Historical Housing Busts
SOURCE: Goldman Sachs Research via Pragmatic Capitalism. Read Full Report

The chart shows the historical distribution of housing market corrections for all the developed market nations and periods in the study. Based on the research, it turns out that the US housing bust was severe but not unusual; the 30-35% correction in the US housing market is not outside the range of other housing busts. 

The study found that after the bust, the economy experiences the following trends:

1. The GDP growth is sluggish for a prolonged period.
   
2. High unemployment and relatively high output gap persists.
3. Double-dip recessions are not common.
4. The private sector deleverages while the public sector leverage increases.
5. Interest rates remain low for a long time6. Stock returns are modest, consistent with slow GDP growth.

Depression is a Choice 
By Steve Randy Waldman
April 17, 2012
SOURCE: Interfluidity.com 

"We (the U.S.) are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives.

But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. 

That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave. They swoop in with incredible speed and force to bail out the financial sectors in which creditors are invested, trampling over prior norms and laws as necessary. 

The same preferences are reflected in what the polities omit to do. They do not pursue monetary policy with sufficient force to ensure expenditure growth even at risk of inflation. They do not purse fiscal policy with sufficient force to ensure employment even at risk of inflation. They remain forever vigilant that neither monetary ease nor fiscal profligacy engender inflation. The tepid policy experiments that are occasionally embarked upon they sabotage at the very first hint of inflation. 

The purchasing power of holders of nominal debt must not be put at risk. That is the overriding preference, in context of which observed behavior is rational."  Read Full Article 


An Example in Real Time

The Dutch Left’s Embrace of the Austerity Suicide Pact: It’s Necessary for the Children! by William K. Black, April 30, 2012 SOURCE: NewEconomicPerspectives.org

"A remarkable, thing has just taken place in the Netherlands. The ruling Dutch political coalition collapsed when the ultra-right wing party refused to support its coalition partners’ austerity package that called for tax increases and reduced government expenditures.
  
The bizarre fact is that European leaders, at the precise time that neoclassical (utopian?) economic dogma has utterly discredited itself empirically, has embraced the failed dogma with a passion worthy of the most formulaic romance novel.  This embrace is not limited to politicians from the extreme right; much of the left’s political leadership has gotten all steamy about austerity." Read Full Article 

Canada's merchandise exports declined 3.9% and imports edged up 0.2%. As a result, Canada's trade surplus decreased from $1.9 billion in January to $292 million in February. 

Exports declined to $39.6 billion, as volumes fell 3.5% in February. After posting several monthly increases, exports of energy products and automotive products were the main contributors to the overall decline.

Exports to the United States decreased 3.8% to $29.3 billion. Lower exports of crude petroleum were the largest contributor to the decline. Imports from the United States edged up 0.4% to $24.5 billion. Consequently, Canada's trade surplus with the United States decreased from $6.1 billion in January to $4.8 billion in February.

Exports to countries other than the United States fell 4.0% to $10.3 billion. Imports from countries other than the United States declined 0.2% to $14.9 billion. As a result, Canada's trade deficit with countries other than the United States increased from $4.1 billion in January to $4.5 billion in February.  
Source: Stats Can via tradingeconomics.com  

Eurozone's PMI Composite Output Index fell to a five-month low in April, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. The index fell for the third month in a row to 47.4, down from 49.1 in March, to signal a faster rate of decline of private sector economic activity. Output has fallen seven times in the past eight months.

Output fell at the fastest rates for five months in both manufacturing and services, with the former seeing the steeper rate of decline.

By country, growth slowed to only a very modest pace in Germany, showing the weakest expansion in the current five-month sequence as weak service sector growth was offset by a sharp decline in manufacturing output. France meanwhile saw output fall for the second month in a row, with the rate of decline accelerating to the fastest since October. Falling manufacturing output was
accompanied by a steep deterioration in service sector activity.

The big-two euro countries nevertheless continued to outperform the rest of the region where output fell sharply, down for the eleventh successive month and at the fastest pace for four months. Steep declines in both manufacturing output and services activity were seen in the periphery. 

Source: The Markit www.markiteconomics.com via pragcap.com