Posted by Kendall Harmon

Treasury Secretary Jacob J. Lew warned Congress on Wednesday that the government would most likely exhaust its ability to borrow in late February, setting up yet another fiscal showdown with Republicans, and this time earlier than congressional leaders had anticipated.

In a letter to Speaker John A. Boehner and the other top three congressional leaders, Mr. Lew said a surge of February spending, mainly tax refunds for 2013, would leave the Treasury with little room to maneuver after the official debt limit is reached on Feb. 7.

The letter amounts to an early alarm bell, coming just weeks after Congress passed its first bipartisan budget and comprehensive spending bill in years. Those bills were supposed to serve as a cease-fire in the budget wars that have rattled the country and the economy since Republicans took control of the House in 2011.

Read it all.

Filed under: * Culture-WatchGlobalizationHistory* Economics, PoliticsEconomyTaxesThe U.S. GovernmentBudgetFederal ReserveMedicaidMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.* TheologyEthics / Moral Theology

6 Comments
Posted January 23, 2014 at 5:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Standard & Poor’s is only raising half a cheer at the deal:

“We believe that to date, the shutdown has shaved at least 0.6 per cent off of annualised fourth-quarter 2013 GDP growth, or taken $24bn out of the economy.

“The short turnround for politicians to negotiate some sort of lasting deal will probably weigh on consumer confidence, especially among government workers that were furloughed. If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their cheque books. That points to another Humbug holiday season.”

Read it all (if necessary another link is there).

Filed under: * Culture-WatchAging / the ElderlyHealth & Medicine* Economics, PoliticsEconomyTaxesThe U.S. GovernmentBudgetMedicaidMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted October 17, 2013 at 5:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Understanding the developing attitude of the central banks, and the effects of their actions, obviously remains central for investors in all financial assets. The “big picture” for global financial assets, involving very low government bond yields and a gradual shift of risk appetite into credit and equities, is unlikely to change until one of two events takes place.

The first would be a decision by the central bankers themselves that the era of unlimited quantitative easing must end, either because of the risk of inflation and asset price bubbles, or because of concerns about fiscal dominance over the monetary authorities. The second would be a realisation by the markets that further action by the central bankers is irrelevant because they have run out of effective ammunition. Either of these events would probably remove the central prop from the equity bull market which began in March, 2009, but neither seems very likely in 2013.

There is certainly no sign that the central bankers themselves will call a halt to the extension of their balance sheets.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)Politics in General* International News & CommentaryAmerica/U.S.A.AsiaChinaJapanEurope--European Sovereign Debt Crisis of 2010

0 Comments
Posted December 31, 2012 at 5:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Standard & Poor’s downgraded the credit ratings of France, Italy and seven other European countries on Friday, a move that may have more symbolic than fundamental financial impact but served as a reminder that Europe’s economic woes were far from over.

Another memory jog came Friday from Greece, the original source of Europe’s debt troubles. Talks hit a snag between the new Greek government and the banks and other private investors that Athens hopes will agree to take losses on their debt so that Greece can avoid a default.

Together, those developments underscore that even as Europe’s debt turmoil enters its third year, no clear solutions are yet in sight — despite recent signs that a new lending program by the European Central Bank might be easing financial market pressures.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankG20 The Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010

0 Comments
Posted January 14, 2012 at 8:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Congressional Budget Office on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy.

Read it all.

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0 Comments
Posted November 23, 2011 at 5:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The crisis of the euro zone has finally hit the potholed road of real politics, with the Greeks now openly questioning whether their commitment to Europe and its single currency still matters more to them than control over their own future and economic well-being.

During the two-year financial crisis, the wealthier countries of northern Europe, led by Germany, have insisted that their heavily indebted brethren in the south radically cut spending in return for emergency loans. They have stuck to that prescription even though austerity has undermined growth and increased unemployment in Greece, Spain, Portugal and now Italy, betting that people in those countries will swallow the harsh medicine because their only alternative is to default and possibly leave the euro zone altogether.

The turmoil in the government of Prime Minister George A. Papandreou means that Greece is about to call that bet. Many Greek politicians appear to be calculating, at this late stage, that they have more to lose by sticking to Germany’s terms than by risking a messy default, and even going it alone with their old currency, the drachma, outside the euro zone.

Read it all.

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0 Comments
Posted November 2, 2011 at 5:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Financial turmoil in global markets continues to play havoc with the value of the U.S. dollar, but technology continues to make the transfer of donor dollars to missionaries quicker and easier.

American missionary income in China has dropped 25 percent in recent years because of the dollar's decline against the Chinese yuan, said a missionary leader who requested anonymity. "In 24 years of missionary ministry, I have never seen things as tough as they are now."

"It's a complaint we hear almost every day," says Bill Bray of Christian Aid Mission, which supports indigenous missionaries in 122 nations. "They need more money because of the exchange rate."

Read it all.

Filed under: * Christian Life / Church LifeMissionsParish MinistryStewardship* Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

0 Comments
Posted October 25, 2011 at 3:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

Read it all.

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0 Comments
Posted October 23, 2011 at 2:32 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

We're just stuck?

If we don't deal with it – if we don't proactively say we're going to get our deficit under control –let me put it this way: My personal belief is that if we do proactively get our long-term budget issues under control, the bond market will say, "Okay, you're credible and we will buy your bonds, because you have put yourself on a credible path – whether it's through cuts, whether it's through tax increases, however you want to do it – but you have to do it. But you have shown us a credible way to get to the place where the growth rate of your deficit is below the growth rate of nominal GDP."

But if we don't do that, my wine bottle of pain becomes a jeroboam and we end up downing it all at once.

That sounds ugly.

It is. It will force budget cuts; it will force tax increases of the magnitude that no one is ready to contemplate. We're talking cuts in Medicare, cuts in education, in defense, in spending of all kinds. That would create a depression, a true depression that would last 4-5 years, push unemployment to 20%-25%....

Read it all.

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0 Comments
Posted October 2, 2011 at 5:16 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

This year, volatility has soared and share prices have fallen sharply, in part because few believe there is a Bernanke put, or, for that matter, a Trichet put. It is far from clear that the authorities could stem a new panic, and even less clear that many would be willing to try.

In other words, the slogan for markets as the International Monetary Fund and World Bank meet this week in Washington could well be, “You’re on your own. Don’t count on anybody to bail you out.”

The situation is thus drastically different from that of three years ago, when I.M.F.-World Bank meetings served as a forum to find joint strategies to ameliorate the financial crisis that had followed the collapse of Lehman Brothers.

Read it all.

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0 Comments
Posted September 21, 2011 at 9:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Joint Select Committee on Deficit Reduction, aka super Congress or super committee, is Congress's answer to its own inability to break the hold of partisan gridlock that took America to the brink of default on Aug. 2, prompting the first-ever downgrade of the nation's credit rating.

The panel, which on Thursday holds an organizational meeting open to the public, has a sweeping mandate to propose cuts to spending and entitlements and recommend tax reform by Nov. 23. Congress must vote the package up or down – no amendments or filibuster – by Dec. 23, or trigger a $1.2 trillion package of automatic spending cuts, equally divided between defense and domestic spending.

"Never has Washington had an all-or-nothing panel that is empowered and backed by a firm timeline like this one is," says John Ullyot, a public-affairs consultant in Washington and former GOP Senate staffer. "The starter pistol will fire right after Labor Day."

Read it all.

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3 Comments
Posted September 6, 2011 at 3:19 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In this year’s speech, he is likely to put particular emphasis on what needs to be done to repair the U.S. economy over the longer run, including lowering long-term deficits. The title of the speech, in fact, is “Near- and Long-Term Prospects for the U.S. Economy.”

While Bernanke has said that Congress should not cut the budget deficit too quickly, lest this austerity undermine the weak economic recovery, he has previously argued that a long-term plan to put the government’s spending in line with its revenue could help instill confidence. Indeed, Deutsche Bank chief economist Peter Hooper said in a research note that the need for longer-term adjustments in the economy could be another argument against new Fed intervention.

“Any action the Fed takes at this point may give the markets no more than a temporary lift and would not resolve the more fundamental problems that are weighing on the economy,” Hooper said.

Read it all.

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4 Comments
Posted August 24, 2011 at 6:35 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Take a look.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted July 29, 2011 at 4:59 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The nation’s Roman Catholic bishops are urging the GOP-led House to reject a cuts-only approach to the budget as Washington tries to avert an unprecedented government default on its multi-trillion-dollar debts.

“A just framework for future budgets cannot rely on disproportionate cuts in essential services to poor persons,” wrote Bishop Stephen Blaire of Stockton, Calif., and Bishop Howard Hubbard of Albany, N.Y., in a Tuesday (July 26) letter to House members.

Read it all.

Filed under: * Culture-WatchReligion & Culture* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* Religion News & CommentaryOther ChurchesRoman Catholic

1 Comments
Posted July 28, 2011 at 12:55 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Should America embark on such fiscal contraction at a time when economic growth has already slipped to stall speed, and debt deleveraging continues with a vengeance, I would like to flee to Mars for safety.

Yes, there is such a concept as an “expansionary fiscal contraction”, as in Ireland (1980s), Denmark (1990s), arguably Canada (1990s), and the UK after both 1932 and 1993, but in every successful case this was accompanied by monetary loosening. That card has already been played this time.

Should America instead opt to evade these fiscal cuts by actually defaulting on debts accumulated by self-indulgent baby boomers, I would also like to flee Mars because such an outcome might be even worse.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

10 Comments
Posted July 27, 2011 at 12:43 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

House and Senate negotiators have not reached a deal that would lift the nation’s debt ceiling just hours before markets in Asia are set to open — a test of whether Washington political dysfunction is beginning to shake the global economy.

House Republicans are not able to reach a deal with Senate Democrats, said congressional sources, though staff-level negotiations are continuing.

And in a sign that talks with Republicans appear to be going sour, Senate Majority Leader Harry Reid (D-Nev.) began to draft his own legislation Sunday that would slash at least $2.5 trillion to match an extension of the nation’s borrowing limit through the 2012 election, leadership aides said.

Read it all.


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0 Comments
Posted July 24, 2011 at 4:08 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

This medicine is very hard for Americans to swallow, but the truth is, we can’t have it both ways. We want an arms-length relationship with the government in good times. In bad times, the cries go out to “do something,” even if it’s pay us to do nothing. We want a free-market economy during expansions, a nanny state in periods of recession. Privatized profits during the boom, socialized losses during the bust.

--Caroline Baum, in a Bloomberg News piece this week


Filed under: * Culture-Watch* Economics, PoliticsEconomyHousing/Real Estate MarketLabor/Labor Unions/Labor MarketStock MarketTaxesThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* TheologyEthics / Moral Theology

3 Comments
Posted July 23, 2011 at 8:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For years now, America has been spending more money than we take in. The result is that we have too much debt on our nation's credit card — debt that will ultimately weaken our economy, lead to higher interest rates for all Americans, and leave us unable to invest in things like education, or protect vital programs like Medicare.

Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem. That's what the American people expect of us. Every day, families are figuring out how to stretch their paychecks a little further, sacrifice what they can't afford, and budget only for what's truly important. It's time for Washington to do the same.

Read it all.

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0 Comments
Posted July 22, 2011 at 6:10 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It’s not that Republicans needed to tug their forelock and go along with whatever grand bargain the White House whipped up. But to win the endgame, they needed something they were willing to concede, something they could tout in public as an example of meeting the Democrats partway.

Their inability to make even symbolic concessions has turned a winning hand into a losing one. A majority of Americans want to close the deficit primarily with spending cuts — which is to say, they’re primed to side with conservatives in the debt-ceiling debate. But in trying to turn that “primarily” into a “completely,” the right has squandered this advantage....

Read it all.

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13 Comments
Posted July 19, 2011 at 5:48 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In February, President Obama submitted his budget. The CBO reported that it would steeply boost the national debt.

In April, the president released a revised deficit-reduction plan so short on detail that the CBO deemed it too vague to evaluate.

Also in April, the Senate unanimously rejected the president's February budget. Since then, the Democratic leadership in the Senate and the White House have put forward no clear budget approach....

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

0 Comments
Posted July 19, 2011 at 5:32 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

...a quick, informal selection of voices from across the country over the weekend found both pessimism and cynicism about the state of negotiations in Washington, resignation about the partisan jousting and more confusion than conniption about what exactly will happen if the president and his Republican opponents cannot make a deal to raise the debt ceiling by Aug. 2.

And neither side, they say, looks good.

“They’re all boneheads,” said Steve Ruzika, 55, an entrepreneur from Boca Raton, Fla., who added that while he is politically conservative, he is fed up with both ends of the political spectrum.

“This has been brewing for a long time,” Mr. Ruzika said. “They should have solved it before now.”

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted July 18, 2011 at 5:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

[BOB] ABERNETHY: But the common good. This idea of the common good, very important in religious and ethics. How do you define it? And who says what the common good is?

[JIM] WALLIS: Well, this week we’ve organized 5,000 pastors to say let’s look at the real people in our congregations and our communities, what’s going to happen to them as opposed to the Washington, D.C. question, who’s up who’s down, who’s going to be the Speaker of the House next time, who’ll win the next election. The common good is about the real people, the people we have to always take into account. And pastors, I think, I wanted to talk to people whose job it is to have re-read the Bible. To get to, to focus on who the real people are here.

Read or watch it all.

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0 Comments
Posted July 17, 2011 at 5:34 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

....Americans are skeptical with good reason and that level of distrust will not go away if all we get is another bipartisan approach to kicking the debt problem down the road. In case you have forgotten, we raised the debt ceiling as recently as February 2010.

When will we gain control of our budget? We routinely hear about trillions in spending cuts, yet we spend more and more each year. Lip service is paid to cutting back, but we all know that spending cuts never, ever happen in Washington DC.

With a slowing economy, the argument is often made that government has to step in and do something. As you can see from the list above, our government has been doing exactly that. Yet, those policies have been ineffective so far.

Read it all.

Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankTaxesThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

2 Comments
Posted July 15, 2011 at 5:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

DJN: *DJ S&P: At Least 50% Chance Of Lowering US L/T Rtg Within 90 Days

*DJ S&P: US S/T Rtg Watch Reflects View Of Significant Uncertainty Of US Creditworthiness

Ugh.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted July 14, 2011 at 7:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.

“It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” said Anthony Cronin, a Treasury bond trader at Societe General SA in New York, one of the 20 primary dealers that trade with the Federal Reserve. “Maybe it’s the impetus to say we’ll need more of a concession.”

Read it all.

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1 Comments
Posted July 14, 2011 at 5:16 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Free lunchism is ultimately the problem with the no-new-taxes pledge that so many politicians have adopted. A refusal to raise taxes, no matter how principled, cannot take us back to the good old days. It would instead lead to a very different American society. For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military — or do some combination of the above.

“We cannot repeat the past when it comes to the federal budget,” Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, recently wrote. “The aging of our population and the rising cost of health care have changed the backdrop for federal budget policy in a fundamental way.”

The most important part of the recent Republican budget plan, written by Representative Paul Ryan, was that it acknowledged this reality...

Read it all.

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26 Comments
Posted July 13, 2011 at 6:40 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

MARK SHIELDS: On revenue.

The reality is this, that every single group, whether it's Simpson-Bowles, whether it's Alice Rivlin and Pete Domenici, whoever it is -- semi-serious, we probably should have said -- yes, there have to be budget cuts to deal with the deficit problem and the debt, but there have to be revenue increases.

It's become a dogma with Republicans now that anybody who votes for a tax increase is no longer a member of the club or the party....

MICHAEL GERSON: I think -- I think Democrats are being equally unreasonable on the issue of entitlements.

This is our long-term spending challenge. It's not that we tax too little. It's that we have expensive entitlement commitments, an aging population, and health care inflation that have made that portion of the budget completely unsustainable....

Read or listen to or watch it all.

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2 Comments
Posted July 2, 2011 at 5:06 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The US dollar will lose its status as the global reserve currency over the next 25 years, according to a survey of central bank reserve managers who collectively control more than $8,000bn.

More than half the managers, who were polled by UBS, predicted that the dollar would be replaced by a portfolio of currencies within the next 25 years.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe U.S. GovernmentFederal ReserveThe National DeficitThe United States Currency (Dollar etc)

0 Comments
Posted July 1, 2011 at 3:01 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Much of the public focus is on the nation's public debt, which is $14.3 trillion. But that doesn't include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted June 13, 2011 at 12:31 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The health insurance program for seniors is the nation's biggest financial challenge.

The first of 77 million Baby Boomers turn 65 this year and qualify for Medicare. Enrollment will grow from 48 million in 2010 to 64 million in 2020 and 81 million in 2030, according to Medicare actuaries. That 33-million increase in the next 20 years compares with 13 million in the last 20.

This demographic burst — combined with the addition of a prescription drug benefit in 2006 and rising health care costs generally — has created an unfunded liability of nearly $25 trillion over the lifetime of those now in the program as workers and retirees. That is the taxpayers' obligation, beyond what Medicare taxes will bring in or seniors will pay in premiums for Medicare Part B — also called supplemental coverage — that helps pay for doctor visits and other expenses outside the hospital.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe U.S. GovernmentBudgetMedicareThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

4 Comments
Posted June 7, 2011 at 11:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

From 2001-07, he argues, the dollar underwent a long, steady decline against the euro, tacitly encouraged by U.S. monetary authorities. In response to the dollar's decline, investors diverted capital into inflation hedges, notably real estate, leading to the subprime bubble. By mid-2007, the real-estate bubble had burst. In response, the Fed reduced short-term interest rates rapidly, which lowered the dollar further. The subprime crisis was severe, but with looser money, the economy appeared to stabilize in the second quarter of 2008.

Then, in summer 2008, the Fed committed what Mr. Mundell calls one of the worst mistakes in its history: In the middle of the subprime crunch—exacerbated by mark-to-market accounting rules that forced financial companies to cover short-term losses—the central bank paused in lowering the federal funds rate. In response, the dollar soared 30% against the euro in a matter of weeks. Dollar scarcity broke the economy's back, causing a serious economic contraction and crippling financial crisis.

In March 2009, the Fed woke up and enacted QE1, lowering the dollar against the euro, and signs of recovery soon appeared. But in November 2009, QE1 ended and the dollar soared against the euro once again, pushing the U.S. economy back toward recession.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy Geithner* International News & CommentaryEurope

1 Comments
Posted May 23, 2011 at 8:06 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The problems of old age (chronic illness, outliving savings, loneliness) are real, but age by itself is not an indicator of need. The blanket defense of existing Social Security and Medicare isn’t “liberal” or “progressive.” It’s simply a political expedient with ruinous consequences. It enlarges budget deficits and forces an unfair share of adjustment — higher taxes, lower spending — on workers and other government programs. This is the morality of the ballot box.

People do not lose their obligations to the larger society by turning 65. We need to refocus these programs on their original purposes. Social Security was intended to prevent poverty, not finance recipients’ extra cable channels. Medicare provides peace of mind as well as health insurance; wealthier recipients can afford to pay more for their peace of mind. Burden-sharing needs to include the elderly. This is the crux of the budget problem.

Facing it is both a moral and financial imperative. With the 2012 election looming, major overhauls of these programs seem unlikely. Still, more modest changes (slow increases in eligibility ages, added taxation of Social Security benefits, costlier Medicare for upscale beneficiaries) could produce significant savings. If even these are absent, the meaning will be plain: Old stereotypes continue to trump new realities.

Read it all.

Filed under: * Culture-WatchAging / the Elderly* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

10 Comments
Posted May 17, 2011 at 6:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The federal government will not run short of money to pay its bills on May 16, when the federal debt reaches the legal maximum of $14.3 trillion.

Even after Aug. 2, the deadline the Treasury Department set this week for Congress to lift the borrowing limit, the government might be able to delay a crisis, perhaps even for a few months, through extraordinary measures such as asset sales.

But with every passing week of stalemate over the debt ceiling, the risk increases that investors will start to fret that the United States will not pay its debts, and demand higher interest rates for loans to the federal government.

Should that happen, the cost could be vast and the damage difficult to reverse.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)* International News & CommentaryAsiaChina

5 Comments
Posted May 5, 2011 at 3:45 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. dollar fell Thursday to its lowest point since the summer of 2008, but officials aren't showing signs that they are alarmed by the currency's descent or acting to stem it.

In recent days, the nation's top two economic policy makers—Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner—have publicly expressed their desire for a strong dollar. But there is little indication of a change in policy from either the Fed or Treasury—or in underlying economic conditions—that would alter the currency's downward course.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe U.S. GovernmentThe United States Currency (Dollar etc)

4 Comments
Posted April 29, 2011 at 6:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A group of the largest US banks and fund managers stepped up the pressure on Congress and the Obama administration to reach a deal to increase the country’s debt limit, saying that even a short default could be devastating for the financial markets and economy.

The warning over the debt limit is the strongest yet to come from Wall Street, highlighting growing nervousness among investors about the US political system’s ability to forge a consensus on fiscal policy.

The most pressing budgetary issue confronting Congress and the Obama administration is the need to raise the US debt ceiling, which stands at $14,300 billion.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

3 Comments
Posted April 27, 2011 at 7:25 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

[Here is the Bloomberg Headline: Swiss Franc Reaches Highest In At Least 40 Years Versus Dollar]

This is painful and sad and (go under the chart to the time box and click "max" all the way to the right) for an even longer term perspective check this out.

Filed under: * Economics, PoliticsEconomyCurrency MarketsThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in General* International News & CommentaryEuropeSwitzerland

8 Comments
Posted April 26, 2011 at 6:01 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. dollar's downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

With no relief in sight for the dollar on any of those fronts, the downward pressure on the dollar is widely expected to continue.

The dollar fell nearly 1% against a broad basket of currencies this week, following a drop of similar size last week. The ICE U.S. Dollar Index closed at its lowest level since August 2008, before the financial crisis intensified.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)* International News & CommentaryAsiaEuropeSouth America

1 Comments
Posted April 25, 2011 at 5:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Members of the International Monetary Fund emerged from their huddle in Washington last weekend resolved to keep every option open to slow the flood of dollars pouring into their countries, including capital controls. That's a dangerous game, given the need for investment to drive economic development. But it's also increasingly typical of the world's reaction to America's mismanagement of the dollar and its eroding financial leadership.

The dollar is the world's reserve currency, and as such the Federal Reserve is the closest thing we have to a global central bank. Yet for at least a decade, and especially since late 2008, the Fed has operated as if its only concern is the U.S. domestic economy.

The Fed's relentlessly easy monetary policy combined with Congress's reckless spending have driven investors out of the United States and into Asia, South America and elsewhere in search of higher returns and more sustainable growth. The IMF estimates that between the third quarter of 2009 and second quarter of 2010, Turkey saw a 6.9% inflow in capital as a percentage of GDP, South Africa 6.6%, Thailand 5%, and so on....

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

1 Comments
Posted April 21, 2011 at 6:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

“More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures....”

--S&P credit analyst Nikola Swann in a statement today explaining why S and P shifted its outlook on America's credit to "negative"

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted April 18, 2011 at 7:15 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

This is a timely reminder of the seriousness of America’s fiscal issues, for the country and for the rest of the world.

The continued failure to come up with a credible medium-term fiscal reform program would increase borrowing costs for all segments of US society, thereby undermining investment, employment and growth. It would also curtail foreigners’ appetite to add to their already substantial holdings of US assets. And it would weaken the dollar.

The US also risks eroding its standing at the core of the global monetary system.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted April 18, 2011 at 10:14 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Shares on Wall Street opened sharply lower and Treasury prices fell on Monday after the Standard & Poor’s rating firm lowered the outlook for the United States to negative, saying that there was a risk that lawmakers might not reach agreement on how to address the country’s fiscal issues.

“More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures,” a credit analyst with Standard & Poor’s, Nikola G. Swann, said. At the same time, the firm affirmed the government’s AAA rating.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsStock MarketThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in General

8 Comments
Posted April 18, 2011 at 9:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

S&P sees a "material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns."

Read it carefully and read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)

0 Comments
Posted April 18, 2011 at 8:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion as the metal reaches a record, according to the fund’s board.

The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, last year added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings reached about $987 million yesterday, as Comex futures closed at $1,486 an ounce....

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” [Kyle] Bass said today in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

Read it all.

Filed under: * Culture-WatchEducation* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankStock MarketThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

4 Comments
Posted April 16, 2011 at 12:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

...here's the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans' benefits, and tax credits for working families take up another 20%. What's left, after interest on the debt, is just 12 percent for everything else. That's 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%. But cuts to that 12% alone won't solve the problem. So any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget. A serious plan doesn't require us to balance our budget overnight – in fact, economists think that with the economy just starting to grow again, we will need a phased-in approach – but it does require tough decisions and support from leaders in both parties. And above all, it will require us to choose a vision of the America we want to see five and ten and twenty years down the road.

Read it all.

Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

43 Comments
Posted April 13, 2011 at 1:36 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Republican budget released on Tuesday is a daring one in many ways. Above all, it would replace the current Medicare with a system of private health insurance plans subsidized by the government. Whether you like or loathe that idea, it would undeniably reduce Medicare’s long-term funding gap — which is by far the biggest source of looming federal deficits.

Yet there is at least one big way in which the plan isn’t daring at all. It asks for a whole lot of sacrifice from everyone under the age of 55 and little from everyone 55 and over. Representative Paul Ryan, the Wisconsin Republican who wrote the plan, calls the budget deficit an “existential threat” to the United States. Then he absolves more than one-third of all adults from responsibility in dealing with that threat.

This decision doesn’t make him unique in Washington. There is nearly a bipartisan consensus that any cuts to Medicare and Social Security should spare the baby boomers and the elderly. And, certainly, retirees or people on the verge of retirement shouldn’t have their benefits changed radically. But the consensus, like Mr. Ryan’s plan, goes too far.

Read it all.

Filed under: * Culture-WatchAging / the ElderlyHealth & MedicineMiddle AgeYoung Adults* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

20 Comments
Posted April 8, 2011 at 1:09 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The above four multi-trillion-dollar liability balls are staggering in their implications. Remember first of all that the nearly $65 trillion of entitlement liabilities shown above are not some estimate of future spending. They are the discounted net present value of current spending should it continue at the projected demographic rate (importantly ­– it is much higher than the annual CPI + 1% used as a discounter because demand for healthcare rises much faster than inflation.) And while some Honorable Congressional Le Pews would counter that Medicaid is appropriated annually and therefore requires no discounted reserve, those words would surely count as “sweet nothings,” believable only to those whom they romance every several years at the polls. The incredible reality is that the $9.1 trillion federal debt that constitutes the next-to-tiniest ball in our chart is nothing compared to unfunded Medicaid and Medicare. It is like comparing Pluto to Saturn and Jupiter. The former (the $9.1 trillion current Treasury debt) does not even merit planetary status in our solar system of discounted future liabilities. It’s really just a large asteroid.

Look at it another way and our dire situation becomes equally revealing. Suppose that the $65 trillion of entitlement liabilities were fully funded in a “lockbox,” much like Social Security is falsely imagined to be. Just suppose. And say the cost of that funding (Treasury debt) was the same CPI + 1% that was used to produce the above discounted present value in the first place. Actually, that’s not a bad guesstimate for the average yield of all Treasury debt. If so, then the interest expense on the $75 trillion total debt would equal $2.6 trillion, quite close to the current level of entitlement spending for Social Security, Medicare and Medicaid. What do we pay now in interest? About $250 billion. Our annual “lockbox” tab would rise by $2.35 trillion and our deficit would be close to 15% of GDP! The simple conclusion would be this: Unless you want to drastically reduce entitlement spending or heaven forbid raise taxes, then Pepé, you’ve got a stinker of a problem.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

2 Comments
Posted March 31, 2011 at 11:34 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Read it all.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted March 20, 2011 at 12:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The greenback...is not just America's currency. It's the world's.

But as astonishing as that is, what may be even more astonishing is this: The dollar's reign is coming to an end.

I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance.

The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Foreign Relations* International News & CommentaryAmerica/U.S.A.AsiaChina

1 Comments
Posted March 3, 2011 at 1:10 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Obama's budget director, Jacob Lew, said as much last week during his briefing on the president's budget. Obama wants to find ways to "work together to find a solution to the long-term issues in Social Security," Lew told reporters, but the program "does not contribute to the deficit in the short term."

That would be nice if it were true. It's not.

Social Security is a cash-in/cash-out program. It went into the red last year, when payroll tax revenue came up about $37 billion short of the benefits paid to retirees. Initially, that shortfall seemed a temporary consequence of the recession. But new projections from the Congressional Budget Office show that factors such as the payroll tax cut Obama and congressional Republicans agreed to last year mean that Social Security will instead come up short every year from now on — at least $45 billion this year, and a staggering half a trillion dollars over the next decade.

Read it all.

Filed under: * Culture-WatchAging / the Elderly* Economics, PoliticsEconomyCredit MarketsThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

40 Comments
Posted February 23, 2011 at 10:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

I wonder if Mr. Obama is at all embarrassed by the 2012 budget. Like his previous two budgets, this one breaks all those “Morning in America” campaign promises of a “new” Washington.

The 2012 budget also is a repudiation of the findings of his very own bipartisan deficit commission.

The Bowles-Simpson commission had plenty of sensible recommendations, like cutting funds for the Corporation of Public Broadcasting, eliminating the Office of Safe and Drug-Free Schools and raising the qualifying age for Social Security.

But you’ll find precious little of this in the 2012 budget. At the White House, political sense apparently matters a lot more than common sense.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsTaxesThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesSenate* International News & CommentaryAmerica/U.S.A.

5 Comments
Posted February 15, 2011 at 11:22 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Now that bipartisan commission has reported, but Mr. Obama didn't fully endorse any of its recommendations. To the contrary, he promised more jobs for teachers and construction workers. He warned against "slashing" Social Security benefits. Corporate tax reform is fine, but if it's revenue-neutral, it only postpones - and makes more politically difficult - the task of narrowing the nation's deficit.

So what happens now? Maybe some members of Congress will display the courage the president has lacked. Maybe Mr. Obama, in the budget he proposes next month, will grapple more realistically with the hard choices than he did Tuesday night. But even if he does, how can he expect public support if he hasn't made the case? From the man who promised to change Washington, it seemed all too drearily familiar.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsTaxesThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted January 26, 2011 at 6:39 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Could the yuan become a rival? China’s economy will probably surpass America’s in outright size within 20 years. It is already a bigger exporter. It is prodding firms to settle trade and even acquire foreign companies in its own currency. That is adding to a pool of “redbacks” outside its borders. These offshore yuan are, in turn, being tapped by borrowers, issuing “dim sum” bonds in Hong Kong.

But as the dollar’s history shows, economic clout is not enough without financial sophistication (see article). If foreigners are to store their wealth in yuan, they will need financial instruments that are safe, stable and easily sold. Dim sum makes for a tasty appetiser. But the main feast of China’s financial assets is onshore and off-limits, thanks to its strict capital controls. The government remains deeply reluctant to let foreigners hold, buy and sell these assets, except under tight limits. Indeed, it is barely ready to give its own people financial freedom: interest on bank deposits is capped; shares are largely owned by state entities; and bonds are chiefly held by the banks—which are, in turn, mostly owned by the state.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe Banking System/SectorThe U.S. GovernmentThe United States Currency (Dollar etc)Foreign Relations* International News & CommentaryAsiaChina

1 Comments
Posted January 22, 2011 at 7:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Chinese President Hu Jintao, who travels to Washington this week for a state visit after a year marked by disputes and tension with the United States, said the two countries could mutually benefit by finding "common ground" on issues from fighting terrorism and nuclear proliferation to cooperating on clean energy and infrastructure development.

"There is no denying that there are some differences and sensitive issues between us," Hu said in written answers to questions from The Washington Post and The Wall Street Journal. He said "We both stand to gain from a sound China-U.S. relationship, and lose from confrontation."

To enhance what he called "practical cooperation" on a wide range of issues, Hu urged an increase in dialogues and exchanges and more "mutual trust." He said, "We should abandon the zero-sum Cold War mentality" and, in what seemed like an implicit rejection of U.S. criticisms of China's internal affairs, said the two should "respect each other's choice of development path."

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsCurrency MarketsThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)Foreign RelationsPolitics in General* International News & CommentaryAsiaChina

4 Comments
Posted January 16, 2011 at 1:38 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Two leading credit rating agencies on Thursday cautioned the U.S. on its credit rating, expressing concern over a deteriorating fiscal situation that they say needs correction.

Moody's Investors Service said in a report Thursday that the U.S. will need to reverse an upward trajectory in the debt ratios to support its triple-A rating.

"We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase," said Sarah Carlson, senior analyst at Moody's.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Banking System/SectorThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)

8 Comments
Posted January 13, 2011 at 7:51 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Sadder, wiser, those of us gathered on the Washington Mall in the freezing morn of Mr Obama’s inauguration can see now that of all the brave, unsustainable hopes uttered by the new young president, the most unsustainable of all turned out to be his Biblical plea to “put away childish things”. He might as well have tried to legislate the word “dream” out of American public discourse. Dreams? Reality? It’s not even close, is it?

Whether fantasy will prevail over factuality, adolescent wishful thinking over maturity, will be the great political motif of the next few years. The omens are not auspicious....

Read it all.

Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

3 Comments
Posted December 28, 2010 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The global prosperity of much of the 20th century would seem to belie the pessimists, but I don't think there is much doubt the moral authority of the West has dramatically declined in the face of the financial crisis. It has revealed deep fault lines within Western economies that have spread to the global economy.

The majority of Western governments are running fiscal deficits of 10 percent or more relative to GDP, but it is increasingly clear that there will be no quick fixes, that big government and fiscal deficits will not bring us back to the status quo ante. Indeed, the tidal wave of red ink has meant that the leverage-led or debt-led growth model is dead.

Developed countries will be forced to deal with their debt on every level, from the personal to the corporate to the sovereign. Being able to borrow may have made people feel richer, but having to repay the debt is certainly making them feel poorer, particularly since the unfunded liabilities that many governments face from aging populations will have to be paid for by a shrinking band of workers.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

0 Comments
Posted December 2, 2010 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The chairmen of President Obama’s debt-reduction commission have been unable to win support from any of the panel’s elected officials for their proposed spending cuts and tax increases, underscoring the reluctance of both parties to risk short-term political backlash in pursuit of the nation’s long-term fiscal health.

The chairmen of the commission — former Senator Alan K. Simpson, a Republican, and Erskine B. Bowles, a Democrat and former chief of staff to President Bill Clinton — delayed for two days, until Friday, a final vote by its 18 members.

They said the delay was to provide more time to look at the final package, but it also gave them further opportunity to woo some of the 12 members of Congress on the commission, six from each party, whose support will be critical if the plan is to be taken seriously as a blueprint for eventual legislation.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

13 Comments
Posted December 1, 2010 at 9:16 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Even as work continues to repair our financial infrastructure and get the economy moving again, we need urgent action to forestall the next financial crisis. I fear that one will start in Washington. Total federal debt has doubled in the past seven years, to almost $14 trillion. That's more than $100,000 for every American household. This explosive growth in federal borrowing is a result of not just the financial crisis but also government unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit.

Retiring baby boomers, who will live longer on average than any previous generation, will have a major impact on government spending. This year, the combined expenditures on Social Security, Medicare and Medicaid are projected to account for 45 percent of primary federal spending, up from 27 percent in 1975. The Congressional Budget Office projects that annual entitlement spending could triple in real terms by 2035, to $4.5 trillion in today's dollars. Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity. Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources.

Unless something is done, federal debt held by the public could rise from a level equal to 62 percent of gross domestic product this year to 185 percent in 2035. Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations....

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsTaxesThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted November 26, 2010 at 8:27 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Surprisingly, the chairmen overlooked the easiest route to reducing the deficits over the next decade: scaling back the costly budget that President Obama presented earlier this year. Much of the projected doubling of the national debt between 2010 and 2020 reflects the spending and tax proposals in that budget.

The Congressional Budget Office estimates that those proposals would, if enacted, raise the 10-year budget deficit by $3.8 trillion, even after taking into account the president's proposed $1.3 trillion of new taxes on businesses and higher-income individuals. The $5.1 trillion gross cost of the Obama proposals reflects the cost of making the Bush tax cuts permanent for individuals with incomes below $250,000, of providing additional tax cuts for low- and moderate-income individuals, and of increasing spending on domestic programs.

As President Obama considers the bipartisan commission's proposals and plans his next budget, he should begin by removing some of the $3.8 trillion of increased deficits that he proposed earlier this year. Financial markets and policy makers around the world want to see if the administration is as serious about deficit reduction as the American public.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsTaxesThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)

0 Comments
Posted November 20, 2010 at 11:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Anyone wondering what President Obama will face when he arrives in South Korea on Wednesday for a global financial summit meeting need look no further than an announcement by China’s leading state-endorsed rating agency, which downgraded the United States’ credit rating on Tuesday — and provocatively questioned American leadership of the global economy.

The agency cited the Federal Reserve’s decision to pump more money into the United States economy and warned of Washington’s “deteriorating debt repayment capability” and “the serious defects in the United States economic development and management model,” which it predicted would lead to “fundamentally lowering the national solvency.”

In the rest of the world, the United States is still the gold standard of credit risks, and the Chinese downgrade is not expected to have much real impact. But the sharply worded attack from the country that is buying billions of dollars in American debt each month was just the latest rhetorical assault on the United States, as officials from China to Germany to Brazil suggest that Washington’s addiction to debt has greatly diminished its credibility.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyG20 The Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy Geithner* International News & CommentaryAsiaChinaEurope

0 Comments
Posted November 10, 2010 at 6:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

China kept up a drumbeat of criticism of U.S. easy money policies on Tuesday, warning two days before a G20 world economic summit that Washington could destabilize the global economy and inflate asset bubbles.

Nearly a week after the Federal Reserve announced it was going pump as much as $600 billion into the economy, world leaders continue to bash the plan, saying it will flood global markets with cash without doing much for the U.S. recovery.

President Barack Obama acknowledged in Jakarta that the Group of 20 rich and developing nations "still have a lot of work to do" to ensure balanced global growth.

Read it all.

Filed under: * Economics, PoliticsEconomyG20 The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerForeign RelationsPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChinaEuropeGermany

0 Comments
Posted November 10, 2010 at 6:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It is undeniable that we are on the path to fiscal collapse. This decline will occur in two stages. First there is the decay as the swelling national debt wears away the economy's foundations and commits more and more future income to foreign creditors. We are already in stage one.

In stage two a lethal combination of phenomena arises in quick succession: greater default risk, looming inflation, higher interest rates, declining growth, financial market instability, and an acceleration of government borrowing. They feed on each other. The economy heads on a downward spiral. Between stage one and stage two there is a tipping point. Experts know it will come, but nobody wants to predict when. (See below.) This article is about the slow economic decline of stage one. Next week part 2 will describe the hell of a full-blown fiscal collapse.

There is no question economics has failed us. The old paradigms have been made obsolete by the hard reality of the 2007-2009 financial crisis and soaring government debt. But some ideas can be salvaged from the wreckage.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketTaxesThe U.S. GovernmentBudgetFederal ReserveSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

4 Comments
Posted November 8, 2010 at 5:33 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The dollar fell the most in four weeks against the currencies of six major trading partners after the Federal Reserve said it will pump more money into the U.S. financial system to spur inflation and employment.

The greenback slid versus 15 of its 16 major counterparts after the Fed said it will buy $600 billion of U.S. Treasuries through June. It pared losses after data yesterday showed payrolls grew more than forecast. The Australian and Canadian currencies reached parity with the dollar as investor appetite for higher-yielding assets rose before leaders of the Group of 20 nations discuss currency policy in Seoul next week.

“The global market dynamic is still supporting dollar weakness,” said Sacha Tihanyi, a currency strategist at Bank of Nova Scotia in Toronto, Canada’s third-largest lender. “The Federal Reserve’s statement may be favorable for the U.S. economy, but it’s unfavorable for the U.S. dollar.”

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

0 Comments
Posted November 6, 2010 at 3:44 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Fed is essentially lending enough money to the government to fund its operations for several months, something called "monetizing the debt." In normal times, this is one of the great taboos of central banking because it is seen as a step toward spiraling inflation and because it risks encouraging reckless government spending.

Read it all (my emphasis).

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankG20 The U.S. GovernmentFederal ReserveSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Foreign RelationsPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

32 Comments
Posted November 5, 2010 at 7:58 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Barack Obama steps back onto the world stage Friday, when he leaves for two economic summits in Asia after a big electoral rebuke.

But his troubles will not ease overseas.

The U.S. and nations abroad are at odds over economic policy. Among the issues, conservative governments in Britain and Germany are pressing for fiscal austerity measures in Europe that Mr. Obama's administration is resisting implementing in the U.S.

"The rest of the world is looking more like the tea party," which wants to rein in government spending, according to Kenneth Rogoff, a former chief economist at the International Monetary Fund.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsDefense, National Security, MilitaryEconomyCredit MarketsThe U.S. GovernmentFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Foreign RelationsPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsia

7 Comments
Posted November 5, 2010 at 7:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The question being asked all across the world of business news is: Will QE2 be successful? Because this policy is literally economic suicide, the question becomes: Will the Federal Reserve be successful in the assisted economic suicide of the U.S. government? I find this an utterly appalling question -- which highlights the intellectual bankruptcy of government policymakers and the bankers who goad them onward.

Quantitative easing is nothing more than a euphemism for printing money out of thin air. Its one-and-only purpose is to destroy the currency being printed. It is pure dilution and absolutely no different than a corporation vowing to improve its fiscal performance simply by printing a lot of new shares.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

5 Comments
Posted November 4, 2010 at 5:57 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Is this a currency war or what?

Fast-growing nations like Thailand are trying to devalue their exchange rates to bolster their export-driven economies.

In Washington, where “strong dollar” has been the mantra for years, policy makers are taking steps that could make the already weak dollar weaker still.

European policy makers worry that a resurgent euro will threaten growth in their own backyard. And the entire world, it seems, is jawboning China to level the playing field and let its undervalued currency, the renminbi, appreciate. It is a step that Beijing, by all accounts, does not want to take.

With so many economies struggling, it suddenly seems as if it is every nation for itself in the currency markets....

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsEuroEuropean Central BankThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)Politics in General* International News & CommentaryAmerica/U.S.A.AsiaEngland / UKEurope

0 Comments
Posted October 22, 2010 at 6:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Obama administration backed away on Friday from a showdown with Beijing over the value of China's currency that would have caused new frictions between the world's only superpower and its largest creditor.

The Treasury Department delayed a much-anticipated decision on whether to label China as a currency manipulator until after the U.S. congressional elections on November 2 and a Group of 20 leaders summit in South Korea on November 11.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe U.S. GovernmentThe United States Currency (Dollar etc)Foreign Relations* International News & CommentaryAsiaChina

0 Comments
Posted October 17, 2010 at 4:08 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The dollar tumbled against most major currencies on Thursday, prompting warnings that the weakness of the world’s reserve currency could destabilise the global economy and push other countries into retaliatory devaluations to underwrite their exports.

Increasing expectations the Federal Reserve will pump more money into the US economy next month under a policy known as quantitative easing sent the dollar to new lows against the Chinese renminbi, Swiss franc and Australian dollar. It dropped to a 15-year low against the yen and an eight-month low against the euro.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)* International News & CommentaryAsiaEurope

0 Comments
Posted October 15, 2010 at 6:42 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The dollar hit fresh lows against several currencies Thursday, raising pressure on global leaders to address worsening tensions among countries vying to keep their currencies weak and exports competitive.

The relentless rise of currencies from the Japanese yen to the Australian dollar is threatening to derail economic recoveries and global cooperation. In the six weeks since the Federal Reserve began discussing the prospect of further easing monetary policy, the dollar has fallen 7% against a basket of currencies.

Compounding matters are frustrations with the Chinese government's unwillingness to allow its currency, the yuan, to significantly appreciate.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCurrency MarketsThe U.S. GovernmentThe United States Currency (Dollar etc)

5 Comments
Posted October 8, 2010 at 8:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

As the U.S. prepares to embark on a new round of Federal Reserve quantitative easing, there are plenty of reasons to doubt that it is the right course for the economy and job creation.

Here’s another: The voyage might have to be aborted — or at least diverted — soon after QE2 leaves the dock because the Fed may be sailing into a political hurricane.

Even before the anticipated launch of the next round of Treasury purchases — it’s expected to be made official on Nov. 3 — the Fed’s unmistakable signals have fueled commodity price gains as the dollar has sagged....

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)Energy, Natural Resources

0 Comments
Posted October 8, 2010 at 6:16 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The House of Representatives by a wide margin passed legislation to penalize China's foreign-exchange practices, sending a powerful warning to Beijing but risking a response that could harm U.S. companies and consumers.

The measure would allow, but not require, the U.S. to levy tariffs on countries that undervalue their currencies, which makes their goods cheaper relative to American products. A majority of Republicans lined up with Democrats to pass the bill on a 348-79 vote, highlighting lawmakers' long-simmering frustration with Chinese trade practices as well as their sensitivity to the faltering U.S. economic recovery with an election looming.

The vote marks the strongest trade measure aimed at China to make it through a chamber of Congress after more than a decade of threats by lawmakers. But despite the broad support Wednesday, dim Senate prospects make it unlikely the measure would become law this year.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsThe Banking System/SectorThe U.S. GovernmentThe United States Currency (Dollar etc)Foreign RelationsPolitics in GeneralHouse of Representatives* International News & CommentaryAmerica/U.S.A.AsiaChina

2 Comments
Posted September 30, 2010 at 7:41 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It increasingly seems as if the policy makers attending like physicians to the American economy are peering into their medical kits and coming up empty, their arsenal of pharmaceuticals largely exhausted and the few that remain deemed too experimental or laden with risky side effects. The patient — who started in critical care — was showing signs of improvement in the convalescent ward earlier this year, but has since deteriorated. The doctors cannot agree on a diagnosis, let alone administer an antidote with confidence.

This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

6 Comments
Posted August 29, 2010 at 7:11 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

This year, the U.S. public debt is projected to reach 62 percent of the economy—up from 40 percent in 2008 and nearly double the historical average, according to recent Congressional Budget Office (CBO) estimates. The financial crisis and recession drove much of this debt swing, yet larger problems loom in the future.

By 2030, the CBO projects that debt will more than double to 146 percent of GDP.[1] The only good news, if it can be called that, is that the U.S. is not alone. Two recent studies by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) highlight the significance of the global debt challenge and stress the need for governments to aim higher than short-term deficit reductions. For the U.S., one of the most poorly positioned countries, addressing the long-term debt challenge must include prompt reform of Social Security, Medicare, and Medicaid.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsThe Banking System/SectorThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted August 6, 2010 at 6:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Earlier this week, the Bank of England Governor, Mervyn King, irked US authorities by pointing out that even the world’s economic superpower has a major fiscal problem -“even the United States, the world’s largest economy, has a very large fiscal deficit” were his words. They were rather vague, but by happy coincidence the International Monetary Fund has chosen to flesh out the issue today. Unfortunately this is a rather long post with a few chunky tables, but it is worth spending a bit of time with – the IMF analysis is fascinating.

Its cross-country Fiscal Monitor is not easy reading and is a VERY big pdf (17mb), so I’ve collected a few of the key points. The idea behind the document is to set out how much different countries around the world need to cut their deficits by in the next few years, and the bottom line is it’s going to be big and hard (ie 8.7pc of GDP in deficit cuts around the world, which works out at, gulp, about $4 trillion).

But the really interesting stuff is the detail, and what leaps out again and again is how much of a hill the US has to climb. Exhibit a is the fact that under the Obama administration’s current fiscal plans, the national debt in the US (on a gross basis) will climb to above 100pc of GDP by 2015 – a far steeper increase than almost any other country.

Read it all and look carefully at the graphs.

Filed under: * Economics, PoliticsEconomyCredit MarketsTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in General

1 Comments
Posted May 15, 2010 at 3:47 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.

“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsThe U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted March 22, 2010 at 8:58 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Premier Wen Jiabao aimed sharp words at Washington on Sunday, ceding little ground on China's currency policy and suggesting that U.S. efforts to boost its exports by weakening the dollar amounted to "a kind of trade protectionism."

In his once-yearly news conference, Mr. Wen blamed the recent deterioration in what he called China's most important foreign relationship on U.S. weapons sales to Taiwan and President Barack Obama's meeting with Tibetan spiritual leader the Dalai Lama.

"These moves have violated China's territorial integrity," Mr. Wen said. "The responsibility does not lie with the Chinese side but with the United States." Mr. Wen said a good China-U.S. relationship "makes both sides winners while a confrontational one makes both sides losers."

Because Mr. Wen comments so rarely in public, his annual press conferences have a magnified importance. This year's comments were a rare opportunity to hear candidly, and in unusual depth, a Chinese leader's perspective on the U.S.

Read it all.


Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentThe United States Currency (Dollar etc)Foreign Relations* International News & CommentaryAsiaChina

0 Comments
Posted March 15, 2010 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.

Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.

“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)* International News & CommentaryAsiaChina

0 Comments
Posted March 9, 2010 at 12:04 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Don't get confused by the size of the numbers at stake. Pay attention to the ratio of cumulative debt to the size of the national economy. That will tell you how easily we can manage the debt.

The debt-to-GDP ratio right now is close to 53%—still in the manageable zone. But after the boomers hit retirement, it will soar. One of the most telling figures in the president's budget document is the Congressional Budget Office's projection that by 2020 the debt-to-GDP ratio will be 77%, assuming no entitlement reforms. That's bad news. The ratio is moving in the wrong direction. At some point, the dollar could tank and interest rates explode.

--Robert Reich in today's Wall Street Journal

Filed under: * Economics, PoliticsEconomyCredit MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

13 Comments
Posted February 5, 2010 at 10:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Mr Zhu noted that investors are increasingly borrowing the cheap US dollar, and investing the borrowed funds in emerging markets, where interest rates are higher, and therefore generating a better return than saving in the dollars.

This phenomenon called carry trade in the US dollar is a "massive issue today," said Mr Zhu.

"It's bigger than the Japanese yen carry trade 12 years ago," he said.

However, if the United States were to tighten its lax monetary policy, making borrowing more costly, funds could then flow out just as suddenly from emerging markets, back into the US market.

This could cause a collapse in emerging markets' currencies, and spark a repeat of the 1997-1998 Asian financial crisis.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)* International News & CommentaryAmerica/U.S.A.AsiaChina

7 Comments
Posted January 28, 2010 at 6:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

David Walker, chief executive officer at Peter G Peterson Foundation and former U.S. Comptroller, talks with Bloomberg's Carol Massar and Matt Miller about the U.S. financial crisis.

Watch it all.

Filed under: * Culture-WatchHealth & Medicine--The 2009 American Health Care Reform Debate* Economics, PoliticsEconomyThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted January 14, 2010 at 5:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Major procedural reforms will be needed as well. One essential step is the implementation of "pay-as-you-go" rules, which require that all increases in spending or tax cuts be financed by savings elsewhere in the budget. The statutory creation of a "fiscal future commission"—modeled on the Defense Base Closure and Realignment Commission, a federal body whose recommendations are subject to an up-or-down vote in Congress—could represent a major breakthrough. It might even be time to reconsider passing a balanced-budget amendment to the US Constitution, a provision that exists in nearly all US states and is now being pursued in a somewhat analogous form by the European Union. Whatever the specific policy approach, the underlying objective should be to create a system that will achieve a balanced budget over the course of the economic cycle.

A responsible fiscal policy would permit the Federal Reserve to run a relatively easy monetary policy, which would hold down interest rates and prevent overvaluation of the dollar. If the Obama administration is looking for a historical model, it should aim to replicate the Clinton-Greenspan policy of the late 1990s (a mix of budget surpluses and low interest rates) rather than the Reagan-Volcker policy of the early 1980s (a mix of large deficits and high interest rates).

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted December 17, 2009 at 12:27 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Call it the fractal geometry of fiscal crisis. If you fly across the Atlantic on a clear day, you can look down and see the same phenomenon but on four entirely different scales. At one extreme there is tiny Iceland. Then there is little Ireland, followed by medium-size Britain. They're all a good deal smaller than the mighty United States. But in each case the economic crisis has taken the same form: a massive banking crisis, followed by an equally massive fiscal crisis as the government stepped in to bail out the private financial system.

Size matters, of course. For the smaller countries, the financial losses arising from this crisis are a great deal larger in relation to their gross domestic product than they are for the United States. Yet the stakes are higher in the American case. In the great scheme of things—let's be frank—it does not matter much if Iceland teeters on the brink of fiscal collapse, or Ireland, for that matter. The locals suffer, but the world goes on much as usual.

But if the United States succumbs to a fiscal crisis, as an increasing number of economic experts fear it may, then the entire balance of global economic power could shift. Military experts talk as if the president's decision about whether to send an additional 40,000 troops to Afghanistan is a make-or-break moment. In reality, his indecision about the deficit could matter much more for the country's long-term national security. Call the United States what you like—superpower, hegemon, or empire—but its ability to manage its finances is closely tied to its ability to remain the predominant global military power. Here's why....

A very important piece--make sure you read it all.



Filed under: * Culture-WatchGlobalization* Economics, PoliticsDefense, National Security, MilitaryEconomyThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.

2 Comments
Posted December 16, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

"You can't stop a train that's being fueled by cheap money," as the Federal Reserve keeps its target interest rate near zero, said Mike Farr, president of the portfolio-management firm Farr, Miller & Washington. "We still have a day of reckoning ahead, but that day is being delayed for now."

--From this morning's Wall Street Journal

Filed under: * Economics, PoliticsEconomyStock MarketThe U.S. GovernmentFederal ReserveThe National DeficitThe United States Currency (Dollar etc)

3 Comments
Posted December 2, 2009 at 8:58 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A sudden crisis is unlikely. Other rich countries with far bigger debts relative to the size of their economies, from Italy to Japan, have soldiered on without hitting a wall. Stable politics, transparent laws and economic dominance give America unequalled credibility with lenders. For all the anxiety the declining dollar drew from China this week (see article), it has no serious rival as the world’s reserve currency. America has sensibly used this fiscal freedom to enact an aggressive stimulus programme. This should be maintained for as long as it is needed.

Yet ignoring the future is also costly. The problem is not the deficits in the next couple of years, but in the years that follow. Uncertainty over how taxes may be raised to shrink deficits may already be weighing on business confidence. Worries about inflation or default could start to push up interest rates. Eventually, private investment will be crowded out.

Barack Obama and Congress can pre-empt such corrosive uncertainty with a plan to reduce the deficit now. Far from requiring immediate spending cuts or tax increases, a credible plan would reassure markets and allow an orderly exit from fiscal stimulus. The Federal Reserve provides a model: it does not plan to tighten monetary policy in the near future, but has signalled its willingness to do so when inflation threatens.

Read it carefully and read it all.

Filed under: * Culture-WatchAging / the ElderlyHealth & Medicine--The 2009 American Health Care Reform Debate* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted November 24, 2009 at 6:15 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)* International News & CommentaryAmerica/U.S.A.

3 Comments
Posted November 23, 2009 at 7:59 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Germany’s new finance minister has echoed Chinese warnings about the growing threat of fresh global asset price bubbles, fuelled by low US interest rates and a weak dollar.

Wolfgang Schäuble’s comments highlight official concern in Europe that the risk of further financial market turbulence has been exacerbated by the exceptional steps taken by central banks and governments to combat the crisis.

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Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)* International News & CommentaryAmerica/U.S.A.EuropeGermany

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Posted November 22, 2009 at 6:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Americans may be tempted to take John Connally's view that none of this is our problem, especially when U.S. stocks are rising and Fed Chairman Ben Bernanke says there's nothing to worry about.

But that's a mistake. Asset bubbles that build and burst in Asia will eventually cause trouble here, much as they did in the Asian monetary crisis of 1997. And if Chinese leaders conclude the U.S. is deliberately squeezing their currency as a way to devalue away America's rising debt burden, they will find ways to return the offense—perhaps on Iran, or North Korea.

The larger mistake is to believe that any nation can devalue its way to prosperity. As other currencies rise in value and force productivity gains, the U.S. economy will become relatively less efficient. American living standards will decline, as those in Asia rise. This is the real lesson of the Connally-Nixon devaluations of the 1970s and the inflation that followed.

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Politics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChina

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Posted November 17, 2009 at 12:19 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For the Fed chairman to comment on currencies at all is highly unusual. By convention, the US Treasury Secretary is the sole US official who talks about the dollar.

Mr Bernanke’s comments came amid growing international unease about the weakness in the dollar, the global reserve currency, which forms a backdrop to President Barack Obama’s tour of Asia.

Liu Mingkang, China’s banking regulator, criticised the Fed at the weekend for fuelling the dollar carry trade in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad, creating the risk of new asset price bubbles.

The Fed chairman also indicated that the US central bank would not ignore the impact of rising commodity prices when evaluating the outlook for inflation. He said he would not rule out using interest rates to combat new asset price bubbles, even though he did not see obvious mispricing in the US at this stage.

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)

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Posted November 17, 2009 at 6:49 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The fiscal 2009 budget deficit, triple that of 2008, was 10 percent of GDP. Lawrence Lindsey says probable policies will produce deficits of 7 percent of GDP for a decade. Ronald Reagan's worst deficit was 6 percent of GDP and for only one year.

Lindsey -- a former member of the Federal Reserve board of governors and director of George W. Bush's National Economic Council (2001-02) -- says Americans' net worth has dropped at least $13 trillion since the recession began in December 2007. What is to be done?

Americans could suddenly begin saving substantially more, but this would deepen and prolong the recession. Alternatively, America could reflate the value of its assets by printing money. Lindsey says it is already doing that -- printing bonds promiscuously and lending money to banks at negligible rates, money that banks can use to buy the bonds. This sharply increases the money supply, which sets the stage either for inflation -- too much money chasing too few goods -- or for recovery-snuffing higher interest rates to try to prevent inflation. Or for something like Japan's lost decade -- banks pouring money into government bonds rather than the real economy.

America, says Lindsey, will not be Weimar Germany, where hyperinflation caused people to rush to stores with satchels of rapidly depreciating currency. But, he adds, no country has successfully behaved the way the United States is behaving.

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChinaIndia

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Posted November 12, 2009 at 5:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For the past eight years, the dollar has increasingly become less revered. Its value has been volatile. As the rest of the world saw the United States struggling with a failing war and soaring budget deficits, many who had large dollar holdings began to reduce those reserves (or increase them less than they otherwise would have). All this put downward pressure on the dollar. And thus began the first signs of a vicious circle. The strength of the dollar is becoming riskier and riskier. The growing U.S. deficit and the ballooning of the Federal Reserve’s balance sheets leave many worried that in their wake will come inflation, undermining the long-term attractiveness of the U.S. currency.

In this article, I try to explain why the dollar is in trouble, but ask—should we care? What are the consequences?

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

23 Comments
Posted October 29, 2009 at 12:17 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Yet the urgent problem now isn't TBTF [too big to fail], or even banker bonuses. These are distractions. The urgent problem is the giant riverboat gamble that Washington can save the economy by doing what comes naturally—spending money carelessly, creating massive new entitlements without funding them, dishing out cheap credit to politically favored sectors, telling business people where and how to invest.

Mr. Feinberg is an apt symbol indeed, for this gamble is built on the conceit that Washington can hector the recipients, whether auto companies, banks or homeowners, into behaving in ways that are "responsible." So far, however, human nature is proving a disappointment: Take the outbreak of tax fraud related to the government's emergency home-buyer's credit.

Nor is the larger gamble looking so good either. Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we're there.

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Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted October 28, 2009 at 12:40 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital. The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.

Currently, dollars account for about 62 percent of the currency reserve at central banks -- the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.

After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy -- ravenous inflation on one hand, and a perilous recession on the other.

"He's in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe United States Currency (Dollar etc)* International News & CommentaryAsiaEurope

7 Comments
Posted October 14, 2009 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Unfortunately, even if things are improving — and I prefer V for victory to W for worry — the fundamental cause of recent financial problems remains unaddressed. Low interest rates fuelled unsustainable debt. Those low rates were the result of China’s need to make money from the pile of dollars it earns from its exports. It did this by buying Treasury IOUs, keeping their price up and their rates down. China’s exports, in turn, were fuelled by its undervalued currency. That policy remains unchanged. So do trade imbalances. Which means the dollar probably has further to fall if imports to America are to become more expensive, and exports of American products more competitive.

There is no indication that the administration finds a dollar decline undesirable, if it is gradual, despite Geithner’s strong-dollar statement. It is the possibility of a dollar collapse that worries some at the White House. The same fear among investors has triggered a flight to gold. Such a development would force up interest rates, aborting the recovery. Obama has no desire to face the electorate in 2012 with high inflation and interest rates soaring, a real possibility if he adds to the downward pressure on the dollar by increasing the red ink already pouring over the nation’s ledgers, as frightened congressional Democrats are demanding.

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Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChina

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Posted October 11, 2009 at 6:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Today's topic: When should we start caring about federal deficits? When should we start doing something about them? Dean Baker and Maya MacGuineas continue their debate on the relationship between unemployment rates and economic recovery, and how much Washington can do about both.

Point: Maya MacGuineas, New American Foundation Committee for a Responsible Federal Budget

The federal budget deficit was bad before the recession; now it is downright alarming. In the fiscal year that just ended, the deficit was about $1.4 trillion -- almost a trillion more than the prior year. And reasonable projections are that we will borrow close to $10 trillion more over the next decade.

Does that mean we should start to reduce the deficit this year? No, not at all. The economic recovery is still too fragile to aggressively start pulling money out of the economy, a policy blunder that could derail our anemic growth.

But at the same time, there are signs that markets and creditors could turn against us at any moment.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)

5 Comments
Posted October 9, 2009 at 7:49 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The dollar fell to a 14-month low against other currencies Thursday, intensifying a trend that the Obama administration has publicly suggested it opposes -- but which it appears prepared to tolerate quietly.

Many of America's trading partners, however, are pushing the other way. In Asia, traders said central banks in South Korea, Taiwan, the Philippines, Thailand, Indonesia and Hong Kong again intervened to slow the dollar's fall against their currencies.

Asian officials fear that the dollar's fall could crimp their export-driven economies. "The [Thai] baht has appreciated a little too rapidly compared with our fundamentals," said Suchada Kirakul, assistant governor of the Bank of Thailand.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted October 9, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Measured in euros (a more stable ruler than the ever-weakening dollar), U.S. real per capita GDP is down 25% since 2000, while Germany's is up 4% and tops ours.

The solution is a strong U.S. jobs and wealth program. It has to include stable money, a flatter, more competitive tax structure, spending restraint, and common-sense bank regulation so small business lending can restart. Treasury has to rapidly lengthen the maturity of the national debt and take steps to protect the Fed from market losses on its long-term debt holdings.

Instead, Washington's current economic program pushes capital away by weakening the dollar, threatening higher tax rates, borrowing short (the Fed's near trillion-dollar overnight debt, Treasury's mounds of bill and note issuance) to lend long (mortgages, student loans, entitlements), doubling down on government subsidies, and rechanneling bank loans to governments and big businesses instead of the small business job-growth engine.

Read it carefully and read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted October 8, 2009 at 9:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. dollar continued its six-month slide Tuesday amid a growing international chorus that wants the dollar replaced -- or at least supplemented -- as the world's reserve currency, a move that would end the greenback's six decades of global dominance.

The dollar has come under attack from abroad as the economic crisis has played out, thanks to the Federal Reserve's decision to flood a seized-up financial system with liquidity last fall. The central bank's moves likely staved off deflation, but the massive influx of new dollars has devalued existing ones. Foreign nations are worried that the massive U.S. national debt and rising deficits are not being addressed. And though inflation is not yet a concern in the United States, a prolonged slide in the dollar's value could lead to higher prices for consumers.

Further, large emerging economies -- such as China, Russia, Brazil and India -- are tired of kow-towing to the American buck, and sense an opportunity to knock a weakened dollar off its imperial perch.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe United States Currency (Dollar etc)Politics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted October 8, 2009 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The sharp fall in the US dollar is giving ammunition to the critics of the Obama administration and fuelling broader concerns about the erosion of America’s reserve currency status.

Republican politicians have highlighted the dollar’s slide as evidence of waning US power. On Wednesday, Sarah Palin, the Republican former vice-presidential candidate, added her voice to those who have expressed concern over the consequences of rising US indebtedness and dependence on foreign oil.

“We can see the effect of this in the price of gold, which hit a record high today in response to fears about the weakened dollar,” she wrote on her Facebook site.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)Politics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted October 8, 2009 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

Read it all.

Update: Jim Lindgren has comments on this there.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)* International News & CommentaryMiddle East

5 Comments
Posted October 6, 2009 at 5:30 am [Printer Friendly] [Print w/ comments]




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