Obama Says He Will Do `Whatever It Takes’ on Economy
By Edwin Chen
Nov. 17 (Bloomberg) President-elect Barack Obama said the U.S. government will do “whatever it takes” to revive the economy, and that means “we shouldn’t worry about the deficit next year or even the year after.”
In the short term, “the most important thing is that we avoid a deepening recession,” Obama said in an interview broadcast last evening on CBS News’s “60 Minutes.”
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Remains elevated.
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Highlights
| Brown Says Fiscal Stimulus in U.K. Will Be Temporary |
Confirms a lack of understanding of fiscal policy.
Brown sets out anti-recession plan
Gordon Brown on Friday heralded an anti-recession strategy founded on tax cuts for low earners and further cuts in interest rates. People on low incomes had “a higher propensity to spend if their credits are higher”, Mr Brown said, noting that recipients of a wider US fiscal stimulus of $170bn (£113.7bn) approved last February had saved half the money. “In the US, rates have been cut to 1 per cent but the European area has been slower with 3.25 per cent in the euro area and 3 per cent in the UK,” he said in a speech. Mr Brown said he endorsed the views of Mervyn King, BoE governor, that there was scope for further cuts. Mr Brown invoked the memory of John Maynard Keynes, whose plans to reflate the economy in the late 1920s were dismissed by the Treasury chief secretary of the time with three words: “Inflation, extravagance, bankruptcy.”
Brown says fiscal stimulus in UK will be temporary
Prime Minister Gordon Brown said Britain’s financial stimulus package will be “temporary.” Brown’s remark mirrors BOE Governor Mervyn King’s warning that the government must put forward a credible plan to reduce the deficit over time. “In these extraordinary circumstances, it would be perfectly reasonable to see some use of fiscal stimulus, provided two conditions are met,” King said on Nov. 12. “One, that it’s temporary. Secondly, that it would be clear there was a medium-term plan to bring tax and spending into balance.” The U.K. Treasury had a budget gap of 37.6 billion pounds ($57 billion) in the first half of its fiscal year. Since March, Brown’s government delivered tax cuts and spending increases worth 4.8 billion pounds to give relief to low-income earners, delay an increase in fuel duties and to help homeowners with mortgages and stamp-duty taxes.
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| Survey | -26.00 |
| Actual | -25.43 |
| Prior | -24.62 |
| Revised | n/a |
Remains depressed.
| Survey | 0.2% |
| Actual | 1.3% |
| Prior | -2.8% |
| Revised | -3.7% |
Routine bounce back of a volatile series.
| Survey | n/a |
| Actual | -4.1% |
| Prior | -5.7% |
| Revised | n/a |
| Survey | 76.5% |
| Actual | 76.4% |
| Prior | 76.4% |
| Revised | 75.5% |
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Nothing an appropriate fiscal package couldn’t immediately turn around.
Fortunately for us, they never have been big on supporting domestic demand.
>
> On Fri, Nov 14, 2008 at 6:40 AM, Davin wrote:
>
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“There are all sorts of technical ramifications when the fed funds rate goes towards zero. There are a lot of questions we’re going to have to grapple with going forward,” Plosser told reporters after a speech at the Economic Club of Pittsburgh. “You have to think about what this means for policy, market functioning, how we manage reserves.”
Yes, about time they thought about how reserve accounting works. They don’t have a clue. There are no operational issues.
But this does mean they may be reluctant to cut to zero.
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(email exchange)
The dollar is a world reserve currency only because we are the only ones who ‘allow’ a trade deficit.
With a trade deficit, the rest of world is long your currency.
With a trade surplus, like japan, the world is short your currency.
The eurozone wants a trade surplus and to be a reserve currency.
They are either ignorant of how a monetary system works or have the arrogance of demanding the violation of an accounting identity by decree???
>
> On Fri, Nov 14, 2008 at 12:15 AM, Russell wrote:
>
> If True … hyper inflation in the pipe.
>
Sarkozy Pushes for Abandonment of Dollar as World Reserve Currency
French President Nicolas Sarkozy said on Thursday ahead of the G20 meeting of world leaders:
“I am leaving tomorrow for Washington to explain that the dollar cannot claim to be the only currency in the world…, that what was true in 1945 can no longer be true today”.
There have been many previous indications that the dollar would not remain the world’s reserve currency for long. But this is a dramatic statement by a close American ally.
Reading between the lines, I am guessing that Sarkozy is pushing for a shift from the dollar to a basket of currencies as a world reserve standard, instead of a change to a single currency such as the Euro or the Yuan.
But we’ll have to wait and see what Sarkozy is really advocating.
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Outstanding advances under Fed ‘unlimited’ swap lines to the 4 foreign CB’s plus several lines with limits no totals $615 billion and accelerating!
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| Survey | -4.4% |
| Actual | -4.7% |
| Prior | -3.0% |
| Revised | -3.3% |
Decelerating rapidly!
| Survey | 8.2% |
| Actual | 6.7% |
| Prior | 14.5% |
| Revised | 13.6% |
Decelerating rapidly!
Karim writes:
Price pressures continue to fall sharply:
| Survey | -2.1% |
| Actual | -2.8% |
| Prior | -1.2% |
| Revised | -1.3% |
This is a severe dropoff!
Karim writes:
Largest ever monthly drop in U.S. retail sales:
| Survey | n/a |
| Actual | -4.1% |
| Prior | -1.1% |
| Revised | n/a |
Looks very bad!
| Survey | -1.2% |
| Actual | -2.2% |
| Prior | -0.6% |
| Revised | -0.5% |
Same!
| Survey | -0.1% |
| Actual | -0.2% |
| Prior | 0.3% |
| Revised | 0.2% |
Interesting drop- not recession like at all.
| Survey | n/a |
| Actual | 5.5% |
| Prior | 6.3% |
| Revised | n/a |
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(email exchange)
>
> On Wed, Nov 12, 2008 at 11:37 PM, Morris wrote:
>
> The Muni stuff is more interesting… See the data…if the USA loses AAA.,
> what does that make states with Budget Gaps of over 10pct of GDP and
> NO capability for a funding mechanism to print money????
>
Dependent on the US government/banks for credit, like the rest of us- (we may now need both a payroll tax holiday and a trillion or so of revenue sharing for the states).
And restoring growth and employment is no big deal, actually, if government sustains demand at reasonable levels, which it always, readily, can do.
We sent men to the moon 40 years ago, cram mind boggling technology into cell phones, do robotic surgery, and don’t understand how a simple spreadsheet called the monetary system works.
Remarkable!
US May Lose Its ‘AAA’ Rating
The United States may be on course to lose its ‘AAA’ rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche.
Yes, that may happen, as ratings agencies have no clue how it all actually works.
“The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system” and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.
With government spending not constrained by revenue, any such event would be an unnecessary political response.
“In the United States there is already a funding crisis,
Not for government.
And a close look at actual monetary operations shows government best thought of as spending first and then borrowing or collecting taxes. Any constraints are necessarily self imposed (debt ceilings, no overdraft at Fed provisions, paygo policy).
and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off,” Hennecke told CNBC.
No, the Fed government sells bonds after they spend, not in order to spend.
In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world.
No, to stem the slowdown the US has to increase its deficit- increase spending and/or cut taxes.
Fortunately, this is already underway via the ‘automatic stabilizers’ as tax revenue slows and transfer payments increase.
Unfortunately we still don’t have the good sense to do this proactively.
>
> On Thu, Nov 13, 2008 at 6:53 AM, Morris wrote:
>
> Your theories are quite interesting- why wouldn’t the G20 announce
> this sort of massive WW stimulus package of say, 10 trillion dollars to
> restart all local economies?
>
They might.
Two points:
1. Deficits need to be ongoing to sustain the financial equity that supports credit structures. It’s not just a matter of ‘jump starting’ though that certainly doesn’t hurt.
We got into this mess by letting deficits get too low. We have yet to recover from the surplus years of the late 90’s that reduced private sector financial equity by maybe a trillion USD, back when that was a lot of money.
2. Any nation is better off by doing it unilaterally in sufficient quantity to restore output and employment. The last thing anyone needs is foreign consumers competing for scarce resources.
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