China Bigger Than German Economy

China has taken Germany's spot as the world's third-largest economy after the United States and Japan.

Total GDP figures were revised upwards to 3.76 trillion dollars. Germany's GDP was just below 2.49 trillion.

Geeks Bearing Gifts

Whether you love the computer world the way it is, or consider it a nightmare honkytonk prison, you'll giggle and rage at Ted Nelson's telling of computer history, its personalities and infights.

Computer movies, music, 3D; the eternal fight between Jobs and Gates; the tangled stories of the Internet and the World Wide Web; all these and more are punchily told.

Depression Looming In Bearish Economy

Well said, Paul Krugman:

“If we don’t act swiftly and boldly,” declared President-elect Barack Obama in his latest weekly address, “we could see a much deeper economic downturn that could lead to double-digit unemployment.” If you ask me, he was understating the case.

We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy.

Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy.

Obama: Internet Key to Economic Recovery

This morning, after President-Elect Obama laid out the key parts of his economic recovery plan during his weekly address, he turned to the Internet and told the country that he intends to “renew our information superhighway.”

“It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online, and they’ll get that chance when I’m President - because that’s how we’ll strengthen America’s competitiveness in the world,” he said.

Source: Lidija Davis.

Global Trends 2025

From the National Intelligence Council's 2025 project:

1 - The whole international system—as constructed following WWII—will be revolutionized. Not only will new players—Brazil, Russia, India and China— have a seat at the international high table, they will bring new stakes and rules of the game.

2 - The unprecedented transfer of wealth roughly from West to East now under way will continue for the foreseeable future.

3 - Unprecedented economic growth, coupled with 1.5 billion more people, will put pressure on resources—particularly energy, food, and water—raising the specter of scarcities emerging as demand outstrips supply.

4 - The potential for conflict will increase owing partly to political turbulence in parts of the greater Middle East.

U.S. In Deep Recession

The U.S. economy entered a recession in April. It will last 14 months, which would make it one of the longest recessions since the Great Depression of the 1930s.

Only the 16-month recessions in the mid-1970s and early 1980s were longer. Even though the economy was technically growing in April this year it would not be unprecedented for the National Bureau of Economic Research to declare a recession was occurring then.

The NBER measures recessions by "a significant decline in economic activity spread across the economy," rather than the traditional definition of two consecutive quarters of falling GDP.

Source: Reuters.

GM Bankruptcy No Option

A study by the Center for Automotive Research (CAR) estimates that in case of a GM bankruptcy 2.5 million jobs would be lost in the first year. The logic: if any of the "Big Three" went bankrupt, many suppliers would also fail; because car companies share suppliers, all U.S.-based manufacturers would suffer crippling parts shortages.

Read Robert J. Samuelson's How to Bail Out General Motors.

Time for Fiscal Stimulus

From "When Consumers Capitulate" by Paul Krugman:

The ongoing efforts to bail out the financial system, even if they work, won’t do more than slightly mitigate the problem. Maybe some consumers will be able to keep their credit cards, but as we’ve seen, Americans were overextended even before banks started cutting them off.

No, what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.

This Could Make 1929 Look Like A Walk In The Park

A chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.

"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.

York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.

"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.

"They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds.

The Bank of England knows the risk. Markets director Paul Tucker says the crisis has moved beyond the collapse of mortgage securities, and is now eating into the bedrock of banking capital. "We must try to avoid the vicious circle in which tighter liquidity conditions, lower asset values, impaired capital resources, reduced credit supply, and slower aggregate demand feed back on each other," he says.

Source: Telegraph

Last Chance to Avert Great Depression

Via Economistsview.Typepad.Com:

Prosperity To End Just Around The Corner?

Congress's initial rejection of the Bush Administration's $700 billion bailout plan calls to mind an unhappy precedent. Back in 1930, the Senate passed the Smoot-Hawley Tariff Act, which raised duties on some 20,000 imported goods. Historians define this as one of the critical steps that led to the Great Depression — a tipping point when the world realized that partisan self-interest had trumped global leadership on Capitol Hill.

It's fair to ask whether America's lawmakers could do it again. The bursting of the debt-fueled property bubble and the crippling losses suffered by banks, together with the political dithering of recent days, have set in motion a chain reaction that, in the worst-case scenario, could lead to something like a 21st century version of the Depression — even if a bailout package does eventually get approved.

Anyone looking at the bail-out package as the salvation for the banking system or the U.S. economy is dead wrong. The problems in the economy and the banking system have gone far beyond what the package can fix.

There is a crisis of confidence in the financial system, and that won’t be fixed by the bail-out package. There is a crisis of confidence in political leadership. There is a well deserved mistrust of Wall Street and others whose greed and recklessness got us into this mess. And there are signs the U.S. economy continues to get worse, including house prices which continue to decline.

And we know it’s not just a U.S. problem. There are fears of a worldwide recession.

According to George Magnus, senior economic adviser at UBS, about 40 percent of OECD economies are in effect already in recession. He puts it all down to deleveraging, as banks cuts back on their lending.

Congress Rejects Wall Street Bailout

U.S. lawmakers in the House of Representatives voted against the biggest proposed government intervention in the U.S. economy since the Great Depression of 1929.

Government officials, Treasury chiefs and political leaders from both sides of the political divide thought they had agreed Sunday on the details of a $700 billion rescue plan that would prop up the nation's ailing financial system -- and be supported in the House of Representatives.

As it became apparent the vote was lost, the Dow plunged about 500 points on the day.