Frontrunning: August 11

  • U.S. Is Bankrupt and We Don't Even Know: Laurence Kotlikoff (Bloomberg)

Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run. This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance. Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue. My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”

  • So much for that whole "austerity" thing: Zapatero considers easing austerity (FT): so let's recap - fake financial stability, fake austerity, fake bond auction results, fake (and delayed) accounting standards (Basel III) - Europe sure has gotten the hang of Keynesianism
  • Is tide turning for realizing CMBS losses? MBIA Says It Will Have C.M.B.S. Losses (NYT)
  • Bank of England warns UK recovery will be weaker than hoped (Telegraph); Bank of England Cuts Growth Outlook, Sees Inflation Undershoot (Bloomberg)
  • The latest bailout for public unions and spendthrift states (WSJ)
  • China Output Growth Weakens; Inflation Accelerates (Bloomberg)
  • Unemployment Drives More US Home Sellers to Cut Price (Reuters)
  • Pimco Says Fed Policies `Good for Risk Assets,' Won't Reduce Unemployment (Bloomberg)
  • Future of the EU Is Up for Grabs (WSJ)
  • The Labor Market's Teenage Wasteland: Chris Farrell (Bloomberg)
  • Credit Easing Goodbye - Quantitative Easing Ahoy! (Merk Funds)
  • Economists Cut U.S. Growth Forecasts as Companies Limit Hiring (Bloomberg)
  • US House Agrees $26bn In State Aid (FT)
  • Sweden Banks in Record Rally as Baltics Avoid Default (BusinessWeek)
  • For the Bank of England, an Economic Balancing Act (WSJ)
  • Louisiana Declares Emergency as Gulf Storm Builds (Bloomberg)
  • In case one was wondering what Krugman's opinion is: The Focal-Point Fed (NYT)
  • Firms Spend More—Carefully (WSJ)
  • The Hudson Institute Economic Report (THI)
  • Our Exhausted Monetary Policy Arsenal (IBD)


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