Real Disposable Income, Saving Rate UP in Dec.

Buried in today's BEA report on Personal Income is some good news in "Table 10. Real Disposable Personal Income and Real Personal Consumption Expenditures: Percent Change From Month One Year Ago," see chart above. Following two months of negative growth in August and September 2008, real disposable personal income increased in each month of the last quarter, ending in December 2008 with 1.3% growth compared to December 2007. Maybe 1.3% growth in real disposable personal income is not great, but at least it's positive and at least the trend is going in the right direction: up.

The personal saving rate has increased in each of the last four months and reached a 7-month high of 3.6% in December (see chart below), as consumers were able to save $378.6 billion in December (on an annual basis), an amount approximately equal to the annual savings for consumers from falling gas prices.

The Real Estate Crash of the 1980s

In a previous post, I wrote about how the housing market crashed in the early 1980s under the crushing weight of the 17-18% mortgage rates, and about we seem to have forgotten how bad the real estate market suffered during that period. We hear a lot though about the "worst economy since the Great Depression©," but nothing about the "worst real estate market since the 1980s."

The graph above tells the story of how bad it really was back then. From the peak of 4 million existing-home sales in 1978, there was -50% drop in home sales over the next four years, so that by 1982 only 2 million homes were sold (data here, Table 7). It took almost two decades, or until 1996, before home sales exceeded the 1978 level of 4 million units.

So before we compare today's economic conditions to the Great Depression, we might want to stop off in the 1980s before we go all the way back to the 1930s.

With All Due Respect Mr. President......

"There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy."

~PRESIDENT-ELECT BARACK OBAMA, JANUARY 9 , 2009

With all due respect Mr. President, that is not true. There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy. Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

MP: Thanks to The Cato Institute, this appeared last week as a full-page in the New York Times and Washington Post, and is scheduled to appear in the Los Angeles Times, Chicago Tribune, and Washington Times. The full text with the 200 economists (including Nobel laureates) who signed the statement is available here. Here's another version, with an additional 100 economists.

Your Tax Dollars At Work, Saving Jobs in Brazil: GM to Invest $1 Billion of Bailout Money in Brazil

WASHINGTON POST -- The stimulus bill passed by the House contains a controversial provision that would mostly bar foreign steel and iron from the infrastructure projects laid out by the $819 billion economic package. A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.

Proponents of expanding the "Buy American" provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas.

LATIN AMERICAN HERALD TRIBUNE -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker. According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.

MP: I guess "Buy American" or "Invest in America" wasn't part of the GM loan package?

The Cultural and Social Effects of Recessions

When all is said and done, something terrible has happened in the United States economy, and no one should wish for such an event. But a deeper look at the downturn, and the social changes it is bringing, shows a more complex picture.

In addition to trying to get out of the recession — our first priority — many of us will be making do with less and relying more on ourselves and our families. The social changes may well be the next big story of this recession.

~George Mason economist Tyler Cowen in the NY Times

FlowingData: "Strength in Numbers"

Watch the amazing video map of Wal-Mart's expansion across the U.S. from 1962-2008.

Watch the growth of Target stores from 1962-2008.

Both are from the website FlowingData, which "explores how designers, statisticians, and computer scientists are using data to understand ourselves better - mainly through data visualization."

HT: Coyote Blog

Here's another Wal-Mart expansion video from a few years ago.

BBC's "Britain From Above" Series

Air Traffic over Britain


Ships Crossing the English Channel

View more videos here. BBC's "Britain from Above" website.