Radio commentary, April 23, 2009
Gotta keep the comments short today because it’s a packed lineup today.
First-time claims for unemployment insurance rose by 27,000 last week to 640,000. Though somewhat below the highs of a month ago, this is still quite elevated. So, continuing the theme of the last few weeks, things are still quite bad, though not getting worse at an accelerating rate.
Sales of existing houses fell by 3% in March, after rising almost 5% the month before. This number has been bouncing around a depressed level since late last year. So, similar conclusion here, too: still crummy, just not getting dramatically worse. These days, that’s good news.
Oh, and how about that Obama? He summoned some executives of the credit card industry to the White House to tell them that, in the words of a Bloomberg wire story, they had to stop “imposing ’unfair’ rate increases on consumers and should offer the public easier to understand terms for credit.” Obama told VISA and the rest that they had to “eliminate some of the abuse” in the industry. That’s a direct quote, and you’ve got to love it. Some of the abuse. Not all. Do they get to choose which parts?
Meanwhile, the banks are still getting trillions from the gov with almost no strings attached. You’ve to hand it to this guy—he’s a masterful politician.
Recession around the world
Outside the U.S., it’s looking like a lot of countries that are heavily dependent on exports are really taking it on the chin. According to IMF projections, the German economy is likely to contract by 5% this year, and Japan’s by more than 6%; these are about twice as bad as the Fund projects for the U.S. A just-released IMF study of recessions over the decades shows that downturns associated with financial crises tend to be deeper and longer than those not associated with financial crises, and globally sychronized recessions tend to be deeper and longer than those that aren’t. Sadly, this is both a financial crisis and globally syncrhonized recession. So this is probably going to be with us for quite a while. The IMF’s projection, which seems reasonable to me, is that the global economy will bottom next year, but not see a serious recovery until 2011.
The IMF’s selective attention
A closing word on the IMF. For an organization most famous as the ghoulish bloodletter to the world’s poor countries, in the service of its role as debt collector for the world’s rich, its behavior in this crisis has been a little surprising at first glance. It’s been a tireless cheerleader for more and bigger stimulus programs, against the opposition of fiscally austere interests like the German government and our own Republicans and conservative Democrats. Of course, they’re never so rude as to name them, but those are the antagonists of stimulus.
No doubt this change in the IMF’s tune is a result of the fact that the rich creditor countries are so deeply affected. So are the poor countries, even more so than the rich, but that’s just their lot in life. When poor countries hit a wall—and even peripheral rich ones like Iceland—it’s cut, squeeze, contract. But when misfortunes strike the rich, things must be getting serious!