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Edward Harrison submits: Complete Story »

Edward Harrison submits:Paul Krugman wrote a post yesterday regarding MMT called "I Would Do Anything For Stimulus, But I Won’t Do That (Wonkish)." The gist of Krugman’s post was to refute Modern Monetary Theory’s view on money and deficits.Krugman writes:Complete Story »

Edward Harrison submits:By Marshall Auerback and Edward Harrison.Marshall’s viewEd has asked me to deal specifically with the issue of Ricardian equivalence, the theorem used by anti-government proponents to argue that fiscal deficits are counterproductive and that cutting deficits in the middle of a recession will actually be good for the economy. It suggests that when a government tries to stimulate demand by increasing debt-financed government spending, demand remains unchanged. This is because the public will save its excess money in order to pay for future tax increases that will be initiated to pay off the debt. The mainstream presumption, then, is that agents won’t spend extra income from a tax cut as they ‘know’ there will need to be a tax hike later to keep the budget balanced. The mainstream would also be concerned that the higher government deficit would somehow ‘crowd out’ private borrowing.Complete Story »

Edward Harrison submits:From the ECRI website: A measure of future U.S. economic growth fell to the lowest since July 2009, indicating that the economy will continue to slow, a research group said on Friday.Complete Story »

Edward Harrison submits:After three days of major market gains, call me naive, but this must be the place. Seriously though, I do think we are in a secular bear market and expect prices to go lower. Remember the 200-day moving average is still above 1100. We’re a long way from there. click to enlargeComplete Story »

Edward Harrison submits:Kenneth Rogoff, a professor at Harvard University and former chief economist at the International Monetary Fund, talks with Bloomberg’s Susan Li i Hong Kong about the global economy and China’s real estate market and economy. Rogoff also discusses the outlook for European banks, the global economy and stimulus policies. Major takeaways:Complete Story »

Edward Harrison submits:I am going to take the German side of the argument on the eurozone’s need for fiscal consolidation. It’s not that I like wearing a hair-shirt. Hardly. It’s because the Europeans have no other choice if they are to avoid higher interest rates and/or default. Yes some countries still could fall prey to national bankruptcy. Yet, for the likes of Germany, this is not a threat if they move toward reducing deficits. Tomorrow morning, in anticipation of the G-20 in Toronto, I will be on BBC World News TV’s GMT programme (1200 London time/0700 Washington time) to talk about the US criticism of European governments’ austerity programmes amongst other issues. As a lead-in to that appearance, I want to explain my viewpoint in this post with some help of a well-reasoned article by the German Finance Minister.Complete Story »

Edward Harrison submits:Sales of new homes plunged a record 33% in May to a record-low after the expiration of the federal tax credit subsidy for home buyers expired. Sales were a seasonally adjusted annualized rate of 300,000, the lowest since record-keeping began in 1963. Now we know how the housing market will do without a government prop. My understanding is that the subsidy is still effective through the end of this month. However, given yesterday’s existing home sales data confirm the fall off in activity, we are probably seeing the effect of the end of the subsidy.Complete Story »

Edward Harrison submits:Gray Newman of Morgan Stanley is the third analyst this week who has been making Mexico-bullish noises due to the Chinese peg move. In his recent research piece called "Latin America: The Renminbi Impact" he says we have to be cautious regarding the overall impact of the Yuan move. At a minimum, any appreciation is bound to be modest. But, of course, the announcement could be taken as a positive for how Chinese officials view their own economy as well in spite of the property bubble. Newman makes this case, indicating they may also be bullish on the sustainability of global growth. I am more cautious here.Complete Story »

Edward Harrison submits:Comstock Partners' latest weekly note called "Why it’s Still A Secular Bear Market" is in line with my view of the economy and market. They see the core issue as a longer-term deleveraging that cannot be solved by fiscal and monetary stimulus. I have said that this likely means lower inflation-adjusted stock prices when the stimulus-induced recovery fades. This is a view they also hold.However, they also provide ten specific reasons why we should see the recovery as already under attack.Complete Story »