A series of articles last night in the US suggest a Budget deal is imminent. From the Washington Post:
The budget deal Patty Murray and Paul Ryan are crafting isn’t a “grand bargain.” … But the deal does lift about a third of sequestration’s cuts while giving agencies more flexibility to deal with the rest. It does mean the 2014 budget is the work of human hands rather than automatic cuts. It might be a vehicle for Capitol Hill to extend expiring unemployment benefits. And it would be a small but real boost to the economy.
Joel Prakken of Macroeconomic Advisors says the deal “would be a modest boost to GDP growth (relative to sequester). Maybe 1/4 percentage point.” Moody’s Mark Zandi adds in the possibility of extending unemployment insurance and estimates that “the lift to GDP next year compared to current law is .4. Small, but it matters.”
THE Federal Reserve is pursuing a very risky monetary policy. Its leaders — the departing chairman, Ben S. Bernanke, and the vice chairwoman, Janet L. Yellen, whom President Obama has nominated to succeed him — are correct that the American economy needs more stimulus, and they believe that the central bank, because of political paralysis, is the only game in town. But if Congress and the Obama administration could agree on a fiscal stimulus that goes beyond a short-term budget deal, the Fed would not have to take such risks.
Still, also from the NY Times, the taper is still seen in the new year:
Federal Reserve officials are in no hurry to retreat from their bond-buying campaign to stimulate the economy and are likely to postpone any cuts to the program until next year, according to public statements by Fed officials and interviews with some of them.
…influential Fed officials see little harm in postponing the decision, particularly compared with the risks of pulling back too soon. Significant details of the eventual retreat also remain the subjects of unresolved debates, according to the public statements and interviews. And some officials argue that the slow pace of inflation is itself a reason for the Fed to maintain its stimulus campaign.
On the data front, nothing much out but the Fed’s Flow of Funds report shows just how effective its reflation has been. From Calculated Risk:
According to the Fed, household net worth increased in Q3 compared to Q2, and is at a new record. Net worth peaked at $69.1 trillion in Q3 2007, and then net worth fell to $55.7 trillion in Q1 2009 (a loss of $13.4 trillion). Household net worth was at $77.3 trillion in Q3 2013 (up $21.6 trillion from the trough in Q1 2009).
The Fed estimated that the value of household real estate increased to $19.0 trillion in Q3 2013. The value of household real estate is still $3.6 trillion below the peak in early 2006.
