The BLS updates its household expenditure data. Here’s the big picture:

This explains, incidentally, how it can both be the case that we’ve had sluggish growth in living standards and an explosion of fun new digital entertainment devices. Entertainment simply isn’t that big of a deal economically. The printing press was, in retrospect, a very important invention. But a massive increase in the productivity of the book-making industry didn’t raise European living standards simply because book-purchasing wasn’t a major part of European economic activity. When productivity in clothing manufacturing accelerated, that made a difference. For the contemporary United States, housing and transportation are the biggest parts of the picture.

Here’s an important piece of background for the Eurocrisis from Kash Mansouri:

The “fiscal balance” is the government budget deficit or surplus. The “ca” or current account balance measures total flows of money into or out of the country. You can see here that Greece and Portugal were, indeed, running irresponsible fiscal policies during the pre-crisis years. During an economic expansion, you really shouldn’t be running budget deficits, though in practice many countries do. And yet if this was fundamentally a fiscal policy crisis, you’d expect Greece and Portugal to be joined by France and Italy in acute crisis with Germany as the scary fifth risk. What you see instead is that Greece and Portugal are joined by Spain and Ireland in acute crisis with Italy as the scary fifth risk. The countries that are in great shape are the countries that were running a current account surplus before the crisis, not the countries that were running government budget surpluses.

The difficult question here, from a “lessons learned” perspective, is what exactly should the Spanish and Irish governments have been doing about this. It’s easy to say that Portugal and Greece should have acted more like Spain and Ireland, but even Spain and Ireland are in trouble. To understand how tough a problem this is to deal with correctly, you need to understand what a current account deficit combined with a budget surplus looks like. To people who fundamentally dislike whatever government is in authority, it looks perhaps like an unsustainable bubble. Prime minister so-and-so says he’s delivered prosperity, but it’s all smoke and mirrors! But to prime minister so-and-so it looks like a tremendous vindication. Thanks to his policies, the basic potential of the Spanish/Irish people is finally being unleashed. Unemployment is low. Wages are rising. The large net financial inflows represent a global vote of confidence in his wise policies and the fundamental merits of the Spanish/Irish people. If some sourpuss economic advisors shows up in the office saying there’s a problem, people are going to ask what the solution is. Give a speech telling international investors that they’ve got it all wrong?

“Folks, my policies just aren’t that big of a deal and you and me both know my country’s workers just aren’t that productive—take your money elsewhere!”

It would be . . . interesting . . . to see a speech like that. And it’s not even clear it would work. What you’d really have to do is run a giant budget surplus. But this would be mighty weird. Growth is humming along, the government is paying its bills, the debt:GDP ratio is falling, the cost of servicing the outstanding debt is low and falling, and you send to parliament a bill for a gigantic tax hike. Not to finance new services. Not to resolve a debt crisis. But to build up a rainy day fund to guard against future crisis even as the existence of the rainy day fund will inspire further confidence in the investor community that your country is a sound investment. Alternatively, you need capital controls.

Back in 1998, Justin Fox published an article in Fortune asking why the economy was so damn awesome, noting that Alan Greenspan attributed it to a mysterious x-factor:

One explanation for this curious confluence of decreasing inflation and decreasing unemployment is what Blinder, now an economics professor at Princeton, calls the “luck factor”: a set of happy coincidences that have put downward pressure on prices. The measurement of inflation has changed, driving the rate down by about half a percentage point. There have also been sharp drops in health care, computer, and oil prices–and a steady rise in the dollar’s value against foreign currencies. Beyond luck, there’s also the fact that the economic policymakers of the developed world have stayed serious about fighting inflation since the early 1980s. That seriousness has convinced consumers and businesses that inflation will stay low, which in turn has reduced upward pressure on prices. [...]

If you look beyond postwar U.S. history, however, you can come up with very different patterns. Economist John Makin of the American Enterprise Institute sees the current expansion as an investment-led, inflation-free “golden age” similar to the U.S. scene in the 1920s and Japan’s in the 1980s. Both those booms ended badly, of course–but they didn’t end in bursts of inflation. James Paulsen, chief investment officer at Norwest Investment Management, looks back even further, to the U.S. in the second half of the 19th century. That was a period of no inflation, revolutionary technological advances, massive global capital flows, and rapid economic growth–and was also characterized by devastating spells of deflation.

I always think it’s a little bit odd that the Federal Reserve’s late-1990s interest rate hikes don’t attract more attention:

People recall that the stock market went way down and then the economy never got as hot as it was in the late-1990s again, so the conventional thing is to say “bubble” and roll our eyes at all those old New Economy articles. But there was this deliberate decision to slow the economy down. And it’s not like having achieved whatever they were trying to achieve, the Fed then managed to flip the growth switch back on post-recession.