US Economy

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S&P downgrades the US

From the newswires: S&P downgrades US debt to AA+ The US had its AAA credit rating downgraded for the first time by Standard & Poor’s to AA+ based on its judgment that the debt ceiling deal agreed by lawmakers would not be enough to curtail record deficits. “The downgrade reflects our opinion that the fiscal

5

ex-Fed trinity muse on QE3

  Below find the video that triggered last night’s equities bounce back. I’m not sure why it stimulated any such thing. There’s not much that’s bullish in it in my view. The phrase that comes to mind for me is ‘old men talk while young men die’:

35

Whither now the US?

I’ve been warning for a couple of months that the US economy is in trouble. It’s hasn’t really been that hard to see, so long as you recognise its underlying condition. The US economy is in a depression. It’s not quite the kind we saw in the 1930s but it’s a depression nonetheless, just slower

23

The US debt deal

Find below details of the US debt deal, direct from the White House: Fact sheet: Bipartisan Debt Deal: A Win for the Economy and Budget Discipline Removes the cloud of uncertainty over our economy at this critical time, by ensuring that no one will be able to use the threat of the nation’s first default

5

Deadlines, debt and downgrades

Find below an excellent note from Westpac covering the fallout from various scenarios emanating from the US debt-ceiling debacle. The note is both useful and entertaining, with Russell Jones of the rates strategies team nicely capturing the absurdity of the situation.

53

Abusing money for power

For me, the most remarkable part of writing The Great Crash of 2008 with Ross Garnaut was diving into the murky depths of Wall St’s extraordinary manipulation of money. In the book, we called this “Clever Money”. It was the story of how, over many years, Wall St took the plain vanilla process of securitisation,

18

The debt ceiling farce continues

Just as I suspected, the nonsensical debate over the US debt ceiling looks like going down to the wire. From the New York Times today: WASHINGTON — Negotiations over a broad deficit reduction plan collapsed in acrimony on Friday after Speaker John A. Boehner suddenly broke off talks with President Obama, raising the risk of

35

Hurtling towards a debt ceiling disaster

Another day passes without any progress in negotiations on raising the US debt ceiling… And the stakes are rising. From Thursday’s Wall Street Journal: Credit rating agencies moved closer to an unprecedented downgrade of the U.S. government’s debt amid deteriorating talks in Washington, with President Barack Obama abruptly walking out of a key meeting Wednesday with

4

Bernanke’s full testimony

Chairman Ben S. Bernanke Semiannual Monetary Policy Report to the Congress Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C. July 13, 2011 Chairman Bachus, Ranking Member Frank, and other members of the Committee, I am pleased to present the Federal Reserve’s semiannual Monetary Policy Report to the Congress (PDF). I will

47

The trouble with mainstream media

One of the reasons I first started blogging was a feeling that the mainstream media is doing a terrible job educating people about some of the biggest issues that we face today. I suspect that most of my colleagues at MacroBusiness feel the same way. Having spent several years as a financial journalist earlier in

41

Disastrous jobs report humbles a blogger

Once upon a time, a man who goes by the name of Rotten Apple wrote a post titled “The Bull Case for the US Economy“. Well, many moons have passed since then, but, to paraphrase Emperor Hirohito’s famous remark, in the meantime the economic situation has developed not necessarily to this humble blogger’s advantage. From

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The bull case for the US economy

There are no shortage of reasons to worry about the state of the world economy today. An unsustainable bubble in China, the possibility of sovereign debt defaults in Europe, the chance that debt ceiling politics will derail the US economic recovery… And I could go on. Like many of the writers on MacroBusiness, I am

57

Some thoughts on soaring healthcare costs

In a previous post, I discussed how the soaring cost of healthcare in the US is the biggest reason for the long-term fiscal problems that the country faces. The Wall Street Journal has a front page story today that gives a perfect illustration of what is wrong with the system. Outside of heart attacks, doctors

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Why the debt ceiling debate is a sideshow

In case you’ve been living under a rock for the past few months, the US is set to “go broke” by August 2 if its politicians don’t approve an increase in the country’s debt ceiling. I have avoided writing about this topic so far, because, as with most matters concerning the US at present, it

17

Fed’s Hoenig: big banks are a threat to capitalism

The Fed’s Thomas Hoenig delivered a striking speech this week on the systemic risk posed by the “Too Big to Fail” status of US banks.  In one of the bluntest speeches from a US central banker I have seen in some time, Hoenig suggests that so-called “systemically important financial institutions” have become a threat to

21

Demystifying the deficit

After a series of posts examining the fiscal woes of the United States (see here, here and here for example), I have refrained from posting on the issue for the past couple of months, mainly because I have little to add that I have not already said. In short, yes, the US has a longer-term

37

Will the US economy bounce?

There is a wealth of debate surrounding the US economy at the moment. The basic tenets of the debate can be summarised as bulls arguing that the current slowdown is the result of high oil prices whacking consumers and the Japanese tsunami whacking production. Bears are arguing there is a structural problem that these shocks

12

US depression returns

The past week has provided a steady stream of dismal news on the US economy. Let’s start with the housing market, which, after a brief rebound, now appears to be double dipping, with the major indices hitting new post-bubble lows. In the words of S&P, which is not exactly given to hyperbole, “home prices continue

13

Osama, Obama and the 2012 Presidential election

It has been some time since I’ve posted on this blog. And what a strange couple of months it has been in US politics. The ongoing fiasco that is the US budget, ludicrous debates about President Obama’s birth certificate, and most recently, the death of Osama bin Laden. What, if anything, does all this mean

5

US triple-dipping

Last week’s GDP figures in the US confirmed the momentum in the US economy’s recovery is slowing as the impetus from stimulus packages and government largesse fades and the true pulse of the economy becomes evident. This trend appears set to continue if last night’s report on the non-manufacturing sector from the Institute of Supply

6

Seventies with a bullet

Ben Bernanke fronted the press following the FOMC meeting earlier this week and told us that QE2 would proeceed as planned and once completed the Fed would “continue to reinvest maturing securities, both Treasuries and MBS, so that the amount that we hold will remain” meaning that “the amount of monetary policy easing should remain

5

The great, steaming debt pile

Standard and Poors last night placed the outlook for the US’s AAA rating on negative watch for a potential downgrade citing not just this recent budgetary impasse but also the trajectory of the United States Governments debt position. The charts below show just why S&P is worried.   It’s common these days to think of

6

Where will all the jobs come from?

I have argued before that while there is no problem with the US running fiscal deficits while its economy regains its feet, in the longer term, reviving non-financial business investment and growing exports faster than imports is the only sustainable way out of the ongoing economic slump. However, this is going to be easier said

18

Paul Krugman versus the world

Paul Krugman has set off a storm of debate in the US blogosphere this week, with a post in the New York Times that raised the possibility of hyperinflation in the US. Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the modern

57

The US economy: hurtling towards another crisis

In a recent post, “Should the US balance its budget“, I argued that it would be a folly for the US to try to balance its budget in the near term, as this would seriously impede the economy’s recovery from the recent deep recession. But this leaves us with some obvious questions. Is the economy

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Questioning the wisdom of austerity

I have written a series of posts on this blog questioning the wisdom of fiscal austerity in the United States today. Inevitably when I make such an argument, I get comments along the lines of “what about Zimbabwe!”, “it’ll lead to hyperinflation!” and “they’re even worse off than Greece!” But these worries are all based

37

Should the US balance its budget?

Deficit hysteria is alive and well in the United States as calls grow to slash spending and return the budget to a “sustainable” position. Today I am going to ask what may seem like a very obvious question: should the US quickly balance its budget or even return it to surplus? Of course it should,

8

Greenspan takes a trip to Fantasy Land

Alan Greenspan has come in for some pretty harsh criticism in the past couple of years about the role he played in inflating the bubble that led to the global financial crisis of 2008. There are two serious charges against Greenspan. The first is the claim that the Fed ran an excessively loose monetary policy

9

The Pentagon on the GFC: “the terrorists done it”

Was it irresponsible lending by the banks? Insufficient regulation? Excessively loose monetary policy by the Fed? There are many theories for what caused the global financial crisis of 2008. But now there’s a new and very novel thesis to add to this list. In a truly bizarre report written in 2009 and released this week,

3

Is Bernanke blowing another bubble?

Fed Chairman Ben Bernanke mounted a spirited defense of quantitative easing on Tuesday in his semiannual monetary policy report to Congress, arguing that it’s effects were little different to conventional monetary policy: Large-scale purchases of longer-term securities are a less familiar means of providing monetary policy stimulus than reducing the federal funds rate, but the