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Comments »Monthly Archives: May 2012
In Play and On the Wires
The CICC Says China Will Crash if Greece Leaves the Euro
Everyone has their own opinion on what will happen to the Chinese economy if Europe blows up. That ranges from a totally delusional “nothing happen” to, well…
Given the consensus remains hugely delusional and bullish, this is probably the most bearish I have come across. From the China International Capital Corp (CICC), they believe that if Greece exits the Euro, China’s economy growth would be cut down to just 6.4% for 2012 without fiscal stimulus, which is 1.7 percentage point lower than their base case:
Comments »Peter Schiff Prepares to Dine on the Carcass of Malinvestment
Peter Schiff has a hard on as he predicts the housing bubble was merely a warm up for what is about to come.
Comments »European Markets Are Accelerating to the Downside
Oil Gets Kicked in the Teeth on Iran Deal, Slowdown, and Rising Stockpiles
SAP to Buy Ariba for $4.3 Billion, $SAP, $ARBA
“SAP AG (SAP), largest maker of enterprise- applications software, agreed to buy Ariba Inc. (ARBA) for $4.3 billion in the German company’s second multi-billion purchase in cloud computing to take on Oracle Corp. (ORCL)
SAP will pay $45 a share, or 20 percent more than Ariba’s May 21 closing price, Walldorf, Germany-based SAP said yesterday. The transaction, subject to approval by Ariba shareholders and regulators, will probably be completed by the end of August, SAP Chief Financial Officer Werner Brandt said on a conference call.”
Comments »BoE Confirms That They Stand Ready to Inject Stimulus
The BoE made no changes to policy. They stand ready to pour money on top of slow growth.
Comments »Jin Liqun of China Investments: Europe Lacks Leadership and Other Countries Will Leave the Euro
Some not so positive comments out of China’s largest investment firm. Normally i would think what do they know, but given Europe’s behavior over the past few years i think FIRE, FIRE, FIRE.
Comments »China Continues to Pledge Pro Growth Policies to Counteract Europe’s Debt Woes
“China’s leaders pledged to intensify “fine-tuning” of policies in the second government statement in four days signaling a commitment to growth as Europe’s debt crisis escalates and domestic demand slows.
“We must proactively take policies and measures to expand demand and to create a favorable policy environment for stable and relatively fast economic growth,” the government said on its website today summarizing a meeting of the State Council, or Cabinet.”
Comments »The Aussie and Kiwi Dollars Fall to New Lows Amid Global Risk Off Trading
World Markets Fall on Concerns Europe’s Debt Crisis is Worsening
Yesterday there was hope, but today there is concern as European leaders meet to discuss how to solve the Greek and greater debt problems.
Japan’s Exports grew slower than expected and bonds were sold as safe heaven trades.
Comments »Global Markets and U.S. Futures Shit the Bed
Yields for Italy, Spain, France, and Germany …
Comments »Congressional Budget Office: Any Way You Slice It, We Are Fucked
Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013
Policymakers are facing difficult trade-offs in formulating the nation’s fiscal policies. On the one hand, if the fiscal policies currently in place are continued in coming years, the revenues collected by the federal government will fall far short of federal spending, putting the budget on an unsustainable path. On the other hand, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion.
In fact, under current law, increases in taxes and, to a lesser extent, reductions in spending will reduce the federal budget deficit dramatically between 2012 and 2013—a development that some observers have referred to as a “fiscal cliff”—and will dampen economic growth in the short term. CBO has analyzed the economic effects of reducing that fiscal restraint. It finds that reducing or eliminating the fiscal restraint would boost economic growth in 2013, but that adopting such a policy without imposing comparable restraint in future years would have substantial economic costs over the longer run.
How Substantial is the Fiscal Restraint in 2013?
CBO estimates that the combination of policies under current law will reduce the federal budget deficit by $607 billion, or 4.0 percent of gross domestic product (GDP), between fiscal years 2012 and 2013. The resulting weakening of the economy will lower taxable incomes and raise unemployment, generating a reduction in tax revenues and an increase in spending on such items as unemployment insurance. With that economic feedback incorporated, the deficit will drop by $560 billion between fiscal years 2012 and 2013, CBO projects.
If measured for calendar years 2012 and 2013, the amount of fiscal restraint is even larger. Most of the policy changes that reduce the deficit are scheduled to take effect at the beginning of calendar year 2013, so budget figures for fiscal year 2013—which begins in October 2012—reflect only about three-quarters of the effects of those policies on an annual basis. According to CBO’s estimates, the tax and spending policies that will be in effect under current law will reduce the federal budget deficit by 5.1 percent of GDP between calendar years 2012 and 2013 (with the resulting economic feedback included, the reduction will be smaller).
With that Fiscal Restraint, What Will Economic Growth Be in 2013?
Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.
How Would Eliminating or Reducing the Fiscal Restraint Affect the Economy in the Short Run?
CBO analyzed what would happen if lawmakers changed fiscal policy in late 2012 to remove or offset all of the policies that are scheduled to reduce the federal budget deficit by 5.1 percent of GDP between calendar years 2012 and 2013. In that case, CBO estimates, the growth of real GDP in calendar year 2013 would lie in a broad range around 4.4 percent, well above the 0.5 percent projected for 2013 under current law.
How Would Eliminating or Reducing the Fiscal Restraint Affect the Economy in the Long Run?
However, eliminating or reducing the fiscal restraint scheduled to occur next year without imposing comparable restraint in future years would reduce output and income in the longer run relative to what would occur if the scheduled fiscal restraint remained in place. If all current policies were extended for a prolonged period, federal debt held by the public—currently about 70 percent of GDP, its highest mark since 1950—would continue to rise much faster than GDP.
Such a path for federal debt could not be sustained indefinitely, and policy changes would be required at some point. The more that debt increased before policies were changed, the greater would be the negative consequences—for the nation’s future output and income, for the burden imposed by interest payments on the federal debt, for policymakers’ ability to use tax and spending policies to respond to unexpected challenges, and for the likelihood of a sudden fiscal crisis. And the longer the necessary adjustments in policies were delayed, the more uncertain individuals and businesses would be about future government policies, and the more drastic the ultimate changes in policy would need to be.
What Might Policymakers Do Under These Circumstances?
They could address the short-term economic challenge by eliminating or reducing the fiscal restraint scheduled to occur next year without imposing comparable restraint in future years—but that would have substantial economic costs over the longer run. Alternatively, they could move rapidly to address the longer-run budgetary problem by allowing the full measure of fiscal restraint now embodied in current law to take effect next year—but that would have substantial economic costs in the short run. Or, if policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.
Alex Jones: The Manufactured War on Terror
CNBC Coverage As $FB Hit New Lows at the Open
A Quick Visual at The Facebook IPO Treatment By Wall Street $FB
POOR HOUSE ALERT: ZUCKERBERG’S NET WORTH PLUMMETS TO JUST $15.6 BILLION
Zuckerberg sold 30.2 million shares at a price of $37.58
Comments »SAN FRANCISCO (MarketWatch) — Zuckerberg sold 30.2 million shares at a price of $37.58 for gross proceeds of $1.13 billion; Thiel sold 16.8 million shares for gross proceeds of $633 million. Facebook insiders had told prospective shareholders of their plans in an S-1 filing last week.
FLASH: MA Secretary of Commonwealth Subpoenas Morgan Stanley Over Facebook IPO, $FB, $MS
Fun times with $FB…no ?
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