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Yes, but this would help world demand.

But it’s throwing away a major opportunity to increase our standard of living by supporting domestic demand unilaterally and letting the rest of the world rely on exports to us:

Interesting news from Treasury:

1. Propose to increase IMF standy funds from $50 Billion to $500 Billion (major positive for emerging market credit).
2. Calling for all G20 countries to spend 2% of GDP in stimulus in both 2009 and 2010.
3. Calling for some kind of global trade finance initiative.

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Given our counter cyclical tax structure, a weak economy causes the deficit to rise until it adds sufficient income and net financial assets to turn things around.

It then goes the other way, with the strong economy driving up revenues faster than even the government can spend, until the falling deficit ends the cycle.

In the past, when the deficit got in the range of 5% of GDP that proved sufficient to cause the turn.

It might be higher this time around.

The surplus years did a lot of damage as they removed substantial net financial assets that only deficits can replace.

The proactive Bush fiscal package reversed the economy earlier than otherwise.

Also, government purchases of financial assets don’t ‘count’ for purposes of this analysis.

So ex TARP, the deficit is maybe 2% or more smaller than the headline deficit number.

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Year over year gasoline demand (in gallons) was down a bit this week still looks to be working its way higher since December.

Year over year changes are now very small, indicating little or no ‘demand destruction.’

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SOV CDS Indicative Levels

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• MBA Mortgage Applications (Released 7:00 EST)
• MBA Purchasing Applications (Released 7:00 EST)
• MBA Refinancing Applications (Released 7:00 EST)
• Bloomberg Global Confidence (Released 7:00 EST)

MBA Mortgage Applications (Mar 6)

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MBA Purchasing Applications (Mar 6)

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MBA Refinancing Applications (Mar 6)

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Bloomberg Global Confidence (Mar)

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