Economics cycles

A wonderful graphic from the New York Times can be used to show what happens to growth in two dimensions:

x-axis: growth over the past 6 months (extremes show sharp swings in output, or sudden drops).
y-axis: annual growth - long term trend (actual rate of decline in the economy).

Looking at that version of things, everything will be fine.

However, and this point was missed by the Economist's Free Exchange, this graphic suffers the same flaw as did the option-pricing model of Long Term Capital Management. That flaw, is that it only takes into account recent recessions, and so is unable to correctly predict the current, more serious one.

In other news, the markets have lost their shine (perhaps I'll post again on them, but not today).

News this week

Using various websites' "most popular" function, I'm looking for a good news and a bad news article from each site.

BBC World News:
Good: umm, "World moves to contain swine flu" has the most positive sounding headline of the "most viewed" over each of the past 5 days.
Bad: "Car attack on Dutch royal parade"

Guardian website most viewed:
Good: Revolutionary Espresso Book Machine launches in London
Bad: Southampton will fold in eight days without a buyer

NY Times most emailed:
Good: After 341 Years, British Poet Laureate Is a Woman
Bad: Personal Health: Paying a Price for Loving Red Meat

Economist Most Read:
Good: The American economy: Better than it looks?
Bad: Chrysler: End of the road

To be clear, these aren't all the "top" story on each list, but are chosen to represent as many different stories as is reasonable, using the top 5, top 10 or whatever the website offers. Swine flu dominates all of the lists, obviously.

Why are AIG workers quitting?

For those who are angry at those earning "excessive" amounts at nationalised companies, I suggest reading the following resignation letter, from an AIG employee, published (here: http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1) in today's New York Times:

I am proud of everything I have done for the commodity and equity divisions
of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit
default swap transactions that have hamstrung A.I.G. Nor were more than a
handful of the 400 current employees of A.I.G.-F.P. Most of those responsible
have left the company and have conspicuously escaped the public outrage.

I suggest reading the whole letter, which puts clearly the point of view of those who feel betrayed by the lack of defence the bosses of these firms are offering.

I must say that it is still easy for him to say, given that he can afford to "give up" $700k. But I still believe such views should be widely heard.