......Page 353
Appendix: There Is no Such Thing as a Housing Shortage......Page 354
C......Page 356
H......Page 357
O......Page 358
T......Page 359
Z......Page 360