US Economy


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


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


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


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


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


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


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


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


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


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


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


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


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


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,


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


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,


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


The media’s “Fail” mark on Wisconsin

A huge political drama is playing out in the state of Wisconsin, where 70,000 protesters filled the streets on Saturday to oppose Governor Scott Walker’s plan to end collective bargaining rights for public employees. A day earlier, Republicans in the lower house had voted to virtually eliminate the right to collective bargaining. Meanwhile, the 14


America’s inequality

Sachs Says Democrats, GOP Both `Unrealistic’ on Budget Uploaded by Bloomberg. – News videos from around the world. Earlier this month, Columbia University Professor, Jeffrey Sachs, launched a stinging attack on the state of economic and social policy in the United States. Sachs is particularly angry that the Government is cutting core Government services at


Why housing incentives must go

As debate continues to rage about the rising US public debt, it is becoming increasingly obvious that politicians are going to have to tackle some sacred cows if they are serious about cutting the deficit. These include areas that have traditionally been immune from cuts, such as defense, social security and Medicare. These three alone


The folly of fiscal austerity

I have already expressed my view on this blog that it is a mistake to conflate the fiscal issues of the United States with those currently faced by troubled euro zone countries like Greece. Predictably, this has upset some commenters, who insist that unless the US takes urgent action to slash its budget deficit, the


US Treasury’s Housing Report Gets it Half Right

Earlier this month, the US Treasury released its much anticipated report to Congress on Reforming America’s Housing Finance Market.  At only 31 pages, the report is a refreshingly easy read. It identifies clearly and concisely what went wrong with mortgage financing and lays out three broad options for reform aimed at: Encouraging greater private sector involvement in the mortgage market


The US Government’s Debt Spiral

Following on from my previous post on the impending US municipal bond crisis, I want to provide a brief overview of the debt time bomb facing the US Federal Government. Karl Denninger at Market Ticker has provided a nice analysis of the US Treasury’s 1 February presentation to the Borrowing Advisory Committee (Hat tip Bernard Hickey for the link). Denninger


US Municipal Bonds: The Next Crisis?

Municipal bonds are bonds issued by lower level governments (county, city or state) in the United States to raise capital for public works projects, such as sewerage, water treatment plants and roads. For decades, municipal bonds have been a favourite amongst investors in the higher tax brackets since they pay higher yields than Treasury bonds and are also exempt


US Democratic Party Shoots Itself in the Foot

The United States Democratic Party has a problem. Following the 2010 Census, which showed strong population growth in Republican held states, six House of Representative seats and Electoral College votes are to be reapportioned toward states won by John McCain (the 2008 Republican candidate) from states won by President Barrack Obama (see below map). This loss


Short looks good, Long looks bad.

The merry go round of US economics continued overnight. Equity traders went off into hyperoptimistic land on the back of perceived profits.   U.S. stocks rose, with the Standard & Poor’s 500 Index gaining the most in two weeks, after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased profit forecasts.