President Obama is hosting a “fiscal responsibility summit” on February 23 that has the goal of reining in the projected growth in government spending in the years and decades ahead. Any such reform, however, will require a dramatic change in the role of government in American society. In the last six months, as the current recession became worse, the cost of government has exploded on top of...

The recession we are facing might be a deep one. But beyond its touted potential for severity, this downturn is exhibiting characteristics that thus far are differentiating it from those in the past. This is not true across the board. Behavior of many economic indicators in this recession is similar to their behavior in prior recessions.  Despite the hype in the press, for example, most of the...

The rate of consumer price inflation fluctuated greatly in 2008, from a peak year-over-year rate of 5.9 percent in July to a low of just 1.1 percent in November. The post-July moderation reflects a series of outright declines in the Consumer Price Index (CPI) itself. The CPI decreased for four consecutive months (through November) - the longest string of decreases in nearly 60 years. Our 2009 ...

The notion that the U.S. economy is now experiencing, or will shortly enter, a period of “deflation” is making headlines and is the subject of much comment in the media. Few who are discussing this appear to have much understanding of what they are talking about. The word “deflation” has been used to describe an economic or financial development during the past 50 years or so, but nearly ...

This time of the year, whether in good economic times or bad, is when we gather with our family and friends and enjoy a Thanksgiving meal together. It marks a remembrance of those early Pilgrim Fathers who crossed the uncharted ocean from Europe to make a new start in Plymouth, Massachusetts. What is less appreciated is that Thanksgiving also is a celebration of the birth of free enterprise in Am...

In Globalization (Greenwood Press, $44), Donald J. Boudreaux, chairman of the economics department at George Mason University, intends to help us understand worldwide free trade. The author begins by documenting the many benefits of globalization. Chief of these, he writes, is that people who live in more open economies have higher standards of living than people who live in less open economies...

In the third quarter of 2008, real Gross Domestic Product (GDP) decreased at an annual rate of 0.3 percent, according to the advance estimates released October 30 by the Bureau of Economic Analysis. This is the second time GDP growth turned negative in the past 12 months. The previous time was the fourth quarter of 2007, when real GDP decreased by 0.2 percent. The chart below shows the contribut...

With the current cost of gas at around $3 and falling, driving has become slightly more affordable than it was a few months ago, when gas was $4 a gallon. The price decrease also takes away some of the incentive consumers have to turn to more fuel-efficient cars. AIER’s new Comparative Fuel Efficiency Calculator shows the influence of the $1 fall in gas prices. Consider a high-priced gas-guzz...

A year ago, on October 9, 2007, the Dow Jones Industrial average reached an all-time high of 14,165.  Yesterday, on October 9, 2008, the index had fallen by 39 percent, to 8,579. As the Wall Street Journal pointed out, the plunge erased $8.4 trillion in the value of U.S. stocks, the equivalent of more than half of the nation’s total output (GDP) for 2007.  A recent government report says retir...

Homeowners who are struggling with their mortgage payments hope that the government bailout currently being debated in Congress will bring them some relief. However, relying on the government as the only hope of avoiding foreclosure is unpleasant, to say the least. It's far better simply to avoid such a difficult situation. And  the current crisis does provide lessons that can help homeb...

AIER's founder, Colonel E.C. Harwood, dedicated a substantial portion of his working life to educating Americans about the damage caused by government inflating. Here we excerpt from the introduction of his monograph, "The Money Mirage," which he published in 1977. How many civilizations have arisen, flourished, retrogressed, and finally disappeared during the time that human beings have existe...

In the second quarter of 2008, real Gross Domestic Product increased at an annual rate of 1.9 percent, after having increased 0.9 percent in the first quarter, according to estimates released by the Bureau of Economic Analysis. In the same report, GDP growth in the fourth quarter of 2007 was revised downward from 0.6 to -0.2.  This is the first time GDP has decreased since 2001. In addition,...

AIER uses analysis of long-term and monthly data for each of 24 selected statistical series to calculate the likelihood of shifts in the business cycle. Through appraising and comparing each of our 12 Leading Indicators, 6 Coincident Indicators and 6 Lagging Indicators, we calculate a score for the percentage of leading indicators that are expanding. Part Three of our four-part web series abou...

AIER’s method of forecasting changes in the business cycle starts with collection of the most recent monthly data (or quarterly data where applicable) for each of 24 selected statistical series. In Parts One and Two of this four-part web series about our forecasting methods, we described each of our 12 Leading Indicators, 6 Coincident Indicators and 6 Lagging Indicators. In this installment,...

Many techniques have been developed for predicting changes in economic activity. AIER relies on a system using statistical indicators. We have found that analysis of selected statistical series to be useful in forecasting reversals in business cycles just prior to or shortly after their occurrence and in forecasting continuations of trends. The method behind using statistical indicators is to ...

Business cycles are alternating waves of expansion and contraction of business activity. Although cycles are recurrent (but not periodic), both their duration and intensity vary greatly. In addition, cycles occur across most business sectors simultaneously. No two business cycles are exactly alike.   AIER has developed a system for forecasting changes in business cycles and publishes the res...

Last week, we looked at the U.S. balance of trade and its components by the magnitudes of the values of imports and exports in dollar terms. We noted, however, that trade is a dynamic process that will invariably change from year to year. The charts below show the percent changes in the values of traded goods and services that took place between April 2007 and April 2008. Some of the large cha...

Many people worry about the large U.S. trade deficit, but the sources of that deficit get much less attention.  The large and growing cost of imported oil is one source, but not the only one. And while there are trade deficits in some sectors, these are partly offset by trade surpluses in others. The U.S. trades a large number of goods and services with other countries, and focusing on the o...

As of April 2008 there were 7.6 million unemployed people in the United States, out of a total workforce of 153 million people. Of those unemployed, roughly half are classified as “job losers,” people who lost their job or completed a temporary job, by the Bureau of Labor Statistics. The remaining half is made up of “job leavers,” people who have left their job voluntarily and are searchi...

Several decades ago, the Austrian economist, Oskar Morgenstern, pointed out the dangers and absurdities of trying to reduce something as complex and ever-changing as the American economy to a single number such as is regularly done with measurements of changes in the Gross Domestic Product . This is equally true with popular measurements of changes in the cost of living, such as the Consumer Pric...