Credit Writedowns » stimulus

Richard Nixon: 1971 Annual Message to the Congress on the State of the Union

Edward Harrison — Wed, 08 Feb 2012 14:24:50 +0000

I have highlighted some of the state of the union addresses by Herbert Hoover in the past because I see the Great depression as a time with certain parallels to the present economic hardship. Let's look at the 1970s instead now. Here's Richard Nixon from 1971, with what was considered a conservative agenda in 1971 based on balancing the federal budget and rolling back centralised governance. However, regarding details, Nixon proposes small government ideas on welfare reform and big government ideas in almost all other aspects of his State of the Union Address. I have bolded what I consider the most important parts

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Doug Casey on the Coming War with Iran

Casey Research — Fri, 03 Feb 2012 04:16:04 +0000

It could just be saber rattling during an election year, but Western powers have been provoking Iran for years now - two decades, really. I just saw another report proclaiming that Iran is likely to attack the US, which is about as absurd as the allegations Bush made about Iraq bombing the US, when he fomented that invasion. It's starting to look rather serious at this point, so I do think the odds favor actual fighting in the not-too-distant future

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[PREMIUM] More on the Fed – Obama stimulus plan

Edward Harrison — Fri, 27 Jan 2012 13:00:55 +0000

My last weekly said the hand-in-hand Fed activism and fiscal activism via Obama's mortgage proposal is bullish. Let me add a bit of colour here

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Monetary and Fiscal Policy for Sovereign Currencies

Randall Wray — Mon, 09 Jan 2012 13:30:48 +0000

This week we begin a new topic: functional finance. This will occupy us for the next several blog posts. Today we will lay out Abba Lerner’s approach to policy

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My comments on MMT’s job guarantee idea

Edward Harrison — Tue, 03 Jan 2012 13:30:24 +0000

Over the holidays, a debate broke out in the blogosphere about the so-called job guarantee idea that the MMT folks have bandied about. I call this controversial idea "Unemployment Insurance for the 21st Century", something I first addressed in 2009, based on a post by Randall Wray. My view: a job guarantee will never happen in the US unless we have a deep Depression like the one that began in 1929. Politically, this idea is a non-starter on this side of the Atlantic

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News Links: Osborne to Fund Infrastructure Projects as UK Retail Sales Fall

Edward Harrison — Mon, 28 Nov 2011 14:30:40 +0000

News links for 28 November

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Bill Gross and Larry Fink on the economy

Edward Harrison — Fri, 18 Nov 2011 20:19:18 +0000

Bloomberg Television has another great set of interviews to see, this time with Larry Fink of BlackRock and Bill Gross of PIMCO. The two sat down with Bloomberg Television's Erik Schatzker for an exclusive conversation at an alumni event hosted by UCLA Anderson School of Management (I guess both are UCLA alums; I almost went there myself). They covered a huge range of topics in the interview from the US supercommittee to Occupy Wall Street to the European Sovereign Debt Crisis and on down the line. Very good stuff Videos below

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China: Continued Boom or Bursting Bubble?

Casey Research — Wed, 12 Oct 2011 21:15:07 +0000

In a February 2010 Casey Report article titled Is China’s Recovery a Fraud?, my thesis was the $2.1 trillion stimulus package rolled out by Chinese authorities after the 2008/2009 financial crash was leading to enormous malinvestment. As with all monetary and fiscal stimuli, however, the initial high is always followed by a hangover

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Bruce Bartlett wants the Fed to target nominal GDP

Edward Harrison — Sat, 08 Oct 2011 19:54:01 +0000

I don't see stimulus though, neither fiscal or significant monetary stimulus either. So that leaves me predicting slowing without policy stimulus until recession hits, at which point the loss of demand will blow the deficit out even more. And then we will have to see what the political appetite for policy responses will be since the banking system and the economy will both be under enormous stress much as they were in 2008-

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A Tale of Two Speeches

Marc Chandler — Fri, 09 Sep 2011 11:30:46 +0000

Dollar continues to firm amid choppy market conditions; US futures point to modest decline. President Obama announces bigger package than expected; fiscal stimulus may be USD supportive. China’s CPI report shows that inflation has likely peaked; Mexico’s minutes may mark a dovish shift

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Hoover’s Great Depression

Edward Harrison — Fri, 02 Sep 2011 03:30:39 +0000

An excerpt from the August 1932 Republican Nomination Acceptance Speech by Herbert Hoover and commentary about his policy choices and ours today

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Roach on the Zombie American Consumer and Debt Forgiveness

Edward Harrison — Thu, 25 Aug 2011 14:14:43 +0000

I doubt we are going to see wide scale debt forgiveness until defaults and debt deflation have taken center stage. But this is something to consider as it was an approach used during the Great Depression

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Jobs and deficit crisis will lead to double dip and more downgrades

Edward Harrison — Wed, 24 Aug 2011 09:30:44 +0000

Former Fed nominee and Nobel Laureate Peter Diamond spoke to Bloomberg News about how he sees the economic difficulties the United States faces. His view is that America faces a jobs crisis in the here and now and that deficit reduction is a longer-term problem

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All back to square one

Claus Vistesen — Thu, 04 Aug 2011 11:30:02 +0000

The S&P 500 completes its worst run in a long time returning to levels not last seen since March, when we thought we had to write off the entire Japanese economy as a nuclear wasteland. So, is it all back to square one for the already weak recovery

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USA Debt Crisis: Is There Any Truth?

John Lounsbury — Sun, 24 Jul 2011 03:17:26 +0000

Last week the NY Times covered the division within the economic community over the way out of the USA's overspending / balance budgeting. “Reasonable people can sit down and, apart from any political or policy motivations, come up with different answers,” said Robert S. Chirinko, a finance professor at the University of Illinois at Chicago who studies corporate taxation. No doubt this is true. The economic community's solutions range from more deficit spending stimulus (on the theory that boosting the economy will boost tax revenues to balance the budget) to out-and-out cutting spending (on the theory that re-balancing, while causing short-term pain, will spur long-term growth). Both extremes have some basis in main stream economic studies

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Deficit Deal Could Derail Growth

Comstock Partners — Fri, 22 Jul 2011 10:30:35 +0000

Comstock Partners argues that while the stock market seems ready cheer any agreement that increases the debt ceiling and avoids a default, such cheering may be extremely short-lived as the economy sinks further under the burden of additional near-term cuts in spending. This conclusion is based not on any particular political ideology or economic theory, but on the historical record

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Americans oppose increasing the debt ceiling. Here’s why

Edward Harrison — Mon, 18 Jul 2011 17:45:00 +0000

The sense that America’s spending is out of control is visceral. It will be cut. Looking for a job, running a business or Investing in a world of austerity is a lot different from getting along in normal times. I advise everyone to think about how this impacts them because the cuts are definitely coming

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The dénouement of deficit fatigue

Edward Harrison — Fri, 15 Jul 2011 14:45:53 +0000

I flagged the inevitability of deficit fatigue as early as November 2008. I am sympathetic to the view that these deficits are an attempt to prop up excess credit growth and thus retard full recovery. But I also fear the consequences of a world without any policy stimulus. That is certainly why I advised a more aggressive policy response early both on stimulus and recognition of bad debt. A more aggressive response on these two fronts would have dealt with both structural and cyclical causes of recession. At this point however my sense is that we are being set up for a severe economic shock unless someone pulls a rabbit out of their hat soon

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The Big Interview with Barton Biggs

Edward Harrison — Fri, 01 Jul 2011 18:49:28 +0000

In this week’s Big Interview, Barton Biggs has a lot to say. What stands out and what the WSJ has stressed is his support for public works programs

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Money and Trading 101

John Lounsbury — Sun, 26 Jun 2011 02:09:04 +0000

When we tighten our belts, it means that we are trying to build up our savings. We do this by spending less. But spending drives our economy. Sales create jobs. So unless Obama has a secret plan to reverse three decades of current account deficits, the Government needs to loosen its belt when we tighten ours. If it doesn’t, then millions of us will lose our shirts

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Roach: Return of the Living Dead

Edward Harrison — Thu, 16 Jun 2011 13:47:35 +0000

Rather than adding stimulus with the aim of goosing demand to help the economy reach escape velocity, I would say that the central objective of economic policy is to help the economy reach full employment. Doing so will increase demand, increase output, and cut budget deficits tremendously. Policy makers should do this while aiding the economy in reallocating scarce resources to areas that will sustain longer-term productivity growth. In America, that means less resources in finance and housing and perhaps more in technology and infrastructure

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The jobs crisis is not just about demand

Edward Harrison — Mon, 13 Jun 2011 12:30:45 +0000

If the US wants job growth, it will need to reduce private sector debt levels - and that takes time. The government can act a a counterweight to the demand drag but I am very sceptical of claims like Summers’ that doing so would solve a jobs crisis borne out of a debt crisis

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Gundlach: “It’s very difficult to move forward with a debt-based economic scheme”

Edward Harrison — Fri, 10 Jun 2011 14:22:41 +0000

Jeffrey Gundlach spoke with Joe Weisenthal of Business Insider in an exclusive interview which they recently carried on their site. Gundlach believes that the economy is “a low-performance mode” that makes the unemployment overhang difficult to solve. In his view, there is “deflation risk in the economy at times when the government isn’t stimulating.”

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QE3 will only become a reality after the economy deteriorates

Comstock Partners — Sat, 04 Jun 2011 15:00:14 +0000

As Jon Hilsenrath pointed out in Thursday’s Wall Street Journal Bernanke has already indicated that the hurdle to more quantitative easing is very high. This is not to say that QE3 is off the table forever. But QE3 will only become a reality after the economy deteriorates to a point where deflation again becomes a clear threat and most opposition to the program fades away. The problem is that, by that time, most portfolio managers will have thrown in the towel and the market will be far lower

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ISM manufacturing index confirms growth slowdown

Edward Harrison — Wed, 01 Jun 2011 15:00:06 +0000

The soft patch in and of itself is not a problem. There is always some sort of mid-cycle slowdown. The real problem for economic growth bulls (and risk assets) is that this particular soft patch is increasingly likely to be met with austerity and contractionary fiscal policy

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More on the Upside-Down World of MMT

Edward Harrison — Thu, 12 May 2011 17:42:01 +0000

I ran across a post by Robert Murphy over at the Mises Institute blog on Modern Monetary Theory. Since I have been pushing the idea that the centrality of secular debt accumulation makes some ideas from MMT and Austrian Economics compatible, it was interesting to see a Mises scholar work over MMT. Here's what Murphy had to say as well as my own thoughts

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On Ideology, economics and the compatibility of Chartalists and Austrians

Edward Harrison — Mon, 02 May 2011 15:30:23 +0000

Below is a framework that delineates the ideology and economics of two groups of economic thought that are much talked about in the wake of the Credit Crisis: the Chartalists and the Austrians. These two groups are considered outside of the mainstream and this is important because many economists and market pundits in both camps predicted the global credit crisis while almost no mainstream economists did. The questions are why and what separates them from mainstream Keynesians and Monetarists and from each other

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First Quarter 2011 GDP: The only improving factor was stronger inventory growth

Guest Author — Thu, 28 Apr 2011 21:45:00 +0000

The Bureau of Economic Analysis' (BEA) first ("Advance") estimate of the annualized growth rate of the first quarter 2011 U.S. Gross Domestic Product (GDP) was 1.75%, down significantly from the 3.11% growth rate reported for the fourth quarter of 2010. When compared to the prior quarter the lower growth was caused by a number of factors: somewhat weaker consumption of durable goods, weaker fixed investments, substantially weaker overall trade numbers, and increased contraction in governmental expenditures. The only improving factor was stronger inventory growth, which reverted to form after an anomalous fourth quarter reduction (most likely driven by a noisy, if not aberrant, price "deflater")

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Fight of the Century: Keynes vs Hayek Round Two

Edward Harrison — Thu, 28 Apr 2011 12:00:45 +0000

These Hayek – Keynes videos are hilarious (hat tip Barry Ritholtz). This one is called "Fight of the Century" - sort of like Marvelous Marvin Hagler against Sugar Ray Leonard

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Stephen Roach: Economy Must Get Off ‘Steroids’

Edward Harrison — Wed, 13 Apr 2011 20:45:02 +0000

Roach talks to Bloomberg's Carol Massar about the risks to an economy operating at stall speed as well as Federal Reserve monetary policy and economic lessons from Japan's lost decades. He thinks a recessionary relapse is more likely than most, but still recommends reducing monetary liquidity and fiscal stimulus. "You can't stand in the way of balance sheet repair," Roach says

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INET Video: Richard Koo on Balance Sheet Recessions

Edward Harrison — Mon, 11 Apr 2011 19:00:43 +0000

Below is a video of Richard Koo from this past weekend's INET conference in Bretton Woods giving us his latest thoughts on policy responses to a balance sheet recession. He believes that Europe, the U.S. and China have much to learn from Japan 's post-1990 balance sheet recession.

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On the Stimulus-Induced Rally and the European Debt Crisis

Edward Harrison — Mon, 14 Mar 2011 12:45:20 +0000

Last Wednesday, BNN’s Howard Green spoke to Rob Cox of Reuters and me about two issues: the monster rally from March 2009 and the ongoing European debt crisis. On the markets, yes, I foresaw a rally two years ago because stock prices were depressed. Back in March 2009, I felt we were in an overshoot

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A brief note on Corporatism

Edward Harrison — Thu, 10 Mar 2011 22:00:07 +0000

This post is designed to be a quick hit but I wanted to put up a few thoughts on corporatism, stimulus and austerity. Consider it an extension of my post "Corporatism masquerading as Liberty". I intend to argue that corporatism is integrally related to the policy options available to an economy experiencing a secular deleveraging.

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A brief note on Corporatism originally appeared on Credit Writedowns

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Flow of Funds indicates businesses have stopped deleveraging

Edward Harrison — Thu, 10 Mar 2011 19:53:14 +0000

The Federal Reserve released the quarterly flow of funds report which allows one to see the debt levels outstanding in the U.S. economy. From the looks of it, deleveraging has not continued apace. UBS’ Andy Lees writes: The Fed Z1 flow of funds report for Q4 just released. Total nonfinancial sector debt grew by 5.1%

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Bread and Circuses: Reform Saudi Style

Marc Chandler — Wed, 23 Feb 2011 18:00:00 +0000

By Marc Chandler The time tested way to dampen popular unrest is to provide food and entertainment to the masses. The problem of course is that sometimes the funds are lacking. In Kuwait and Saudi Arabia, for example, this is not the case and the government’s have been "generous" in providing relief. Given the impact

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