Monday, October 26, 2009

Recession, tax revenue, the Economist, and Monopoly.

Glenn Rudebusch, at the FRB San Francisco, answers five key questions. The financial crisis is over. The recession is most likely over. We won't return to normal employment for some time. Inflation will not be too high. The Fed has an exit strategy to undo its recession-fighting policy actions.

Federal revenue as a share of GDP is at its lowest point since 1950. It's an interesting graph, and I want to see how the percentage federal revenue has fluctuated with GDP growth and also with the change in tax rates. The top tax rate was slashed a lot in the 60s, but you don't see much of a change.

The Economist's forecast. No big surprises, I think. Still, an interesting read. I might expect a slower increase of the federal funds rate than they do, though.

Free Exchange on the history of Monopoly, Anti-Monopoly, and Hasbro.


CD Rates said...

This is the biggest question on everybody's mind that how we would handle high inflation after recession. Now recession is actually not over but it like over the head and high inflation is shaping high in the head.

Jdvn1 said...

I, along with Rudebusch and the Economist, disagree with you. The recession is most likely over, and inflation will stay low for quite some time.

So, no, that isn't the biggest question on everyone's mind.

CD Rates said...

Still inflation would be up for sure, and then it is going to be a next battle for us after recession terror.

Jdvn1 said...

Inflation will be higher than this year--but that doesn't say much. Inflation is expected to be pretty low through at least most of next year, probably pretty close to 1.5% for the year. Don't expect high inflation until 2011 or later. The Fed will certainly play a role in keeping inflation down, too.

I'll be watching the growth of the European countries, which will weaken the dollar, so that our exports might get an unexpected boost, so that foreign demand might help domestic supply and unemployment.

Jdvn1 said...

Again, both the FRB-San Francisco and the Economist mention low inflation. Here's a post from Menzie Chinn with both "official" and blue chip forecasts:

I think it's clear that inflation isn't a big concern.

CD Rates said...

Yeah, there you are. Now you have explained it well, thank you so much. Lucky to have conversation(Sort of) with you and got the right answer. Thanks for your time. Will catch you blog for sure.