The Post-Crisis Mentality
Mark Zandi is Chief Economist and co-founder of Moody's Economy.com, where he directs the company's research and consulting activities. Moody's Economy.com, a division of Moody's Analytics, provides economic research and consulting services to businesses, governments and other institutions.
Mark's research interests include macroeconomic, financial, and regional economics. Recent areas of research include studying the determinants of mortgage foreclosure and personal bankruptcy, an analysis of the economic impact of various tax and government spending policies, and an assessment of the appropriate policy response to bubbles in asset markets. In addition, Mark conducts regular briefings on the economy. He is frequently quoted in national and global news outlets.
Question: What has fundamentally changed post-crisis in terms of the financial system?
Mark Zandi: Well, we won't be spending like we have in the past. For 25 years, from the early 80's to the mid part of this decade, consumers spent very aggressively. They borrowed heavily and used that to finance spending. Wealthier households thought they were really wealthy and didn't need to save and so they spent also very aggressively.
I think after this crisis, this great recession, that has changed in that consumers are going to be much more cautious going forward and they'll save more. Higher income, wealthier households because they know they're not wealthy and that savings values are going to rise as quickly as they thought. Low and middle income households because they'll have no choice, they just can't borrow to finance their spending. So, to see change an inflection point with respect to households and how they spend their money and how aggressively they spend their money.
Question: How will the Millennials be affected by the recession?
Mark Zandi: Actually, there's been a huge change in their saving behavior. If you look at their saving rates, people in their 20's and early 30's firmly negative, firmly negative, right up until early 2008. Since then it's positive. And not inconsequentially so. I mean, a measurable saving. So I think even younger households have changed. They're thinking about the world has changed and they're going to behave differently going forward. In part that's on their own volition because they realize and understand that economies don't move in a straight line and that they need to be prepared for things when things don't do well. But part of it is being forced upon them because they are just not able to get that credit card or get that big auto loan, or get that mortgage like they did in the past. I think people are starting to think and are starting to worry about things like, are my taxes going to go up? Whose taxes are going up? Spending by the government on Medicare and on Social Security. Am I going to be able to get Social Security and Medicare at 65? Am I going to get the same benefits as I've gotten in the past? So, those are big questions that I think people are now really starting to ask themselves and it does have political implications. There are many, but that would be one key implication.
Question: What can we learn from the spring stimulus package?
Mark Zandi: Well, in my view, I think it worked. I don't think it's any accident that the recession ended just at the same time that the stimulus – now, I'm talking about the $787 Billion package passed last February. But that stimulus is now providing its maximum benefit. So, the stimulus worked in that it brought this recession to an end and it's providing a little bit of juice for the economy into the various parts of recovery. Now, this stimulus probably isn't going to be enough to push the recovery into a self-sustaining economic expansion and that's where we are right now. It's a little bit tricky and so we may need to see more – the government may need to provide more help to make sure that that transaction does actually occur. The intent of the stimulus was to end the recession, get a recovery going, and in my view, it worked.
Question: You wrote in a recent paper. “It’s no coincidence that the great recession ended just as the stimulus package began providing its maximum economic benefit.” How do you know? (Steven Landsburg, The Big Questions)
Mark Zandi: Well, it's a good question. I mean, we can look at individual aspects of the stimulus package and then look at the parts of the economy to which that stimulus would have an impact. So for example, the Cash for Clunkers, we know that that had a huge effect on vehicle sales and helped turn around vehicle production and employment in the vehicle sector. The First Time Homebuyer Tax Credit, the housing market stabilized this summer. Housing prices actually have risen a little bit in the last few months. Now there are many reasons for that, all of them policy related, but one of the key policy aspects that helped the market was the First Time Homebuyer Credit.
Consumer spending stabilized, and consumers got tax cuts, Social Security recipients got checks, so I think it helped there play a role. Without help from the feds, states would have been cutting. Let me just give you a statistic. In the year ending in the second quarter of 2009, state and local tax revenues fell by $120 billion. On a percentage basis, we've never seen anything like that, $120 billion and in that same year; aid from the federal government to state and local government increased by $110 Billion, so almost a complete offset. Not complete in some states, but localities have been cutting programs and jobs and raising taxes because they still have a budget hole, but could you imagine what they'd be going through had they not gotten that help.
You have to think about what the world would have looked like without the stimulus. You've got to construct a counterfactual, but in the case of state government, I don't think that very hard to do. You can ask any governor and they'll pretty much tell you that the stimulus was very important to keeping their budgets together as well as they were kept together.
Recorded on November 10, 2009
Why the next generation of investors will be cautious savers, explains Mark Zandi, Moody’s chief economist.
Dominique Crenn, the only female chef in America with three Michelin stars, joins Big Think Live this Thursday at 1pm ET.
The images and our best computer models don't agree.
A trio of intriguing galaxy clusters<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQzNDA0OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxNTkzNzUyOH0.0IRzkzvKsmPEHV-v1dqM1JIPhgE2W-UHx0COuB0qQnA/img.jpg?width=980" id="d69be" class="rm-shortcode" data-rm-shortcode-id="2d2664d9174369e0a06540cb3a3a9079" data-rm-shortcode-name="rebelmouse-image" />
The three galaxy clusters imaged for the study
Mapping dark matter<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="d904b585c806752f261e1215014691a6"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/fO0jO_a9uLA?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>The assumption has been that the greater the lensing effect, the higher the concentration of dark matter.</p><p>As scientists analyzed the clusters' large-scale lensing — the massive arc and elongation visual effects produced by dark matter — they noticed areas of smaller-scale lensing within that larger distortion. The scientists interpret these as concentrations of dark matter within individual galaxies inside the clusters.</p><p>The researchers used spectrographic data from the VLT to determine the mass of these smaller lenses. <a href="https://www.oas.inaf.it/en/user/pietro.bergamini/" target="_blank" rel="noopener noreferrer">Pietro Bergamini</a> of the INAF-Observatory of Astrophysics and Space Science in Bologna, Italy explains, "The speed of the stars gave us an estimate of each individual galaxy's mass, including the amount of dark matter." The leader of the spectrographic aspect of the study was <a href="http://docente.unife.it/docenti-en/piero.rosati1/curriculum?set_language=en" target="_blank">Piero Rosati</a> of the Università degli Studi di Ferrara, Italy who recalls, "the data from Hubble and the VLT provided excellent synergy. We were able to associate the galaxies with each cluster and estimate their distances." </p><p>This work allowed the team to develop a thoroughly calibrated, high-resolution map of dark matter concentrations throughout the three clusters.</p>
But the models say...<p>However, when the researchers compared their map to the concentrations of dark matter computer models predicted for galaxies bearing the same general characteristics, something was <em>way</em> off. Some small-scale areas of the map had 10 times the amount of lensing — and presumably 10 times the amount of dark matter — than the model predicted.</p><p>"The results of these analyses further demonstrate how observations and numerical simulations go hand in hand," notes one team member, <a href="https://nena12276.wixsite.com/elenarasia" target="_blank">Elena Rasia</a> of the INAF-Astronomical Observatory of Trieste, Italy. Another, <a href="http://adlibitum.oats.inaf.it/borgani/" target="_blank" rel="noopener noreferrer">Stefano Borgani</a> of the Università degli Studi di Trieste, Italy, adds that "with advanced cosmological simulations, we can match the quality of observations analyzed in our paper, permitting detailed comparisons like never before."</p><p>"We have done a lot of testing of the data in this study," Meneghetti says, "and we are sure that this mismatch indicates that some physical ingredient is missing either from the simulations or from our understanding of the nature of dark matter." <a href="https://physics.yale.edu/people/priyamvada-natarajan" target="_blank">Priyamvada Natarajan</a> of Yale University in Connecticut agrees: "There's a feature of the real Universe that we are simply not capturing in our current theoretical models."</p><p>Given that any theory in science lasts only until a better one comes along, Natarajan views the discrepancy as an opportunity, saying, "this could signal a gap in our current understanding of the nature of dark matter and its properties, as these exquisite data have permitted us to probe the detailed distribution of dark matter on the smallest scales."</p><p>At this point, it's unclear exactly what the conflict signifies. Do these smaller areas have unexpectedly high concentrations of dark matter? Or can dark matter, under certain currently unknown conditions, produce a tenfold increase in lensing beyond what we've been expecting, breaking the assumption that more lensing means more dark matter?</p><p>Obviously, the scientific community has barely begun to understand this mystery.</p>
Scientists have found evidence of hot springs near sites where ancient hominids settled, long before the control of fire.
Astronomers spot an object heading into Earth orbit.
Minimoons<p>Scientists have confirmed just two prior minimoons. One was <a href="https://en.wikipedia.org/wiki/2006_RH120" target="_blank">2006 RH120</a>, which orbited us from September 2006 to June 2007. The other was <a href="https://en.wikipedia.org/wiki/2020_CD3" target="_blank">2020 CD3</a>, which got stuck in the 2015–2016 timeframe, and is believed to gotten away in May 2020.</p><p>2020 SO, the new kid on the block, is expected to arrive in October 2020 and pop out of orbit in May 2021.</p><div id="37962" class="rm-shortcode" data-rm-shortcode-id="f4c0fc8a2cba6536ea4cd960ebed3e6e"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1307729521869611008" data-partner="rebelmouse"><div style="margin:1em 0">Asteroid 2020 SO may get captured by Earth from Oct 2020 - May 2021. Current nominal trajectory shows shows capture… https://t.co/F5utxRvN6Z</div> — Tony Dunn (@Tony Dunn)<a href="https://twitter.com/tony873004/statuses/1307729521869611008">1600621989.0</a></blockquote></div>
Identifying 2020 SO<p>The first clue 2020 SO isn't your ordinary asteroid is its exceptionally low velocity. It's traveling much more slowly that a typical asteroid — their <a href="https://www.lpi.usra.edu/exploration/training/illustrations/craterMechanics/" target="_blank">average rate of travel</a> <a href="https://www.lpi.usra.edu/exploration/training/illustrations/craterMechanics/" target="_blank" rel="noopener noreferrer"></a>is 18 kilometers (58,000 feet) per second. Even <a href="https://en.wikipedia.org/wiki/Moon_rock" target="_blank">moon rocks</a> sent careening into Earth orbit by impacts on the lunar surface outpace pokey 2020 SO.</p><p>For another thing, 2020 SO has an orbital path very similar to Earth's, lasting about one Earth year. It's also just slightly less circular than our own orbit, from which it's barely tilted off-axis.</p><p>So, what is it? <a href="https://cneos.jpl.nasa.gov/ca/" target="_blank">NASA estimates</a> that the object has dimensions very reminiscent of a discarded Centaur rocket stage from the <a href="https://en.wikipedia.org/wiki/Surveyor_2" target="_blank" rel="noopener noreferrer">Surveyor 2 mission</a> that landed an unmanned craft on the moon. Back in the day, rocket stages were jettisoned as craft were aimed toward their desired position. This stuff, if released high enough, remains in space. It appears that this Centaur rocket, launched in September 1966, is now making its way back homeward, at least for a little bit.</p><p>When 2020 SO arrives at its closest point in December, the rocket is expected to be about 50,000 kilometers from Earth. Its next closest approach is much further: 220,000 kilometers, in February 2010.</p><img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQzMDk3NC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYyODg1MTQ1MX0.HGknDwqp0GmeuczKY_AS7vrPG7KMFUc_XO95tNoI2xo/img.jpg?width=980" id="e5cda" class="rm-shortcode" data-rm-shortcode-id="85eb1f790d8c3ee5b261f7ba13eaa5e1" data-rm-shortcode-name="rebelmouse-image" alt="Centaur rocket stage" />
Centaur rocket stage
What we may be able to learn<p>Earthly space programs being as young as they are, scientists would love to know what's happened to our rocket during a half century in space.</p><p>While 2020 SO won't get close enough to drop into our atmosphere, its slow progress has scientists hopeful that they'll still get some kind of a decent look at it.</p><p>Spectroscopy may be able to reveal what the rocket's surface is like now — has any of its paint survived, for example? Of course, being out in space, it's likely to have been hit by lots of dust and micrometeorites, so the current state of its surfaces is also of interest. Experts are curious to know how reflective the rocket is at this point, valuable information that can help planners of future long-term missions anticipate how well a craft out in space for extended periods will remain able to reflect sunlight.</p>
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