Congressional Budget Office
It’s amazing what people can trick themselves into believing and even shout about when you tell them exactly what they want to hear. It was disappointing to see Brad DeLong’s latest defense of Fed policy, which was published this past weekend and trumpeted far and wide by like-minded bloggers. If you take DeLong’s word for it, you would think that the only policy risk that concerns hedge fund managers is a return to full employment. He suggests that these managers criticize existing policy only because they’ve made bad bets that are losing money, while they naively expect the Fed’s “political masters” to bail them out. Well, every one of these claims is blatantly false. DeLong’s story is irresponsible and arrogant, really. And since he flouts the truth in his worst articles and ignores half the picture in much of the rest, we’ll take a stab here at a more balanced summary of the pros and cons of the Fed’s current policies. We’ll try to capture the discussion that’s occurring within the investment community that DeLong ridicules. Firstly, the benefits of existing policies are well understood. Monetary stimulus has certainly contributed to the meager growth of recent years. And jobs that are preserved in the near-term have helped to mitigate the rise in long-term unemployment, which can weigh on the economy for years to come. These are the primary benefits of monetary stimulus, and we don’t recall any hedge fund managers disputing them. But the ultimate success or failure of today’s policies won’t be determined by these benefits alone – there are many delayed effects and unintended consequences. Here are seven long-term risks that aren’t mentioned in DeLong’s article...
- Once a beacon, Obama under fire over civil liberties (Reuters)
- Eurozone in longest recession since birth of currency bloc (FT)
- EU Oil Manipulation Probe Shines Light on Platts Pricing Window (BBG)
- BMWs Cheaper Than Hyundais in Korea as Tariffs Crumble (BBG)
- Stock Boom Isn't a Bubble, Says BOJ's Kuroda (WSJ)
- Struggling France strives to shake off economic gloom (FT)
- JPMorgan investors take heat off Dimon (FT)
- Private-Equity Firms Build Instead of Buy (WSJ)
- Bloomberg Saga Highlights Clash Between Two Worlds (WSJ)
- Bank documents portray Cyprus as Russia's favorite haven (Reuters)
- HSBC Signals 14,000 Jobs Cuts in $3 Billion Savings Plan (BBG)
- Argentines Hold More Than $50 Billion in U.S. Currency (BBG)
There are a dozen significant economic indicators that are warning that the U.S. economy is heading into a recession. The Dow may have soared past the 15,000 mark, but the economic fundamentals are telling an entirely different story. If historical patterns hold up, the economy is heading for a very rocky stretch. But most average Americans are not that concerned with the performance of the stock market. They just want to be able to go to work, pay the bills and provide for their families. During the last recession, millions of Americans lost their jobs and millions of Americans lost their homes. If we have another major recession, that will happen again. Sadly, it appears that another major recession is quickly approaching. The following are 12 recession indicators that are flashing red...
The policy approach that no one dares to question - "In the long-term, we need to fix our public finances. We’re on an unsustainable path that needs to be corrected to protect younger and future generations. But in the short-term, we need to focus on growth. The economy stinks and people are suffering. Any attempt to lower debt in these conditions would be folly. On the contrary, the government needs to provide more stimulus to promote growth" has no support to its key premise in business cycle history, the idea that the economy will return to full employment and stick there, allowing ample time for debt reduction. Once stimulus is removed, expansions often struggle to continue for much longer. And if the stimulus is replaced with restraint, it seems logical that the expansion’s expected life shortens further. In other words, there is no Magic Pendulum. What’s the typical life of an unassisted expansion? Based on the data presented here, I’ll call it two years.
There is no hope whatsoever of so-called U.S. "energy indepedence" unless three things happen. First, environmental rules have to be wound back to 1970 standards -- in other words, disband the EPA and make civil plaintiffs show actual harm, not just hypothetical harm because someone goofed on a sheaf of mandated paperwork. Second, stop wasting taxpayer money on nonsense like $25 per gallon biofuel. Third and most urgently, stop subsidizing Wall Street. Let the market decide what interest rates make sense, rewarding companies who can find and produce oil, instead of gorging themselves sick on artificially cheap junk bonds that money-losing shale swindlers will never pay off.
While immigration was pretty far down on the priority list at this time last year, recently the topic has taken a front seat in lawmakers’ chambers down in Washington. ConvergEs's Nick Colas notes that policymakers on both sides of ideological spectrum are establishing positions and recommendations for reform, and are familiarizing themselves with some of the lesser-known facts about immigration. In a nutshell, he explains: immigration is not all about border crossings from Mexico and undocumented workers. There are many more figures – and costs – associated with immigration, most of which have palpable and measurable impacts on the US economy. From GDP growth to the health of the housing market, immigration’s influences may not be widely known, but should be in order for policymakers and investors to make informed decisions.
"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." While a low CPI may be puzzling in the midst of massive, global currency abuse, there are three realities about inflation that convince us it's not only coming, but will catch an unsuspecting citizenry off guard. Let's take a look at why we're convinced inflation will be one of the next big catalysts for the gold price...
Lightening does not strike twice in the same place very often, especially in Washington.
We Could Offset the Need for the “Sequestration” Budget Cuts By Stopping Nuclear Subsidies
The Republican jerks have squandered an opportunity to come up with anything that is even remotely feasible.
The numbers we are faced with are so large, the COLA changes are really just a rounding error.
Overview of the drivers of the fx market, a discussion of the price action and a review of the latest Commitment of Traders report from the futures market. Contrary to ideas that QE3+ is the dominant force and dollar negative, the net speculative position is now long dollars against all the major currency futures but the Australian dollar and Mexican peso. The dollar's gains though appear to be a function of events outside the US.
If we can't even cut federal spending by 2.4 percent without much of the country throwing an absolute hissy fit, then what hope does America have? All of this whining and crying about the sequester is absolutely disgraceful. The truth is that even if the sequester goes into effect, the U.S. government will still take in more money than ever before in 2013 and it will still spend more money than ever before in 2013. So it is a bit disingenuous to call what is about to happen "a spending cut", but for the sake of argument let's concede that point. If this is how bad things are now, how bad will they be when a day of reckoning for our economy arrives? And a day of reckoning is coming. Our politicians can try to keep kicking the can down the road for as long as they can, but eventually time will run out. We can borrow our way to prosperity for a while, but in the end there is always a very bitter price to pay for doing so. I would love to tell you that there is a chance that all of this will be turned around, but the truth is that all of this whining and crying about the sequester shows that America is doomed.
... And this time it is a true parabola.
Army Chief of Staff: “The conundrum we have is that we don’t need the tanks”