The most recent advance estimate of gross domestic product by the Bureau of Economic Analysis said that real GDP declined at an annual rate of 1 percent during the second quarter of 2009. This estimated decline in the output of goods and services produced within the United States is less severe than the 6.4 percent decrease that took place in the first quarter of the year. These numbers, however, should be taken with a grain of salt. Advance estimates of GDP are revised, often substantially.

Start-ups and early-stage firms employ many people, innovate, and often grow rapidly. In the current recession, however, the increase in entrepreneurial activity doesn't necessarily mean good news about the state of the economy.

The first chart in every edition of The AIER Chart Book shows the purchasing power of the dollar since 1792, the first date from which relevant statistics can be calculated. Starting at a value of $1 in 1792, through many fluctuations both above and below that value during the 19th and early 20th centuries, a startling conclusion emerges: The price level always had a central tendency of $1 for as long as the United States was on a gold standard (1792-1933, with an 18-year hiatus during and right after the Civil War). 

That is, an explicit link to a particular weight of gold per dollar tended to serve as a long-term guarantor of long-term stability of the purchasing power of the dollar.

Despite its enormous responsibility for the state of the economy, the Federal Reserve’s performance is difficult to assess. One problem is that by statute the Fed is to pursue three separate goals: moderate long-term interest rates, maximum employment, and stable prices. These three objectives tend to come into conflict. At present, for example, the Federal funds rate is approaching 0.1 percent, unemployment is at its highest level in decades, and the price level is in decline. Out of concern for unemployment, however, the Fed is unwilling to raise interest rates At the same time, it is creating a serious threat of future inflation.

The current issue of AIER’s Research Reports leads off with Allan Meltzer’s critique of the Obama administration’s proposals for giving the Federal Reserve System a new role in bank regulation. The article reprints testimony Professor Meltzer gave July 9, 2009, before the Subcommittee on Monetary Policy of the House Committee on Financial Services.

After months of no positive movement, 11 out of AIER's 12 primary leading indicators have posted increases in the most recent batch of data. However, the big picture does not yet point to a definite change in the business cycle. For most of the series, the upturn has lasted for only a month or two, and the statistical probabilities do not yet point to long-term changes.

With the recession hammering local governments, a growing number are eyeing bankruptcy as an option. Municipal bankruptcy rose out of the Great Depression when the sinking economy took with it many state and local governments. Unable to pay their debts, local governments lobbied for federal legislation allowing them to file for bankruptcy. The result was Chapter 9 bankruptcy, and in the past 70 years, nearly 600 local entities have filed under Chapter 9. That may seem like a lot, but it’s far lower than the roughly 24,000 of annual business bankruptcy filings in recent years. Not every state allows this option, but currently, more than half of U.S. states do.

If anything, the current recession has put money in the pockets of gold dealers.

A recent report by the United Nations Environment Program finds that 25 percent of all fisheries are collapsing because of overfishing. (A fishery is considered collapsed if its annual catch is less than 10 percent of its historical maximum catch.) While the current state of fisheries sounds alarming, future forecasts look worse. A 2006 article published in Science predicts that by 2048, all fish stocks worldwide will be gone if historical trends continue. The conditions of United States fisheries fare just as poorly. 

The Consumer Price Index (CPI) decreased by 1.4 percent, before seasonal adjustment, during the 12 months ending in June, according to data released this month by the Bureau of Labor Statistics. The 12-month rate of price change was also negative in March, April, and May - and the rate of decrease has accelerated each month. The major factor is the sharp decrease in energy prices compared to their level a year ago. Even though energy prices rose more than 7 percent in June, they were still 25 percent below their level in June 2008.