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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 13th, 2009

Deficits vs Unemployment

Posted by WARREN MOSLER on 13th March 2009


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With proactive deficit spending as in 2003 unemployment peaks before the deficit peaks.


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Posted in Articles | 4 Comments »

Brazil Discovery May Contain 8 Billion Barrels of Oil

Posted by WARREN MOSLER on 13th March 2009


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About 90 days of world consumption.

Exxon’s Brazil Discovery May Contain 8 Billion Barrels of Oil

by Joe Carroll

Mar 13 (Bloomberg) — Exxon Mobil Corp.’s oil discovery off the coast of Brazil may hold enough crude to rival the nearby Tupi prospect as the Western Hemisphere’s largest find in three decades.


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Posted in Articles | No Comments »

Mark to market fundamentals

Posted by WARREN MOSLER on 13th March 2009


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Mark to market is out of context with our banking model that incorporates government funding of bank liabilities for the further public purpose of lending based on credit analysis.

Mark to market is in order for non banks that rely on private funding.

Current policy is the result of leadership that doesn’t understand the monetary system.


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Posted in Articles | 10 Comments »

Excellent review of quantitative easing

Posted by WARREN MOSLER on 13th March 2009


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Well done professor!

Excellent Review of Quantitative Easing


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Posted in Articles | 10 Comments »

Barker Says BOE Should Print Money

Posted by WARREN MOSLER on 13th March 2009


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And yet another central banker who doesn’t understand monetary operations…

Has to be a new low for the BOE.

Barker Says BOE Should Print Money as U.K. Recession Worsens

by Jennifer Ryan and Brian Swint

Mar 13 (Bloomberg) — Bank of England policy maker Kate Barker said the bank’s decision to buy assets with newly created money is necessary to prevent deflation as Britain’s recession shows signs of worsening.

Printing money “is the best course in order to achieve our objective of keeping inflation to target in the medium term.” “The downside risks to growth, and therefore to inflation, identified in the February inflation report were in danger of crystallizing,” she said. Barker said the impact of the reduction in the benchmark to lower levels had become “successively reduced” with each cut, and lower rates on their own would be insufficient to revive growth.


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Posted in Articles, UK | No Comments »

Imperfect competition in the copper markets?

Posted by WARREN MOSLER on 13th March 2009


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Copper fell with the Master’s inventory liquidation but then bottomed about the same time crude did. While gasoline demand started recovering from its modest declines back then it is doubtful if the same has happened with copper, as construction has continued to decline since then.

Market action feels like the producers got together and decided to cut back on supply.

Political leaders who understood markets would be looking into it.

Investors who recognize the economic value of oligopoly collusion might also look into it.


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Posted in Valance | No Comments »

Re: Noyer says rising deficits may increase saving

Posted by WARREN MOSLER on 13th March 2009


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(email exchange)

Maybe they’re reading my blog???

>   
>   On Mar 13, 2009 at 7:06 am, John wrote:
>   
>   NOYER SAYS RISING DEFICITS MAY INCREASE SAVING BY EUROPEANS
>   
>   Story to follow.
>   


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Posted in Email | 3 Comments »

Re: In case you thought Romer knows how anything works

Posted by WARREN MOSLER on 13th March 2009


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(email exchange)

>   
>   On Thu, Mar 12, 2009 at 3:31 PM, Tom wrote:
>   
>   Christina Romer gave a speech on Monday at Brookings in which she
>   strongly argued for dollar devaluation as a tool to create economic
>   recovery.
>   

Continues the beggar they neighbor policies that Paulson pushed.

>   
>   This is the sort of thing that provides political cover for Fed Chairman Ben
>   Bernanke to pursue a more aggressive quantitative easing policy.
>   

Yes, of course he doesn’t matter for anything of consequence, but that’s another story.

>   
>   Romer, who is chair of the Council of Economic Advisors, praised FDR’s
>   1933 decision to allow the gold price to float up from $20.63/oz. to
>   $34.85/oz.
>   

Yes, should have floated it entirely.

Back then, the gold standard constrained even the US Treasury from borrowing.

We don’t have that issue, so moving the USD down for that reason is moot.

>   
>   That decision offers a template for what the Fed could do today, she said
>   (italics mine):
>   
>   This monetary expansion [in the wake of the 1933 devaluation] couldn’t
>   lower nominal interest rates because they were already near zero. What it
>   could do was break expectations of deflation.
>   

That pesky, ridiculous, ‘inflation expectations theory’ again!

>   
>   Prices had fallen 25% between 1929 and 1933. People throughout the
>   economy expected this deflation to continue. As a result, the real cost of
>   borrowing and investing was exceedingly high.
>   

Expectations had nothing to do with it. Lack of aggregate demand did. And the Treasury was revenue constrained due to the gold standard.

>   
>   Consumers and businesses wanted to sit on any cash they had because
>   they expected its real purchasing power to increase as prices fell.
>   

Not the reason. When on a gold standard, a rising value of gold is expressed by falling prices for everything else as gold is fixed.

Hence the revaluation upward of the price of gold which was a devaluation of the dollar. (Dollar buys less gold)

>   
>   Devaluation followed by rapid monetary expansion broke this deflationary
>   spiral. Expectations of rapid deflation were replaced by expectations of
>   price stability or even some inflation. This change in
>   expectations brought real interest rates down dramatically.
>   

No, deficit spending supported demand and broke the deflation.

>   
>   The change in the real cost of borrowing and investing appears to have had
>   a beneficial impact on consumer and firm behavior. The first thing that
>   turned around was interest-sensitive spending. For example, car sales
>   surged in the summer of 1933. One sign that lower real interest rates were
>   crucial is that real fixed investment and consumer spending on durables
>   both rose dramatically between 1933 and 1934, while consumer spending
>   on services barely budged.
>   

Must have been something else going on.

>   
>   Romer’s analysis of the Roosevelt devaluation parallels Bernanke’s almost
>   exactly.
>   

Comforting!

>   
>   Bernanke also has written that loose monetary policy was the key to the
>   economic recovery of 1933-34. Further on in her speech, Romer cautions
>   against letting up on stimulative measures too quickly, lest the economy
>   plunge back into recession, such as happened to the U.S. in 1937.
>   

In 1937 there was a new whopping social security tax that was ‘off budget’ and sent the economy into a tailspin as it drained billions of financial assets from the private sector.

Doesn’t anyone in DC know how any of it works?????


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Posted in Email | No Comments »

2009-03-13 USER

Posted by WARREN MOSLER on 13th March 2009


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Trade Balance (Jan)

Survey -$38.0B
Actual -$36.0B
Prior -$39.9B
Revised n/a

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Exports MoM (Jan)

Survey n/a
Actual -5.7%
Prior -5.8%
Revised n/a

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Imports MoM (Jan)

Survey n/a
Actual -6.7%
Prior -5.8%
Revised n/a

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Exports YoY (Jan)

Survey n/a
Actual -16.4%
Prior -9.3%
Revised n/a

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Imports YoY (Jan)

Survey n/a
Actual -22.8%
Prior -15.4%
Revised n/a

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Trade Balance ALLX (Jan)

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Import Price Index MoM (Feb)

Survey -0.7%
Actual -0.2%
Prior -1.1%
Revised -1.2%

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Import Price Index YoY (Feb)

Survey -13.5%
Actual -12.8%
Prior -12.5%
Revised -12.5%

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Import Price Index ALLX 1 (Feb)

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Import Price Index ALLX 2 (Feb)

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U of Michigan Confidence (Mar P)

Survey 55.0
Actual 56.6
Prior 56.3
Revised n/a

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U of Michigan TABLE Inflation Expectations (Mar P)


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Posted in Daily | No Comments »