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When It Comes to Trade, the NYT is Far More Confused Than Iowa VotersCEPR / October 14, 2017
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Year-Over-Year Change in Prices of Medical Care, College Tuition and Car InsuranceKevin Cashman / October 13, 2017
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Higher Gas Prices Lead to Another Big Jump in Inflation, Core Rate Remains StableOctober 13, 2017 (Prices Byte)
Dean Baker / October 13, 2017
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The Dollar Does Matter for TradeDavid Rosnick / October 12, 2017
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The Republican Tax Plan to Slow GrowthDean Baker
HuffPost, October 12, 2017
Dean Baker / October 12, 2017
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Corea del Norte y Yemen — los costos del imperioMark Weisbrot / October 12, 2017
report informe
The Impact of Low Unemployment Rates on Disadvantaged GroupsDean Baker and Cherrie Bucknor / October 12, 2017
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NYT Column Shows Cost of Protectionism: The Case of CopyrightsCEPR / October 12, 2017
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Latin America and the Caribbean
NYT Gets Trumpian In Support of NAFTACEPR / October 11, 2017
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The Scorecard on Development, 1960–2016: China and the Global Economic ReboundMark Weisbrot, David Rosnick and / October 11, 2017
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Why Is It So Hard to Distinguish Technology Policy from Technology?CEPR / October 11, 2017
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Latin America and the Caribbean
Canada’s NAFTA Labor PlankDean Baker
Democracy, October 10, 2017
Dean Baker / October 10, 2017
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The Real Rate of Recovery, October 2017October 10, 2017
Kevin Cashman / October 10, 2017
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The International Monetary Fund’s World Economic Outlook in Theory and PracticeMark Weisbrot / October 10, 2017
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Other Countries Pay for Drug Innovation, Should They Have to Pay for Marketing As Well?CEPR / October 10, 2017
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Kevin Warsh as Fed Chair: The Art of Marrying Rich and Falling UpwardDean Baker
Truthout, October 9, 2017
Dean Baker / October 09, 2017
Article Artículo
Fears of Next Financial Crisis Stem from Confusion Over Last OneA NYT article on the seemingly healthy state of the world economy carries the headline, "The economy is humming. Banks are cheering. What can go wrong?" The piece is written as though we need to fear the possibility that another financial crisis is just around the corner. We don't.
It's become popular in the economics profession to highlight the financial crisis as the culprit behind the Great Recession, as opposed to the collapse of the $8 trillion housing bubble. This is very self-serving for economics profession because finance can be complicated. After all, not many people are experts on collaterized debt obligations and all the various risks that can be created if they and other complex derivatives lose value.
By contrast, the housing bubble was a pretty simple story. We had an unprecedented run-up in nationwide house prices that could not plausibly be explained by the fundamentals in the housing market. Rents were following their historic pattern, pretty much rising in step with the overall rate of inflation. And, we already had a record vacancy rate even before the bubble burst. That doesn't fit a story with house prices being driven by the fundamentals of supply and demand in the housing market.
And the bubble was clearly driving the economy. Residential construction hit a record share of GDP in 2005, at almost 6.5 percent. (Normal is around 3.5–4.0 percent.) The $8 trillion in bubble generated housing wealth also led to a consumption boom, with consumption hitting a record high as a share of GDP.
It should have been obvious both that there was a bubble and that there would be no easy way to replace the demand generated by the bubble after it burst. The fact that virtually the entire economics profession failed to recognize the situation is an enormous embarrassment. Therefore, we get the complicated financial crisis story as a cover-up.
The financial crisis story also has the added dividend of justifying the Wall Street bailout. After all, the alternative was a Second Great Depression. No one really has a coherent story as to why we would have been condemned to a Second Great Depression if we let the market work its magic on Goldman Sachs, Citigroup, and the rest, but if we're already in the magical mystery world of financial crisis land, then sure, maybe the curse from letting the big banks go under will condemn us to a decade of double digit unemployment.
CEPR / October 09, 2017