Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, and Richard Fisher, head of the Federal Reserve Bank of Dallas, indicated that although economic growth is cooling, more stimulus is not necessary. Hoenig also reiterated his stance that the Fed should increase its key interest rate to 1% to keep inflation at bay and counter the threat of asset-price bubbles. Meanwhile, Fisher said additional asset purchases by the Fed are not needed.
Bloomberg
Yes Mr Hoenig, it is time for the Fed to stop buying financial assets and to start buying real assets... try real property so that the Dollar is backed by something in addition to gold.
Showing posts with label stimulus. Show all posts
Showing posts with label stimulus. Show all posts
Thursday, July 8, 2010
Tuesday, July 6, 2010
The US stimulus resembles the ineffective Japan model. Same Results inevitable?
From the Financial Times:
Fiscal stimulus was equivalent to 4.4 per cent of world growth last year but will amount to a negative 1.6 per cent next year, according to data from JPMorgan. “Beyond the current quarter, growth momentum will be coming down as fiscal policy moves from net stimulus to drag,” the bank’s recent Global Data Watch warns …
Still, the problem with much of the fiscal policy is about substance as well as scale. How is it possible to spend almost $800bn and not have more lasting effects to show for it?
Unfortunately, the US fiscal spending plan more closely resembles that of Japan than China – and is likely to have the same minimal or even counter-productive impact
American citizens are increasingly voting with their feet. In Hong Kong, so many US passport holders fear the deluge of US taxes that will inevitably follow the spending binge that it can now apparently take as much as 11 months to secure an appointment at the US consulate to surrender US citizenship.
And the conclusion drawn:
Given the lack of lasting effects from the US stimulus other than a huge tax bill down the (poorly paved) road, the lines at the consulate in Hong Kong are likely to get longer.
Fiscal stimulus was equivalent to 4.4 per cent of world growth last year but will amount to a negative 1.6 per cent next year, according to data from JPMorgan. “Beyond the current quarter, growth momentum will be coming down as fiscal policy moves from net stimulus to drag,” the bank’s recent Global Data Watch warns …
Still, the problem with much of the fiscal policy is about substance as well as scale. How is it possible to spend almost $800bn and not have more lasting effects to show for it?
Unfortunately, the US fiscal spending plan more closely resembles that of Japan than China – and is likely to have the same minimal or even counter-productive impact
American citizens are increasingly voting with their feet. In Hong Kong, so many US passport holders fear the deluge of US taxes that will inevitably follow the spending binge that it can now apparently take as much as 11 months to secure an appointment at the US consulate to surrender US citizenship.
And the conclusion drawn:
Given the lack of lasting effects from the US stimulus other than a huge tax bill down the (poorly paved) road, the lines at the consulate in Hong Kong are likely to get longer.
Tuesday, June 29, 2010
Americans' savings rate rises to highest level in almost a year
Americans pushed up their savings rate last month to 4%, the highest level in nearly a year. Meanwhile, consumer spending increased 0.2% compared with April. Almost all of the economic growth in the U.S. is coming from spending by the government or businesses that are getting stimulus money, analysts said. The Washington Post
This is not high by international standards and not very healthy in my opinion. I had been looking for the rate to move to 7-8%; I have been wrong.
This is not high by international standards and not very healthy in my opinion. I had been looking for the rate to move to 7-8%; I have been wrong.
Wednesday, March 18, 2009
Fed Action
News Alertfrom The Wall Street Journal
The Federal Reserve said Wednesday it will buy up to $300 billion in longer-term Treasurys and raise the size of lending programs already aimed at reducing mortgage rates by another $750 billion, a forceful reminder that officials still have powerful tools to combat the recession.
The commitment to buy Treasury securities and additional mortgage-related debt should mean lower rates for a variety of business and consumer loans. Meanwhile, the Federal Open Market Committee voted 10-0 to hold the target federal funds rate for interbank lending in a range between zero and 0.25% and to continue using credit programs financed by an expansion of the Fed's balance sheet to stabilize markets.
For more information, see:http://online.wsj.com/article/SB123739788518173569.html#mod=djemalertNEWS
The Federal Reserve said Wednesday it will buy up to $300 billion in longer-term Treasurys and raise the size of lending programs already aimed at reducing mortgage rates by another $750 billion, a forceful reminder that officials still have powerful tools to combat the recession.
The commitment to buy Treasury securities and additional mortgage-related debt should mean lower rates for a variety of business and consumer loans. Meanwhile, the Federal Open Market Committee voted 10-0 to hold the target federal funds rate for interbank lending in a range between zero and 0.25% and to continue using credit programs financed by an expansion of the Fed's balance sheet to stabilize markets.
For more information, see:http://online.wsj.com/article/SB123739788518173569.html#mod=djemalertNEWS
Monday, February 23, 2009
The "stimulus" timed to next election campaign
It is interesting to note that the "stimulus" package of spending just passed has been touted by politicians from congress to the White House as the medicine the economy needs.
It is ironic that the vast bulk of spending dosn't come on stream this year 2009 or even next year 2010 but really hots up in 2011. Just in time for the next presidential election er re-election, campaign.
So those of you who think that politicians cared to read the details of this behemoth spending bill, let alone been given time to think through the unintended consequences of these expenditures must have been at the same party that Michael Phelps attended.
Between now and the start of the next election campaign, we are going to see ever more strained relations with our trading partners who are going to be strong armed into buying the trillion dollars of Treasury securities we must sell. They are ,of course, going to extract tribute by forcing us to pay ever higher interest rates.
That means that every other interest rate in this country that is keyed off treasuries must go up in tandem. Poof goes the real estate/mortgage rescue... So the banking system will paralyze..
And of course unemployment is going to hit 8% this year and 9% to who knows maybe even 10% next year. So tax revenues will drop... it does work that way ya know, no income so no tax liability...oh yes we do tax unemployment benefits..we dont?? just wait a while.
Then of course, that exquisitely timed political calculation kicks in. Spend untold billions of dollars into an economy with rising unemployment (nevermind that the banking system will be in a mess), and rising prices and dropping real estate values and rising bankruptcies, foreclosures and demands for costly social services.
But wait... the solution is obvious!! Raise tax rates on those who can afford to pay!!Easy peasy!!
About 5% ish of taxpayers by then will fall into that magic $250,000/yr rich category. Or is that $100,000 or $75,000 I forget. But then we can always go back and see where our esteemed Veep defined rich.
Oh yes... the most wonderful political fairy tale is that higher tax rates wont ever change the behaviour of those suffering the tax raise. Their behaviour dosn't change..no no they meekly pay up. The DONT hire accountants to find any and all loopholes, or buy legal tax shelters, or switch their behaviour so that they avoid rising into the higher tax brackets. No No they dont do that despite 5000 years of economic history to the contrary with nary an exception (there are a few but weapons and death threats were involved--our legal system would never stand for that).
This time its different. Ask Nancy Pelosi. The arithmetic is too elegant to mess up with reality. Or Chuck Schumer who wants us to join him in his arrogant conviction that people "dont really care about a little pork". I believe Marie Antoinette referred to it as cake but she lost her head anyway. Watch out Chuck!!!
Prediction: the people WILL notice. Beware o politicians. You might have to get a real job where your pay actually does depend on your performance and making tthe correct choices. The greatest politician job security bill ever foisted on a weary and scared nation will come back to bite you.
Chuck..lowest ever approval ratings for Congress are that way for a reason. Remember it cost Marie Antoinette her head. Will this cost this nation its head? We are a few heartbeats away from finding out.
If you have any investments sell them now and sit on the cash.... I predict that very soon you will get VERY much bigger returns from US treasury debt than available now.
It is ironic that the vast bulk of spending dosn't come on stream this year 2009 or even next year 2010 but really hots up in 2011. Just in time for the next presidential election er re-election, campaign.
So those of you who think that politicians cared to read the details of this behemoth spending bill, let alone been given time to think through the unintended consequences of these expenditures must have been at the same party that Michael Phelps attended.
Between now and the start of the next election campaign, we are going to see ever more strained relations with our trading partners who are going to be strong armed into buying the trillion dollars of Treasury securities we must sell. They are ,of course, going to extract tribute by forcing us to pay ever higher interest rates.
That means that every other interest rate in this country that is keyed off treasuries must go up in tandem. Poof goes the real estate/mortgage rescue... So the banking system will paralyze..
And of course unemployment is going to hit 8% this year and 9% to who knows maybe even 10% next year. So tax revenues will drop... it does work that way ya know, no income so no tax liability...oh yes we do tax unemployment benefits..we dont?? just wait a while.
Then of course, that exquisitely timed political calculation kicks in. Spend untold billions of dollars into an economy with rising unemployment (nevermind that the banking system will be in a mess), and rising prices and dropping real estate values and rising bankruptcies, foreclosures and demands for costly social services.
But wait... the solution is obvious!! Raise tax rates on those who can afford to pay!!Easy peasy!!
About 5% ish of taxpayers by then will fall into that magic $250,000/yr rich category. Or is that $100,000 or $75,000 I forget. But then we can always go back and see where our esteemed Veep defined rich.
Oh yes... the most wonderful political fairy tale is that higher tax rates wont ever change the behaviour of those suffering the tax raise. Their behaviour dosn't change..no no they meekly pay up. The DONT hire accountants to find any and all loopholes, or buy legal tax shelters, or switch their behaviour so that they avoid rising into the higher tax brackets. No No they dont do that despite 5000 years of economic history to the contrary with nary an exception (there are a few but weapons and death threats were involved--our legal system would never stand for that).
This time its different. Ask Nancy Pelosi. The arithmetic is too elegant to mess up with reality. Or Chuck Schumer who wants us to join him in his arrogant conviction that people "dont really care about a little pork". I believe Marie Antoinette referred to it as cake but she lost her head anyway. Watch out Chuck!!!
Prediction: the people WILL notice. Beware o politicians. You might have to get a real job where your pay actually does depend on your performance and making tthe correct choices. The greatest politician job security bill ever foisted on a weary and scared nation will come back to bite you.
Chuck..lowest ever approval ratings for Congress are that way for a reason. Remember it cost Marie Antoinette her head. Will this cost this nation its head? We are a few heartbeats away from finding out.
If you have any investments sell them now and sit on the cash.... I predict that very soon you will get VERY much bigger returns from US treasury debt than available now.
Wednesday, February 11, 2009
Trojan horse in Senate bill: healthy care nationalization
And here's something in the plan that I bet you didn't know was a part of it.
This past weekend and Monday I took the time to read "The Obama Stimulus Plan".
I will leave politics to the side and will leave my interpretation from an Economic perspective aside. What I will NOT leave to the side is what is buried in "The Bill" from a health care standpoint. YOU NEED TO KNOW.....the "stimulus bill" is a Trojan Horse.....hidden in "this horse" is the legislation to NATIONALIZE HEALTH CARE."
So... Do I have your attention now? Here's a link to the story by Betsy McCaughey on Bloomberg...http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLzfDxfbwhzs
This past weekend and Monday I took the time to read "The Obama Stimulus Plan".
I will leave politics to the side and will leave my interpretation from an Economic perspective aside. What I will NOT leave to the side is what is buried in "The Bill" from a health care standpoint. YOU NEED TO KNOW.....the "stimulus bill" is a Trojan Horse.....hidden in "this horse" is the legislation to NATIONALIZE HEALTH CARE."
So... Do I have your attention now? Here's a link to the story by Betsy McCaughey on Bloomberg...http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLzfDxfbwhzs
Friday, February 6, 2009
When the "Stimulus/Spending" fails: what then?
Could it be that we have now moved from a recession to a depression? Bill Bonner, thinks so...
He was also the first to put in writing the thoughts about the U.S. following Japan's decade of funk, with his book Financial Reckoning Day, that was published about 6 years ago! So... I stop to listen to what he has to say... I don't always agree, but I sure do listen, for his track record is good... Recall, he also coined the "Trade of the Decade" at the turn of the millennium... "sell the DOW, and buy Gold on the dips"... That's worked out quite nicely, eh?
Courtesy of Bill Bonner: a scenario to think about: full story here: (www.dailyreckoning.com)
"In a recession, the basic plan or formula for the economy is still valid.The economy just needs a little time...and maybe a little monetary boost...before it continues growing. Typically, inventories are sold down...so a new burst of production can begin.
But in a depression, the problems are structural.
One way of understanding this is just to look at balance sheets. Whether you are a business or a family, you can only afford so much debt. When you get too much, you have stop and pay it down. And when it becomes so great you can't pay if off - because you don't have enough income - you have to declare bankruptcy. A depression is when a whole economy declares bankruptcy...or should. Because it can't pay its debts. Businesses, for example, have been built for a level of demand that no longer exists. It is not a question of waiting a few months. By the time consumers are ready to buy again, the whole economy will have moved on. Imagine, for example, a guy who built a nationwide chain of stores just to sell ipods to teenagers. The business may have been a great success - for a while. And he took out huge loans so he could expand...and take advantage of the demand. But then comes a depression. He says to himself: 'I'll just get some more financing...and wait it out.' But who's going to lend to him? By the time the kids begin buying again, ipods will be like vinyl LPs. His business is history. His lenders have lost money. The loans should be written off and the business should be destroyed, not mummified and preserved.
A depression is when the whole economy changes its business plan, in other words. And that takes time...and creative destruction.
How much time? Well, in the United States alone there is about $6 trillion too much private debt...$1 trillion too much output capacity...and millions of "excess" workers. How long will it take to retrain, retool, and re-absorb these excesses?
We don't know. The last depression took about 20 years...and a major war (talk about creative destruction!) Then, the United States was making the structural shift from a Japan-like capital investment-led economy...to a post-WWII consumer-led economy."
Sheesh!
He was also the first to put in writing the thoughts about the U.S. following Japan's decade of funk, with his book Financial Reckoning Day, that was published about 6 years ago! So... I stop to listen to what he has to say... I don't always agree, but I sure do listen, for his track record is good... Recall, he also coined the "Trade of the Decade" at the turn of the millennium... "sell the DOW, and buy Gold on the dips"... That's worked out quite nicely, eh?
Courtesy of Bill Bonner: a scenario to think about: full story here: (www.dailyreckoning.com)
"In a recession, the basic plan or formula for the economy is still valid.The economy just needs a little time...and maybe a little monetary boost...before it continues growing. Typically, inventories are sold down...so a new burst of production can begin.
But in a depression, the problems are structural.
One way of understanding this is just to look at balance sheets. Whether you are a business or a family, you can only afford so much debt. When you get too much, you have stop and pay it down. And when it becomes so great you can't pay if off - because you don't have enough income - you have to declare bankruptcy. A depression is when a whole economy declares bankruptcy...or should. Because it can't pay its debts. Businesses, for example, have been built for a level of demand that no longer exists. It is not a question of waiting a few months. By the time consumers are ready to buy again, the whole economy will have moved on. Imagine, for example, a guy who built a nationwide chain of stores just to sell ipods to teenagers. The business may have been a great success - for a while. And he took out huge loans so he could expand...and take advantage of the demand. But then comes a depression. He says to himself: 'I'll just get some more financing...and wait it out.' But who's going to lend to him? By the time the kids begin buying again, ipods will be like vinyl LPs. His business is history. His lenders have lost money. The loans should be written off and the business should be destroyed, not mummified and preserved.
A depression is when the whole economy changes its business plan, in other words. And that takes time...and creative destruction.
How much time? Well, in the United States alone there is about $6 trillion too much private debt...$1 trillion too much output capacity...and millions of "excess" workers. How long will it take to retrain, retool, and re-absorb these excesses?
We don't know. The last depression took about 20 years...and a major war (talk about creative destruction!) Then, the United States was making the structural shift from a Japan-like capital investment-led economy...to a post-WWII consumer-led economy."
Sheesh!
Thursday, February 5, 2009
Summers warns of deflation threat
Warning that the U.S. does "not have time to wait," Lawrence Summers, director of the National Economic Council, said the country faces "a real risk" of slipping into deflation. He said it is urgent that Congress quickly adopt the economic stimulus proposed by President Barack Obama. Bloomberg.
I agree with the deflation threat, but again as I have highlighted this stimulus bill is an abomination!
I agree with the deflation threat, but again as I have highlighted this stimulus bill is an abomination!
Tuesday, February 3, 2009
When will we know if Government Stimulation is working?
How will we know that the government stimulus is working to stabilize the markets?
Very simply, It ALL comes back to commodities; we will know that the financial markets will stabilize when…oil prices rise again.
The economic data that the media tend to focus on are often lagging indicators. Unemployment, GDP, corporate earnings and retail sales tell us what has already happened…not what is going to happen.
Very simply, It ALL comes back to commodities; we will know that the financial markets will stabilize when…oil prices rise again.
The economic data that the media tend to focus on are often lagging indicators. Unemployment, GDP, corporate earnings and retail sales tell us what has already happened…not what is going to happen.
Dishonesty in labelling: The house "stimulus" package
Thought this rant pretty much sums up why the Congress has the lowest approval rating in history! Hope it wont drag down the approval rating of our President:
Courtesy Chuck Butler, President, Everbank World Markets.
OK, speaking of stimulus... I'm very upset with the "new and Improved" stimulus package. I'm sure you've figured this out already from previous rants. However, now... I'm even more ticked off! Oh, and the TV / Cable media are swallowing the propaganda from the White House, hook, line and sinker! Here's what I'm talking about folks...
The package has a "buy American" portion in the package... This is protectionism folks... And here's what gets my goat the most about protectionism at this stage of the recession... Fed Chairman, Big Ben Bernanke, is supposedly a "U.S. depression guru"... Well, Big Ben, wasn't the protectionism of the 1930's one of the reasons for the Great Depression? And is just so happens that now we've had "the cheater's" confirmation, calling China "currency manipulators", and that was followed up with the "buy American" portion of the package...
Look... There's nothing wrong with the slogan, Buy American... In fact, I think it would be a great thing to go around saying and doing, based on our manufacturing prowess... But, that's not what I'm talking about here... I'm talking about protectionism, at a time when the global economies are hurting and need to export to us... I'm really surprised that the currency traders haven't seen this and taken the dollar to the woodshed... But then, maybe they're getting the wool pulled over their eyes...
The other thing that ticks me off on the "new and improved" stimulus package is the fact that a very small piece of the $816 Billion (before the Senate adds their pork!), stimulus is for the infrastructure projects that have been billed as a "major piece" of this plan! HOGWASH! Now, I'm not going to sit here and pass judgment on all the "items" that are being allocated Billions of dollars, like $1 Billion to deal with the census problems, and $88 Billion to help move the Public Health Service into a new building next year, and $650 million for TV Converter boxes. The list of items like this goes on and on... And all worthy items, I'm sure... But none of these types of spending allocations, and I repeat this so you get the full force of this statement... None of these types of spending allocations are doing anything to create jobs. Oh... And just for those of you keeping score at home... $50 Billion is allocated to bricks and mortar... Infrastructure... Which has had "top billing" on this package... Well, the truth is out... I sure hope someone takes their lawmakers to the woodshed for this!
Courtesy Chuck Butler, President, Everbank World Markets.
OK, speaking of stimulus... I'm very upset with the "new and Improved" stimulus package. I'm sure you've figured this out already from previous rants. However, now... I'm even more ticked off! Oh, and the TV / Cable media are swallowing the propaganda from the White House, hook, line and sinker! Here's what I'm talking about folks...
The package has a "buy American" portion in the package... This is protectionism folks... And here's what gets my goat the most about protectionism at this stage of the recession... Fed Chairman, Big Ben Bernanke, is supposedly a "U.S. depression guru"... Well, Big Ben, wasn't the protectionism of the 1930's one of the reasons for the Great Depression? And is just so happens that now we've had "the cheater's" confirmation, calling China "currency manipulators", and that was followed up with the "buy American" portion of the package...
Look... There's nothing wrong with the slogan, Buy American... In fact, I think it would be a great thing to go around saying and doing, based on our manufacturing prowess... But, that's not what I'm talking about here... I'm talking about protectionism, at a time when the global economies are hurting and need to export to us... I'm really surprised that the currency traders haven't seen this and taken the dollar to the woodshed... But then, maybe they're getting the wool pulled over their eyes...
The other thing that ticks me off on the "new and improved" stimulus package is the fact that a very small piece of the $816 Billion (before the Senate adds their pork!), stimulus is for the infrastructure projects that have been billed as a "major piece" of this plan! HOGWASH! Now, I'm not going to sit here and pass judgment on all the "items" that are being allocated Billions of dollars, like $1 Billion to deal with the census problems, and $88 Billion to help move the Public Health Service into a new building next year, and $650 million for TV Converter boxes. The list of items like this goes on and on... And all worthy items, I'm sure... But none of these types of spending allocations, and I repeat this so you get the full force of this statement... None of these types of spending allocations are doing anything to create jobs. Oh... And just for those of you keeping score at home... $50 Billion is allocated to bricks and mortar... Infrastructure... Which has had "top billing" on this package... Well, the truth is out... I sure hope someone takes their lawmakers to the woodshed for this!
Friday, January 30, 2009
The house Bill Revisited
To give you a “taste” of what this pork-laden monstrosity contains, check out this excerpt from Speaker of the House Nancy Pelosi’s appearance on CBS.
CBS: Can you honestly say that every program in this plan is solely to stimulate the economy?
Pelosi: (nods) Yes I will.
CBS: How does $335 million in STD [sexually transmitted disease] prevention stimulate the economy?
Pelosi: I’ll tell you how – there is a, uh... I’m a big believer in prevention. And we have, uh – there’s a, uh, part of the bill on the health side of it that is about prevention. It is about, uh, it being less expensive to the states to do these prevention measures...
Okey dokey, Ms. Pelosi. I guess she took the word “stimulate” to mean something else there... hoping folks will loosen up and have a little more fun perhaps?
CBS: Can you honestly say that every program in this plan is solely to stimulate the economy?
Pelosi: (nods) Yes I will.
CBS: How does $335 million in STD [sexually transmitted disease] prevention stimulate the economy?
Pelosi: I’ll tell you how – there is a, uh... I’m a big believer in prevention. And we have, uh – there’s a, uh, part of the bill on the health side of it that is about prevention. It is about, uh, it being less expensive to the states to do these prevention measures...
Okey dokey, Ms. Pelosi. I guess she took the word “stimulate” to mean something else there... hoping folks will loosen up and have a little more fun perhaps?
Thursday, January 29, 2009
The Congressional "bailout/stimulus" bill
I am deeply dissappointed to see that the House is totally uninterested in clarity, truth in labelling or anything remotely resembling the CHANGE our President was elected to effect.
This bill that passed the house contains every Pork program that Democrats have dreamed about for the last 20 years.
It is not a jobs bill. Its a PORK bill.
It is not a stimulus bill it is a PORK spending bill.
I am of the opinion that every member of the House should be required to go out an spend the next 6 months trying to start a business that hires 20 people. Let them dream up an employment project, incorporate, hire , get liscences and permits, pay payroll taxes and a salary for themselves without going bankrupt in six months.
It will be fascinating to see if President Obama will rise to the challenge and eliminate all programs that do not provide immediate stimulus to the economy. That would be honest and true to his campaign promise.
It is no wonder that Congress has such a low rating. These guys cant even abide by Truth in Labelling. This bill bails out nobody and provides no stimulus.
This bill that passed the house contains every Pork program that Democrats have dreamed about for the last 20 years.
It is not a jobs bill. Its a PORK bill.
It is not a stimulus bill it is a PORK spending bill.
I am of the opinion that every member of the House should be required to go out an spend the next 6 months trying to start a business that hires 20 people. Let them dream up an employment project, incorporate, hire , get liscences and permits, pay payroll taxes and a salary for themselves without going bankrupt in six months.
It will be fascinating to see if President Obama will rise to the challenge and eliminate all programs that do not provide immediate stimulus to the economy. That would be honest and true to his campaign promise.
It is no wonder that Congress has such a low rating. These guys cant even abide by Truth in Labelling. This bill bails out nobody and provides no stimulus.
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