Krugman claims there is no evidence that uncertainty over regulation is hurting the economy. " Iâve tried to point out that there is no evidence for this claim: business investment is no lower than youâd expect given the state of the economy" Of course he misses that investment would probably be higher if it werent for regulation uncertainty. It seems that he claims that uncertainty doesnt affect human behavior, that seem crazy, specially during this new normal that have more regulations down the pipe than normal
In Krugman's defense, I don't believe that uncertainty over the regulation is slowing things down any more than normal. There is always some level of uncertainty. Anybody who thinks now is any different just has very little experience in business. I would suggest joining a decent country club and playing golf regularly with the members - you will find one constant in the conversations ... complaints about how regulations and taxes are making things extraordinarily difficult and ruining the economy. So yes, government is a pain in the ass, but that's always been the case. I'm no fan of our current president, but he's no worse than the others. What's hurting the economy is overcapacity and propped up wage and asset prices assure a slow grinding debt deflation.
Just look at FinReg, Healthcare and a number of congressional bills. US is embarking in a new era where regulation will be higher than normal. And thats not my opinion, its a statement coming directly from the authorities running government Anyone who submits bills look to 'deregulate' gets laughed in the face. Deregulation is a curse word, free market economics is as well. All the result of the Great Recession and the financial crisis
Now we know why the stock market and commodities are on a moonshot, while the $ gets beaten with ugly stick. Today's leak to the WSJ ... Fed Mulls Symbolic Shift Officials to Consider Putting More Money Into Bond Market as Recovery Wavers By JON HILSENRATH Federal Reserve officials will consider a modest but symbolically important change in the management of their massive securities portfolio when they meet next week to ponder an economy that seems to be losing momentum. The issue: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead. Any changeâonly four months after the Fed ended its massive bond-buying programâwould signal deepening concern about the economic outlook. If the Fed's forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy. Moving to stop the Fed's portfolio from shrinking would prevent monetary policy from slightly tightening in the face of a weakening recovery. The central bank's $2.3 trillion portfolio has nearly tripled in size since 2007. Buying new bonds with this stream of cash from maturing bondsâprojected at about $200 billion by 2011âwould show the public and markets that the Fed is seeking ways to support economic growth. It could also be a compromise that rival factions at the Fed support, as officials differ about whether and how to address a subpar recovery. Whether the Fed makes any move next week depends in large part on economic data, particularly the government snapshot of the jobs market due Friday. Since Fed officials last met in June, data on consumer confidence and spending have softened and job data haven't improved. But overall financial conditions have improved somewhat, with a rebounding stock market. Officials in the Fed's anti-inflation camp aren't convinced the economy is slowing significantly and are wary of taking new actions. Others are eager to consider new steps to address recent signs of a slowdown and persistent high unemployment. Fed officials aren't yet prepared to take the larger step of resuming large-scale purchases of mortgage-backed securities or U.S. Treasurys. But they are holding open that option if the economy deteriorates. Private forecasters generally expect real GDP to grow by an annual rate of about 2¾% in the second half of 2010. If the picture deteriorates and they forecast growth falling below 2%, the Fed would be more likely to act. In a speech in South Carolina Monday that was more somber than his testimony to Congress last month, Fed Chairman Ben Bernanke said: "We have a considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings." Mr. Bernanke said Monday that the Fed must avoid raising interest rates too soon and urged the government to proceed cautiously in cutting spending and raising taxes. "We need to be careful about tightening too quickly," Mr. Bernanke said, promising that monetary policy would remain loose until "sustained" growth is seen, especially in jobs. A few months ago, many investors expected the Fed to begin raising its key interest-rate target by the end of this year; futures markets now indicate traders don't expect that until late 2011. Mr. Bernanke highlighted what he called the "battered" shape of state and local budgets. "Many states and localities continue to face difficulties in maintaining essential services and have significantly cut their programs and work forces. These cuts have imposed hardships in local jurisdictions around the country and are also part of the reason for the sluggishness of the national recovery." The Fed is in a difficult spot. As Mr. Bernanke noted, inflation, now about 1%, is likely to run below the central bank's unofficial target of 1.5% to 2% for the next couple of years. That is stoking worries of deflation, a debilitating fall in prices across the economy. Unemployment is expected to remain high even longer. The Fed already has pushed short-term interest rates to near zero and purchased about $1.7 trillion in Treasury debt and mortgage bonds to drive down long-term interest rates. The purchases ended in March, and many officials are reluctant to resume them. "We run the risk of doing things in an effort to solve a problem that we're not well-equipped to solve," Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in an interview last week. Too many people, he said, "have come to believe that monetary policy is always the solution to our economic problems." But Mr. Plosser said he was open to reinvesting proceeds from maturing mortgage bonds into Treasury securities. Part of the appeal of such a move is that the Fed in the long-run wants its portfolio to be in Treasury bonds and not mortgage debt, and this would move it in that direction. Fed officials aren't sure buying more mortgages or bonds would have a big effect on rates. Mortgage rates and other long-term interest rates already are very low. It also would saddle the Fed with an even larger portfolio to unwind later. As mortgages are refinanced and mortgage bonds mature or are prepaid, the Fed's holdings shrink. The Fed's mortgage holdings inched down from $1.129 trillion in mid-July to $1.117 trillion at month's end. The Fed's mortgage buying pushed investors to buy other assets, including corporate bonds and stocks. Any extension of that program, even in the form of reinvestment, could help support the recent rally in such riskier assets. Like Mr. Plosser, Richard Fisher, president of the Federal Reserve Bank of Dallas, worried that the Fed could be expected to do too much. He said in an interview that choosing to hold the balance sheet steady for now "could be" an area where Fed officials have common ground. "I'm more comfortable with that debate than I am with the debate about adding to the balance sheet," he said. Another regional Fed bank president, James Bullard of St. Louis, last week warned of deflation risks and said the Fed should expand its portfolio if those risks mount. In an email exchange Monday he said he didn't want to prejudge what actions the Fed might take at its next meeting, saying that there are many "technical issues" that needed to be considered when the Fed makes decisions about its balance sheet. Another option, he said and Mr. Bernanke has noted, is changing the language in the Fed's policy statement to influence markets by altering its message to the public. Another ideaâpushing down short-term interest rates by reducing a rate called the interest on excess reservesâis on the table, but doesn't have a big following at the Fed. That rate is already low, at 0.25%, and the Fed's target federal funds rate is below that most days. The Fed wouldn't get much benefit by pushing the rate lower, and reducing it could disrupt the money-market mutual fund industry.
Details of Lehmans liquidity before BK http://economicsofcontempt.blogspot.com/2010/07/anatomy-of-lehmans-failure-and.html Funny, after the Koreans walked out of Leh, PIMCO pulled $4b in repo lines from LEH. Yet Bill Gross was giving misleading statements on TV saying 'we are still trading with Lehman', he should have said 'we are decreasing our trading with lehman and we are worried'
Vince Reinhardt suggests Fed will adopt easing measures by Fall http://noir.bloomberg.com/avp/avp.h...//media2.bloomberg.com/cache/vf.JS84Adb9I.asf
Oct 2010 ZQ is at 99.825 99.830 while the front contract 99.8175 99.82 I never seen a further out contract trading higher than the front before. It seems the market is betting that the IOR will be gone or that excess reserves will be increased and that will drive down the Effective Fed Funds rate
Romer steps down and is rumored to be trying to jump in the San Francisco Fed president post http://noir.bloomberg.com/apps/news?pid=20601068&sid=aNidueQFQ5qQ If that is true, the Obama dovish domination continues, now it would expand beyond the Board and even reach the regional Presidents, who tend to be more hawkish