Look for strong growth of our exports and imports in the coming year.

The IMF has an interesting observation in its latest World Economic Outlook. Talking about total international trade volume around the world, they find:

For years I heard sellers of luxury goods say, "The rich will always have money." Then the recession came and we learned that the rich will not always spend their money. As an example, I wrote a blog post using the mega-yacht business as an example of the economics of the luxury market.

Now some hot-shot quantitative economists have illuminated me even more. Jonathan A. Parker and Annette Vissing-Jorgensen (both of Northwestern University) have written a paper about how consumer spending varies across the business cycle. Their conclusion is that the spending of upper income groups is much more variable than the spending of lower income groups. (The article appeared in the American Economic Review: Papers and Proceedings, May 2009. Available here: Who Bears Aggregate Fluctuations and How?)

"The deeper the slump, the zippier the recovery."

That is James Grant's judgment in a nutshell. The conclusion surprised me, not because I disagree, but because I'm used to Grant being pretty bearish. His Wall Street Journal article is illustrated with photos of Roosevelt, Greenspan and Buffett (not Jimmy), as well as cute animals. No wonder the paper is losing money. His conclusion cries out for a simple chart. Let's look at the data!

Prompted by Greg Mankiw's reading list, which I blogged about earlier this week, I did some serious browsing through two of the books.

It looks like the President will reappoint Ben Bernanke to the chairmanship of the Federal Reserve. (One story here.)

If it were up to me, I would not have reappointed Chairman Bernanke. Reasons:

When the committee that figures this stuff out meets, they emphasize the four coincident indicators of the economy. Before looking at the latest charts, keep in mind that we are mostly looking at data through June (for employment, through July). The Wall Street Journal survey finds that most of us economists believe that the recession is either over, or that August is the bottom and next month it will be over. The belief that the recession is over is not based on hard data, but on an estimate of what the July data will be when published, and also on what the coming months will bring. We won't know for sure that the recession is over until we are so far into the recovery that another dip would be defined as a new recession, and not part of the current recession. Got that? In a nutshell, saying that the recession is over is making a forecast.

Now let's look at actual data on the four coincident indicators:

The efficient markets hypothesis, the bedrock of modern finance, is under attack due to -- get this -- irrational behavior. Believe it or not, it appears that some market participants behaved irrationally. So where does that evidence leave us?

What is the efficient markets hypothesis? The Wikipedia definition is pretty good:

Chris Anderson's new book, Free, is actually subtitled, "The Future of a Radical Price," but he does a great job of explaining the economic concepts related to Free. And he does not sound like a dry economics textbook while he's doing it (at least not to me).

The Free concept at its best is shown by Google (GOOG), which gives away search but learned to sell ads alongside the search results. This is a very old concept, actually. Radio, and then television, gave away content but sold ads. Some of the new tools, such as YouTube and Twitter, have mastered the free part, but are still struggling with the pay part.

I've updated my forecast for the latest GDP revision. Key positives and negatives were laid out in this post. Here's how my new forecast looks:

That red line is the average growth rate in recovery, assuming that second quarter was the bottom for GDP.