Econ: The Forecast is...?

[notyoueither]

Oh dear.

[Naked Gents Rut]

I wouldn't read too much into it. If I'm reading it right, he's saying that in non-wartime economies, a stock market crash (defined as cumulative real returns of -25% or less) is associated with a 20% probability of a decline in per capita GDP of more than 10% and a 2% probability of a decline in per capita GDP of more than 25%. He doesn't seem to be controlling for many other variables and there's no hint of a causal relationship.

It's interesting intellectually, but, based on what I can glean from the article, I wouldn't take it very seriously as a prediction of the probability that this particular recession ends up being a depression.

[notyoueither]

Does it have an impact on your previously held position that thoughts of a depression are needlessly alarmist? I think your term was catastrophist.

[Naked Gents Rut]

Does it have an impact on your previously held position that thoughts of a depression are needlessly alarmist?

Not really. All the economic forecasts are still on my side.

[notyoueither]

Your side is not standing on the strongest of ground.

[RedFred]

I am not one of those guys ready to stock up on guns, gold and non-perishable food items - but there is some bad news out there. And some that is just wacky. Even with using derivatives as 'instruments of mass destruction' the red ink that AIG continues to bleed each month is almost unfathomably huge.

Not that we can look down at the Americans with any degree of smugness. While other companies were using hedge funds like a roulette wheel, Manulife had a brain cramp and forgot to hedge to reduce their risk on their guaranteed investments. Maybe they thought the market would just go up forever. Quebec seems particularly hard hit by investment insanity. The Caisse appeared to be running a casino instead of an investment fund and the QPP is thinking of delinking from CPP on account of so many sour investments.

Weird stuff going down. We got a awesome deal on a nice Caribbean cruise. But when the time came to pay up the price had dropped again by half. It would be more expensive just to book a week in a hotel in Vancouver now.

On a personal note I am thankful that both my wife and myself are in stable jobs. So many are now being laid off through no fault of their own.

[Naked Gents Rut]

Your side is not standing on the strongest of ground.

You've yet to provide any evidence for this.

[Naked Gents Rut]

More research for NYE!

http://www.forbes.com/2009/03/04/global-recession-insolvent-opinions-columnists-roubini-economy.html

edit: Damn, this article is far more convincing and scary than Barro's. Roubini really earned his nickname with this one.

[notyoueither]

Your side is not standing on the strongest of ground.

You've yet to provide any evidence for this.

You're doing a fine enough job of doing it for me.

[Naked Gents Rut]

Someone had to.

[notyoueither]

Yup, you're so ****ed, but then so are we all. With some positive outlook for China and India.

http://paul.kedrosky.com/archives/2009/03/martin_feldstei_1.html

It's an hour long, but it explains the shortcomings of current US policy in the circumstances. Also indicates the Euros are even more ****ed.

[Naked Gents Rut]

China's far more ****ed than America is. The U.S. doesn't have to worry about social unrest tearing the country apart.

[Darius871]

The U.S. doesn't have to worry about social unrest tearing the country apart.

You sure about that?

[notyoueither]

I think he's saying that China has the wherewithal to satisfy domestic expectations. I suppose that happens when you control the mechanisms of production for yourself... and everyone else.

[Naked Gents Rut]

You sure about that?

Yes.

I think he's saying that China has the wherewithal to satisfy domestic expectations.

No. I'm saying the exact opposite, in fact. Or are you talking about the hour-long thing no one is going to watch?