Gross Domestic Product

"A Full Blown Deflationary Episode" Coming

"Recent weeks have seen commentators either busy throwing in their towels, as the equity bull market has marched resolutely upwards and onwards (maybe that will change after Monday), or wrestling with their conundrums. Many have found the robustness in government bond prices through August most perplexing, especially when set beside continued resilience in developed equity markets. Once again, equity participants are missing the big picture. For despite clear signs from the business surveys of some sort of H2 recovery, firm evidence is emerging that the global economy is sliding towards a full-blown deflationary episode once this recovery falters." - Albert Edwards

Obama To Reduce Budget Deficit By $262 On "Fewer" Than Expected Bank Failures

Archive this one for the funny pages. It has been leaked by administration officials (and sponged up by Bloomberg), that on August 25, when the CBO releases its updated budget estimate, the 2009 deficit is expected to decline from $1.825 trillion to $1.58 trillion. And, get this, one of the reasons for the reduction is the FDIC spending $78 billion less, presumably due to "fewer bank failures than the administration anticipated." Pardon us, but last time we checked, not only did the FDIC have no cash left in the FDIC, and was effectively in a debtor position vis-a-vis the administration, but of the top 4 banks pending for blow up, Colonial was under (granted with some arbitrarily optimistic loss expectations), Guaranty was about to be hawked over to a few siesta loving left midfielders, and Corus was about to... well, we are not quite sure what the hell Corus is doing these days.

The Cost Of A "Non-Trivial" Flu Epidemic

The Daily Telegraph has compiled some rather sobering data on what the economic cost of the flu pandemic could ultimately be. This is a little less rosy than Steve Liesman's prediction that everything will blow over in a day or two. As a reminder the WHO is raising the epidemic to level 5, its second highest threat level: presumably they have not gotten the memo.

From the Daily Telegraph:

Moody's On U.S.: AAA Stable.... For Now

Moody's noted earlier that the U.S.' AAA rating is stable for now, although it is not clear how the government's interventions in the financial markets and economic stimuli will affect the deteriorating financial position. U.S. Treasuries issued to the public are "most certain" to be paid, wrote Steven Hess, Moody's senior credit officer, in a research report. If that isn't a good example of diplomacy and watching out for one's career, nothing is.