Keywords: US Economy, Fed, Monetary Policy
Contrarian views regarding policy action:
When looking at the recovery speed of the two economies one should also compare the development of the real estate markets, a major factor in private wealth:
Keywords: US Economy, Recovery, Double Dip
July 26, 2010
Keywords: US Policy, Global Financial Crisis, Regulation of the Financial System
A view which could not win a majority at the moment:
The U.S. economy is recovering and the Federal Reserve needs to raise interest rates, lest it leave in place a policy that will only fuel future financial imbalances, Federal Reserve Bank of Kansas City President Thomas Hoenig said Friday.
“We need to get off of the emergency rate of zero, move rates up slowly and deliberately,” which will bring policy in better alignment “with the economy’s slow, deliberate recovery,” the official said. While the markets may like the current stance of monetary policy, Hoenig said “I wish free money was really free and that there was a painless way to move from severe recession and high leverage to robust and sustainable economic growth, but there is no short cut.” read more in the Wall Street Journal
Keywords: Fed Rate, Interest Rates
The euro area economy grew 1 percent in the second quarter of this year, a much better rate than had been expected, as Germany’s best quarterly performance since reunification compensated for slow growth in Spain and Italy and a sharp decline in Greece, according to data released Friday.
The rise in gross domestic product in the 16-country area that uses the euro currency was the fastest in four years, Eurostat, the European Union’s statistics office, reported. It compared with a 0.2 percent rise in the first quarter.
Economists cautioned that Europe would not maintain that rate of growth all year. And the figures also highlighted the sharp divergence in growth rates between Germany and the South European countries that are at the heart of the Continent’s sovereign debt crisis.
“The 2.2 percent surge in Germany sits uncomfortably alongside a 1.5 percent contraction in Greece, which remains firmly in recession, and only modest growth of 0.2 percent in Spain and 0.4 percent in Italy,” Chris Williamson, chief economist at Markit, a data provider, wrote in a note. read more
Keywords: Euro, European Union, European Economy
Guardian.co.uk: Greece's economy deeper in recession than forecast• Second-quarter GDP in Greece estimated to have fallen by 3.5% year-on-year • Record jump in Greek unemployment prompts that crisis could intensify social unrest, August 12, 2010
Greece's recession deepened more than expected in the second quarter of 2010 after the country was rocked by its financial crisis and a series of government measures to slash public debt.
Investment dropped and public spending slumped in the three months to June as Greek politicians battled to regain the confidence of financial markets and meet the conditions of a multibillion-euro bailout from the European Union and International Monetary Fund.
There was also a fresh warning sign that the economic crisis could further intensify social unrest, after a record jump in unemployment. The crisis has already led to widespread industrial action and public protests.
With the fiscal squeeze only just starting, Greece is expected to remain mired in recession for the rest of this year. read more
Keywords: Greece, Greek Crisis
Keywords: Sovereign Debt, Debt Crisis, Debt and Growth
Keywords: US Economy, Fed Policy
In his recent NYT editorial, US Treasury Secretary Timothy Geithner proclaimed:
Even the surge in imports, which lowered the rate of increase of G.D.P., actually reflects healthy and growing American demand.
I imagine that he must then be thrilled by today's trade report, which revealed the trade deficit swelled by $7.9 billion on the back of an explosion of imports. Analysts were quick to note that the new figures will contribute to another downward revision to the already disappointing Q2 GDP report: read more
Keywords: US Trade Deficit, US GDP, US Recession, Double Dip
Keywords: Nouriel Roubini, Deflation, China Growth
The U.S. economy has a "significant likelihood" of entering a double-dip recession if the government doesn't step in to help the unemployed, economist Robert Shiller told MarketWatch News Break on Wednesday. read more
Keywords: US Economy, Unemployment, Douple Dip
Keywords: China, Growth in China
For many, corruption and political cronyism are seen as an inevitable part of Greek politics. This column argues that the same could have been said in the 1970s about Hong Kong, now a beacon of low corruption. Hong Kong managed this turnaround by appointing a non-elected governor accountable to the UK government. Greece could achieve the same by calling on the EU and start counting the benefits. read more
Keywords: Federal Reserve Board, Policy Effectiveness
Certain hedge fund managers, crowding analysts and alleged economic exports predicted the death of the Euro just weeks ago. Let's see whether the current revival is sustainable...
Keywords: Euro, Dollar, Exchange Rate
The Federal Reserve will meet on Tuesday faced with a pivotal decision about whether to abandon its presumption that the economy is gradually picking up steam and begin to consider new steps to keep the recovery from sputtering out. read more
Keywords: Federal Reserve Board, Deflation
"Every dime of government spending pleases some in-built constituency. Once legislators give money away (that is, spend tax monies), it is much harder subsequently to take the spending back.
Here is an excerpt about the "boom and bust cycle" of government spending:
Whether it is public employees, government agencies, trade unions (teachers, fire, police, etc.), pensioners, or particular businesses and industries benefitting from government largesse, each constituency or special interest has its sacred cows of government spending. In times of plenty — such as cheap-money-induced economic booms — when the government's tax take is bountiful, each constituency fights for additional appropriations to be directed to their favored cause, whether it is new spending programs, special tax credits for social-welfare causes, or pseudo-economic purposes. In times of dire fiscal conditions, each constituency fights vehemently to oppose a loss of their share of seized private property.
This difficulty of reducing government spending is aggravated by the boom-and-bust cycle itself. In times of plenty, it is easy for politicians (who are spending someone else's money anyway) to budget new, ongoing spending programs lauded by the special interests — on top of what are clearly extraordinary and one-time boosts in tax take. When the bust occurs and taxes dry up, not only do legislators have to bring ongoing spending into alignment with ongoing tax revenue, but they must also undo the extraordinary additions to spending that were approved during the boom — with the attendant fiscal pain and inevitable public backlash."
Keywords: Government Spending, Fiscal Programms
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