Macro signs: Eying Europe’s bad news
President Obama’s latest stimulus plan involved some big numbers but it did little to lift the mood of investors.
Instead, investor attention shifted to Europe where a WSJ report said “stress tests”, published more than a month ago, underestimated some lenders’ holdings of potentially risky government debt.
Concern over the European banking sector was further aggravated by Germany’s banking association saying the country’s 10 biggest banks may need 105 billion euros of additional capital under Basel III.
In a light week for macroeconomic data it seems bad news overseas is translating into investors taking their money off the table at home.
More gloom comes from Nouriel Roubini, a professor at New York University. At the annual Ambrosetti conference on Lake Como he said the U.S. has run out of bullets in its arsenal to fight off a recession, writes the Telegraph.
“We have reached stall speed. Any shock at this point can tip you back into recession,” said Roubini.
G20 dilemmas amongst the golf balls
Interesting dilemmas facing G20 countries as their finance ministers and central bankers get together on the golf ball strewn Scottish coast ( a meeting in St Andrews we will be Live Blogging on MacroScope, by the way).
First, you have the Brazilians who are worried about hot money and have already slapped a tax on foreign investments in domestic bonds and stocks in order to cool down capital inflows. They want the G20 to take action against what their central bank chief calls “imbalance- and bubble-building”.
Next you have the Americans and other big economies who know that the huge amounts of stimulus they have put into the world economy have to be removed eventually. They are not ready to do it yet, but expect the G20 countries to discuss how they are going to “sequence” the great unwinding.
And then there is Argentina, which is not alone in noticing that talk of unwinding tends to put investors on edge. Its central bank governor wants the big countries to be careful, fearing a rapid reversal of stimulus policies could mean big outflows in emerging market countries such as, er, Argentina.
So a tricky balance, a super-sensitive investor audience, and plenty of domestic politics. Fore!
from Tales from the Trail:
Joltin’ Joe Biden defends economic stimulus program
If you thought the Obama administration's $787 billion economic stimulus program was meant to provide one big jolt to the economy, you've got it all wrong, Vice President Joe Biden says.
"The act was intended to provide steady support for our economy over an extended period -- not a jolt that would last only a few months," he wrote in an op-ed piece in Sunday's New York Times.
More than a third of it is tax cuts for 95 percent of working Americans, he says. Another chunk of it goes for extended unemployment insurance and healthcare for those hardest hit by the recession.
"The bottom line is that two-thirds of the Recovery Act doesn't finance 'programs,' but goes directly to tax cuts, state governments and families in need, without red tape or delays," Biden says.
The final third of the funds goes for infrastructure projects, including what the vice president calls the "largest investment in roads since the creation of the Interstate highway system."
So no big economic jolt -- more of a big long-run infusion.
But hang on, says Don Stewart, a spokesman for Senate Republican leader Mitch McConnell. That's not how the Obama administration sold the package to the public.
This is what we should call: BLATHERING FROM INCOMPETENTS
Why is anyone listening to the lies but questioning anything substantively?
Bernanke is the same expert who only last year told Congress wonderful fairytales about housing, the markets, and the economy just as the bubble was beginning its implosion.
Apply the controls available, without inventing new ones, and refrain from creating a Nation dependent on its government (through politicized cronyism) for financial success. Prosperity has no address on that road.
http://pacificgatepost.blogspot.com/2009 /07/bernanke-and-super-fed-say-its-over .html
Make changes at the top and change the structure over money’s controls.
Watch out for the G20 spin
Be careful this week about buying wholeheartedy into any G20-related spin about supposedly savvy, free-spending Britain and America doing more to combat the world economic crisis than supposedly stubborn, overly cautious Germany and France. The actual figures show it is much more complex than that.
A Reuters calculation on discretionary fiscal stumuli and the International Monetary Fund’s assessment show that, if anything, Britain is the significant laggard and that German spending almost matches the United States over the next two years. Here are the IMF’s numbers (% of GDP):
2009 2010
Germany 1.5 2.0 France 0.7 0.7 UK 1.4 - 0.1 US 2.0 1.8
Just to add to the complexity, discretionary spending estimates do not include bank bailouts (which would boost UK and U.S. anti-crisis spending numbers) But nor do they include automatic economic stabilisers such as existing social welfare schemes and safety nets (which would boost Germany and France versus the U.S. where such things are rare to non-existant).
There is bound to be some squabble over who is doing what when the G20 starts on Wednesday. Just remember the numbers.
It’s nice to have a President of the
US that seems respected by the rest of the
world as intelligent!
