Monthly Archives: September 2010

The Trade Threat to China is Wrong

By Admin | Published: September 29, 2010

http://www.cnbc.com/id/39418278

Today, the US House of Representatives is set to vote, and likely pass, a Chinese currency tariff bill (HR 2378). Ostensibly, this bill is an attempt to force the Chinese to revalue their currency and thereby help save American jobs. While the goal of the bill is questionable, the reason for its existence is not. Prior to the mid-term elections, the US unemployment rate is the driving force in American politics. Given the tenuous position of the Democrats, they are attempting to show the electorate that they can not only create jobs, but also stand up to the Chinese. … …READ MORE

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UK To Rev Up QE2?….or not:

By Admin | Published: September 28, 2010

Today, the Bank of England’s Adam Posen stated that the central bank needs to address persistent slow growth by starting another round of quantitative easing. Here’s his argument: “There remains a significant gap between what the economy could be producing at full employment and what it currently produces….Monetary policy should continue to be aggressive about promoting recovery, and, subject to further debate, I think further easing should be undertaken.” This is the opposite of what Bank of England’s Andrew Sentence just yesterday (raise rates to combat inflation). These opposite views on the outlook for risks to the UK economy generate … …READ MORE

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Death, Taxes and Fewer Jobs

By Admin | Published: September 24, 2010

At a news conference yesterday, the Democratic Senate leadership announced the bad news: no tax cut extensions for anyone will happen before the mid-term elections. The lack of movement is occurring despite the support by President Obama and 40 House Democrats who want to move forward on extending tax cuts for the middle income earners. The Bush tax cuts are not the only important tax issue that needs to be resolved before December 31st with taxes on estates, capital gains, dividends, important corporate tax credits and relief from the Alternative Minimum Tax all up for renewal according to WSJ.

Not … …READ MORE

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Euro Sovereign Animal House

By Admin | Published: September 23, 2010

http://www.cnbc.com/id/39324537

Over the last two days, there have been several assurances by officials in Europe that their fiscal positions are improving and that the European sovereign debt situation is improving.

Yesterday, the Portuguese secretary of state Carlos Costa Pinto said that Portugal has vowed to meet ambitious deficit-reduction targets. “We’re on the right track and we will meet our deficit commitments this year and in the future…..There is no cause for alarmism.”

Also, Spanish PM Zapatero stated emphatically that “Our bonds are solid…All new sovereign bond issuances have been successful. The prices that we need to cover
our financing needs … …READ MORE

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The Summers of Our Discontent

By Admin | Published: September 22, 2010

http://www.cnbc.com/id/39306970

To recap on August 6th, I put out my list of things that needed to change to boost the markets. Here they are again.

1.Job growth that is consistently +100k.
2.The Federal Reserve rolling over the quantitative easing purchases that are maturing.
3.Congress announcing it will extend the Bush tax cuts for 1 or 2 years.
4.Congress announcing it will extend the Death tax holiday for 1 or 2 years.
5.Congress announcing a cut in the corporate tax rate.
6.A turning over of the current White House economic team. (Romer and Orzag have already resigned.)
7.A new economic team … …READ MORE

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Helping or Hurting Small Business?

By Admin | Published: September 16, 2010

http://www.cnbc.com/id/39212187

With a 61-37 vote to end debate, the Senate is set to assist small business with small legislation that establishes a $30 billion lending fund and $12 billion in tax breaks for small business. The tax breaks consist mainly of a bonus depreciation provision that would allow companies to write off assets more quickly. The bill creates a lending fund to be directed to help community banks make loans to small business. The bill is set up like a mini-TARP program that provides capital injections into community banks that want to participate.

It provides guidelines and stipulations for participation … …READ MORE

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Let the Currency Games Begin!

By Admin | Published: September 15, 2010

See my appearance on CNBC on the Tea Party:

http://www.cnbc.com/id/39193266

The intervention in the Japanese yen has begun and will need to continue for a prolonged period to subsidize Japanese exporters. It is no accident that the Japanese stock market rose last night after the actions by the Bank of Japan. It’ll be fascinating to watch the verbal gymnastics today in Congress should the intervention be brought up for discussion. How can the Japanese get a pass to intervene when the Chinese are being criticized for essentially the same activity?

A Japanese government official has said it’s too early to … …READ MORE

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Yuan is the Word

By Admin | Published: September 13, 2010

http://www.cnbc.com/id/39150215

The Chinese currency has had a big move since the beginning of September. The renminbi or yuan has appreciated over 550 points moving from 6.8175 down to 6.7618. This is a larger move than what happened in June when the Chinese pledged to allow the currency to reflect economic fundamentals. Why is this occurring?

Some of the move can be explained by the recent spate of positive Chinese economic data. In August, the global equity markets were unsettled by the unexpected drop in Chinese imports and the concern was that Chinese growth was slowing. In September, these fears have … …READ MORE

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Mark Twain Meets Regulation

By Admin | Published: September 10, 2010

Bloomberg reports today that US regulators are fighting with German regulators over the implementation period for Basel III or what I call B3. The US actually wants only a 5 year period where the Germans want a 10 year period. Faster implementation will mean higher capital standards and lower capital available for lending. Also, faster implentation will likely lead to errors in regulatory decision making with grave repercussions for the global financial system.

In the January 2010 AEI Outlook Series, Jeffery Friedman and Wladimir Kraus wrote this:

“There is little evidence that deregulation or banks’ compensation practices caused the financial … …READ MORE

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Positives Taking Back the Markets

By Admin | Published: September 9, 2010

The markets are now in the process of unwinding the double-dip scenario that had reached a zenith in August when jobless claims were 500k. Yesterday, SF Fed Director of Research stated, “Our forecast at the San Francisco Fed is for real GDP growth of about 2½ percent this year. We expect growth to pick up steam next year to between 3½ and 4 percent.” This is the first time I’ve seen this strong of a positive outlook for next year and it’s encouraging.

At the beginning of August, I put out a list of 15 positives that were needed to … …READ MORE

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