UK CAMERON Comments
*DJ UK Cameron: Economic Threat As Serious As It Was In 2008
*DJ UK Cameron: “We Need To Tell Truth About Econ Situation”
*DJ UK Cameron: This Was Debt Crisis, Not Normal Recession
*DJ UK Cameron: Crisis Caused By Too Much Borrowing
*DJ UK Cameron: More Govt Borrowing Would Make Crisis Worse
???
*DJ UK Cameron: More Borrowing Risks Higher Rates, Less Confidence
???
So much for his legacy
Japan’s Fujimura Says Japan May Boost Europe Bailout Bond Purchases
The modern day saga of the Trojan Horse continues.
as the euro debt crisis gives Japan the cover to do something
otherwise highly problematic.
Japan buying euro zone debt is a way to bolster the euro vs the yen
and thereby support Japan’s exporters.
Fujimura Says Japan May Boost Europe Bailout Bond Purchases
October 5 (Bloomberg) — Japan may increase its purchases of bonds to finance Europe’s debt crisis rescue fund, Chief Cabinet Secretary Osamu Fujimura said.
Fujimura told reporters today in Tokyo the government “would like to consider” buying more bonds from the European Financial Stability Facility to help stabilize the region. Japan bought more than 20 percent of the fund’s initial five-year, 5 billion euro ($6.6 billion) bonds in January, and purchased another 1.1 billion euros of 10-year EFSF bonds issued in June.
“Europe’s fiscal problem is also very important for Japan in terms of restoring market confidence, and the Europeans are grappling with this,” Fujimura said.
Merkel does not want to allow Greece to default
To my point,
Merkel’s view is now that allowing Greece to default is a gift to the Greek govt. that
rewards bad behavior, introduces moral hazard, etc.
The trick is to support Greece and not permit default without using German taxpayer funds and without weakening the credit capacity of Germany.
Hence, the current policy of ECB bond buying,
which accomplished all of the above,
is not inflationary,
carries austerity as it’s prime term and condition,
holds Greece to it’s obligations,
enhances ECB earnings and capital,
and is operationally sustainable,
is likely to continue.
Merkel said that her “entire council” of economic advisers says Greek debt should be restructured, advice that she is not prepared to take. “If we tell a country ‘We cancel half of your debt,’ that’s a great deal,” she said. “Then the next guy will immediately show up and say he wants the same.”
HuffPost Blog Post – Deficit Reduction Super Committee Fighting the Battle of New Orleans
EU Ministers to Debate More Stimulus
Interesting!
EU Ministers to Debate More Stimulus
By Matthew Dalton
October 2 —European Union finance ministers this week will discuss whether governments with the strongest public finances can provide some budget stimulus to help support flagging economic growth in the 27-nation bloc.
The debate, set for a meeting in Luxembourg on Tuesday, could signal a small reversal of a policy adopted by ministers in October 2009 that calls on all EU countries to start cutting their deficits in 2011. With postcrisis economic growth much slower than expected, the EU is under pressure from the International Monetary Fund and the U.S. to consider more stimulus.
The European Commission sought to debate the idea at the meeting. The idea is that countries not violating the EU’s deficit limit of 3% of gross domestic product could allow their “automatic stabilizers”to operate without restrictions.
Lignet Link
Mosler: Greek Default Not Logical Path Out of Crisis
Mosler: Greek Default Not Logical Path Out of Crisis
By Forrest Jones and Kathleen Walter
September 30 — Letting Greece default won’t end Europe’s crisis and won’t allow Germany and other core nations to brush themselves off and move merrily on their way, says Warren Mosler, principal and co-founder of AVM, an international bond firm with 30 years of experience in Europe and author of the 2010 book, “The 7 Deadly Innocent Frauds of Economic Policy.”
In fact, it will do the opposite. It will cost money and rattle key export markets for Germany and other countries targeting European periphery countries.
Greece has run up debts and may default and exit the euro, yet many in wealthier nations such as Germany oppose bailouts for Greece and other debt-ridden Mediterranean nations.
They also have opposed backing euro-wide bonds, which basically shores up the Greek economy via the financial backing of the Greece’s richer northern neighbors.
However, allowing the European Central Bank to play a role in Greece’s economic reform will not put the load on German, French and other taxpayers, Mosler says.
“It’s a question if a bailout now is good for Germany and France but not so good for Greece, because if Greece is allowed to default, then their debt goes away. They are agreeing to wipe out their debt and it reduces their payments,” he said in an exclusive Newsmax.TV interview.
“But if they fund Greece, and don’t allow them to default, then Greece has to continue to make these payments. So the whole dynamic has changed from doing Greece a favor to disciplining Greece by not allowing them to default.”
That makes default, arguably, less imminent.
“I would think the odds are shifting to the endgame where Greece doesn’t default, where at the end of the day Greece is forced though the austerity measures to run a primary balance or primary surplus, the interest payments will largely wind up with up with the European Central Bank, who is buying Greek debt in the marketplace,” Mosler says.
Furthermore, the logic that applies to keeping Greece in the eurozone applies to the other nations such as Italy.
“It used to be if Germany, France and the others bailed out Greece, and then suddenly they have to bail out Ireland, Portugal, Spain and Italy, they could never have the capacity to do that. It’s now understood that there is no limit, no nominal limit to the check that the European Central Bank can write,” Mosler says.
Plus, Europe can expect no side effects of such Central Bank involvement.
“It will not weaken the euro, it will not cause inflation and it will not increase total spending in the region. In fact it will help reduce total spending in the region because the European Central Bank imposes terms and conditions when it intervenes.”
Should Greece default, however, Europe would feel the pain, but it shouldn’t be too bad in the United States, Mosler says.
Yes, regulators would have to react.
“The FDIC would have to decide how they would want to respond to a drop in equity. Would they want the banks to raise more capital? Would they give them time to do it?”
But they wouldn’t have to react too much.
“They don’t need to shut the banks down, it doesn’t need to be disruptive to the real economy.”
Turning to the United States and President Barack Obama’s economic policies, Mosler says the president is on the right track by running deficits, but adds he’s doing a poor job of explaining the rationale behind his policies.
Or he just doesn’t understand it.
Bernanke comments
> *DJ Bernanke:US Can Learn From China’s Succesful Economic Growth Story
Right, like how their annual deficit spending has been over 20% of GDP
if you count state lending.
Wonder how he missed that one?
> *DJ Bernanke:Promoting Technology, Education Behind Emerging Nations’ Success
> *DJ Bernanke:Sound Fiscal Policy, Open Trade, Better Rules Behind Emerging Nations’ Success
> *DJ Bernanke:China, India, Other Emerging Nations Can Keep High Growth Rates For Years
> *DJ Bernanke:Over Time, Emerging Economies Like China Will Gradually Slow Down
> *DJ Bernanke:Trade Imbalances Threaten Emerging Nations’ Economic Stability
> *DJ Bernanke:Emerging Nations Will Be Challenged If They Rely On Trade For Growth
> *DJ Bernanke’s Prepared Remarks From Cleveland Clinic Speech
Deficit Reduction Super Committee Fighting the Battle of New Orleans
I realize it’s not a perfect analogy,
but, due to poor communications,
the battle of New Orleans was fought
well after the War of 1812 had ended.
Likewise, the Congressional super committee is fighting the battle for deficit reduction
long after the vaporization of the primary reason driving that move towards deficit.
The main difference is the stakes are much higher this time,
with the real cost of the lost output from the excessive, ongoing,
global output gap far exceeding
all the real losses of all the wars in history combined.
The headline reason for deficit reduction was
the rhetoric about the immediate danger of the US
suddenly becoming the next Greece,
with the US govt being cut off from credit,
interest rates spiking,
and visions of the US Treasury Secretary
on his knees, hat in hand,
begging the IMF for funding and mercy.
And the looming flash point was the threat of a US downgrade if
a credible deficit reduction package wasn’t passed before the Aug 2 deadline,
when the Congressionally self-imposed US borrowing authority was to expire.
After a prolonged Congressional process that was
even uglier than the healthcare process,
with already dismal Congression approval ratings moving even lower,
the debt ceiling was extended with a measure that contained some deficit reduction,
and also set up the current super committee to ensure further deficit reduction.
Soon after, however, Standard and Poor’s decided it all wasn’t enough,
and the dreaded downgrade was announced.
And then the unexpected happened.
Rather than spike up as widely feared,
market forces drove US Treasury interest rates down, substantially.
What was happening? Where had the mainstream gone wrong?
Former Fed Chairman Greenspan and celebrity investor Warren Buffet
both immediately had the answer.
S&P was wrong.
The US is not Greece.
The US govt prints its own money, while Greece does not.
The US always has the ability to pay any amount of dollars,
that markets can’t take away.
And everyone agreed.
And the driving force behind deficit reduction was suddenly not there,
and the rhetoric of becoming the next Greece vanished from the national TV screens.
And, unfortunately, just like the news that the War of 1812 had ended
didn’t get to New Orleans in time to prevent thousands from
losing their lives in that bloody battle that would otherwise not have been fought,
the news that the US isn’t Greece apparently hasn’t gotten through
to the Congressional members of the super committee
now fighting the current battle over deficit reduction.
What was learned after the downgrade was that
there is no such thing as a solvency problem for the US govt.
Short term or long term.
True, excessive deficit spending may indeed someday cause unwelcome inflation,
but the US government is never in any danger of not being able
to make any payment (in dollars) that it wants to.
And yes, the discussion could be shifted to a discussion
as to whether current long term deficits forecasts
translate into unwelcome inflation in the future
that may demand action today.
However no specific research has been done along those lines.
And, in fact, inflation forecasts,
which all assume our current fiscal trajectory,
don’t show any signs of an inflation problem.
Nor are the long term US Treasury inflation indexed bonds flashing any inflation warnings.
In fact, the Fed and most other forecasters remain more concerned over the risk of deflation.
And Japan, with a debt to GDP ratio about triple that of the US,
has been fighting its battle against deflation for nearly two decades.
So, clearly, shooting from the hip on this issue,
by suddenly declaring long term deficits
must be immediately addressed
with cuts to Social Security,
and with tax hikes,
to prevent a looming inflation problem,
(now that the prior errant reason, that the US could be the next Greece, has been dismissed)
could only be considered
highly irresponsible behavior
on the part of the super committee.
An informed Congress might recognize
the reason for the urgent action to reduce the federal deficit
and the reason for the super committee
is no longer there.
And, therefore, in informed Congress might suspend the super committee,
and regroup and reconsider before taking action.
It is widely agreed the current problem is a massive lack of aggregate demand.
It is widely agreed that a combination of tax cuts and/or spending increases
will restore sales, output and employment.
But instead of a compromise where the Republicans get some of their tax cuts
and the Democrats some of their spending increases, and the economy booms,
both sides are instead going the other way and pushing proposals to reduce aggregate demand,
even though they no longer have good reason to do so.
The battle of New Orleans was fought after the reason for fighting it had ended,
And, likewise, long after the reason for deficit reduction vaporized,
this battle continues to be fought
with both parties continuing acting counter agenda.
(feel free to distribute)