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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.

Earnings season coming

Posted by WARREN MOSLER on June 30th, 2009


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I am thinking earnings season should be pretty good this quarter.

Fiscal policy has been more than supportive since year end, fiscal consolidation is currently still all talk.

Negative shock risks are still there, however, California, eurozone banks and/or governments, nukes, etc.

Not sure on timing.

World Outlook: Recovery ahead

For the first time since the beginning of the downturn we have revised up our forecasts for economic growth. We now expect global growth to rise to 2.5% in 2010 compared to 2.0% envisaged in our previous World Outlook from 30 March 2009. The upward revision is due entirely to better prospects for industrial countries, where growth next year is now seen reaching 1.0% compared to 0.3% before.

Most of the upward revision to global growth in 2010 results from a stronger outlook for investment growth (which has risen to 2.0% from 0.1%) and export growth (up to 4.1% from -2.2% before). The improved prospects for exports and investment reflect greater confidence in the effectiveness of authorities’ efforts to restore stability in the financial sector.

In our view the global economic and financial crisis has had two key drivers: (1) the breakdown of the global growth model of the past decade or so, which led to unsustainable international current account imbalances; and (2) the financial crisis, which ensued when the inability of debtors to repay their creditors became evident. As a result, we can expect to see lower trend growth and higher economic volatility, the opposite of what the world economy experienced during the era of the Great Moderation.


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9 Responses to “Earnings season coming”

  1. Art Cashin Says:

    Art Cashin was just on CNBC, for the uninitiated, he is a 45 year veteran trader old wiseman. He said the bar is set SO LOW, lower than a limbo bar, that companies can’t help but to beat expectations. He said not to use that as a predictor though, because it would not be a good one going forward how healthy these companies are.

    Phil Grande often talks about this SCAM that is pulled on the public of setting the earnings expectations so low, then when they beat the street by a penny, dumping that garbage on dumb sheeple investors. Phil often says recently they have set the bar about 2 feet under the ground, so how can you help but not to get over it? LOL!

    Nothing has changed, the same old wall street crooks and tricks are still in play.

    Warren you or no one else here has convinced me how with women stopping to have babies globally at the level they had them the past 50 years, how we keep our socieites and economies growing?

    EDIT

    Reply

  2. Jim Baird Says:

    So, I’m wondering – what do you think of CA paying in IOUs? It could be a good thing, if they do it right (but it’s California, so they won’t…)

    Reply

  3. warren mosler Says:

    agreed!

    Reply

  4. Mike S Says:

    Word at every company I’ve talked too is either that revenues are down but not much, or that they are doing well but are not hiring. I’ve talked with dozens of firms – or desks within banks – and many are scared but overworked.

    Reply

  5. Dave Begoka Says:

    Everybody I know is out of work or suffering major pay cuts!

    Ebay sales are way down and i just heard a bunch of Health Care workers are getting the axe too.

    Reply

  6. zanon Says:

    California may go the IOU route. If that works out, I guess it settles the argument over whether states can (should) issue their own currency.

    Reply

    Vipul Reply:

    As I posted in the innocent frauds thread:

    US Constitution:
    Section 10 – Powers prohibited of States

    No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

    Missouri tried this very thing back in 1830! The Supreme Court ruled it unconstitutional:

    http://www.blackwellreference.com/public/tocnode?id=g9781577180999_chunk_g97815771809995_ss1-316

    http://press-pubs.uchicago.edu/founders/documents/a1_10_1s21.html

    But the Supreme Court reversed itself in 1837 (After Chief Justice Marshall died)

    http://www.answers.com/topic/briscoe-v-bank-of-the-commonwealth-of-kentucky

    The key difference was Kentucky created a state bank, and then used its notes instead of directly issuing them itself. So for California to do this legally, it would first need to create a State Bank of California.

    Not sure how the federal income tax issue would be dealt with, since there was no income tax in 1837.

    Reply

  7. Jim Baird Says:

    Bill Mitchell has a pretty good analysis of the CA IOUs here:

    http://bilbo.economicoutlook.net/blog/?p=3145

    Reply

  8. warren mosler Says:

    there are a few complications

    i’d just call them tax credits if they go that route

    still the issue of whether fed income taxes are due on cal tax credit income.

    Reply

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