Comments on: Eurozone Hard Pressed: 2% Fiscal Solution Deferred

By: The IMF Sends A Message « The Baseline Scenario

The IMF Sends A Message « The Baseline Scenario — Tue, 03 Feb 2009 02:27:25 +0000

[...] countries on board, at least in terms of broadly supporting the need for more funding. The writing on the eurozone wall probably helped – if the IMF is called upon in Western Europe, it needs to have a considerable [...]

By: Kevin Casey

Kevin Casey — Mon, 26 Jan 2009 00:43:59 +0000

So if we assume the world economy needs 2% stimulus, and that economy is roughly US $70 trillion that implies $1.4 trillion of necessary stimulus. The US gov’t (in all its various forms) is now talking about $1 – $2 trillion in stimulus – mostly increased gov’t spending. In spite of this, markets do not seem to believe this will provide an adequate solution – as gauged by various global stock markets’ reactions so far.

Therefore, I would argue this is a nice theory. But, the issue is not only how much is spent, but HOW it is spent. And so far, no one is quite sure how the money will be spent. My fear is it will be far too much in “pork barrel” projects and far too little in incentivizing future productive behavior and spending with true long term benefit.

Not all spending is created equal.

Not all spending is productive.

Not all spending incentivizes productive growth…Witness the essentially useless US tax rebates of 2008 now burdening our children and their children…

By: Rob Viglione

Rob Viglione — Sat, 24 Jan 2009 19:41:11 +0000

The rest of the world would be better off long term to let the USD slide to where it truly belongs. This would bring near term economic pain, but longer term healthy realignment of purchasing power for countries that save, invest, and conduct sound fiscal and monetary policies.

This ridiculous race to the currency bottom will rob global savers through inevitable inflation, which will take its biggest toll on the poor and middle class.

Policy objectives should be to promote healthy, sustainable behavior. American, Greek, and Italian behaviors are not the example to which we should be holding the rest of the world!

By: The Long Bond Yield Also Rises « The Baseline Scenario

The Long Bond Yield Also Rises « The Baseline Scenario — Fri, 23 Jan 2009 14:25:56 +0000

[...] leave a comment » The spread between Greek government 10-year bonds and the equivalent German government securities rose sharply this week – Greek debt at this maturity now yields 6.0% vs. German debt at 3.1%. Other weaker eurozone countries appear to be on a similar trajectory (e.g., Irish 10 year government debt is yielding 5.8%) and if you don’t know who the PIIGS are, and why they are in trouble, you should find out. [...]