In May 2008, the blog aligned itself with Harvard’s Prof Martin Feldstein, who declared that the Q1 2008 US GDP report was “grossly misleading“. Feldstein, after all, was in a position to know, as he was then chairman of the official body that decides whether the US is in recession.
15 months later, the US Commerce Department has finally admitted that Feldstein was right. It has revealed that “the first 12 months of the US recession saw the economy shrink more than twice as much as previously estimated”.
The blog learnt long ago that if something seems “too good to be true”, then it probably is. It awards itself a pat on the back for not falling into this trap on the US GDP numbers.
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There’s an economists’ fable about this kind of speculation.
An assistant economics professor, walking with a full professor, reaches down for a $100 bill he sees on the sidewalk.
He is held back by his senior colleague,
who points out that if the $100 bill were real, it would have been picked up already.
Optimization by the participants
in a market typically eliminates any opportunities for supranormal returns: big bills aren’t often dropped on the sidewalk, and if they are, they are picked up very
quickly.
US Fed launches its $600bn QE2 Lifeboat
So now its official. This week, the US Federal Reserve confirmed it was launching its ‘QE2 Lifeboat’. It will inject $600bn into the US economy, in yet another bid to kick-start full economic recovery. Clearly, this is a major initiative…