The numbers today from Germany are sobering. One would like to think that they would have an impact on the policy debate there.
Month: June 2009
Every week now, the Sunday newspapers compete with each other for overyhyped stories on the implications of NAMA. This one from the Sunday Tribune about the plans of a wily group of “solvent developers” has to be the best so far. Titled “Solvent developers to compete with Nama”, the story goes as follows:
Some of the country’s cash-rich developers are putting together war chests and are planning to compete with the National Asset Management Agency (Nama) when it tries to buy their debts from the bank.
At least two development groups have put funding of between €200m and €300m together as they don’t want their investment property loans in particular transferred to Nama, and hope to be in a position to buy their own loans at a significant discount.
Buying the loans, said a senior industry source, would effectively mean that the developers would take control of the properties at today’s prices rather than ones agreed at the peak of the market.
Most likely, this “plan” is either the product of the overactive imagination of said industry source or perhaps has been misinterpreted by the intrepid Tribune reporter.
Still, if there is any chance that this plan could be put into effect, let me be the first economist to recommend that it be extended beyond developers to the whole Irish public. I’m solvent and I’d love to get my mortgage cut in half (i.e. buy my loan at a significant discount.) I’m sure our readers would too. Perhaps we should set up a lobby group and get a senior industry source to brief the Tribune about it?
Note: The Merriam-Webster online dictionary defines solvent as “able to pay all legal debts”. (I’m assuming the Tribune aren’t referring to the second meaning of the word, which is something “that dissolves or can dissolve” but now that I think about it, I’m not so sure.)
Robeert Shiller has a nice little piece on the subject here. (HT: Mark Thoma)
As readers will be well aware, the Irish unemployment has soared since the end of 2007. Most of the short-run commentary focuses on the monthly Live Register (LR) figures, which we know contain many landmines of interpretation. The Quarterly National Household Survey (QNHS) data are based on more economically meaningful (ILO) definitions, but these too need to be handled with care. (For example, anyone working for pay or profit for one hour a week or more is classified as employed.)
The survey data allow us to look at the employment rate – that is, the proportion of the adult population in employment – and this is probably more meaningful as a current economic indicator than the unemployment rate. (The employment rate is the product of the labour force participation rate and (one minus) the unemployment rate.)
A look back at the employment rate over the past twelve years is interesting. The male employment rate has fallen by five percentage points – from 70.5% to 65.5% – since the third quarter of 2007. (N.B. These figures are not seasonally adjusted, but I do show the four-quarter moving average.) 
This brings it back to where it was in the late 1990s. The female employment rate dropped by only two percentage points – from 52.7% to 50.7% – over the same period. 
This leaves it where it was in 2006. The overall rate fell by three and a half percentage points, from 61.5% to 58.0%, so it is back to here it was in 2004.
Female participation held up well in 2008, but male unemployment has risen, and participation fallen, faster.
The continuing relatively high participation rates is one hopeful sign in an otherwise gloomy landscape. The forthcoming QNHS for the first quarter of 2009 will probably show further rises in unemployment and falls in participation, but perhaps later this year there will be signs of stabilisation.
Barry Eichengreen and I have posted an update to our column comparing the current global economic crisis with the Great Depression. The data are through the end of March (apart from the discount rate data, which are through the end of April). Further updates will be posted as the industrial output and trade data are processed by the international organisations which we are using as our source.
At the global level, March saw green shoots in the stock market, but not in the real economy — although world trade stabilised, and there was a clear deceleration in the rate of decline of world industrial output.
We are also, for the first time, posting data on individual countries. These emphasise the gravity of the current crisis. They also show green shoots in some countries, particularly in Eastern Europe and Japan. Hopefully subsequent numbers will confirm these encouraging signs.
Is this the end of the beginning, or a lull between storms? Hopefully the former, but how can one be certain, especially given the various unexploded landmines littering the economic landscape, and the steady increase in unemployment around the world with its potential to create new holes in the financial sector? The Great Depression also saw increases in output which turned out to be temporary, largely due to the policy mistakes of central bankers and politicians trapped by a gold standard mentality. As my column with Barry pointed out, the policy response has been much better this time around, and may be bearing fruit. Once the recovery is clearly under way, governments will need to start balancing the books. But a premature tightening of fiscal policy would be disastrous, which is why Europe needs to avoid artificial fiscal straitjackets.