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Monthly Archives: October 2010

QE3 and the $14T test tube economy

What else the Fed might do for Plans C & D if needed –if QE2 fails to achieve its objective?   Plan C could be to raise the public’s expectations of future inflation. In theory, the Fed could attempt this by announcing promises to keep short term interest rates at zero no matter what happens to inflation in the near term months – but with […] Read the rest of this entry »

QE2 increases PIIGS default

QE2 is intended to help get the US economy going. But as with all economic experiments, there are unintended consequences.  Let’s talk about what it will do to the PIIGS countries.  I know we’ve not talked about them much in the past while. They haven’t gone away. The PIIGS countries continue to present a risk to the global banking system. With the US launching […] Read the rest of this entry »

More evidence we’re in a balance sheet recession (and that the Fed is wrong)

In the past few months we’ve discussed balance sheet recessions and why “it is different this time”. In other words, we are in one now as opposed to a business cycle recession.  The Federal Reserve as recently as 2 weeks ago reiterated their diagnosis that our economy was in a business cycle recession and that we’re still growing, but slowly. To which we say: […] Read the rest of this entry »

3Q 2010 US economy remains weak. BEA data is suspect.

Friday morning saw the release of the government’s estimate on the economy for 3Q. They announced that the economy grew at a 2.0% pace. I’ve made no secret of the fact that the independent data I follow suggested the 3Q GDP figure is around -2% and that the 4th quarter is likely to show we’re deeper yet into a recession. I’ve also made it […] Read the rest of this entry »

Why can’t we balance our budget (or at least have a plan to)

On Wednesday, the UK released a plan to drastically reduce its budget deficit. Currently the UK has a $243B annual budget deficit that is slightly larger on a % of GDP basis than ours – making the UK & the US the worst in the G20 group from a budget deficit perspective. So my hat goes off to the UK Treasury Secretary George Osborne […] Read the rest of this entry »

The Vegas Fed

Last week, the Fed tipped it’s hand as it frequently does lately where big decisions are concerned.  2 months ago, the Fed began leaking that it was considering further monetary policy stimulus in the form of a second round of quantitative easing – the QE2. A month later, they polled economists as to what would be an acceptable size. The consensus was in the […] Read the rest of this entry »

The Fed is (still) wrong. This time it IS different…

On Wednesday last week, we had the pleasure of a visit by the Richmond Federal Reserve President – Jeffrey Lacker. Dr Lacker gave a speech in Chapel Hill that I was privileged to attend, and in particular I was very pleased to discuss current monetary policy with him. With that said, I have mixed feelings about the Richmond Fed’s position on further monetary policy […] Read the rest of this entry »

The Economist hints at US Depression in 2011

This week’s The Economist magazine had an interesting article –well several actually- but one in particular that points out that when countries try to cut their budget deficit as a % of GDP by 1%, they usually find that GDP contracts by half a % as a consequence. A painful consequence.  One that Ireland & Greece are finding out right now.  Less face it, […] Read the rest of this entry »

Currency Wars

Arguably one of the biggest economic datapoints for the week came early in the week via the Bank of Japan’s announcement they would lower short term interest rates back to zero. The Yen has grown in value over the past few months because other large currencies are being demolished by their own governments. So Japan is now stepping up the pace to destroy its […] Read the rest of this entry »

September 2010 (un)employment report

Friday saw the release of the much anticipated September employment report from the Bureau of Labor Statistics –the BLS. This is the last national employment report before the mid-term elections, so you better believe there’s a lot riding on it. The BLS report showed: 64,000 new private payroll jobs created   159,000 federal, state, and local govt jobs lost     TOTAL  95,000 jobs lost […] Read the rest of this entry »