Where is the US economy headed?

The situation in Greece at the moment is dire. You can argue that it's the product of crony capitalism and an over generous welfare system, but that doesn't alter the conditions on the ground. The suicide rate has rocketed, people have suffered cut after cut in their income and prices have shot through the roof.

If something is not done to promote growth, the far-right will just get stronger. They're already buoyed after a strong showing in the poll in which one of their pledges was to plant landmines on Greece's borders. I don't want a repeat on 1930s politics.

If the improvement is based on borrowing the betterment is only temporary. The problem is left to the period after Mr Obama has left office.

No. But such needless government jobs exist in every country. They even exist in the US, where they are called "about half of the armed forces". I can't think of anyone who has objective information on which we could judge if such jobs make up a greater percentage of employment in one country than in the other.

Better watch it Thomas. Attacking the military budget is both unamerican and socialist. The warmongers will get very upset if we dont have the power to intervene any where in the world. Its what makes us free?

What is the panel's view on Mr Obama criticising the German government for sticking to the austerity programme.

I'm with Obama, austerity isn't working.

What does "working" mean? There's a theory that the New Deal didn't work and that it was the war that got things humming.

If Mr Obama wants to punt the ball into the long grass so he can win the election and worry about it afterwards then it's okay by me. But it is a debt crisis and I can't see how you solve it by borrowing more. It matters what people are doing and not that they are doing something.

Remember that the Germans absorbed East Germany and it was an economic basket case. They had the courage to make a parity of the two currencies.

I think you are being deliberately evasive and distorting the question to suit your (hard to understand) agenda.

The contaigon among the Eurozone countries is very clearly influenced by the existence of their common currency - a factor that, to some extent, makes them a single financial entity. Their collective failure to adhere to the financial stability pact they established when the common currency was created, or even to ensure that the required financial reporting of member states was accurate; coupled with generally low economic growth and inflexible labor markets were the main sources of their collective risk. The orriginal pact would have set limits on total debt as a % or GDP and on running deficits, among other things. It was ignored in apparently good times, but left them vulnerable to the collapsing bubble that occurred in 2008. Now their banks have significant exposure to the public debt of other members, including those which for their own individual reasons are exceedingly vulnerable to a collapse of confidence among potential lenders. This is the obvious source of the correlation distortion to which you referred.

Ireland had and has a very productive economy and low total debt levels, but it had an unusually intense and serious construction bubble; some probably illicit collusion among banks and politicians; and made a very bad bet on nationalizing a then still unquantified debt, which suddenly raised its debt to uncertain but very high levels relative to expected future GDP. That path to the collapse is entirely consistent with the proposition I put forward, and the lack of correlation with the public debt or prior deficit components of the proposition is entirely incidental and obvious.

Italy has long-term problems with low economic growth driven by politically motivated subsidies and a very inflexible labor market, as well as high debt levels relative to GDP. Spain had much less debt relative to GDP but a very large exposure to the collapsing real property bubble, as well as rapidly rising deficit levels among its regional governments. The result was a fast rising deficit (and debt) together with a sharply dropping GDP. As with Italy their relatively inflexible labor market rules and the sclerosis associated with social welfare programs has inhibited their GDP recovery.

All of these situations involved only varying relative levels of the several factors I identified as creating financial vulnerability . Your efforts to find a selective lack of correlation among individual elements are positively deceptive, and I think you know that.

I think you understand all this perfectly well: you just chose to ignore it to make some rhetorical point (though what it might be still evades my understanding).

That's a bit nasty George.

The common currency had a political motivation. We need to unite to avoid being picked off one at a time. And it will be done too. You're making too big a fuss about short-term teething troubles.

We're loaded. We've never had it so good.

I don't have an agenda, unless you call it an agenda that I'm interested in testing hypotheses against data, and adapting my politics to the hypotheses that pass. As far as I am concerned, the two questions are: what caused the Euro crisis, and how can Europe get out of it? To figure out the answers, I look at the economic models that are out there, run them against the data we have, and ask what the models that fit the data recommend. So that's what I did with the hypotheses you suggested. No more, no less.


So far, I agree.


On this point, I disagree, for three reasons. First, pre-crisis Europe collectively did stay within the bounds of the stability pact. Second, pre-2007 adherence of individual member states to the pact was uncorrelated with their post-2007 damage from the crisis. Third, and most importantly, the Maastricht pact's so-called stability criteria have nothing to do with what standard macroeconomic models would suggest stabilizes a currency union. The greatest risk for such unions is asymmetric shocks, where depression hits some parts but not others, and a one-size-fits-all monetary must necessarily wreak havoc somewhere. The Maastricht criteria do nothing to address this risk. Maastricht, in other words, is called a stability pact, but it's not a stability pact.


I agree. The same construction bubble happened in Spain, and in Italy, and in Greece, and not in the countries that didn't fall off the cliff. On this variable you truly do have a good correlation. But when you take this variable seriously, it tells a story about out-of-control inflows of hot, private money through an under-regulated banking system. It has nothing to do with either the overregulation story, nor the welfare-state story, nor the government-deficit story you were telling earlier. This is a story of private financial market failure that taxpayers got stuck with the bill for. For the future, the obvious correction of this market failure is more, not less, public oversight of the banking system.


What's selective about it? You tell me, because you selected them! All I did was take the causes you suggested and check if there was a correlation between them and the problems that you alleged they caused. And there wasn't.


It's called "hypothesis testing", and it's not a rhetorical point. It's what we trained physicists do to figure out how the world works. Engineers do it, too. I hope you've done lots of it yourself when you had your engineer hat on.

You do by increasing your revenue, stimulating growth means more tax receipts. At the moment we're borrowing more to pay for unemployment.

Alastair Campbell's plan to cut borrowing in the medium term was working, we were coming out of recession, and growth continued throughout 2010.

Once Osborne's policies started to bite in 2011 the recovery faltered. Along with Cameron he'd spent the last year talking the economy down for political reasons.

Are you sure you mean Alastair Campbell?

It's all about re-alignment between the public and private sectors.

I blame those who vote for minority parties. Labour didn't want anything to do with the chickenshit Liberal Democrats.

I think Mr Obama will try to buy the election using money the next generations will be billed for.

No I don't, I meant Alastair Darling sorry. I was a bit bleary-eyed when I posted that.

We already don't have the power to intervene anywhere any time we feel like it in the world, not enough resources off all types.

From what i can understand there are all kinds of ways to save money in the military by eliminating programs and weapons that are out dated and by revamping where we have people stationed at.

Just like with health care, there is no need to throw the baby out with the bath water, but just focus on waste and outdated ways of doing things. For example: filling out a book every time you go to a new doctor. I mean why isn't that sort of thing on computers now?

All good suggestions, except for the fact that conservatives will veto anything the Obama administration recommends to save cost in defense.

Good evening. This thread has become a bit quiet lately. Not surprising, I guess, as we seem to just be plodding along. I don't agree with that but the economy has never covered well in the mainstream media.
Tomorrow the employment numbers come out. The consensus is that net new jobs will be around 150,000 - barely good enough to stay ahead of workforce growth. I think it is likely to be more like 120,000. Unemployment rates will remain unchanged.
The European situation is getting more and more scary. Our exports to them may seize up shortly.

Have you all heard this little girl's speech about the banks?
The audio is good but is not in sink with the video.

That might well be the general idea John. There are a lot of people who have had quite enough of what America exports.

Hi, Spendius. Haven't seen you around lately. How have you been?

There are conflicting evidence for what's happening to the world's economies. Even in the US, the drop in home prices are believed to have bottomed out, and most areas in the country are seeing more activity in home sales. Visit the tourism industry, and they seem to also be picking up. I recently returned from a national parks tour in the Western US, and Globus tour company is increasing their staff to meet the increasing demand. We had two trainees on our tour, and will be leading tours within two weeks. Restaurants and bars seem to be busy in most areas of the country, and hotel rates are increasing.

I believe there is danger on the current media emphasis on the Euro country problems that only exacerbates the problems to our markets and consumer confidence.

As for unemployment rates, we can't expect miracles when the conservatives continue to cut taxes without funding already legislated spending, and all levels of government continues to lay off workers by the thousands.

The conservatives are already talking about not approving the next round of the debt ceiling without more spending cuts.