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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for March, 2009

Eurozone- quantitative easing VS fiscal adjustment

Posted by WARREN MOSLER on 31st March 2009


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Thanks, they all have it wrong regarding quantitative easing.

Net financial assets of the non government sectors remain unchanged.

There is no ‘monetary’ consequence apart from the resulting somewhat lower long term interest rates.

And the idea that it helps delays fiscal responses that do help.

Europe needs its politicians to drive a new fiscal stimulus

by Julian Callow

Mar 31 (FT) — As international pressure intensifies on the European Central Bank to print money by adopting a programme of aggressive asset purchases, it is worth questioning whether Europe has got its priorities in the right order. So far, the ECB has been doing most of the heavy lifting in terms of injecting stimulus into the euro area.

Looking ahead, it is preferable that opportun- ities to undertake radically further fiscal easing are fully exploited before requiring the ECB to go down the route taken by the Federal Reserve, Bank of England and Swiss National Bank (ie. undertaking “pure” quantitative easing via extensive asset purchases financed by the creation of new central bank money).

This implies quantitative easing is more powerful than fiscal and should be saved for last. Not true.

In short, if the euro area is to err on the side of being a little reckless in terms of policy,

Quantitative easing is totally tame, not reckless. It’s just part of the CBs role in setting the term structure of risk free rates.

it is preferable this be in a fiscal, rather than monetary, direction.

For the eurozone, with the national governments credit sensitive agents, fiscal is unfortunately the reckless pass under current institutional arrangements.

This is for three reasons.

First, well devised and appropriately targeted fiscal incentives can prove very efficient, both in terms of stimulating demand and even in timeliness. For example, a modest €1.5bn scheme to encourage new car purchases via subsidies to scrap older cars (just 0.06 per cent of German GDP) has already led to about 350,000 new orders being placed in Germany. That represents 11 per cent of German registrations last year.

Yes, fiscal works!

Second, the fiscal framework is much better established, including a possible exit strategy.

Just the thought of an exit strategy shows a lack of understanding of how aggregate demand works and is managed by fiscal policy. It also shows deficit myths are behind the statement.

For decades, economists have built up a good understanding of fiscal multipliers and lags. The cost of such measures is transparent,

There is no ‘cost’, only nominal ‘outlays’ by government.

unlike a strategy of central bank asset purchases, where the impact and exit strategy are uncertain and future costs are obscured.

Yes, few understand this simply thing. It’s about price (interest rates) and not quantities.

Third, for the euro area there is a particular reason why aggressive quantitative easing could prove hazardous.

It can’t be hazardous.

This results from the unique status of the ECB and euro as icons of European integration. Even though it may have happened more than 80 years ago, the collective memory of the hyperinflation experienced by Germany and Austria during the 1920s – and of its consequences, which ultimately gave birth to the euro – still casts a long shadow over European perceptions of paper money.

The mainstream believe that it is inflation expectations that cause inflation, and we pay the price via their errant analysis.

Here, we should not forget that, in contrast to the dollar, the pound and the Swiss franc, the euro has been in physical cash circulation for only seven years. As well, it is worth noting that the proportion of EU citizens saying they tend not to trust the ECB has tended to shift upwards – to 31 per cent in the most recent survey (autumn 2008), the highest in EMU’s history. This compares with 48 per cent saying that they tend to trust the ECB (source: Eurobarometer 70).

In short, were the ECB to adopt a strategy of aggressively printing money through an extensive asset purchase programme, this would risk significantly undermining the euro’s credibility, particularly if this strategy was not well communicated.

Credibility is way overrated!

That said, the ECB is in a neighbourhood where most of its peers have embarked on a strategy of aggressively printing money.

The term ‘printing money’ is a throwback to the gold standard and fixed FX in general where the CB prints convertible currency in excess of reserves. This has no applications with today’s non convertible currency.

This risks pushing up the euro on a trade-weighted basis further, at least in nominal terms, which would represent another negative shock to euro area exporters. In this context, if fiscal policy was used more aggressively as a means of providing new stimulus to the economy, it should seek in part to compensate businesses whose outlook could be further weakened by currency appreciation.

Increasing deficits does not strengthen a currency. If it did Zimbabwe would have the word’s strongest currency.

Without doubt, reaching agreement on sufficiently robust fiscal stimulus in Europe is harder to accomplish than a policy of leaving the bulk of policy stimulus up to the ECB.

True. And too bad the ECB doesn’t have any policy variables at hand to add to aggregate demand.

The measures, rather than having a small committee to determine the appropriate level of stimulus, must be decided by politicians, who face political constraints and competing interests. But the transparency that gives a strategy of fiscal stimulus its rel>ative appeal also hampers the ability of politicians to execute it. Also, we are presented with an adverse starting position, with the euro area budget deficit likely this year to be close to 6 per cent of GDP.

That’s the good news. The automatic stabilizers are causing the deficits to grow to the point where they will trigger a recovery. Hopefully before the point where the national governments become insolvent trying to fund themselves.

Nonetheless, this should not mean that the aggressive use of additional fiscal stimulus is insuperable. We have lived through desperate times, which call for desperate measures. Central banks, including the ECB, have already responded with far-reaching measures. In order to stimulate economic recovery in Europe, its political leaders need to take up the baton.

Europe could also assist its cause by several other measures. For one thing, it seems odd that the European Commission has launched “soft” excessive deficit procedures against several euro area countries. As well, European governments, including the European Commission, could do a much better job of outlining to the rest of the world, in a clear and concise way, the details of their stimulus actions so far. For, encompassing the full range of monetary and financial system support measures, these are far from being negligible – with the discretionary fiscal stimulus measures alone amounting to about 1 per cent of euro area GDP in 2009.

Julian Callow is chief European economist at Barclays Capital


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Posted in Articles | 2 Comments »

2009-03-31 USER

Posted by WARREN MOSLER on 31st March 2009


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ICSC UBS Store Sales YoY (Mar 31)

Survey n/a
Actual -0.2%
Prior -1.4%
Revised n/a

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ICSC UBS Store Sales WoW (Mar 31)

Survey n/a
Actual 1.1%
Prior -0.4%
Revised n/a

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Redbook Store Sales Weekly YoY (Mar 31)

Survey n/a
Actual -0.6%
Prior -1.3%
Revised n/a

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Redbook Store Sales MoM (Mar 31)

Survey n/a
Actual 0.2%
Prior 0.0%
Revised n/a

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ICSC UBS Redbook Comparison TABLE (Mar 31)

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S&P Case Shiller Home Price Index (Jan)

Survey 147.20
Actual 146.40
Prior 150.66
Revised 150.56

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S&P CS Composite 20 YoY (Jan)

Survey -18.60%
Actual -18.97%
Prior -18.55%
Revised -18.60%

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S&P Case Shiller US Home Price Index (Jan)

Survey n/a
Actual 139.14
Prior 150.00
Revised n/a

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S&P Case Shiller US Home Price Index YoY (Jan)

Survey n/a
Actual -18.23%
Prior -16.55%
Revised n/a

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Chicago Purchasing Manager (Mar)

Survey 34.3
Actual 31.4
Prior 34.2
Revised n/a

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Consumer Confidence (Mar)

Survey 28.0
Actual 26.0
Prior 25.0
Revised 25.3

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Consumer Confidence ALLX 1 (Mar)

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Consumer Confidence ALLX 2 (Mar)

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NAPM Milwaukee (Mar)

Survey n/a
Actual 30.0
Prior 29.0
Revised n/a


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Review of the recession and how to end it

Posted by WARREN MOSLER on 30th March 2009


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  1. The problem is suboptimal output and employment which is evidence of a lack of aggregate demand.
     
  2. Less important what caused the drop in aggregate demand
    • The end of the subprime expansion in 2006 reduced the demand for housing
       
    • The wind down of the one time Q2 2008 fiscal adjustment (Q2 2008 GDP was up 2.8%)
       
    • The Mike Masters inventory liquidation that began in July 2008 added supply from inventories, reducing output and employment
       
    • A shift in the propensity to spend due to the pro cyclical nature of credit worthiness

     

  3. My proposals for restoring aggregate demand:
    • A full payroll tax holiday – This tax is taking $1 trillion per year from workers and businesses struggling to make ends meet $1,000 per capita in revenue sharing for the States (approx. $300 billion total).
       
    • Federal funding for a $8 per hour full time job for anyone willing and able to work that includes federal health care.
       
    • Caveat – Unless our demand for motor fuel is cut in half, restoring aggregate demand will also empower the Saudis to set ever higher prices for crude oil which will cause our real terms of trade and standard of living to deteriorate.
       
    • Political options for reducing imported fuel consumption:
       

      • Regressive – utilizing allocation by price (Carbon tax, fuel taxes)
         
      • Closer to neutral – mandating higher fuel economy requirements for new vehicles, offering incentives to trade up to more fuel efficient vehicles
         
      • Progressive – substantially reducing speed limits to discourage driving and advantage public transportation

     

  4. Redirect banking to serve public purpose
    • Ban banks from all secondary markets.
       
    • Allow bank lending only to serve public purpose.
       
    • Do not use the liability side of banking for market discipline.

     

  5. Analysis of current situation
    • Our leaders believe they must first ‘get credit flowing again’ to restore output and employment.
       
    • Unfortunately the reverse is the case; restoration of output and employment will restore the flow of credit.
       
    • Government is removing about $1 trillion per year in payroll taxes from employees and employers who can’t meet their mortgage payments and wondering what is causing the financial crisis.
       
    • All moves to date by the Treasury and Federal Reserve have only served to shift financial assets between the public and private sectors. Nothing has directly added to aggregate demand.
       
    • Therefore the economy has continued to deteriorate, with only the ‘automatic stabilizers’ slowly adding financial assets and income to the private sector, as the counter-cyclical deficit rises.
       
    • The rate of federal deficit spending (not counting TARP and other shifting of financial assets that does not directly alter demand, as above) now exceeds 5% of GDP and seems to have begun moving the economy sideways.
       
    • The new fiscal package starts taking effect in April. While modest in size, it isn’t ‘nothing’ and will further support GDP.
       
    • Employment will not grow until real output of goods and services exceeds productivity growth.
       
    • Fuel prices are already moving higher.

     

  6. Conclusion
    • Leadership that doesn’t understand how the monetary system works has needlessly prolonged the recession and delayed the recovery.
       
    • They have put a premium on ‘confidence’ as the President spends countless hours in front of the TV cameras, when in fact loss of ‘confidence’ means only that federal taxes can be lower for a given level of federal spending:

      lower confidence = less private sector spending = less aggregate demand = lower taxes or higher federal spending to sustain output and employment

    • The headline USD trillions they have directed towards the financial sector has accomplished little or nothing beyond burning up expensive political capital and credibility.
       
    • They are in this way over their heads, and it’s costing us dearly.
       


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Posted in Mosler 2012, Oil, Political, Proposal | 6 Comments »

Mosler plan vs Geithner plan

Posted by WARREN MOSLER on 30th March 2009


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The Mosler plan to better accomplish what the Geithner plan has attempted to do:

Targeted credit default insurance between the FDIC and the banks

Here’s how it works:

Any bank could apply for FDIC credit default insurance.

The bank would submit the securities it wants insured to the FDIC for approval.

The FDIC would calculate a risk adjusted cash flow value for those securities (for a fee to cover expenses).

The bank then has the option of buying credit default insurance from the FDIC at perhaps a 1% annual premium of the average balance outstanding.

The FDIC credit default insurance would cover any bank losses on those securities.

This utilizes the FDIC as the ‘bad bank’ as is its intended purpose.

The FDIC should already have the capability to assess the risk adjusted value of all bank securities, as it does that to perform its normal audit functions.

The purchase of FDIC credit default insurance eliminates all capital charges and risk considerations for the bank for those securities.


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Posted in Articles | 6 Comments »

Geithner backwards again on banks, risk, and recovery

Posted by WARREN MOSLER on 30th March 2009


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No we don’t. We ‘get out of this’ with a fiscal adjustment sufficient to restore output and employment, and as credit worthiness improves lending picks up.

Banking is necessarily pro cyclical Tim, get over it!

Geithner Says Some Banks to Need ‘Large Amounts’ of Assistance

by Ryan J. Donmoyer

Mar 29 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner said that for the U.S. economy to recover from the recession, banks need to show more willingness to take risks and restore lending to businesses.

“To get out of this we need banks to take a chance on businesses, to take risks again,” Geithner said today on the ABC News program “This Week.”


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Posted in Articles | 3 Comments »

Obama for or against unions?

Posted by WARREN MOSLER on 30th March 2009


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Didn’t we just hear a speech from our President about the need to strengthen unions?

White House to set GM, Chrysler deadlines: report

Mar 27 (Reuters) — The Obama administration will set a strict deadline for General Motors Corp and Chrysler LLC to reach cost-cutting deals with creditors and their major union even as it extends more aid to the struggling automakers, the New York Times reported on Friday.

The New York Times reported that the White House autos task force was likely to set a deadline of weeks rather than months for GM and Chrysler to reach a deal with creditors and the United Auto Workers. Under the terms of the $17.4 billion in emergency loans approved for the Detroit automakers by the Bush administration in late December, GM and Chrysler need to win concessionary agreements to reduce the amount owed to the United Auto Workers and other creditors. GM and Chrysler have reached agreements in principle to change provisions of their contract with the UAW that would reduce the average hourly cost for production workers, another provision of the loan deal.


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Posted in Articles, Obama | No Comments »

2009-03-30 CREDIT

Posted by WARREN MOSLER on 30th March 2009


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IG On-the-run Spreads (Mar 30)

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IG6 Spreads (Mar 30)

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IG7 Spreads (Mar 30)

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IG8 Spreads (Mar 30)

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IG9 Spreads (Mar 30)


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Posted in Credit | 2 Comments »

Re: Financial services

Posted by WARREN MOSLER on 27th March 2009


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(email exchange)

Yes!

>   
>   Sounds like Krugman has been reading your blog:
>   

The Market Mystique

by Paul Krugman

Mar 26 (NY Times) — But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.

The market mystique didn’t always rule financial policy. America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

And the financial system wasn’t just boring. It was also, by today’s standards, small. Even during the “go-go years,” the bull market of the 1960s, finance and insurance together accounted for less than 4 percent of G.D.P. The relative unimportance of finance was reflected in the list of stocks making up the Dow Jones Industrial Average, which until 1982 contained not a single financial company.

It all sounds primitive by today’s standards. Yet that boring, primitive financial system serviced an economy that doubled living standards over the course of a generation.


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Posted in Articles | 1 Comment »

Financial services

Posted by WARREN MOSLER on 27th March 2009


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>   
>   Sounds like the IMF & misguided bankers everywhere are systematically
>   degrading everyone’s economy.
>   

Yes!

>   
>   Do enough people anywhere understand national currency systems?
>   

No!

>   
>   Are ALL financial service industries more trouble than they’re worth?
>   

Best i can tell. There probably are a few that are OK, just haven’t identified them.

We need our banks only to:

  1. Manage the payments system
  2. Provide a ‘safe’ depository/insured deposits
  3. Make and hold loans deemed to further public purpose that are not subject to liquidity issues of the lender.

In 1972 the US had 2.6 million housing starts with a population of only 200 million people, all financed by a bunch of boring savings and loans staffed by VERY modestly paid loan officers who left at 3:30 every day to play golf. (I was one of them.)


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Posted in Articles, Email | 3 Comments »

Student exam at Wartburg College

Posted by WARREN MOSLER on 27th March 2009


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Congrats, Professor Fullwiler- there are at least some students learning how the monetary system actually works!

EC342

Winter 2009

Case Study 5

The following quotes from rather famous figures or institutions are all completely incorrect regarding the nature of government debt and deficits according to the modern money framework described in class. For this case the task is to explain how the following quotes are incorrect.

As with the previous two cases choose 2-3 points in these quotes contradicting modern money, and explain the refutation of the point in the modern money paradigm.

In the interest of political balance, the quotes here are from a Democrat (President Obama), a Republican (Senator Judd Gregg), and the bi-partisan Congressional Budget Office.

Writing grading criteria are in effect.

Quote 1:

President Obama on 60 minutes

Mar 22 (CBS) —

KROFT: Is there some limit to the amount of money we can spend?

OBAMA: Yes.

KROFT: Or print trying to solve this crisis?

OBAMA: There is.

KROFT: And are we getting close to it?

OBAMA: The limit is our ability to finance these expenditures through borrowing. And the United States is fortunate that it has the largest, most stable economic and political system around. And so the dollar is still strong because people are still buying treasury bills. They still think that’s the safest investment out there. If we don’t get a handle on this, and also start looking at our long-term deficit projections, at a certain point, people will stop buying those treasury bills.

Quote 2:

March 22, 2009
Gregg: ‘This country will go bankrupt’
Posted: 03:41 PM ET

From CNN Associate Producer Martina Stewart

GOP Sen. Judd Gregg warned Sunday that the country might be headed for a fiscal crash if spending isn’t controlled.

WASHINGTON (CNN) – Even though he was almost a member of the new Obama administration, New Hampshire Republican Judd Gregg Sunday slammed President Obama’s approach to handling the country’s fiscal outlook.

“The practical implications of this is bankruptcy for the United States,” Gregg said of the Obama’s administration’s recently released budget blueprint. “There’s no other way around it. If we maintain the proposals that are in this budget over the ten-year period that this budget covers, this country will go bankrupt. People will not buy our debt, our dollar will become devalued. It is a very severe situation.”

Gregg, known as one of the keenest fiscal minds on Capitol Hill, also told CNN Chief National Correspondent John King that he thought it was “almost unconscionable” for the White House to continue with its planned course on fiscal matters with unprecedented actual and projected budget deficits in the coming years.

“It is as if you were flying an airplane and the gas light came on and it said ‘you 15 minutes of gas left’ and the pilot said ‘we’re not going to worry about that, we’re going to fly for another two hours.’ Well, the plane crashes and our country will crash and we’ll pass on
to our kids a country that’s not affordable.”

Quote 3:

From page 43 of A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook published March 2009 by the Congressional Budget Office (CBO; http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf)

“The primary difference between the current projections and the ones published in January is the effect of the American Recovery and Reinvestment Act of 2009. Although ARRA will boost output significantly in the next several years, any short run effects of the stimulus legislation on the business cycle will have dissipated by the end of the projection period. In the latter part of the period, the legislation reduces projected output by roughly 0.1 percent, principally through its influence on capital accumulation.”

“Capital accumulation is affected because the increase in government debt is expected to displace, or “crowd out,” a smaller amount of private capital. That result occurs because the reduction in overall national saving dampens spending on business fixed investment and the construction of housing. Although the size of such displacement is very uncertain, CBO assumes that, in the long run, each dollar of additional federal debt crowds out about a third of a dollar’s worth of private domestic capital (with the remainder of the rise in debt offset by increases in private saving and inflows of foreign capital).”


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Posted in Articles | 1 Comment »

Fed swap lines a touch lower

Posted by WARREN MOSLER on 27th March 2009


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Central bank liquidity swaps (13) $327,692 – $1,894


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Posted in Articles, Fed | 5 Comments »

2009-03-27 USER

Posted by WARREN MOSLER on 27th March 2009


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Personal Income MoM (Feb)

Survey -0.1%
Actual -0.2%
Prior 0.4%
Revised 0.2%

 
Karim writes:

  • Personal income down 0.2%, down 4 of last 5mths, and up 1% y/y
  • Wage and salary income down 0.4%, down 4mths in a row, and -0.2% y/y
  • Personal spending up 0.2%, and down 0.2% in real terms
  • Based on Jan-Feb data, real Q1 spending may be flat from -4.3% in Q4
  • But because of weakening trend thru Q1, sets up for another negative in Q2
  • Saw one forecaster change Q1 estimate from -7.2% to -6.5% and leave Q2 estimate unch at -4.8%

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Personal Income YoY (Feb)

Survey n/a
Actual 1.0%
Prior 1.4%
Revised n/a

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Personal Income ALLX (Feb)

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Personal Spending (Feb)

Survey 0.2%
Actual 0.2%
Prior 0.6%
Revised 1.0%

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PCE Deflator YoY (Feb)

Survey 0.8%
Actual 1.0%
Prior 0.7%
Revised 0.8%

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PCE Core MoM (Feb)

Survey 0.2%
Actual 0.2%
Prior 0.1%
Revised 0.2%

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PCE Core YoY (Feb)

Survey 1.6%
Actual 1.8%
Prior 1.6%
Revised 1.7%

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U of Michigan Confidence (Mar F)

Survey 56.8
Actual 57.3
Prior 56.6
Revised n/a

 
Karim writes:

  • Final Michigan survey for March showed small upward revision in confidence: 56.6 to 57.3 (Feb was 56.3)
  • 5-10yr inflation expectations revised lower: 2.8 to 2.6 (Feb was 3.1)
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    U of Michigan Confidence TABLE Inflation Expectations (Feb)


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Posted in Daily | No Comments »

UK’s Brown and King re: failed auction

Posted by WARREN MOSLER on 26th March 2009


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Brown ‘Terribly Fragile’ After Bond Auction Flops

by Robert Hutton and Mark Dean

Mar 26 (Bloomberg) — The first failed British bond auction in more than seven years leaves Prime Minister Gordon Brown’s reputation for economic competence even more tarnished as he battles recession and a rising tide of voter anger.

Brown, who had the backing of 30 percent of the electorate in a ComRes Ltd. poll last week, must now cope with what amounts to a vote of no confidence by investors in his ability to end the recession. Bank of England Governor Mervyn King, his ally for much of the past decade, warned a day earlier that there’s no more money for further spending.

Wrong! Spending is not inherently constrained by revenues.

King must not understand how the monetary system works.

“The notion that Brown is leading us to the promised land is laughable,” said Ruth Lea, economic adviser to the Arbuthnot Banking Group Plc in Solihull, England. “He cannot get to grips with how other people see this country now, as the sick man of Europe.”

Yes, that’s how most see it, but they don’t understand how the monetary system works.

The Treasury yesterday tried to sell 1.75 billion pounds ($2.6 billion) of 40-year gilts and got 1.63 billion pounds of bids, a sign that investors are reluctant to finance his record borrowing.

No, a sign at that point in time that investors didn’t want to buy that many bonds of that maturity.

This does not constrain government spending.

“Brown’s strategy now looks terribly fragile,” said Mark Wickham-Jones, a professor of politics at Bristol University. “His situation is economically extremely uncertain, politically risky and this auction again highlights how we are now in un-chartered territory.”

He doesn’t seem to understand the monetary system either.

G-20 Tour

The auction failure couldn’t have come at a worse time for Brown, who set off on a five-day tour this week to win support for his economic-reform plans before a summit of leaders from the Group of 20 nations he’s hosting in London on April 2. He’s in Brasilia today and due to visit Chile after speaking in New York yesterday.

He does understand that he does not need their support for anything regarding the UK economy.

German Chancellor Angela Merkel has resisted Brown’s push for a new fiscal stimulus, saying her country already has committed to a boost worth 4.7 percent of gross domestic product.

Germany does have funding constraints the UK doesn’t have as per the eurozone institutional arrangements.

Brown’s Agenda

The government says the G-20 will focus on stabilizing financial markets, reforming global financial institutions and helping people get through the recession. Brown wants them to agree on a fiscal stimulus to support growth, something King warned might not be affordable.

More evidence King doesn’t understand the monetary system. ‘Affordable’ is not an applicable concept regarding nominal spending with a non convertible currency.

“Given how big these deficits are, I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits,” King said in Parliament on March 24.

Brown’s spokesman Tom Hoskin said yesterday the prime minister wasn’t troubled by the auction failure. “There have been other auctions that have been uncovered in other countries,” he told reporters in London. “The underlying strength of the market in gilts is there.”

More to the point, it’s not a necessary condition for deficit spending. The economics of deficit spending are the same whether or not guilts are sold. The difference is long term rates are higher if the Treasury issues long term securities. They should listen to Goodhart and not issue or sell them at all.


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Posted in Articles | 14 Comments »

EU President slams US policy

Posted by WARREN MOSLER on 26th March 2009


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Looks like the EU leaders don’t know much about how monetary systems work, either.

EU Presidency: Obama Plans ‘a Way to Hell’

by Raf Casert

Mar 25 (AP) — A top European Union politician on Wednesday slammed U.S. plans to spend its way out of recession as “a way to hell.”

Czech Prime Minister Mirek Topolanek, whose country currently holds the EU presidency, told the European Parliament that President Barack Obama’s massive stimulus package and banking bailout “will undermine the stability of the global financial market.”


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Posted in Articles, ECB | 4 Comments »

2009-03-26 USER

Posted by WARREN MOSLER on 26th March 2009


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GDP QoQ Annualized (4Q F)

Survey -6.6%
Actual -6.3%
Prior -6.2%
Revised n/a

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GDP YoY Annualized Real (4Q F)

Survey n/a
Actual -0.8%
Prior 0.7%
Revised n/a

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GDP YoY Annualized Nominal (4Q F)

Survey n/a
Actual 1.2%
Prior 3.3%
Revised n/a

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GDP Price Index (4Q)

Survey 0.5%
Actual 0.5%
Prior 0.5%
Revised n/a

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Core PCE QoQ (4Q)

Survey 0.8%
Actual 0.9%
Prior 0.8%
Revised n/a

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Personal Consumption (4Q)

Survey -4.4%
Actual -4.3%
Prior -4.3%
Revised n/a

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Initial Jobless Claims (Mar 21)

Survey 650K
Actual 652K
Prior 646K
Revised 644K

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Continuing Claims (Mar 14)

Survey 5475K
Actual 5560K
Prior 5473K
Revised 5438K

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Jobless Claims ALLX (Mar 21)


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Posted in Daily | No Comments »

Geithner Plan

Posted by WARREN MOSLER on 25th March 2009


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This is what happens with a government that doesn’t know how the monetary system works and thinks it needs private capital participation:

Geithner Tempts Investors with Loans, 25% Returns

by James Sterngold

Mar 24 (Bloomberg) — The U.S. government’s plan to rid banks of toxic assets may attract investors with financing that helps generate returns as high as 25 percent. The Public-Private Investment Program would encourage the purchase from banks of certain securities backed by mortgages and other assets, as well as whole loans. Loans from the Federal Reserve and Federal Deposit Insurance Corp. debt guarantees will bring out the bidders.


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Posted in Articles | 7 Comments »

WSJ reports housing wrong

Posted by WARREN MOSLER on 25th March 2009


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Thanks, the negatively biased reporting continues as the evidence grows that the Obamaboom is underway.

The driving force is clear- the federal deficit seems to have gotten large (albeit the ugly way- falling revenues and rising transfer payments as output falls and unemployment rises) to again support incomes and spending.

This is how it most often happens with leadership that doesn’t understand how the monetary system works.

And analysts who don’t understand how the monetary system works will be late to anticipate the recovery as well, just as they initially failed to recognize that ‘monetary policy’ would be ineffective.

But no doubt the will cast whatever happens in terms of the monetary policy actions taken by the Fed and Treasury, rather than a result of the fiscal forces from the ‘automatic stabilizers.’

>   
>   On Wed, Mar 25, wrote:
>   
>   See excerpt from todays WSJ. See they say that average prices declined
>   month over month. Then look at the actual data. The mean or average
>   price actually went UP from 239K to 251K but they say “and prices
>   month over month fell too.
>   
>   They don’t even read the release. These numbers are confirmed on BB.
>   

New-Home Sales Rise as Prices Fall

by Jeff Bater

Mar 25 (WSJ) — The median price of a new home tumbled 18.1% to $200,900 in February from $245,300 in February 2008. The average price decreased 16.7% to $251,000 from $301,200 a year earlier. And prices month over month fell, too; in January 2009, the median price was $206,800 and the average was $239,100.


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Posted in Articles, Housing | 5 Comments »

Obama on a new world currency

Posted by WARREN MOSLER on 25th March 2009


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This is what you get from a president who doesn’t understand the monetary system. The strength of the dollar is off point:

Obama Defends Spending Plan, Tempers Criticism of Wall Street

by Julianna Goldman and Kim Chipman

Mar 25 (Bloomberg) — “I don’t believe that there’s a need for a global currency,” Obama, 47, said. “As far as confidence in the U.S. economy or the dollar, I would just point out that the dollar is extraordinarily strong right now.”

The main difficulty with a world currency is how the budget deficit (the only source of net savings of financial assets for that new currency) in that currency is managed. And with a world of leaders who don’t understand how currencies work, the odds of getting that anywhere near right are very long.


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Posted in Articles, Currencies, Obama | 5 Comments »

2009-03-25 USER

Posted by WARREN MOSLER on 25th March 2009


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MBA Mortgage Applications (Mar 20)

Survey n/a
Actual 32.2%
Prior 21.2%
Revised n/a

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MBA Purchasing Applications (Mar 20)

Survey n/a
Actual 267.80
Prior 257.10
Revised n/a

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MBA Refinancing Applications (Mar 20)

Survey n/a
Actual 6363.20
Prior 4497.60
Revised n/a

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Durable Goods Orders (Feb)

Survey -2.5%
Actual 3.4%
Prior -5.2%
Revised -7.3%

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Durable Goods Orders YoY (Feb)

Survey n/a
Actual -28.9%
Prior -27.9%
Revised n/a

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Durables Ex Defense MoM (Feb)

Survey n/a
Actual 1.7%
Prior -4.0%
Revised n/a

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Durables Ex Transportation MoM (Feb)

Survey -2.0%
Actual 3.9%
Prior -2.5%
Revised -5.9%

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Durable Goods ALLX (Feb)

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New Home Sales (Feb)

Survey 300K
Actual 337K
Prior 309K
Revised 322K

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New Home Sales Total for Sale (Feb)

Survey n/a
Actual 330.00
Prior 340.00
Revised n/a

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New Home Sales MoM (Feb)

Survey -2.9%
Actual 4.7%
Prior -10.2%
Revised -13.2%

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New Home Sales YoY (Feb)

Survey n/a
Actual -41.1%
Prior -46.1%
Revised n/a

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New Home Sales Median Price (Feb)

Survey n/a
Actual 200.90
Prior 206.80
Revised n/a

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New Home Sales TABLE 1 (Feb)

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New Home Sales TABLE 2 (Feb)


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Posted in Daily | No Comments »

A bottom in home prices?

Posted by WARREN MOSLER on 24th March 2009


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A bottom in home prices?

And with the low created by forced and massive foreclosure liquidation auction sales a V shaped bottom is to be expected.

House Price Index MoM (Jan)

Survey -0.9%
Actual 1.7%
Prior 0.1%
Revised -0.2%

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House Price Index YoY (Jan)

Survey n/a
Actual -6.3%
Prior -8.9%
Revised n/a

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House Price Index ALLX (Jan)

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Posted in Articles, Housing | 4 Comments »