Spending Uniqueness Updates
ENDI 4-Week
EMORY
Sankalp
Index
Index .......................................................................................................................................................................................................... 1
Investor Confidence=Brink [1/3] ............................................................................................................................................................... 2
Investor Confidence=Brink [2/3] ............................................................................................................................................................... 3
Investor Confidence= Brink [3/3] .............................................................................................................................................................. 4
Investor Confidence High/Increasing [1/2] ................................................................................................................................................ 5
Investor Confidence High/ Increasing [2/2] ............................................................................................................................................... 6
Economy Increasing/ Brink [1/2] ............................................................................................................................................................... 7
Economy Increasing/ Brink [2/2] ............................................................................................................................................................... 8
Internals- Fiscal Discipline ........................................................................................................................................................................ 9
AFFIRMATIVE ANSWERS
Economy Low .......................................................................................................................................................................................... 10
Investor Confidence Low [1/3] ................................................................................................................................................................ 11
Investor Confidence Low [2/3] ................................................................................................................................................................ 12
Investor Confidence Low [3/3] ................................................................................................................................................................ 13
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Investor Confidence=Brink [1/3]
Consumer Confidence is low but stable
Jacobe 08 Chief Economist
(Dennis Jacobe, “No Deepening of US Consumer Confidence Crisis- Yet”, 07-15-08, pg online @ http://www.gallup.com/poll/108838/deepening-us-consumerconfidence-crisis-yet.aspx)
The percentage of consumers giving the economy a "poor" rating averaged 47% in June, ticked up to 50% in the first week of July, and fell
back to 48% in the second week of July. The percentage of lower-income Americans (those making less than $24,000 a year) rating current economic conditions as "poor" increased from
56% in June to 60% in the first week of July and 59% in the second week of the month. "Poor" ratings among upper-income Americans (those making at least $90,000 a year) increased
from 38% in June to 45% in the first week of July, before going back to 38% in the second week. Among those making $60,000 to less than $90,000, the percentage went from 39% to
46% and then to 45% during the same time, while among those making $24,000 to less than $60,000, the "poor" ratings remained basically unchanged, going from 49% in June to 50% in
consumer ratings of the current economy have been extremely negative,
but given that they are not much different than they've been for several months, they don't seem to signal a deepening crisis in
consumer confidence. Of course, consumers may not have had enough time to absorb the degree to which the credit crisis has
worsened in recent weeks. Further, one could argue that current perceptions of the economy's future course can't get much worse than the 85% to 90%
the first week and 49% in the second week of July.During the last few months,
"getting worse" range they have been exhibiting. On the other hand, roughly 60% of lower-income consumers already rate the current economy as "poor," so the current 48% to 50%
"poor" rating for consumers overall can clearly increase. Gallup sums these two ratings of current conditions and future expectations in its daily monitoring of Americans' current views of
the economy.
However,
it seems that many of the nation's key economic leaders may not be fully aware of just how fragile current consumer
confidence is at this point. Gallup's polling suggests that consumers are now as concerned about the economy as they have been at any time
since the early 1990s.
Obama assures commitment- but foreign investor confidence is on the brink
Xinhua News Agency 03-15-09
(“Obama says China can have confidence in the U.S Economy”, Xinhua News Agency, 03-15-09, pg online @ http://www.china.org.cn/international/200903/15/content_17445204.htm)
U.S. President Barack Obama assured on Saturday that
Luiz Inacio Lula da Silva at the White House.
China can have confidence in the American economy after meeting with his Brazilian counterpart
"Not
just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United
States," Obama said.
"There is a reason why even in the midst of this economic crisis you have seen actual increases in investment flows here in the U.S.," he
said.Obama also noted the U.S. will push for stricter regulation of the financial industry "front and center " at the upcoming G20 summit in London,
playing down suggestions of a rift between the Europe and the United States over whether more emphasis should be placed on stimulus or financial regulatory reform.
Chinese Premier Wen Jiabao said earlier Friday he is "a little bit worried" about the safety of Chinese assets in the United States, urging the
U.S. government to ensure the security of those assets.
"We lent such huge fund to the United States and of course we're concerned about the security of our assets and , to speak truthfully,
I am a little bit worried," Wen told a press conference after the close of the annual session of the National People's Congress (NPC) and the National Committee of the Chinese
People's Political Consultative Conference (CPPCC).
China has invested its huge foreign exchange reserves in low-risk but low-yield assets, such as U.S. government bonds, to play it safe.
According to the U.S. Treasury, China held US$681.9 billion worth of U.S. government bonds as of November.
"China
is indeed the largest creditor of the United States, which is the world's biggest economy . We are extremely interested in
developments in the U.S. economy," said Wen, adding that he is expecting the effect of the measures taken by the U.S. government to counter the global financial crisis.
Asked to react to Wen's concern, Lawrence Summers, director of the U.S. National Economic Council, noted on Friday that U.S. would be "sound stewards of the money we invest."
"This is a commitment that the president has made very
a speech at the Brookings Institution, a leading think tank in the United States
clear --we need to be sound stewards of the money we invest," said Summers in
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Investor Confidence=Brink [2/3]
Obama is committed to decreasing debt but the economy would inevitably collapse if foreign investors pull out
Raum 7-03-09 Associated Press
(Tom Raum, “Mountaing of Debt: Rising Debt maybe the next crisis”, 7-03-09, pg online @ http://www.cbn.com/cbnnews/finance/2009/July/Mountain-of-DebtRising-Debt-May-Be-Next-Crisis/)
The debt gap is "something that keeps me awake at night," Obama says.
He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between
government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.
Deficits don't reflect holdover indebtedness from previous years. Some spending items - such as emergency appropriations bills
and receipts in the Social Security program - aren't included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was
$11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross
domestic product.
By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's
still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India,
France, Germany and Canada have comparable debts as percentages of their GDPs.
Where does the government borrow all this money from?
The debt is largely financed by the sale of Treasury bonds and bills. Even today, amid global economic turmoil, those still are seen
as one of the world's safest investments.
That's one of the rare upsides of U.S. government borrowing.
Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian
Gulf oil exporters, the three top foreign holders of U.S. debt.
But as the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the
securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S.
bonds and other securities.
And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S.
interest rates.
As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby
boomers retire and begin collecting Social Security and Medicare benefits.
While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the
government's mushrooming debt - and what it might mean for future generations
Increase in governmental intervention will devastate investor confidence
Jacobe 02-23-09 Chief Economist
(Dennis Jacobe, “U.S. investor optimism hits new low”, 02-23-09, pg online @ http://www.gallup.com/poll/116053/investor-optimism-hits-new-low.aspx)
Still, the
greatest source of deterioration in investor perceptions may be owing to the instinctive recognition on both Wall Street and Main Street of something one
"government risk." This started under the Bush administration, as the Treasury and the Fed responded on an ad hoc basis to the growing financial crisis, and has
intensified under the Obama administration. As the government intervenes on an ever-greater scale to help ameliorate the economic crisis, it is
changing the rules of the game by which the private-sector economy usually operates. This has the side-effect of creating new government risk for
consumers, investors, and businesses alike.
might call
The current banking situation with its talk of nationalization is a prime example. Basically, the government has announced that it will apply new "stress tests" to the nation's banks and
then use these tests to decide which banks will remain in business and which banks will essentially be taken over by the federal government. Regardless of whether this is a good idea,
when it is suggested without details, it may have the unintended effect of increasing the degree of government risk associated with every
banking institution. In turn, a virtual run on bank stocks can occur as investors flee a risk they cannot evaluate. In this way, the perception of surging government risk
can do far more to destroy investor confidence than efforts like the stimulus bill can do to rebuild it .
Government needs to act quickly and forcibly to stabilize the financial system -- once and for all -- and to get credit flowing again. As it does so in banking and elsewhere,
however, it should act to minimize the degree of government risk it creates and the unintended consequences it produces.
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Investor Confidence= Brink [3/3]
China increased holdings of treasury bonds but confidence will remain on the brink
China Daily 7-19-09
(“China Increases U.S Treasury Holdings”, China Daily, Beijing Review.com.cn, 7-19-09, pg online @ http://www.bjreview.com.cn/headline/txt/200907/20/content_208128.htm)
China, the biggest foreign holder of U.S. Treasuries, increased its holdings of U.S. government notes and bonds by $38 billion to $801.5 billion
in May, according to a U.S. Treasury report released on Thursday. The total amount, which exceeds $800 billion for the first time, was equivalent to 37.6 percent of its $2.13 trillion
foreign exchange reserves then.
On the contrary, Japan, Russia and Canada were sellers of U.S. assets in May. Japan, the second-biggest international investor, reduced its total holdings by $8.7 billion to $677.2 billion.
"The surge in May does not mean that China will continue buying more U.S. debt in the future ," said He Maochun, director of the Research Center
of Economy and Diplomacy of Tsinghua University.
China has already tried to reduce its reliance on the U.S. currency in some ways. It signed 650 billion yuan worth of currency swaps since December with six nations including Indonesia,
Argentina and Belarus, and it is encouraging trading partners to use the yuan for cross-border trade settlements.
China previously announced it would buy $50 billion worth of bonds denominated in Special Drawing Rights, the International Monetary Fund's unit of
account, to be issued by IMF. Russia and Brazil have committed to $10 billion each.
"China does not have a better option than the U.S. Treasuries, which are relatively secure compared to other options ," he said.
Li Lianzhong, who heads the economics department of the Central Policy Research Office, said earlier that China should use more of its foreign exchange reserves to buy gold, energy and
natural resources assets.
Li cited the high percentage of gold in the foreign exchange reserves of the United States, Italy, Germany and France, to argue that China's gold holdings, which accounted for about 1.6
percent of its reserves, are too small.
In addition, he believes that China
should consider buying good overseas companies and also acquire technologies during the economic
crisis.
The Obama administration is counting on countries like China to finance its expensive $787-billion economic stimulus and China has expressed
concern about the prospects for the country's economy and the health of its investment.
"We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets," Premier Wen Jiabao said during a March 13 press
conference. "To speak frankly, I do indeed have some worries," he said.
Experts also suggest that the country should reduce the size of its trade surplus, either by importing more from other countries or by doing more overseas investment.
"We understand China's
currency policy is aimed toward an eventual balance between inflows and outflows. But for now, inflows are
dominant," said Patrick Bennett, Asia Foreign Exchange & Rates Strategist with Societe Generale in Hong Kong.
Bennett believes that a modest appreciation of the Chinese yuan would also work to slow inflows and would be a damping influence on the trade surplus.
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Investor Confidence High/Increasing [1/2]
Investor Confidence high now- financial study proves
Reuters 04-21-09
(“Investor Confidence hits 9-month High”, 04-21-09, pg online @ http://www.reuters.com/article/etfNews/idUSLAG00339020090421)
Confidence among institutional investors shot up to a nine-month high in April as a recovery in global equity markets boosted morale in all regions,
according to a survey by State Street.
The U.S. financial services firm said on Tuesday its global investor confidence index rose by 9.4 points to
upwardly revised March reading of 70.2.
Confidence was up in all three regions the firm surveyed.
The index was 65 percent up on an all-time low in December of 48.2, but well off the record high of 111 set in February 2001.
79.6, its highest since July, from the
Among North American investors, the index rose 10 points this month to 70.2 . European investors saw their reading increase 5 points to 68.9. The rise
among Asia investors was more modest, with the index up 0.7 points to 87.3 from 86.6.
"The data reveal that institutional investors have
University Professor and a co-developer of the index.
participated with some enthusiasm in the recent market recovery," said Ken Froot, Harvard
State Street's Paul O'Connell, the other co-developer of the index, gave a cautious assessment. "Significant questions
remain about the path and pace towards
recovery, both in the U.S. and further afield .
"The global nature of the current financial crisis means that estimates of recovery time based on individual country examples from history may be too optimistic, and this is likely to weigh
on investors' minds as we move through the second quarter," O'Connell said.
Major companies are raising investor confidence now
London Forex Broadsheet 07-16-09
(“Investor Optimism Leads U.S Markets Higher”, Seeking Alpha, 07-16-09, pg online @ http://seekingalpha.com/article/149121-investor-optimism-leads-u-smarkets-higher)
Global markets advanced for the third consecutive day on Wednesday, as investors’ optimism was raised after key companies reports have
beat analysts’ expectations so far.
U.S. markets are advancing at a strong pace, after Intel’s (INTC) earnings beat analysts’ projections. Moreover, Intel’s order surged at a faster pace on record from the
first quarter to the second one, adding further hopes that U.S. companies are able to withstand the credit crisis and sluggish consumer spending .
Helped by Intel’s results, technology companies were among the best performing sectors in Europe and in the U.S. on Wednesday.
Goldman Sachs' (GS) and Intel’s earnings helped lift the market’s optimism as investors interpreted these quarterly results as
signs that the global economy is recovering. The view that global demand is picking up once again caused oil to rally, posting its first gains in 10 days. As such, raw
materials companies advanced on average 3% on the day, helping to push the major U.S. indexes higher.
Moreover, every one of the 10 industries represented in the U.S. markets advanced on Wednesday.
much of gains seen in the CPI can be traced back to
a jump in energy prices. From one year ago, inflation fell by 1.4% in June, being the biggest drop recorded since 1950.
During the U.S. session, a release showed that inflation rose 0.7% in June, much more than forecasted. However,
At the same time, a different report showed that the business activity in the New York region stayed flat in July compared with the previous month; but still, the index is hovering near the
highest level achieved over the last year.
Congress and Obama set to boost Investor Confidence Now
Online Finance 08
(“Congress to bring back Investor Confidence”, 11/23/08, pg online @ http://www.online-finance.net/world-news/congress-to-bring-back-investorconfidence.html)
A brighter and better stimulus package can be expected pretty soon from President-elect Barack Obama.
This was signaled on Saturday and it seems that
he would follow a far better plan of spending and making tax cuts than everything he drew round on the campaign track, locating the attitude for a revival attempt that might soak up and
describe much of his expressions.
In the weekly radio address of the Democrats, Obama stated he will direct his monetary planning team to formulate a two-year stimulus plan with the aim of economizing or creating
nearly 2.5 million jobs. He addressed it as “A plan big enough to face the tests we face."
He stated he
aspired to sign up the stimulus package into law pretty quickly after taking the office in January. 20, 2009. Obama by now is
organizing plans with the Democratic leaders of the Congress, who have stated they will begin working in December.
With the economic crisis worsening, many of his rivals are trying to use it as a reason to act against him based on many of the issues he highlighted in his campaign, inclusive of cutting
taxes for the lower and middle class employees, addressing concerns about neglected public infrastructure jobs like roads and schools and making new "green jobs" via federal business
incentives for energy substitutes and eco-friendly technology.
In view of the recession, Obama is stated to be rethinking the key campaign pledge, which was to repeal the Bush tax cuts for the wealthy Americans.
Obama's lecture in a YouTube video, was fraction of an attempt to quiet turbulent monetary markets influenced by the failure of an outgoing president and a lame administration.
The
Congress is to come up with a plan to increase the economy and bring back investor confidence.
Obama plans to launch his economic team on Monday, starting with Timothy Geithner, Treasury secretary. The News that Geithner, the president of the Federal Reserve Bank of New
York will get the job had the stock market up by nearly 500 points on Friday after continual days of sharp losses.
Lawrence Summers, the Former Treasury Secretary will be the director of the National Economic Council in the White House per reports from Obama’s assistant. The economic team will
also have Peter Orszag as the next White House budget director.
We need to wait to see if there will be any revival
of the economy after the current economic team sets in to action.
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Investor Confidence High/ Increasing [2/2]
Obama is cutting the budget maintaining investor confidence
Knowlton 08 New York Times
(Brian Knowlton, “ Obama Vows to Cut Budget Waste”, New York Times, 11-25-08, http://www.nytimes.com/2008/11/26/us/politics/25cnd-transition.html/ )
Mr. Obama said he would nominated Rob Nabors, staff director of the House Appropriations Committee, to be Mr. Orszag’s deputy.
“Budget reform is not an option, it’s a necessity,” Mr. Obama said. After focusing Monday on financial rescue efforts and the rough outlines of his planned stimulus package,
he concentrated Tuesday on budget issues.
Mr. Obama cited, as an example of the sort of cuts he expects Mr. Orszag and Mr. Nabors to find, a recent government report showing that farmers whose incomes exceeded $2.5 million
had probably wrongly been paid some $49 million in government subsidies over a three-year period.
But he did not offer any other specific targets, and by itself, correcting the problem with the farm program would make only a trivially small dent in the budget deficits the federal
government will face for years.
The president-elect, who until this week had been keeping a low profile in Chicago while constructing his administration, was speaking in
his second economy-related news
conference in two days, with a third set for Wednesday. He was asked about the much higher profile he had suddenly adopted, and whether he had changed his mind about there being
“only one president at a time.”
“It’s
important, given the uncertainty in the markets and given the very legitimate anxiety that the American people are feeling that they know their
new president has a plan and is going to act swiftly and boldly,” Mr. Obama said.
The people needed to know, he said, “that we don’t intend to stumble into the next administration , we are going to hit the ground running.”
Obama is committed to the economy- investors are on his side
Financial Daily 6-18-09
(“Obama pushes reforms to restore investor confidence”, 6-18-09, pg online @ http://thefinancialdaily.com/NewsDetail/89035.aspx)
President Barack Obama will lay out on Wednesday his vision for reshaping US financial regulation, aiming to tighten oversight of the
largest firms whose excessive risk-taking triggered a global recession.
The proposals will include closing one bank regulator and creating new overseers for big-picture economic risk and consumer financial product safety, according to a document detailing
the administration's proposal.
In a package of reforms that takes on many tough jobs while avoiding at least one, the administration proposes putting the Federal Reserve in charge of monitoring the largest financial
firms in the hope that holding one agency accountable will prevent a repeat of the severe banking and capital markets crisis that has shaken economies around the world.
"We
must act now to restore confidence in the integrity of our financial system, " the administration said in the 85-page document.
lasting economic damage to ordinary families and businesses is a constant reminder of the urgent need to act to reform our
financial regulatory system and put our economy on a track to a sustainable recovery."
"The
Months of debate in the US Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform
between now and mid-July. Conservative House Republicans have already offered their own rival plan.
Obama and his top economic advisers see the current financial upheaval as the latest in a series of crises going back decades, so their regulatory reform
intends to correct problems beyond just those blamed for the latest episode.
The Obama plan will call for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the
objective of streamlining bank supervision.
In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial syste m, working in conjunction with a council of other regulators to
be chaired by Treasury.
The goal is to make sure a failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize
the broader economy.
Obama will call for establishment of an independent consumer financial products watchdog agency, and for requiring financial firms to hold
more capital so they can better survive tough times.
More transparency and accountability would be mandated for exotic financial markets , which in recent years expanded far beyond the government's
ability to keep track of them. –Reuters
Investor psychological shift ensures rising confidence
Read 6-30-09 Associated Press
(Madlen Read, “Strong quarter ends cautiously as earnings loom”, 6-30-09,
http://www.google.com/hostednews/ap/article/ALeqM5jmT59dgLTTziX4p9X9MRBRpWZGdQD9958Q602)
Investors carried Wall Street to a remarkable second-quarter performance even though stocks' big spring rally stalled weeks ago.
The major indexes all managed to end the quarter with double-digit percentage gains. Now, whether the market regains its momentum in the July-September period or
hunkers down again will depend on what companies have to say in the next few weeks — not just about their own prospects, but the economy's as well.
The Dow Jones industrial average rose 11 percent during the quarter, while the Standard & Poor's 500 index surged 15.2 percent. Both indexes logged their first quarterly gains since the
third quarter of 2007. The Dow also had its best quarter since 2003 and the S&P 500 its best since 1998.
The S&P 500 index and the Nasdaq composite index are finishing the first half of 2009 in the black. The Nasdaq, heavily populated by tech stocks, rose 20 percent for its first winning
quarter in a year and had its best quarter since 2003.
The quarter turned out better than most traders might have expected when the major indexes sank to 12-year lows in early March on growing despair about the recession. But the market's
advance wasn't as impressive as it was in mid-June, when the major indexes hit multi-month highs. Since then, investors' uncertainty about the strength of an economic recovery has
brought the Dow down 4 percent, the S&P 500 down 2.8 percent and the Nasdaq, 1.5 percent.
On Tuesday, the last day of the quarter, the Dow fell 82.38, or 1 percent, to 8,447.00; the S&P 500 fell 7.90, or 0.9 percent, to 919.33, and the Nasdaq slid 9.02, or 0.5 percent, to 1,835.04.
Investors have gone through a big psychological shift over the past six months . After sending the Dow plunging to a 12-year low in early March amid
fears of another Great Depression, they drove it up a staggering 34 percent from mid-March to mid-June as the global economy and corporate world
showed signs of stabilizing.
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Economy Increasing/ Brink [1/2]
Obama is committed to fixing the economy now- progress proves
Reuters 7-17-09
(Chizu Nomiyana, “US economy backs away from Abyss”, 7-17-09, pg online @ http://www.reuters.com/article/GCAEconomy/idUSTRE56G4UC20090717?sp=true)
T0he United States averted a financial catastrophe but sustainable recovery depends on redirecting the economy away from
consumption, a top White House economic adviser said on Friday.
In excerpts of remarks prepared for delivery later on Friday, Lawrence Summers also defended President Barack Obama's "ambitious" policy agenda, saying it would lay the
foundation for future prosperity.
"We
were at the brink of catastrophe at the beginning of the year but we have walked some substantial distance back from the
abyss," Summers said in excerpts of a speech released by the White House. "Substantial progress has been made in rescuing the
economy from the risk of economic collapse that looked all too real six months ago."
Summers said the rebuilt U.S. economy must be more export-oriented, with less of a focus on consumer spending and the sort of financial engineering that has been blamed for
contributing to the current economic crisis.
The economic recovery should be "more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population," he said.
Critics of Obama's policy plans, which include reforming health care and addressing climate change, have argued that it is overly costly and ambitious -particularly in the middle of a deep recession. However, Summers said the reforms were essential for repairing the economy.
"Yes,
the President has an ambitious agenda," he said. "But it is an agenda comprised of measures that lay a foundation for future
prosperity and for the confidence on which the current recovery depends ."
Economy is recovering slowly but it is still on the brink
Malsbury 06-16-09 BSMM, MM The American Chronicle
(Michelle Malsbury, “US Economy Still in Peril”, The American Chronicle, 06-16-09, pg online @ http://www.americanchronicle.com/articles/view/110436)
Despite the gloom and doom on Wall Street just prior to the presidential elections last fall and the bailouts soon afterward we are
far from seeing the bottom. The stock market remains a bumpy ride at best. Foreclosures and unabated unemployment continue to
dominate our economic landscape across America with ripple effects globally.
While there is some talk about a second stimulus I would caution our legislators to get the first stimulus out and working before
incurring any more debt. Unless we can begin to create significantly more jobs we are going to continue to see foreclosures rise
and less consumer spending. States that are already broke will continue to be taxed with paying more and more unemployment
benefits. We´ve seen nothing comparable in our lifetimes.
Economy is improving but remains on the brink
Superville 04-10-09 The Huffington Post
(Darlene Supervill, “Obama, Economic Advisers Meet: Glimmers of Hope”, 04/10/09, pg online @ http://www.huffingtonpost.com/2009/04/10/obama-economicadvisers-m_n_185521.html#)
President Barack Obama declared Friday that the
slumping economy has begun to show "glimmers of hope ," but cautioned that it remains severely
stressed and will require lots more work to turn it around .
Once criticized for talking too pessimistically about the economy, Obama is highlighting the positive.
"We're starting to see glimmers of hope across the economy," the president said after a White House meeting with his economic team, including Treasury
Secretary Timothy Geithner and top economic adviser Larry Summers. Federal Reserve Chairman Ben Bernanke also participated in the session.
Obama echoed Summers' prediction a day earlier that the
"sense of a ball falling off a table" would end in a few months .
The president highlighted signs of thawing in the credit markets, particularly for small businesses
workers will soon see in their paychecks and a jump in mortgage refinancings due to historically low interest rates.
seeking loans, along with tax cuts he said
Obama said those positive moves as well as infrastructure work and other spending underwritten by his $787 billion stimulus program all point to welcome signs of long-anticipated
economic improvement.
"We're starting to see progress," Obama said. "And if
we stick with it, if we don't flinch in the face of some difficulties, then I feel absolutely convinced that
we are going to get this economy back on track."
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Economy Increasing/ Brink [2/2]
Economy is stabilizing and showing signs of recovery
Torres 7-21-09
(Craig Torres, “Bernanke sees ‘Tentative Signs of Stabilization’ in Economy”, Bloomburg.com, 7-21-09, pg online @
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajT5Q2VaFT1M)
July 21 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said while the economy is showing “tentative signs of
stabilization,” the central bank intends to maintain a “highly accommodative” monetary policy for “an extended period.”
“The pace of decline appears to have slowed significantly,” Bernanke said today in semi-annual testimony before the House
Financial Services Committee. At the same time, “in light of the substantial economic slack and limited inflation pressures,
monetary policy remains focused on fostering economic recovery,” he said.
Fed officials said in a report submitted as part of Bernanke’s testimony that policy will be “tightened” when the labor market
improves, an economic recovery takes hold and pressures holding down inflation “diminish.” The comments follow a rally in
stocks and a rebound in corporate earnings that have stoked speculation the worst recession in half a century is ending.
Bernanke, 55, defended the central bank’s actions to restore financial stability, urged lawmakers to lay plans for reining in the
deficit, and warned Congress against impinging on the Fed’s independence in his testimony.
The Fed chief has countered the credit crisis with actions unprecedented in the central bank’s 95-year history, cutting the
benchmark lending rate to as low as zero and flooding the banking system with cash. He today detailed how the Fed can reverse
the stimulus “when appropriate,” and expressed confidence it has tools to prevent any inflation surge.
Economy has stopped declining and is set for recovery
Dodge 7-11-09 Bloomburg.com
(Catherine Dodge, “Geithner Says Pace of Economic Decline ‘Slowed Dramatically’”, Bloomburg.com, 7-11-09, pg online @
http://www.bloomberg.com/apps/news?pid=20601103&sid=a_wb3heteT48)
Secretary Timothy Geithner said that while the pace of decline in the U.S. economy has “slowed dramatically,”
there are still “enormous challenges.”
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place ,” Geithner said, according to the transcript of
July 11 (Bloomberg) -- Treasury
an interview with “CNN’s Fareed Zakaria GPS” show to be broadcast tomorrow.
The pace of job losses has slowed, consumers and businesses are more confident and financial markets are improving , Geithner said. “If you think back
to where we were at the end of last year, beginning of this year, you know, we had an economy falling at a remarkably rapid rate,” he said.
Investor concern that a recovery from the deepest recession in half a century may be delayed pushed stocks down for a fourth week. The unemployment rate rose in
June to 9.5 percent, the highest in almost 26 years, and U.S. employers cut 467,000 jobs, according to a government report released last week.
The world’s largest economy contracted at a 5.5 percent annual pace in the first quarter of the year, capping the worst six-month performance in half a century.
The economy probably shrank at a 1.8 percent rate from April to June, according to a Bloomberg survey of economists, who also predicted a return to growth in the current quarter.
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Internals- Fiscal Discipline
Fiscal Discipline key to maintaining investor confidence
Associated Press 06-04-09
(“Fiscal Balance crucial to restore Investor Confidence”, 06-04-09, Kuwait Times, pg online @
http://www.kuwaittimes.net/read_news.php?newsid=MTM4MTEzOTcyOA==)
Federal Reserve Chairman Ben Bernanke is urging Congress and the Obama
administration to start plotting a strategy to curb record-high US budget
deficits. Failing to do so could eventually erode investor confidence and endanger the economy's prospects for long-term health, he said.
Bernanke's comments, before the House Budget Committee yesterday, come as concerns grow at home and overseas about the United States' mounting red ink. "Even as we take
steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we,
as a nation, begin planning now for the restoration of fiscal balance," Bernanke said.
The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year's all-time high. The
recession has taken a bite out of tax revenues paid by people and companies. At the same time, the government's spending has risen,
paying billions to shore up banks, help the unemployed and others hurt by the downturn, the longest since World War II.
Bernanke said that such
forceful government intervention to fight the worst financial crisis since the 1930s and lift the US out of
recession was "necessary and appropriate" even though it worsened the nation's budget deficit . Bernanke acknowledged that Congress and the
administration face "formidable near-term challenges" that must be addressed as they take steps to stabilize the financial system, reduce home foreclosures and spur banks to lend more
freely. The
success of these efforts will be crucial to
turning the economy around.
The danger
of prolonged and persistently high budget deficits is that they can cause investors to lose their appetite for US debt,
which would drive up interest rates. Higher interest rates could discourage spending and investment, hurting the economy.
Bernanke cautioned: "Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither
financial stability nor healthy economic growth." With the recovery likely to be subdued, inflation will remain low, Bernanke
predicted. Some worry that the Fed's aggressive efforts -- including buying billions worth of government bonds -- to revive the
economy could sow the seeds of inflation.
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Economy Low
Economy is tanked and will continue to deteriorate
Deragon 08 Strategic Planning Officer at Social Media Connection
(Jay Deragon, “A Relationship Economy: Is the Economy Decling or Recovering?”, A Relationship Economy, 11/23/08, pg online @ http://www.relationshipeconomy.com/?p=2583)
The IMF’s chief economist has warned that the global financial crisis is set to worsen and
Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.
“The worst is
becomes normal.”
that the situation will not improve until 2010.
yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper on Saturday, adding that “a lot of time is needed before the situation
He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.
The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.
But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.
Withdrawals of capital leading to problems of liquidity “can be so significant that the IMF alone cannot counter them,” he said, adding that massive withdrawals
of
investments from emerging countries could represent “hundreds of billions of dollars .
“We do not have this money. We never had it,” he said. The IMF had spent a fifth of its 250 billion dollar fund in the last two
weeks, Blanchard added. He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut on Thursday.
The central banks “should lower interest rates to as close to zero as possible,” he said.
The economic
system has just begun to feel the disruptive nature of a globally connected economy when a leading country (USA)
realizes it is in an economic decline with no quick answer or sound solutions . Obama, all of us, buckle your seat belt.
The US and World Economy are doomed despite optimistic reports
O’Connor 6-1-09 International Committee of the Fourth International
(Patrick O’Connor, “UN repot issues dire forecast for world economy”, 6-01-09, pg online @ http://www.wsws.org/articles/2009/jun2009/unec-j01.shtml)
The United Nations’ Department of Economic and Social Affairs (DESA) updated its “World Economic Situation and Prospects”
report last Thursday, forecasting world growth this year of negative 2.6 percent. World trade is expected to decline by 11.1
percent—the sharpest annual contraction since the 1930s. The latest estimates are revised sharply downward from previous UN
forecasts in January of positive 1 percent growth for 2009, with even the most pessimistic scenario then anticipating negative 0.5
percent growth.
The revised figures are another indication of the unprecedented rapidity with which the slowdown in global economic activity has
developed. Putting paid to recent optimistic US media reports of a potential imminent recovery, DESA’s director of the
development policy and analysis division Rob Vos said there were “no green shoots to be seen which could signal beginnings of a
new spring in this still very wintry landscape”.
The report predicts a contraction of 3.9 percent for the advanced economies in 2009. The US economy is forecast to shrink by 3.5
percent. “With unemployment rising sharply and financial de-leveraging continuing, the risk of the economy falling into a
protracted deflation is still increasing,” the UN warns.
Data released by the US Commerce Department on Friday added further weight to the UN forecast. First quarter 2009 US gross
domestic product (GDP) declined by 5.7 percent, not as severe as the previous quarter’s 6.3 percent contraction, but still worse
than most economists’ predictions.
U.S economy will continue to decline- multiple factors prove
Isidore 01-06-09 Senior writer at CNNmoney.com
(Chris Isidore, “Fed predicts economy will get worse”, CNN Money.com, 01-06-09, pg online @ http://money.cnn.com/2009/01/06/news/economy/fed_minutes/)
The U.S.
economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts
from the staff of the Federal Reserve.
This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to
spur economic activity.
According to the minutes from that meeting, the central bank is now predicting that gross domestic product, the broadest measure of economic activity, will fall in 2009.
"I think that the Fed is really very scared right now -- like everybody else -- and they want to pull out all the stops," said David Wyss, chief economist for
Standard & Poor's.
The Fed indicated that most members at its meeting expected a slow recovery to begin in the second half of the year, but that unemployment would still rise "significantly" into 2010.
Employers cut 1.9 million jobs over the first 11 months of 2008, which took the unemployment rate up to 6.7%. The December report will be released by
the Labor Department Friday and economists surveyed by Briefing.com expect a loss of 475,000 jobs and that the unemployment rate will rise to 7%, which would mark a 15-year high.
The Fed cited a
multitude of problems dragging down the economy besides rising unemployment, including stock market declines, low
consumer confidence, weakened household balance sheets and tight credit conditions. It said business spending is also likely to fall due to weak retail sales and the credit
crunch.
In addition, some members of the Fed expressed concerns that the
economy could worsen even more than currently expected .
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Investor Confidence Low [1/3]
No investor confidence in Obama’s economic plan now
Bandyk 03-03-09 US News
(Matt Bandyk, “Market to Obama: I’m just not that into you”, 03-03-09, pg online @ http://www.usnews.com/blogs/capital-commerce/2009/03/03/market-toobama-im-just-not-that-into-you.html)
"I think he
overestimates his ability to take people .. and, sort of, charm them into being nice," Barney Frank, has famously said of Barack
Obama. And while America's Charmer-in-Chief has worked his magic with the Women from Maine and some of the Blue Dog Democrats, not so much with the
Rump Republicans in the House.
And not
so much, it would appear, with the Investor Class, both here and overseas. The Dow Jones industrials fell 4 percent yesterday, dropping below
market barometer is now down a whopping 30 percent since Election Day, including an 18 percent drop over the past three weeks. That, even as
President Obama's plans to stimulate the economy, fix the banking system and bailout struggling homeowners have come into
sharper focus.
One could view the slow-motion crash as a financial vote of no-confidence in the White House's ability to effectively fix America's economic mess
and lead the rest of the world out of its tangle. (No confidence in the spending-heavy stimulus plan that treats 2009 as a wash. No confidence in the workin-progress Geithner plan that seems intent on forcing banks to take losses. And certainly, one could argue, no confidence in a long-term economic
plan will raise taxes by $2 trillion (including interest expenses and cap-and-trade costs) over the next decade as well as increasing government's role in healthcare and energy.) Or
7,000. The
maybe, to be fair, investors think nobody has any answers. To Wall Street, the Long Boom looks to have morphed into the Long Bust.
But who cares about Wall Street, right? Those are the folks, Obama says, who are pretty much responsible for this entire mess. But it's not that simple. The plunging stock market is much
more than a vote of no confidence. Consider the following: In dollar terms, we are talking about a loss of around $9 trillion in wealth, a good chunk of which has been borne by the
retirement and savings plans of millions of Americans. An analysis by the Employee Benefit Research Institute found that the typical retirement portfolio of $50,000 to $100,000 lost 15
percent of its value in 2008. Investors in the $100,000 to $200,000 range suffered a loss of 21 percent. And folks with more than $200,000 lost more than a quarter of their savings, on
average.
Of course, these are just "paper losses," right? Just numbers on a page. Nonsense, as Bernie Madoff's clients know all too well. As such, there's an economic response by anxious people
who suddenly see years of investing gains vanish with little hope of rapid return. They save more and spend less. The personal savings rate, after briefly going negative in mid-2005 and
staying under 1.0 percent thereafter, has now vaulted up to around 5 percent. And you can be sure that much of that additional savings is going somewhere besides Google and Apple
stock. It's going into traditional low-yielding assets such as savings accounts, checking
Indeed, some economists predict the savings rate will inch back up to the high single digits, where it was in the 1980s.
accounts, CDs, and money market funds .
Bad news. America has shifted from an income economy to an asset economy during the past generation. Even though incomes continued to grow, our asset
wealth grew far faster, both homes and stocks. This meant we could save less -- at least as defined by government statisticians who don't count capital gains -- and spend more.
Economic analyst Edward Yardeni took a look at the impact of an 8 percent savings rate. He calculates that if the savings rate went back to 8 percent in the fourth quarter of last year, real
GDP would have been down by 17.9 percent instead of 3.8 percent. "Obviously, no
one is saying that the saving rate should rise so much in such a short
period of time," he explains. "However, if consumers really do decide to save more on a long-term basis, then the size of the economy
would shrink since consumers account for so much economic activity."
Economy and investor confidence is low- Obama failure
Levy & Salas 09 Bloomburg
(Ari Levy & Caroline Salas, “Obama becomes banker-in-chief in Credit Market Freeze”, 01-20-09, pg online @
http://www.bloomberg.com/apps/news?pid=20601110&sid=aBKDYyojIxfk)
Jan. 20 (Bloomberg) -- The
U.S. economy has little chance of recovering from what may prove to be its worst recession since World War II unless President
Barack Obama shows he can get banks to lend money again.
Since the Bush administration and Congress last year approved the $700 billion Troubled Asset Relief Program that injected capital into Bank of America Corp., Citigroup Inc. and
JPMorgan Chase & Co., individuals
and companies aren’t getting any of it as fourth-quarter lending by the biggest banks by assets
plummeted. The asset-backed market, which is supposed to enable banks to keep lending by transforming loans into tradable securities, remains frozen, leaving
would-be lenders unable to package and sell mortgages, credit-card debt and auto loans.
After reporting more than $1 trillion of market losses and writedowns, banks
are adding billions of dollars to reserves amid a 16-year high in unemployment and two
confidence has waned, sending an index of bank stocks to a 13-year low last week. Obama, 47, can’t expect
relief from the Federal Reserve, which already cut its main interest rate to as low as zero . All eyes will be on the 44th president today in anticipation that he may
years of falling home prices. Investor
unveil a sweeping recovery plan.
“It’s
a day-one, minute-one problem for the new administration,” said Stuart Eizenstat, deputy U.S. Treasury secretary from 1999 to 2001 and now a partner at
difficult to understand with the degree of oversight exactly how those banks got into such deep
water. The point now is to keep them liquid, get the balance sheets in order and to get them to start lending.”
Covington & Burling LLP in Washington. “ It’s
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Investor Confidence Low [2/3]
Investor Confidence is drastically low now
USA Today 02-23-09
(Adam Shell, “S& P 500 is at risk of hitting a new low as angst persists”, USA Today, 02-23-09, pg online @ http://www.usatoday.com/money/markets/2009-0222-stocks-bear-market-bottom_N.htm)
Given the magnitude of the losses, some investors worry that their nest eggs have been so depleted that they won't be able to retire.
Some wonder if they will ever again see the money they lost.
"I have some apprehension every time I look at my 401(k) statement," says Grace Cooling, an engineer in Houston. "I hope the market recovers in the next 10 years."
Cooling, 42, says she has not bailed out of stocks or lost faith in the stock market but admits to stashing new money in safer but low-yielding certificates of deposit. "My biggest
fear," she says, "is that my investments may not recover."
She is not alone in her search for safety. Investors are piling into assets viewed as havens, such as short-term Treasury bills and gold, as well as cash. In mid-February, there was nearly $4
trillion parked in money market mutual funds, vs. $3.4 trillion a year ago, according to Crane Data.
"Several hundred billion is true cash seeking shelter," says Peter Crane, founder of the money market-tracking firm.
David Hefty, CEO of Cornerstone Wealth Management, is preaching defense for now. But says many investors are likely suffering from financial paralysis.
"They are in the Land of Oz," he says. "Their investment plan is closing their eyes, clicking their heels three times and hoping their portfolios go back to where they
were in October 2007." Investors shouldn't expect a V-shaped recovery, nor rule out lower lows. Hefty says it will take a long time to get back to even.
A recent analysis by Bespoke Investment Group found that the S&P 500 could get back to its record high by August 2011 if the market generates annualized returns of 25%. Using more
conservative projections, such as an annual return of 10%, which is the long-term average, it would take six years to earn back losses.
For investors exiting stocks for the safety of long-term government bonds, the break-even point is 20-plus years away.
Tough "years often cause investors to give up on stocks," notes Paul Hickey of Bespoke. But, "The cost of safety certainly comes at a price."
Staying fully invested in stocks also might come at a steep price. Experts say many of the conditions associated with a true market bottom are missing:
•Not enough fear. At market bottoms, people are scared, really scared, so scared that investors who want out of stocks, get out . As
a result, a closely watched Wall Street "fear gauge," known as the VIX, normally shoots to the sky. On Friday, the VIX closed above 49. But that doesn't come close to the fear level on
Nov. 20, when the S&P 500 hit its bear market low, and the VIX topped 80.
"We haven't seen a true fear spike, and that usually means there is another shoe to drop," says Price Headley, chief analyst at BigTrends.com.
•Not enough bears. Too few investors have given up hope and turned bearish, which normally occurs at troughs, says Todd Salamone, senior researcher at Schaeffer's Investment
Research.
The number of investment newsletter writers who said they were bearish last week, for example, was well below the number of bears in November when the lows were put in. Similarly,
56.7% of investors surveyed last week by the American Association of Individual Investors said they were bearish — nearly double the long-term average. However, that was still fewer
than the bears present at the panic lows hit in October and November 2008, and in March 2008, when JPMorgan Chase bought Bear Stearns when the Wall Street bank was on the verge of
failure.
"The mentality is, we're down 50%, how much lower can we go?" Salamone says. "If the lows get taken out, those types of investors are
potential sellers."
•Not enough good economic news. Stocks historically turn up before the economy. But that hasn't occurred yet because the economic data ,
ranging from home sales and job losses to retail sales and factory orders, keep getting worse.
Investor confidence is low and will continue to decline
Jacobe 02-23-09 Chief Economist
(Dennis Jacobe, “U.S. investor optimism hits new low”, 02-23-09, pg online @ http://www.gallup.com/poll/116053/investor-optimism-hits-new-low.aspx)
American investor optimism plunged in February, as the Gallup Index of Investor Optimism -- a broad measure of investor perceptions -- fell 24 points to -64, a new
low. Neither the president's signing of the new fiscal stimulus bill last Tuesday nor his announcement of a new housing rescue plan on Wednesday
was able to keep Gallup's Index of Investor Optimism -- a survey of those having $10,000 or more of investable assets -- from plunging to its lowest level
since its inception in October 1996.
The Index peaked at 178 in January 2000, just prior to the bursting of the dot-com bubble. Last year, the Index turned negative for the first time in its history, reaching its previous low of 49 in December. Before last year, the low for the Index was 5 in March 2003, reflecting investor concerns at the outset of the Iraq war.
Optimism deteriorated along both dimensions of the Index in February. Investor expectations for the U.S. economy over the next 12
months became even more negative, as the Economic Dimension of the Index worsened by 11 points to -70 -- worse than December's -64 and a new low. At the same
time, investors' expectations for their personal portfolios worsened by 13 points to 6 -- a new low for the Personal Dimension.
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Investor Confidence Low [3/3]
No Investor Confidence in Obama now
Ferguson 03-11-09 Liberatarian Party of Indiana
(Donny Ferguson, “Investor Confidence in Obama Plumetting”, smallgovtimes, 03-11-09, pg online @ http://www.smallgovtimes.com/2009/03/investorconfidence-in-obama-plummeting/)
Seventy-two percent (72%) of
investors now say the economy is getting worse . That’s a sharp increase from the 68 percent who said so
when Obama was inaugurated.
Rasmussen’s Investor Index, the measure of investor confidence on a daily basis, had never been lower than the Consumer Index in its
seven-year history. It dipped below the Consumer Index last week and has remained there much of the time.
What does all the mean? It means the people who actually create jobs in this country recognize Obama’s policies for what they are — proven failures that
destroy jobs and will delay our eventual economic recovery.
Investors aren’t the only ones giving Obama’s economic train wreck a thumbs-down. Confidence in the job market among all Americans also continues to
dry up. His approval rating among all voters is pretty much what is was for every previous president, but his disapproval rating is nearly twice as high. Despite the
spin from the White House and water-carrying by the media, Americans have little faith in Obama’s failing plan to tax Americans into prosperity.
Rising debt makes investor pull out inevitable
Schoen 6-04-09 Senior Producer at MSNBC.com
(John W. Schoen, “Rising interest rates could threaten recovery”, 6-04-09, pg online @ http://www.msnbc.msn.com/id/31091125/ns/businesseye_on_the_economy/)
As the U.S. Treasury continues to churn out hundreds of billions of dollars of fresh debt, officials are confronting one of the thorniest problems since the
financial crisis began.
Who’s going to buy all this paper? And if demand dries up, how much higher will interest rates have to go to attract new buyers?
The question is not just academic. When the crisis first hit last fall, investors worldwide sought shelter in U.S. Treasuries, and interest rates plunged. That
helped to shore up battered banks and restart the housing industry with low mortgage rates But now, as the financial crisis seems to have waned and the global economy shows signs of
recovering, interest rates have begun rising, or "backing up." Any further rise in rates could throw cold water on the economy, boost the cost
of mortgages and other loans and push back the recovery that many forecasters are looking for before the year is over.
“Along with declining home prices, those (lower) interest rates were key to reviving housing demand," said Thomas Higgins, chief economist with the Los Angeles investment
management firm Payden & Rygel. “That's a key risk for the latter part of the year. We know where the crisis began, and it began in housing. And we need housing to recover.”
Though home sales have perked up this spring as mortgage rates fell below 5 percent, the 30-year fixed rate recently reversed course, rising to 5.29 percent this week — up nearly fourtenths of a percentage point from a week ago, according to Freddie Mac.
Fed officials say they are committed to keeping rates low, but it remains to be seen how far it can defend its target in the global money market. The
central bank typically
manages only short-term lending rates used by banks for overnight loans. Since the financial crisis hit last fall, the Fed has embarked on a bold
experiment to push down longer-term rates by wading into the multitrillion-dollar global market for Treasuries. The Fed’s task is made more complicated
by the hundreds of billions in fresh debt paper the Treasury is churning out to finance the economic stimulus package, plug the growing hole in the federal
budget and roll over the huge pile of past government borrowing that comes due every quarter. To attract investors to buy those bonds, the Treasury pays interest rates based on the lowest
bids at auction. If
investors demand higher rates, the cost of all long-term borrowing goes up.“The government is keeping these rates lower and there
are no legitimate, long-term real buyers of size to handle these auctions and the mortgage product that's being produced to try to stimulate the economy,” said Rich Berg,
CEO of Performance Trust Capital Partners. "So (rates are headed higher) unless Uncle Sam is going to finance the whole thing for the next 20 years, which is
not going to happen."
Foreign investors are fast pulling out of U.S treasury bonds now
Trumbull 6-15-09 The Christian Science Monitor
(Mark Trumbull, “Are foreign investors losing interest in U.S treasury bonds”, 6-15-09, pg online @
http://features.csmonitor.com/economyrebuild/2009/06/15/are-foreign-investors-losing-interest-in-us-treasury-bonds/)
Just as the US government has decided it wants to borrow more than ever, foreign investors have decided they’re not so eager to lend.
In April, foreign investors pumped only $41.9 billion into US Treasury bonds , down from about $55 billion in March.
This doesn’t necessarily portend a run on the dollar or a new crisis for the US economy. But it may help explain why the cost of borrowing money has been going up for the US Treasury –
costs that will be shouldered by taxpayers for years to come.
Some of the most
prominent nations reduced their Treasury holdings in April, although the total of all foreign holdings of US debt dipped only slightly. China
pared its stake by $4.4 billion, to $763.5 billion total. Japan, which ranks second to China in Treasury holdings, also posted a small decrease. So did Russia, Brazil, and oil
exporting nations.
The government is issuing debt at a prodigious pace, and counting
on foreign investors to buy much of it. Economists at Goldman Sachs project that new borrowing by the government will total $1.7 trillion in the final half of the 2009
Weak foreign demand comes as the Treasury would like foreign investors to buy more of its bonds, not less.
fiscal year, followed by $1.4 trillion in 2010 and $1 trillion in 2011.
Is this the
beginning of fiscal Armageddon for the world’s largest debtor nation ? Most investment analysts say no. Foreign central banks, for instance,
shift away from Treasury bonds by investors is driven partly by growing confidence in an
economic recovery, which has prompted more money to flow into stock markets worldwide. But the US still faces a fiscal challenge.
aren’t trying to unload their US debt holdings. The
“The shift in global preferences back to equities, which seems rational, comes at an inconvenient time when there are heavy auctions of US Treasury securities,” Brian Bethune, an
economist at IHS Global Insight, writes. This partly explains “the sharp decline in US bond prices that we have seen in the past couple of months.”
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