Syria seems like a cake walk after Iraq and Afghanistan. But there are a few things different here. Iran and Russia are backing Syria. Go ahead and fire a few missiles into Syria. It’s a little like your neighbor beating his wife and you decide to empty your handgun into his home to get him to stop. It isn’t going to end there, now is it?
What we need to realize here, is that we are at a point to where we could start WWIII. And without using any gas, 4 billion people could starve to death in a nuclear winter, because some US President had a red line that was not to be crossed. Give me a break. War is about killing people. If you’re not any good at it, you lose.
Messages from the external and government sectors
The second release of the 2013Q2 NIPA figures  suggests faster (2.5 ppts. versus the initially estimated 1.7 ppts.), albeit still modest growth. However, would be a mistake to conclude that fiscal drag is unimportant.
Figure 1: Log GDP, in bn. Ch.2009$, SAAR, July release (red), August release (blue). Source: BEA.
Now consider the fact that in fact the government spending (all levels) on goods and services declined even more than first estimated.
Figure 2: Log government consumption, in bn. Ch.2009$, SAAR, July release (red), August release (blue). Source: BEA.
With these revised figures, all levels of government continue to subtract from overall growth (in a mechanical sense) – although not as much in the two previous quarters. This is notable because the previous reading for 2013Q2 had indicated state and local spending had turned around to contribute to, rather than deduct from, growth.
Figure 3: Contributions to real GDP growth, in percentage points, SAAR, of non-government sector (blue), defense (red), Federal nondefense (green), and state and local (purple). Source: BEA.
The external sector shifted from a contribution -0.81 ppts to zero, thus accounting (once again in a mechanical sense) for the entire increase in estimated growth.
Figure 4: Contributions to real GDP growth, in percentage points, SAAR, of non-government sector (blue), defense (red), Federal nondefense (green), and state and local (purple). Source: BEA.
The revisions in exports and imports are shown in Figures 5 and 6.
Figure 5: Log exports of goods and services, in bn. Ch.2009$, SAAR, July release (red), August release (blue). Source: BEA.
Figure 6: Log imports of goods and services, in bn. Ch.2009$, SAAR, July release (red), August release (blue). Source: BEA.
Lower imports contribute to current quarter growth, in an accounting sense. However, they can also signal slower GDP growth going forward, insofar as the marginal propensity to import is positive. One might also look to cues from certain types of imports. Capital goods are sensitive to expectations of future demand, so the fact that capital goods imports are flat is a bit troubling.
Figure 7: Log capital goods exports (blue), and imports (red), in bn. Ch.2009$, SAAR. NBER recession dates shaded gray. Source: BEA, and NBER.
Growth in capital goods exports (blue line) is encouraging, if only because of the low expectations for rest-of-world demand.
Returning to the government sector, it’s important to recall government spending on goods and services doesn’t summarize the entire effect of spending cuts. Transfers have also been reduced. Figure 8 illustrates the drag coming from a reduction in government expenditures (spending, transfers) relative to GDP.
Figure 8: Log government total spending to GDP ratio (blue), and to potential GDP (red). Total spending measured as sum of real government consumption and nominal transfers deflated by personal consumption deflator. Potential GDP is February 2013 CBO measure in Ch.2005$, adjusted by the ratio of 2011 GDP measured in 2005 and 2009 units. NBER defined recession dates shaded gray. Source: BEA, second release, CBO Budget and Economic Outlook, NBER, and author’s calculations.
In sum, it’s a good thing that growth was revised up, but it could be yet faster with a sensible fiscal policy.
The details of the area covered by crops so far and that covered during this time last year is provided below in a table
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