In the first quarter of 2013 real GDP increased at the annualized rate of 2.5%. Based on the text of the announcement I infer that they’re still using the old method of calculating GDP rather than the new one. I wonder how the calculation would come out if the new method were used.
2.5% is roughly the historical average. That’s too slow to bring the unemployed back to work. Most of the increase is due to an increase in personal consumption expenditures while personal income declined. If you believe that we’ve been through a “balance sheet” recession, this is terrible news. We’re not deleveraging at all.
I note that consumption of services increased at an annualized rate of 3.1% compared with an increase of .6% in the previous quarter and I suspect that much of that is healthcare, that may take some of the wind out of the sails of those who had thought that we’d gotten the problem of rising healthcare costs licked.
Essentially, it’s better news than if growth were slower but not nearly as good as we really need.
“If you believe that we’ve been through a “balance sheet†recession, this is terrible news. We’re not deleveraging at all.’
Heh. Commented at OTB – a rare event these days – on just this before I saw this. Deleveraging my ass. Hocking the future. Not good.
No doubt in a few minutes the usual suspects will have about 12 thumbs down. And be on their knees for Obama..
I note that in the post you’re referring to at OTB the commenters obviously read the headlines but haven’t read the text on the finding on the Rogoff and Reinhart 90% debt to GDP cliff. The finding supported the basic claim: that GDP growth declines as debt to GDP rises. It just rebutted the cliff which sort of stood to reason. Gradualism is pretty common in nature.
The finding supported the basic claim: that GDP growth declines as debt to GDP rises.
It did not. There are no findings anywhere which indicate the causality which you are asserting.
Did too. I did not assert causality only correlation.
Oh? Then why did you choose to write it as you did?
You didn’t write : “The finding supported the basic claim: that debt to GDP rises as growth declines.”
You didn’t write: “R&R’s assertion that as debt to GDP ratio rises groth declines was demonstrated to be unsupported. All we know is that there is correlation between the two, not causality.”
You didn’t write: “We know there is a correlation, but no more than that.”
You wrote in a manner which defended the austerian line.
I have no problem with that statement.
There’s another point here. The findings are not that economies grow as debt to GDP increases which some are suggesting they found, at least implicitly.
Ben,
Wow, generally I think you provide a lot of food for thought and cogent arguments, but here you make a rather pathetic semantic argument in an attempt to show Dave is “defending the austerian line.” Is that really the best you can do?
R and R should be out of the business. Fundamental basis for their work is making certain that numbers cited are accurate. Citing them eliminates any credibility in one’s argument or discussion. How do we know anything they did or will do in the future has passed rudimentary scrutiny?
I t appears that the HARP program is working quite well. They are not writing down principal, so debt may look the same ( I assume the look just at principal for consumer debt?) but people actually do have more money to spend.
http://www.latimes.com/business/la-fi-harp-refinance-20130427,0,5348642.story
Steve
steve, since the purpose of HARP is not deleveraging but to allow debtors to continue to refinance and continue making interest payments, it’s not really relevant. Cashflow may have become better but their balance sheets aren’t.
“steve, since the purpose of HARP is not deleveraging but to allow debtors to continue to refinance and continue making interest payments, it’s not really relevant. Cashflow may have become better but their balance sheets aren’t.”
Spoken like a true LBO man. As my chief credit officer 20 years ago noted “the deal has to get better.”
That is, interest service is not enough. You must work down the debt because – and you all know me, so pardon the French – shit happens. You simply cannot live in a persistant state of maximum leverage. At some point you will not be able to service principal.
I know there are those who who believe that it doesn’t matter. I suspect they also believe in perpetual motion machines. Even sovereigns have debt capacity. Been to Greece lately?