Link Banana

The day that thing stopped going up seems like a decade ago. Oh, it was.

(via Andrew Sullivan)

I just read two profiles. Neither was interesting enough to merit it’s own post, but the combination seemed to just pass the bar. The two:

• Dr. Doom. Depending on who you ask Nouriel Roubini is either a lucky pessimist or prescient thinker. There is, however, no doubt that he predicted America’s current economic turmoil in 2006.
• Hit Man. Jerry Corsi, author of the bestselling “Obama’s a Muslim drug addict” book, gets a brief but interesting profile in the New Yorker.

In the “that’s a convoluted way to find the good in a recession” category, I submit this Op-Ed about willpower. 

The brain has a limited capacity for self-regulation, so exerting willpower in one area often leads to backsliding in others. The good news, however, is that practice increases willpower capacity, so that in the long run, buying less now may improve our ability to achieve future goals — like losing those 10 pounds we gained when we weren’t out shopping.

Translation: You’ll get fat during the recession, but afterwards dieting will be easier.

No we didn’t stave off a recession, but The Onion does financial news right:

Successfully adding yet another infuriating block of text to an already indecipherable paragraph, some investors said they hoped to stave off bankruptcy for Bear Stearns, which, during last year’s impossible-to-write-about mortgage crisis, saw its value depreciate almost as quickly as readers’ interest in this story.

This week’s Economist makes the argument that total GDP, which is usually used for measures of growth from country to country doesn’t work very well. Because it ignores the direction of population size, it distorts the picture in favor of growing countries — and misses the fact that the US is already in a recession.

Once you accept that growth in GDP per head is the best way to measure economic performance, the standard definition of a recession—a decline in real GDP over some period (eg, two consecutive quarters or year on year)—also seems flawed. For example, zero GDP growth in Japan, where the population is declining, would still leave the average citizen better off. But in America, the average person would be worse off. A better definition of recession, surely, is a fall in average income per person. On this basis, America has been in recession since the fourth quarter of last year when its GDP rose by an annualised 0.6%, implying that real income per head fell by 0.4%.

Though I though Mr. Reich’s column would be a usual blurb about the uselessness of stimulus packages, he offers some interesting ideas:

The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway.

A larger earned-income tax credit, financed by a higher marginal income tax on top earners, is required. The tax credit functions like a reverse income tax. Enlarging it would mean giving workers at the bottom a bigger wage supplement, as well as phasing it out at a higher wage. The current supplement for a worker with two children who earns up to $16,000 a year is about $5,000. That amount declines as earnings increase and is eliminated at about $38,000. It should be increased to, say, $8,000 at the low end and phased out at an income of $46,000.

The verdict among the chattering classes is falling strongly on the side of a coming American recession. And this clever metric agrees with that growing consensus.

The Economist’s informal R-word index is also sounding alarms. Our gauge counts how many stories in the Washington Post and the New York Times use the word “recession” in a quarter. This simple formula pinpointed the start of recession in 1981 and 1990 and 2001. In the past few years the R-word index has been extremely low. It began to rise in the second half of 2007 and, measured at a quarterly rate, has soared in early 2008 (see chart). Although the number of stories is still lower than before previous recessions, the recent jump—if sustained for a quarter—is similar to that which preceded the 2001 downturn.