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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 January 27th, 2011

Hawkish Comments from LBS

Posted by WARREN MOSLER on 27th January 2011

The problem with the euro zone trying to keep the costs of imports down in this context is that it can only be done via a strong currency, which works against their desire to increase net exports, and even that doesn’t necessarily work if the foreign supplier has sufficient pricing power, as the Saudis do with crude prices.

It’s all about the struggle to optimize real terms of trade, which is difficult enough when the leadership understands the real issue as well as the monetary system.

Unfortunately they don’t seem to understand either one, and their real standard of living pays the price.

Karim wrote:

These are very hawkish comments from one of the more centrist and
pragmatic Governing Council members. ECB starting to realize that the
austerity measures taking place are only in 12% of Euro GDP (the PIGS).
The remaining 88% increasingly going in a different direction in terms
of macro performance.

 

5:31 ECB Bini Smaghi: “Core” CPI Losing Its Relevance
5:31 ECB Bini Smaghi: Deflation Risks Were Overestimated
5:30 *BINI SMAGHI: EURO AREA MUST `SIGNIFICANTLY’ CONTAIN COSTS
5:30 *BINI SMAGHI: RISING RISK OF `SECOND ROUND EFFECTS’ OF INFLATION
5:30 *BINI SMAGHI SEES HIGHER INFLATION FROM EMERGING MARKET PRODUCTS
5:30 *BINI SMAGHI: PAST SHOWS TENDENCY TO UNDERESTIMATE INFLATION
5:30 *ECB’S BINI SMAGHI: IMPORTED INFLATION CAN NO LONGER BE IGNORED

Posted in EU | 87 Comments »

Claims/Durables/GDP

Posted by WARREN MOSLER on 27th January 2011

Karim says:

CLAIMS

  • Labor Dept cites delayed filings in 4 states (Georgia, Alabama, North and South Carolina) as cause for 51k back-up in claims.
  • Those states probably depressed prior number, so current level likely closer to 420k; consistent with 150-200k gains in payrolls

ORDERS

  • Core capital goods orders rise 1.4% in December after 3.1% gain prior month; running at 9% at a 3mth annualized rate
  • Core shipments up 1.7% after 1.4% gain
  • Core shipments and core orders both revised higher for October and November

GDP

  • See notable upside risk to Q4 GDP tomorrow. Consensus 3.5%.
    Focus appears too much on inventory drag (which will be large) and not enough on contribution from net trade and these capex revisions.
  • Could see 5% print tomorrow.

Posted in Karim | No Comments »

S&P Cuts Japan Debt Rating to AA Minus

Posted by WARREN MOSLER on 27th January 2011

David Beers at S and P knows better and should be ashamed of himself and his organization for not making it crystal clear that ‘ability to pay’ is not in question, and that downgrading Japan has to be based solely on their assessment of ‘willingness to pay.’

Also note that even with repeated downgrades the term structure of risk free rates remains a function of market perceptions of where the BOJ will set rates down the road, along with a few ‘technicals’ of supply and demand.

S&P Cuts Japan Debt Rating to AA Minus
Published: Thursday, 27 Jan 2011 | 4:02 AM ET
By: Reuters

 
Ratings agency Standard & Poor’s cut Japan’s sovereign debt rating to AA minus from AA on Thursday, warning that Japan’s government debt ratio would continue to rise more than it had previously expected.

 
The agency said it expects Japan’s fiscal deficits to remain high in the next few years, which would further reduce the government’s already weak fiscal flexibility.

 
The outlook on the long-term rating was stable, it said, reflecting its view that Japan’s strong external balance sheet and monetary flexibility partially offset the pressures stemming from the fiscal side.

Posted in Japan | 14 Comments »