Levels compatible with fundamentals refer to monetary conditions such as to allow realizing full employment and fiscal balance at the same time. I have a systematic way of determining this. However, the government should always keep the budget balanced if full employment is realized.
I am optimistic about the US fiscal deficit, which has fallen to about 7% of the GDP, down from over 10% a few years ago. Encouraging signs also include much slower rates of increase in health costs, and an awareness for the need to tackle the so-called entitlement expenditures. With the economy on a path of growth, outlook is much brighter than Europe.
I am actually less interested in the unemployment rate than in job creation. Typically, American job creation has ranged from 100,000 upwards each month.
In my earlier articles I have been maintaining that the US has been outperforming Europe and Britain because its austerity is relatively tame. We know that state governments have cut close to 2 million jobs since the recession started.
I believe the government spending here is inclusive of transfers. Government spending on goods and services is less than the percentages indicated here.
Fact is I have never seen such a scenario when all countries panic at the same time and attempt to devalue their currencies in a destructive scramble for competitiveness. My point is that such a scenario has been "academic" thus far.
Central Bank Independence And The Nature Of Currency Wars [View article]
China has been promoting consumption in a myriad of ways. After the global financial tsunami China subsidized the purchase of electrical appliances, especially in rural areas. China abolished the agricultural tax and raised personal allowances. China also promoted, I think, wrongly--given the congestion and pollution problems, the sale of automobiles. Although consumption has been lagging behind investment the growth of retail sales over the last decade has typically, if not always, been in double digit range.
Japanese Yen Is Massively Oversold But Which Currency Pair Offers The Best Value? [View article]
My reading is that the Yen has a long way to depreciate based on economic fundamentals. I am not a chartist, and cannot draw conclusions from charts. I have long argued that the Yen needs to depreciate all the way beyond 90 Yen to the dollar before the economy can regain traction in growth. Virtually all the major export-dependent manufacturers are losing money now, and Japan has had several months of straight trade deficits.
The Effectiveness Of Quantitative Easing [View article]
I am saying that while the monetary base has grown in a frightening fashion, both M1 and M2 have grown at much more subdued pace. You can check the figures.
Chart Of The Day, Housing Bubble Edition [View article]
To me, the key to a speculative bubble is over-leveraging. The price is not supported by the buyers' own purchasing power, which is only artificially propped up by credit. So all that needs to be done is to regulate leveraging.
Might Eurobonds Be The Answer To The Euro Crisis? [View article]
Euro bonds that help reduce the cost of servicing debt is a necessary condition, but not a sufficient condition, of managing this crisis. A credible growth strategy must be part of the solution. Also necessary is a mechanism that prevents any member automatically to be accessible to raising funds through the commonly underwritten Eurobonds. Some assurance that the member is well behaved and thus responsible has to be in place.
Focus On Total Debt Misplaced; Moral Hazard Problems Misunderstood [View article]
Exactly. Net debt = debt positions minus credit positions. Virtually all companies have accounts receivable as well as accounts payable. Net debt is the balance of the two. Total debt ignoring credit positions almost inevitably grows over time.
Highlights From Today's Housing Data [View article]
Managed Fixed Exchange Rates [View article]
Managed Fixed Exchange Rates [View article]
Extreme Fiscal Austerity Proven Counter Productive [View article]
This Is Austerity? [View article]
This Is Austerity? [View article]
Currency War: Facts And Myths [View article]
Central Bank Independence And The Nature Of Currency Wars [View article]
Japanese Yen Is Massively Oversold But Which Currency Pair Offers The Best Value? [View article]
President Kennedy Responds To Paul Krugman [View article]
The Effectiveness Of Quantitative Easing [View article]
http://bit.ly/QOtddy
The Effectiveness Of Quantitative Easing [View article]
Chart Of The Day, Housing Bubble Edition [View article]
Might Eurobonds Be The Answer To The Euro Crisis? [View article]
Focus On Total Debt Misplaced; Moral Hazard Problems Misunderstood [View article]