The recession of 2008-09 keeps getting worse, even now. For the second time, the annual benchmark revisions to the GDP data have shown that the recession was deeper than previously thought. The decline in GDP is now put at 5.1 per cent rather than 4.1 per cent.
By the magic of FRED, here it is in levels (green is before the 2010 revisions, blue before the 2011 revisions, red is today):
A familiar consequence of crises is a flight to quality. This crisis is no exception, with gold soaring to nominal highs and the Swiss franc appreciating against pretty much every other currency on the planet.
However, owing to two decades’ worth of financial globalisation, a trend more pronounced during this crisis than any other was that this shift to safe-haven assets was coupled with a flight of capital across borders. As European Central Bank research, out on Wednesday, notes, investors were not only risk averse, but also fearful of uncertainty. And this so-called “uncertainty aversion” fed home bias.
The capital flight threatened financial stability and hindered economic growth. So what to do? For the ECB, there are two things: better analysis and more regulation.
From a monetary policy perspective, what’s interesting about today’s preliminary GDP figure is that both hawks and doves believe it supports their arguments.
GDP coming in at 0.2 per cent for the second quarter means the UK economy has barely grown over the past nine months, which adds weight to doves’ calls for further easing if the economy does not pick up in the three months to September.
This from Gavyn Davies, writing for the FT:
Christine Lagarde. Image by Getty.
The Federal Reserve is too often seen as a panacea for the US’s economic ills. This no doubt owes much to its dual mandate to both maintain price stability and promote employment, despite there being little monetary policy can do to influence structural unemployment.
And so Christine Lagarde’s comments today that there has been a rise in structural unemployment in the US – and that, by implication, fiscal policy should shoulder more of the burden for creating jobs – is to be welcomed.
This from the FT’s Rahul Jacob in New Delhi and James Fontanella-Khan in Mumbai:
India’s central bank has raised interest rates by a higher than expected 50 basis points, signalling its determination to battle persistent high inflation.
Christian Noyer, Banque de France governor, has created confusion after apparently signalling another European Central Bank interest rate rise is in the pipeline. In an interview published on Tuesday, he told Financial Times Deutschland – the German language newspaper - that the ECB was exercising “strong vigilance” - code used in Frankfurt to signal a rise in official borrowing costs is a month away.
Or did he? Mr Noyer may have been a victim of the eurozone’s linguistic diversity.
There are two questions worth asking about Vince Cable’s call for a second round of quantitative easing.
Was it appropriate? And, more to the point, was he right?
The first is easier to answer than the second. It was in no way appropriate for him to make the call. And, as this post on the FT’s Westminster blog notes, it is something of a reverse ferret.
The timing of the comments is cunning.