317. Global crisis: one interesting plot
Uncategorized — By Dmitry Podolsky on March 22, 2009 at 10:46 pm
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As it seems, I did not write about global crisis for quite a long time 
It is not like I see any meaning to get deeper into finding ultimate reason why the crisis had to take off (I guess the only meaningful question one might ask in the present situation – “what am I, personally, going to do about this surprising turn in my life?”), old interests do not die out too quickly. Sometimes I find some material regarding crisis here and there and really want to share it with you… but then I ask myself – are you really interested? Why do you need to know that? Well, I am going to forget about those questions this time
I have the following rather interesting plot that has quite a lot to do with the history (and the future) of the global financial crisis.
So, what are you thoughts? Is it correct? (= is Soros right calling this turmoil much worse that the Great Depression?) If it is wrong, where is the flaw?
Cheers,
Dmitry.
P.S. In the mean time – have you noticed a couple of changes on NEQNET? First of all, you can now print any post from NEQNET in a nice fashion (that is, header, footer, social bookmarking icons, Facebook Connect etc. are not to appear on the paper – this will probably save you ta page or two of paper per print-out) by clicking on “Print This Post” link below the title of the post. Instead of printing, you can also save the post of your choice as a PDF file with the same bonuses as printing it out.
I have also decided to follow Lubos Motl’s path and turn Odiogo text-to-speech support on NEQNET. Now, istead of reading a post you have option to listen it (or save text-to-speech version as MP3 file and listen to it on your way home from the office).
Finally, if you have a webcam, you can now leave video comments on NEQNET. To do this, click on the title of the post you want to comment on, scroll down until you see the comment form and press “Add video comment with Seesmic”. You don’t need to have a Seesmic account to post the comment, just press “Anonymous” in the next screen and have fun
14 Comments
The Obama deficits are simply stunning – to the extent that I start to be pretty serious about the Russian scholars’ seemingly crazy predictions of a U.S. collapse etc.
To revenge, I have followed your example and included a “print this post” button on my blog (individual posts), too.
Is that graph corrected for inflation? Or otherwise, wouldn’t it even be better if the surplus/deficit were calculated as a proportion to the GDP? It seems that if you don’t do any of these, variations will become exponentialy bigger and turn any analasys meaningless.
Dear Daniel, if you do so, the recent era will be essentially unchanged, while the World War II will generate somewhat comparable deficits to this year.
Dear Lubos and Daniel,
Exactly.
That’s what I have found, too, the only significant fluctuation is the WWII, while present crisis is nothing special. So, I think I have to doubt that Soros can make his conclusion based only on deficit data. On the other hand, inflation is really noticeable – is it good or bad? Of course, it’s bad: although one can introduce an inflation-related correction to deficit data, this correction is not introduced in reality to your salary
That’s, if deficit is going to be covered partially by you as a tax payer, one might expect certain growth of taxes. On the other hand, if deficit will be covered by printing out more cash (as it seems to be dealt with in recent years), the instability of the situation will just grow.
Anyway, I conclude that the scary thing is not budget deficit but inflation.
Lubos, I did not know you are familiar with Khazin’s ramblings
I am impressed (do you speak Russian by the way?)
Cheers,
Dmitry.
Privet, Dmitry,
Khazin is interesting, and I am familiar with his musings, but I actually meant Igor Panarin and his collapse of the U.S. into 6 states. See e.g.
http://www.supercollide.com/2009/01/end-of-us.html
http://online.wsj.com/article/.....38419.html
I included the supercollider blog because it’s fun that a supercollider blog reported on it, too.
I still speak and understand Russian at some basic level. I used to be very good in it, as a kid, and Tolik Morozov told me that when I visited Rutgers in 1997 for the first time, my Russian was better than my English.
Now it’s just OK but you can still join the crowds of Russian fans of the musician called L.M.:
http://www.youtube.com/watch?v=LgzhG-B4zWM
Best wishes
Lubos
Hi Lubos,
Panarin is a somewhat mysterious person
(former GRU expert), while Khazin is professional economist and, I guess, is more interesting to follow 
Very nice video
Cheers,
Dmitry.
Right now people are much more worried about deflation than inflation. You don’t want to fall in a deflationary trap which is extremely hard to get out off and much more devastating to economies.
So the federal reserve is pumping money like crazy trying to inflate the system to fight this, the problem is they are at the zero bound on the interest rates which means they no longer have as much control directly. Fortunately, the interest rate cutting efforts as well as other tools that have recently been put to use seem to be working somewhat, so the deflationary tendencies are less bleak than they were a few months ago.
So yes, eventually in a year or two they will have to be very, very careful about not inflating too much and they’ll have a tightrope problem between keeping the recovering economy growing and taming the urge to keep inflation in check.
Dear Haelfix,
I know this mantra but I don’t quite believe in it. The reason is that, if you take a look at GDP deficit curve and its correlations with oil prices, you’ll see that GDP deficit started to take off well before oil prices dropped significantly to call it deflation (pretty trivial point, isn’t it?)
Oh yes, and the problem, as I see it, is that they kept doing that for decades, even, say, on the peak of growing dot com bubble, when there was no smell of deflation whatsoever.
Cheers,
Dmitry.
I got a doubt. When they say they are pumping money, they are doing it from China’s Swiming Pool, right? I mean, they are not stupid of just pumping by just printing money like Weimar Republic and Zimbabwe nowadays, right?
Let me be arrogant for a moment and say: “Yes, they are”. There is an important difference though between Weimar Rep. and US – dollar is the world reserve currency.
That’s like saying US wants to forfeit the status of dollar as a world reserve currency, which is stupid.
arrogant=stupid
, but one may note that US stopped publishing M3 data hardly because they wanted to pump some money from “China?s Swiming Pool” 
Cheers
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