Household debt in the US now stands so large, paying it down to 2001 levels – as a proportion of income – would require a drop in consumer spending of $2.7 trillion, some 18% of this year's gross domestic product. Deleveraging to 1990 levels of gearing (again, a then-record at the time) would cost US households $3.5 trillion, well over a quarter of their 2010 incomes.
Understanding QE Part Two
In the FSO article Misunderstood QE Focuses on Asset Prices, Not Banks we discussed how Mr. Bernanke’s quantitative easing program is implemented via the Fed’s eighteen primary dealers, not traditional banks. Today, we will dig a little deeper into to who gets the Fed's printed money.
Both Ben Bernanke and Tim Geithner are talking around the 800-pound gorilla in the room: the dollar. Bernanke made no reference to it in his discussions regarding the economy, as he focused upon the very low inflation and employment rates. The Fed solution is to embark upon further monetary easing, or putting additional dollars into the financial system.
How to benefit from currencies' race to the bottom
Despite currency tensions, there are five currency zones that will likely become more appealing as currency wars intensify: Canada, Brazil/Chile, Switzerland, Australia and the Asia-Pacific region.
G-20 meeting limited competitive devaluations. Even the media now treats G-20 meetings as either non-events or highlights the emptiness of their concluding resolutions. We shouldn’t continue to look to them for real change or commitment. But this weekend’s meeting produced more than expected in the statement that was made that nations had agreed to not continue ‘competitive devaluations’.
OK, so by now you have heard that existing home sales were up 10% in August. At least that’s what the NAR and the mainstream media reported. Yes, there were some qualifications added to those media reports. Here are a few facts, or as Paul Harvey would say, “The rest of the story”.
As the current economic downturn shows no signs of lifting, we hear quite a lot of rhetoric from current and potential office-holders about what government can and will do to create more jobs. This is especially disconcerting to those who understand that the best thing government can do for job creation is to simply get out of the way.
Three times a year the market says “I call”, and companies need to reveal their hands. At this time of year there is a long line of CEO’s holding their annual conference calls to announce how things have gone over the last three months and to give forward guidance. This week will see the largest percentage of quarterly reports of the season.