Brilliant. Reminds me of Will Rogers. Think of all he’d have said if he’d understood MMT.
US Treasury May Issue Debt With Floating Interest Rate
By Jeff Cox
October 24 (CNBC) — Dealers and traders have been approached recently with plans to issue a floating-rate note that for investors would provide an opportunity to profit should rates go up and for the government a chance to restructure its debt even further.
1. A full FICA suspension to end that highly regressive, punishing tax and restore sales, output, and jobs.
2. $150 billion in federal revenue sharing for the state goverments on a per capita basis to sustain essential services.
3. An $8/hr federally funded transition job for anyone willing and able to work to facilitate the transition from unemployment to private sector employment.
4. See my universal health care proposals on this website (Health Care Proposal).
5. See my proposals for narrow banking, the Fed, the Treasury and the FDIC on this website (Banking Proposal).
6. See my proposal’s to take away the financial sector’s ‘food supply’ by banning pension funds from buying equities, banning the Tsy from issuing anything longer than 3 month bills, and many others.
7. Universal Social Security at age 62 at a minimum level of support that makes us proud to be Americans.
8. Fill the Medicare ‘donut hole’ and other inequities.
9. Enact my housing proposals on this website (Housing proposal).
10. Don’t vote for anyone who wants to balance the federal budget!!!!
As previously discussed, no double dip, but instead continued sequential quarter to quarter gdp growth with q4 possible better than q3 as well, helped by lower gasoline prices.
The 8.5% federal budget deficit continues to provide fundamental nominal support for GDP and the domestic credit sectors are still too weak to subtract much if they do pull back.
And it still seems to me that the chances of a euro area event reducing aggregate demand in the US are reasonably low.
US Views : OK for Now, But Slowdown Ahead
By Jan Hatzius
October 9 (Goldman Sachs)
1. After the sharp slowdown earlier in the year, the US economy seems to have grown at roughly a trend pace over the summer. Our GDP “bean count” now stands at 2½% for the third quarter, the ISM indexes are broadly stable in the low 50s, payroll employment is growing at a pace of around 100k per month, and the unemployment rate has been flat for the past three months.
2. Although the recent US growth news has generally beaten low expectations, we expect a renewed deceleration to just a ½%-1% growth pace in the next two quarters and see the risk of renewed recession at about 40%. The main reason is the turmoil in the euro area, where we switched to a recession forecast last Monday. To be sure, there is more talk in Europe about the types of action that we think would help, including a larger financial safety net for sovereign issuers (perhaps achieved by “leveraging” the EFSF), proactive bank recapitalization, and monetary easing. But policy continues to move very slowly relative to the building risks in the financial system and the deterioration in the real economy. A true turnaround in the financial situation does not yet appear to be in sight, let alone a bottoming in the real economy.
3. There are several channels through which the European crisis is likely to weigh on US growth. The impact via reduced exports is the most obvious, but it is unlikely to be very large. Exports to the Euro area account for about 2% of US GDP, so an impact of much more than 0.1-0.2 percentage point would probably require a much deeper European recession than we are forecasting. The bigger issue is the significant tightening in financial conditions and the availability of credit. Since early summer, our financial conditions index has tightened by more than 50bp, a move that might shave ½ percentage point from growth over the next year. In addition, there are some early indications of tightening credit availability including an increase in the percentage of small firms reporting in the NFIB survey that “credit was harder to get” last time they tried to borrow (the next update is due on Tuesday). Tighter credit could easily shave another ½ point or more, for a total impact from Europe on US growth of 1-1½ percentage points. Should the European recession deepen, the risk of further dislocations in the financial system and greater spillovers into the US would grow (for more on this, see Andrew Tilton’s US weekly dated September 16 at US Economics Analyst: 11/37 – Will the European Storm Cross the Atlantic?).
4. One key question is whether the European crisis—and the unsettled fiscal policy environment more generally—has caused a sufficiently large increase in uncertainty to lead companies to postpone hiring and capex decisions in a self-reinforcing manner. There is some evidence that corporate behavior may be changing, as online job ads have dropped off and the percentage of firms increasing employment in the nonmanufacturing ISM survey has declined at the most rapid pace on record over the past two months (data go back to 1997). No such deterioration was visible in Friday’s payroll numbers, but online job ads lead by a month or two and most of the ISM responses probably came after the payroll survey week, so the jury is still out.
5. The other key drag on US growth is the tightening of fiscal policy. Our baseline assumption remains extension of the employee-side payroll tax cut and passage of a small business hiring incentive; we do not assume extension of emergency unemployment benefits (although this is a close call), a further expansion of the payroll tax cut as proposed by the President, additional infrastructure spending or aid to state governments, or another foreign repatriation tax break. We also expect the Congressional “supercommittee” to agree on spending cuts and revenue increases that cover part of the mandated $1.2 trillion in savings over 10 years; the remainder will likely come via automatic cuts that take place from 2013. Overall, we view the risks around our assumption of just under 1 percentage point of fiscal drag (excluding multiplier effects) in 2012 as roughly balanced at present.
6. Even in the baseline case of no recession, we expect additional monetary easing as the Federal Reserve supplements “Operation Twist” with yet more purchases of long-term securities financed by creation of excess bank reserves (that is, additional QE). We believe that this could still boost growth a bit by further reducing the term premium in the Treasury yield curve and thereby ease financial conditions. But policymakers are clearly running into diminishing returns. If they want a bigger impact, they will probably need to supplement additional QE with changes to the Fed’s monetary policy framework. A relatively incremental version of this is the proposal by Chicago Fed President Evans to promise no monetary tightening until the unemployment rate falls back to 7%-7½% and/or inflation rises to 3%. A more radical version would be a temporary increase in the Fed’s inflation target or a move to price level or nominal GDP level targeting as discussed by Jari Stehn a couple of weeks ago (see US Economics Analyst: 11/38 – The Fed’s “Unconventional” Unconventional Options).
7. While additional easing is likely eventually, we currently do not expect a big move at the November 1-2 FOMC meeting. This is based partly on the somewhat better data and partly on Fed Chairman Bernanke’s remark in his congressional testimony that Fed officials had “no immediate plans” to ease further. Of course, since Bernanke also said that he saw the economy as “close to faltering,” it probably would not take a huge amount of new information to change his mind, but for now our best guess is that the next statement will be less eventful than its two predecessors.
As previously suggested, the Fed doing anything would cause markets to believe it’s all going bad out there.
However, the US economic news still looks like modest improvement,
so I still suspect the reaction to the Fed will be temporary, and start wearing off around noon Eastern time today.
q3 still looking up from q2 which was up from q1.
And gasoline prices now moving lower help the consumer a bit more,
so q4 should be up more than q3.
With GDP sequentially better all year, makes sense to me that earnings in general will continue to grow.
Employment not doing much as there is still some underlying productivity growth
which also helps keep unit labor costs in check.
This means stocks still be in their ugly trading range, with the lower bound somewhere around current levels.
Though potential external shocks remain.
With the ECB again writing the check today by buying Italian and Spanish bonds
the current situation is in fact operationally sustainable, and I suspect what we are seeing
is the resolution. The ECB buys as needed in conjunction with imposing austerity,
and the euro zone muddles through with flat to modestly negative growth and deficits higher than they’d like.
Note too, that the ECB buys bonds are relatively high yields, and pays relative low rates of interest on the clearing balances it creates
to make the purchases. This results in a profit for the ECB that adds to their stated capital and their stated capacities.
So as long as they keep buying there’s no default and not only no losses, but rising ECB profits.
And there’s no inflationary consequences because none of this increases actual spending by the national govts.
All it does is allow them to fund their austerity budgets as dictated by the ECB.
China continues to decelerate and so far avoid reporting a hard landing,
and while the jury is still out on that score, trade and demand growth is slowing.
They know how to increase demand but are holding back due to concerns of inflation.
Commodities are finally selling off and heading towards their marginal costs of production,
just as the textbooks describe, as global tight fiscal keeps demand in check.
And with seemingly no one in any position of responsibility understanding how their monetary systems work,
and instead carrying on as if they were all operating under some sort of fixed exchange rate constraint,
the odds of an acceleration in aggregate demand any time soon remain remote.
Initial jobless claims dropped by 9,000 to 423,000 the week ended Sept. 17, as expected. Continuing claims fell by 28,000 to 3,727,000 in the week ended Sept. 10. The four-week moving average of new claims, a more reliable indicator of the labor market’s recent performance, rose by 500 to 421,000
FHFA House Price Index Up 0.8 Percent in July
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in August to 116.2 (2004 = 100), following a 0.6 percent increase in July and a 0.3 percent increase in June.
So much for Jeurgen’s legacy:
US Has an ‘Enormous’ Debt Problem: ECB Official
September 1 (CNBC) — A debt crisis is still gripping the developed world, European Central Bank policymaker Juergen Stark said, adding there was no alternative but for countries to take painful steps to consolidate their public finances.
“The crisis is not over. Not just in Europe is it not over, it is also not over in other regions of the world,” he said, adding the United States had an “enormous” debt problem and lacked the structures to get the problem under control.
Stark estimated the level of public debt at around 84 percent of gross domestic product for the euro zone and at a little below 100 percent of GDP for the US, according to Dow Jones newswire.
“Just consider what levels of debt we are passing on to future generations,” he said, according to DJ. “This isn’t responsible, politically, morally or ethically.”
Stark, a member of the ECB’s executive board, declined to discuss ECB monetary policy during a panel discussion at the Alpbach Forum economic conference on Thursday.
Right answer, wrong reason.
Whatever…
Fitch Affirms US Triple-A Rating, Outlook Stable
August 16 (Reuters) — Fitch Ratings said on Tuesday it affirmed the United States’ top-notch credit rating at Triple-A, giving the world’s largest economy a reprieve after it was downgraded by Standard & Poor’s little more than a week ago.
Fitch said the outlook for the rating was stable.
“The affirmation of the US ‘AAA’ sovereign rating reflects the fact that the key pillars of US’s exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base,” Fitch said in its statement.
“Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to ‘shocks’.”
However, Fitch warned the outlook for the rating depended on the economy and the political process in Washington to reduce the public debt.
It said an upward revision to medium to long term projections for public debt either as a result of weaker than expected economic recovery or failure of the joint committee to agree on at least $1.2 trillion in deficit reduction would likely put the United States on negative outlook.
“The rating action would most likely be a revision of the rating Outlook to Negative, which would indicate a greater than 50 percent chance of a downgrade over a two-year horizon. Less likely would be a one-notch downgrade,” the statement said.
Welcome stumbleupon! This blog has information and ideas that can change the way you think about government deficits, unemployment and the growth of this nation. We offer a free book online called the Seven Deadly Innocent Frauds. You do not need an economics degree to read this! Our mandatory readings are also an excellent resource. Thank you for visiting!
This is an opening for Moody’s to gain a competitive advantage over S&P.
Moody’s can announce that whereas any issuer of it’s own currency can always make nominal payment on a timely basis,
ability to pay is absolute and beyond question for the US government.
Therefore, when reviewing the US government’s credit rating, only willingness to pay is a consideration.
And given the recent Congressional proceedings regarding the debt ceiling,
an entirely self imposed constraint,
Moody’s is putting the US on notice with regard to willingness to pay.
