Tag Archives: Economy

Why the ECB is crushing Europe

By Admin | Published: September 14, 2011

In an excellent new paper for the IMF, Laurence Ball, Daniel Leigh and Prakash Loungani researched 173 episodes of fiscal austerity over the past 30 years that included the average deficit cut amounting to 1 percent of GDP. While their conclusions that growth suffered won’t be shocking, the specific numbers are telling.

“… the evidence from the past is clear: fiscal consolidations typically have the short-run effect of reducing incomes and raising unemployment. A fiscal consolidation of 1 percent of GDP reduces inflation-adjusted incomes by about 0.6 percent and raises the unemployment rate by almost 0.5 percentage point within two … …READ MORE

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Why the US Economy Can't Recover

By Admin | Published: July 18, 2011

On Sunday, the NYT ran a very solid article breaking down why the US economy is missing its key driver of growth: the consumer. While I completely disagree with the article’s prescription for what needs to be done (shocker: more govt spending), the research on the history of consumer spending and why it’s anemic now is insightful.
Here’s the best part:
“Earlier this year, Charles M. Holley Jr., the chief financial officer of Wal-Mart, said that his company had noticed consumers were often buying smaller packages toward the end of the month, just before many households receive their next paychecks. … …READ MORE

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Lots of Negatives for US dollar

By Admin | Published: June 7, 2011

Tuesday Bullets:

· Headlines: “CHINA FX OFFICIAL WARNS OF RISKS IN “EXCESSIVE” HOLDINGS OF US DOLLAR ASSETS” and “CHINA FX OFFICIAL SAYS US DOLLAR WILL CONTINUE TO WEAKEN AGAINST OTHER MAJOR CURRENCIES.”

· On Greek debt, ECB’s Trichet states that while he’s against imposing losses on creditors, he indicated he’d approve of financial institutions maintaining their level of outstanding credit. “That is not a default,” he said at an event in Montreal late yesterday. “That is something the ECB would consider appropriate.”

· April German manufacturing orders better than expected at +2.8% vse +2.0%.

· April Euroland retail sales better … …READ MORE

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CNBC at 11:30 AM ET on President Obama's economic program

By Admin | Published: June 3, 2011

Since I’m on CNBC at 11:30 discussing President Obama’s economic program, I thought I’d reprint my testimony in front of Congress on the topic.

Here it is:

Chairman Issa, Ranking Member Cummings, subcommittee Chairman Jordan and Ranking Member Kucinich, thank you for the opportunity to participate in today’s hearing and to share my views regarding the American Recovery and Reinvestment Act of 2009 and, specifically, the results two years after its enactment on the economy and the financial markets.
As you may know, I am the Bank of Montreal’s Global Currency and Public Policy Strategist. I have worked in the … …READ MORE

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Lending and the Recovery

By Admin | Published: February 1, 2011

Yesterday, the Federal Reserve released their Senior Loan Officers Survey for Q1. BMO’s Jennifer Lee had these insights:

- stronger demand for C&I loans by large and medium-sized firms jumped in Q1. The “net percentage of domestic respondents reporting stronger demand for C&I loans” rose to 28.1, which is the first positive reading since 2010Q3 and the largest reading since 2005Q3. This must stem from companies needing loans to bulk up on M&E purchases that they can fully write off this year.
- fortunately, the banks continue to ease their lending standards, although the speed hasn’t picked up. The “net … …READ MORE

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Obama to miss his “Reagan” moment

By Admin | Published: January 13, 2011

Friday, US Treasury Secretary Timothy Geithner is scheduled to meet with corporate CFOs to discuss changing the current tax structure that is inefficient at best and job killing at worst. This meeting is specifically going to address the corporate tax structure and comes after President Obama’s fiscal reform commission recommended cutting the rate from 35% to 25%. The 35% rate is the highest amongst the major G20 nations.

Unfortunately, it may be just a dog and pony show. According to the Hill, Valerie Jarrett, a senior White House adviser, acknowledged Wednesday that a push to overhaul the nation’s tax codes … …READ MORE

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Why Japan remains irrelevant

By Admin | Published: December 14, 2010

Why Japan Will Remain a Problem: Late Monday, Japanese Prime Minister Japanese announced that he had directed two ministers to lower the business tax rate by five percentage points from the current 40%. “By cutting the corporate tax cut by five percentage points, we want private-sector companies to expand investments in Japan, boost employment, increase wages, thereby contributing to achieve sustained growth and beat deflation,” Kan told reporters following a meeting with Finance Minister Yoshihiko Noda and METI Minister Masayuki Naoshima according to MNI.

Sounds great, right? The problem is that Japan has been doing this type of tweaking for … …READ MORE

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A Step in the Right Direction

By Admin | Published: September 7, 2010

Also, up on CNBC: http://www.cnbc.com/id/39038675

Over the weekend, President Obama unleashed a fusillade of economic proposals meant to not only raise the nation’s hopes of economic recovery (just around the corner), but also to raise the flagging poll numbers of the Democratic party.

Here are the kenspeckel polling numbers that give Democrats a queasy feeling. According to a new Washington Post-ABC News poll, 40 percent of registered voters say they have more confidence in Democrats and 38 percent say they have more trust in Republicans.

Sounds okay, right? The problem is three months ago, Democrats had a 12-point advantage. The … …READ MORE

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Five Questions for Ben Bernanke

By Admin | Published: July 21, 2010

Over the next two days, Federal Reserve Chairman Ben Bernanke will present his semiannual review of monetary policy to Congress. All of these are central for understanding the central problem of the US economy: lack of job creation.

Here are my five key questions he needs to answer for the markets.

Number one, why did the Fed downgrade their assessment of the economy and what sectors are generating to diminished outlook? This stems from their latest report on the economy that slightly reduced their ranges of growth and raised concerns over a double dip recession.

Number two, why did the … …READ MORE

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Ultimate Economic Mixed Metaphor: The Obama Budget

By Admin | Published: February 1, 2010

Today, President Obama holds a press conference to discuss the details of his 2011 budget. According to the press release, here are the key facts:
Overall 2011 Spending: $3.834 trillion.
2011 Discretionary Spending: $1.415 trillion.
2011 Projected Deficit: $1.267 trillion or 8.3 percent of GDP (down from $1.556 trillion or 10.6 percent of GDP in 2010).
10-year Deficit Reduction: $1.2 trillion, excluding war savings.
Tax Cuts: More than $300 billion in the next 10 years for individuals, families, and businesses.
The White House fact sheet also contains these highlights: “The Budget includes $100 billion for immediate job-creating investments in small … …READ MORE

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