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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 July 14th, 2009

IMF Says U.K. Can’t Afford 2010 Stimulus

Posted by WARREN MOSLER on 14th July 2009


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This says a lot more about the IMF than the UK:

IMF Says U.K. Can’t Afford 2010 Stimulus, Telegraph Reports

The U.K. is alone with Argentina as the only members of the Group of 20 that cannot budget for temporary spending increases next year to aid economic growth, the Sunday Telegraph cited the International Monetary Fund as saying. The Washington-based fund presented a paper at a G-20 meeting in Basel saying the average fiscal stimulus among member countries will be 1.6 % next year, the Telegraph reported. Britain’s fiscal position has left it unable to budget for an increase in expenditure or tax cuts in 2010 to boost the economy, the Telegraph cited the IMF as saying.


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Posted in Deficit, Government Spending | No Comments »

Germany looking into dollar bonds

Posted by WARREN MOSLER on 14th July 2009


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>   
>   (email exchange)
>   
>   On Tue, Jul 14, 2009 at 11:10 AM, wrote:
>   
>   Why do you think Germany is looking at issuing dollar bonds?
>   

Good question!

They think the odds of the Fed bailing them out in a pinch are better than the ECB?

They have banks with dollar debt who need to repay the dollar swap line advances from the ECB?

The dollar interest rate is lower?

They are concerned about borrowing so many euro?

They want to bet the dollar will go down?
Some investment banker has talked them into believing there is some advantage to diversify their borrowings by currency?

None of these possible explanations make any sense so it must be something else.

Germany ‘Closely Monitoring’ Dollar Bonds for Sale

By Anchalee Worrachate

July 10 (Bloomberg) — Germany is “closely monitoring” the dollar-denominated bond market for a possible sale, the head of the nation’s debt agency said.

“Dollar bonds are looking more attractive now from the issuer’s perspective than a couple of months ago,” Carl Heinz Daube, head of Germany’s Federal Finance Agency, said today in an interview from Frankfurt. “Nevertheless, there’s still no cost advantage for us at this point. If the price is right, we won’t say no.”

Selling dollar bonds would allow Germany to appeal to a wider range of investors, including money managers in the U.S. who don’t want to take on foreign-exchange risk. The agency issued five-year dollar bonds in 2005, the only time it sold debt denominated in the U.S. currency.

A meeting with U.S. investors suggested there’s “strong” interest in the debt, Daube said.

“I met investors in the U.S. last week and a number of institutional investors seemed to be keen to invest in Germany’s dollar bonds,” he said. “The final decision is with the Ministry of Finance.”

Germany hired banks to sell the five-year securities that come due in 2010 and may do so again should it proceed with a dollar-bond sale, Daube said on June 23.

“We tend to do less funding in the summer because of the holiday season,” Daube said. “But I might not say no if there’s a great cost advantage next week.”

Record Sales

The German debt agency will sell an unprecedented 346 billion euros ($481 billion) of government securities this year, 157 billion euros of which are bonds, with the remaining 189 billion euros in shorter-dated money-market instruments.

Bank bailouts and economic stimulus packages are swelling budget deficits in some of Europe’s largest economies, forcing governments to compete for cash. Poland last week sold $2 billion of dollar bonds after getting about $8 billion of investor orders. Spain sold $1 billion of three-year securities in dollars in March. Greece said in April it may sell debt denominated in either Japanese yen or the U.S. currency during the latter half of the year.

“Governments are diversifying their issuance as there’s so much funding to be done,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Group Plc in London. “There’s a cost element that needs to be looked at. At the moment, it’s relatively attractive to issue dollar bonds.”

The German government is looking at overall costs, including hedging fees against the dollar’s appreciation, before deciding whether to offer the bond, Daube said. The dollar rose more than 13 percent versus the euro in the past 12 months.

“We are not allowed to carry any currency risk,” he said. “The whole package will have to be good because we must be able to save taxpayers money to issue such bonds.”


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Posted in Deficit, ECB, Germany | 5 Comments »

Amount Outstanding Under Dollar Liquidity Swaps

Posted by WARREN MOSLER on 14th July 2009


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coming down nicely, thankfully!


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Posted in CBs, Currencies, ECB | No Comments »

Trading adds nothing to the real economy

Posted by WARREN MOSLER on 14th July 2009


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Darn, you’re good!!!

Going on my blog.

Part of what it does is transfer funds from pension funds and the like to Goldman employees which adds some to aggregate demand.

What a way to run an economy!

:(

Mike Norman Economics

Goldman profit soars on strong trading gains

Who cares?

Trading adds nothing to the real economy. You have incredibly smart people working at Goldman who merely speculate for a living: buy something then flip it for a profit.

The economy would be better served if people like these worked in more productive sectors–science, industry, health care, alternative energy, etc.

Goldman might have failed if the Federal Government did not help it during the worst days of the financial crisis. Morgan Stanley certainly would have failed.

The fact that our leaders chose to sustain the non-bank intermediaries like Goldman is a testament Wall Street’s power and influence.

We don’t need them. They add too much volatility and risk to the financial system without any concomitant benefit.

All this country needs is a commercial banking system backed by the Gov’t. We had that in the past and it worked fine. Banks originated loans, serviced them and bankers made a little more than civil servants. People bought houses and cars and businesses were able to get money to expand and grow. Same as now, except without all the risk and speculation.

A nation’s power has nothing to do with having a vast, unregulated. financial sector, yet we continue to think so. President Obama is more under the spell of Wall Street than Bush ever was and for that matter, Obama is probably the most pro-Wall Street president in recent memory. Odd, when you think he ran on a platform of helping the working class.


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Posted in Trading | 12 Comments »

Retail/PPI

Posted by WARREN MOSLER on 14th July 2009


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Karim writes:

Retail sales weaker than expected (especially in light of fact that May/June were peak months for consumer provisions in stimulus package)

  • 0.6% headline; 0.3% ex-autos; -0.2% ex-autos and gasoline

PPI

  • Headline up 1.8%; 0.5% core; driven by 3.4% gain in light truck prices; ex-vehicles, core unch
  • Intermediate stage (1.9%/0.4%) and crude (4.6%/2.6%) largely driven by energy prices that have since reversed


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Posted in Daily | No Comments »