Author Archives: jfrankel

Recap: Obama Recovery, Emerging Markets & 2012 Crash

Share Button

A recent video interview from Project Syndicate recaps some of my recent op-eds.  It covers the following territory:

  •           The Obama Recovery.    The U.S. economy was in free fall in late 2008, whether measured by GDP statistics, the monthly jobs numbers, or inter-bank spreads.     Was the end of the recession in mid-2009 attributable to policies adopted by President Obama?   A full evaluation of that question to economists’ standards would require delving into the complexity of mathematical models.  The public generally has a simpler standard:   was the impact big enough to be visible to the naked eye?   Amazingly, the answer is “yes.”   Whichever of those statistics one looks at, and whether it is coincidence or not:  the economic free-fall ended almost precisely the month that Obama took office, January 2009.
  •           Emerging markets have generally had much better economic fundamentals over the last decade than advanced economies.    For example, one third of developing countries have succeeded in breaking the historical syndrome of procyclical (destabilizing) fiscal policy.   For the first time, they took advantage of the boom of 2003-08 to strengthen their budget balances, which allowed a fiscal easing when the global recession hit in 2008-09.
  •           The 15-year cycle in EMs.  Market swings that start out based firmly on fundamentals can eventually go too far.   Some emerging markets like Turkey look vulnerable this year.  A crash would fit the biblical pattern: seven fat years, followed by seven lean years.  Here are the last three cycles of capital flows to developing countries:
    • 1975-81: 7 fat years (“recycling petrodollars”)
    • 1982: crash (the international debt crisis)
    • 1983-1989: 7 lean years (the “Lost Decade” in Latin America)
    • 1990-1996: 7 fat years (Emerging Market boom)
    • 1997: crash (the East Asia crisis)
    • 1997-2003: 7 lean years (currency crises spread globally)
    • 2003-2011: 7 fat years (the triumph of the BRICs)
    • 2012: ?
      • read more

    • Share Button

    GDP Reattains Pre-Recession Peak

    Share Button

    This morning the Bureau of Economic Analysis released its first estimate for 2011 GDP.   It showed national output for the first time surpassing the pre-recession peak, which occurred in the last quarter of 2007.    (See chart below)    The expansion in 2011 was led by autos, computers, and other manufactured goods.

    Given that the economy hit its trough in mid-2009, the long slow climb since then has been disappointing.   The outcome turns out to have been worse than the conventional wisdom that sharp declines tend to be followed by sharp recoveries.   On the other hand, the outcome turns out to have been somewhat better than the Reinhart-Rogoff thesis that when the cause of a recession is a financial crisis, the recovery tends to take many years.   read more

    Share Button

    “Built to Last” — A Reaction to Obama’s State of the Union Message

    Share Button

    Obama’s slogan for the SOTU last night, “An Economy Built to Last,” was a way of referring to one of the accomplishments of his first years: successfully reviving the auto industry, which many had said couldn’t be done without nationalizing it.   References to other accomplishments were stated more quickly, such as national security (withdrawal from Iraq, disposing of Osama bin Laden) or more obliquely, such as health care reform, financial reform, and arresting the freefall of the economy that Obama inherited in January 2009 (via fiscal stimulus and TARP – both of which are not especially popular programs). read more

    Share Button