Assessing Quantitative Easing

The Wall Street Journal has a good graphic assessing Quantitative Easing - basically it shows that QE did not accomplish very much in terms of stimulating the economy. I think this is a bit misleading since I do not think that was really the goal of the QE program. Basically, it was to prevent deflation and move investors away from safe haven of government bonds (by lessening the benefits of holding bonds). The argument that a liquidity trap makes monetary policy all but ineffective seems to hold up. So, while QE may not have gotten us out of the hole we are in, it did prevent deflation which would have made things worse - and that is the real measure of its success.




Here is the graph:

Interactive Economic History & Policy

The Big Picture has reposted a great New York Times interactive graphic from 2009 showing a history of the American economy from 1960 to 2009, policy actions during that time and descriptions from economists. Great teaching tool - hopefully they will update it. Check it out:

Bitcoin - New Currency?

A new on-line currency, the bitcoin, has been created and is in circulation. Basically, it is currency created through a computer algorithm that can be used for on-line purchases and is free from any national government. There is a lot of talk that it will become the currency of drug dealers and criminals. Newsweek has a short article on it here and the Economist blog has a larger post on it here.

I am not sure what will happen to this currency. I suspect not much. The amount to be put in to circulation will be small (21 million coins, even at a price of $18 per coin, is not much of a base for a currency). However, the bigger issue is whether this currency can offer anything (except hiding illegal activity) that most people would want in a currency that is not already available. I know that Internet people will say that this is a new form of currency - however, the idea of private entities creating their own currency is not a new idea. More importantly, the fixed amount of bitcoins will likely result in hoarding, hence raising its value - but leading to a form of deflation. Or, it could simply be too difficult to use and be utterly worthless. Either way, it will be interesting - although not very useful.

Krugman on Keynes

For the 75th anniversary of the General Theory, Paul Krugman gave a good talk (called "Mr. Keynes and the Moderns") on how to read Keynes and how Keynes' ideas might be useful to policy makers now. It is available here and here.

Deadbeat Germany - Historically Yes!

The German online magazine Spiegel has a great article that should humble Germany's demands for Greek, Irish and Portuguese austerity. It makes the case that in the twentieth century, Germany was a major defaulter and depended on other countries absorbing its losses - i.e. taking "haircuts". It is a good historical perspective that shows that Germany does not have a financially righteous past - but is really a reformed sinner.

Inflation Solution?

The Wall Street Journal has a good piece today on how a rise in inflation (it says 5%) would do a great deal get the economy up and running again. The basic idea is that it will destroy debt. The argument is not new - of very provocative - the surprise is the source.

Interactive Euro Crisis Map

The New York Times has a good set of interactive maps of the Euro Crisis. The crisis seemed to be heading to some type of resolution this week until Germany changed its mind on forcing some of the losses on bond holders. Now it appears that bond holders will be protected and the crisis has been pushed down the road. However, the crisis is far from resolved - it price tag has just been pushed more on the European taxpayers. The big lingering question is when this crisis will explode. The maps are informative.

Average Income over Lifetime

The Wall Street Journal has the following graph showing average income over he course of a lifetime. The big point of the article and the graph is how income plateaus at age forty. This reality runs counter to how most people see their income growth over heir lifetimes (what would this mean for the idea of the "lifetime income hypothesis"?) The bigger point is that people's expectations of quickly rising incomes in their fifties might result in people underfunding their retirement plans.

GDP Growth since 1939

Krugman posted this good graph of GDP growth since 1939 on his blog. It is a good teaching tool.

Charlie Rose Again - Grethen Morganson

Charlie Rose has another interview, this time with New York Times columnist Gretchen Morganson about the crisis. Should be good.

Half Way to a Lost Decade? Depends on How You Measure

Justin Wolfers on the Freakeconomics blog has a good post showing that if you measure GDP by income, instead of the more usual spending, the recession has been longer and deeper - and we still have not fully recovered. This explains more fully why people still say we are in recession when people in Washington tout that we have been in recovery for years. The two good charts from the post are:

FRBSF Ecnomics Letter - Education & Monetary Policy

John Williams, president of the San Fransisco Fed published a letter about how he thinks economics education needs to adapt the teaching of monetary policy to reflect the recent actions of the Fed.

Greek Problem - Good Charts

One of the big questions in the world economy right now is how long can the Europe crisis go on and when will it break. The German magazine Spiegel has the following charts showing the worsening condition for Greece - it does not look good.

The first chart shows clearly how debt growth is outpacing GDP growth (which is negative).

























Clearly Greece is going down (unless the Germans want to permanently support them). One of the big unknown is the losses a Greek (and Irish and Portuguese) restructuring will do to European banks - will the debt crisis cause a European Lehman crisis. The balance sheet of the ECB is looking shaky, as shown in the chart below.

Health Care - A International Comparison Chart

Paul Krugman has a good chart showing the quality and cost of health care around the world.

Charlie Rose - Krugman, Walker & Rogoff

Charlie Rose has interviews with Paul Krugman, David Walker and Ken Rogoff about the the current state of the economy: http://www.charlierose.com/view/interview/11710#schedule