Rosenberg in the morning

September 29, 2009

From Gluskin Sheff’s Chief Economist David Rosenberg this morning:

Now that Cash-for-Clunkers is over, auto sales are collapsing again. says the run-rate so far in September is down to 8.8 million units at an annual rate, but we see now that JD Power’s tracking is down to 590,000, which would be little better than a 7.0 million rate or half the pace of August and 24% below the already-depressed levels of a year ago. The November 30th expiry date for the first-time homebuyer subsidy, and this group has been responsible for one-third of housing activity, may also have something to do with the below-consensus sales figures for August that came out last week.

But don’t worry — Uncle Sam is coming back to the rescue. Congress is moving to extend emergency jobless benefits to over one million workers who are about to see their benefits expire by year-end. The House already approved on Tuesday a 15-week extension in states with unemployment rates of 8.5% or higher (oh — that only includes 27 states right now, by the way) and now Congress is looking at extending and expanding the homeownership tax credit. The short-term-ism in fiscal policymaking in terms of still trying to promote consumption and credit remains is fully intact and is actually quite sad because the U.S. boomer population is seriously short of savings needed to fund a boom in the retirement community over the next two decades. A Harvard University report shows that 60% of Americans do not have enough savings to fund their retirement. Why the government wants to resist the natural trend towards higher savings rates is … well, it’s unnatural. When your homeownership rate is over 67% and your consumption-to-GDP ratio is over 70%, you’re not exactly suffering from under-spending.

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***Why the government wants to resist the natural trend towards higher savings rates is … well, it’s unnatural.***

I assume that is a rhetorical question and feigned surprise — the government needs wage inflation to provide tax revenue increases to keep the debt manageable. I suppose they think that propping up asset prices is one way of doing this. I wish them all the luck in the world, because the alternative methods of keeping the debt manageable are much nastier–tax increases, currency controls, and debt repudiation.

People keep saying we are turning into Japan, but I don’t think we’ll be that lucky. . .

Posted by But What do I Know? | Report as abusive

3547 extended benefits for 13 not 15 weeks

Posted by steve | Report as abusive