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BoA sees US double-dip danger from `fiscal chicken' [Fiscal Tightening]
Telegraph (UK) ^ | 6:16PM BST 23 Aug 2010 | By Ambrose Evans-Pritchard

Posted on 08/23/2010 8:57:07 PM PDT by DeaconBenjamin

Ethan Harris, the bank's chief North American economist, said early data for August suggest that "an already weak recovery is getting weaker" with a rising risk of a relapse into recession, yet the two parties seemed determined to outbid each other with austerity measures.

"Politicians are clamouring for quick action, not to stimulate a dangerously weak economy, but to bring down the budget deficit. We strongly support efforts to bring down the deficit, but only once the economy is on a healthy growth trajectory," Mr Harris said.

The Democrats want to see an end to the Bush tax cuts for the wealthy: the Republicans want to cancel infrastructure projects designed to keep the building industry alive, arguing that it crowds out private enterprise

"The most pressing concern to us is that absent new legislation, all of the Bush tax cuts expire at the end of this year. We estimate that would represent a 2pc hit to household income. If such an increase were not reversed, we believe it could trigger a double-dip recession."

* * *

The Congressional Budget Office estimates that fiscal policy will swing from boost equal to 2pc of GDP (annualised) earlier this year to a withdrawal of 2pc by late next year, without a change of policy. This risks a shock to the system at a time when then inventory cycle is fading and the economy has failed to reach "escape velocity".

Yet a view is taking hold on Capitol Hill that federal spending is out of control and has itself become the main threat to durable recovery. "More people believe that Elvis Presley is alive than the stimulus created jobs," said Congressman Kevin McCarthy, a leader of the Tea Party movement.

(Excerpt) Read more at telegraph.co.uk ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: good; riddance

1 posted on 08/23/2010 8:57:09 PM PDT by DeaconBenjamin
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To: DeaconBenjamin

When did the recession end?

We just keep swirling down the bowl.


2 posted on 08/23/2010 9:01:08 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: DeaconBenjamin
a rising risk of a relapse into recession, yet the two parties seemed determined to outbid each other with austerity measures.

An implicit assumption here that Keynesian economics is correct.

Ten years ago, this would have been unthinkable. Keynes was wrong, wrong, wrong. Tons of evidence for knowing that he was wrong. Tons of evidence showing that supply side economics was absolutely correct.

And yet, magically, with no supporting evidence of any kind, a great many pundits have decided that massive government borrowing is the best way to get out of debt. It's madness.

3 posted on 08/23/2010 9:07:14 PM PDT by ClearCase_guy
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To: DeaconBenjamin
The Democrats want to see an end to the Bush tax cuts for the wealthy: the Republicans want to cancel infrastructure projects designed to keep the building industry alive

This isn't 1930. Everyone's not going to go out and grab a shovel and start building dams. People today are not going to get their hands dirty and revive America.

4 posted on 08/23/2010 9:08:38 PM PDT by TheThinker (Communists: taking over the world one kooky doomsday scenario at a time.)
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To: mylife

Bump!


5 posted on 08/23/2010 9:08:46 PM PDT by bushwon ("If you think healthcare is expensive now, wait till it is free"--PJ O'rourke)
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To: DeaconBenjamin

Deep budget cuts: we win.
Default: we win.

Things may be a little tough along the way, but it’s a win-win situation for anyone who doesn’t like big government. Granted, those who derive their income from government or government-dependent businesses won’t like it.


6 posted on 08/23/2010 9:10:36 PM PDT by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: DeaconBenjamin

My fiscal chicken was cooked and eaten. Now, with reduced work hours and no health or life insurance, my goose is cooked. After that, unemployment and starvation.

Gee, Obama. That “Hope” and Change” thingy really worked. Now I have no “hope” and no “change”, and soon, no job.

On behalf of my family, Fu*k You, you red bastard!


7 posted on 08/23/2010 9:12:05 PM PDT by MadMax, the Grinning Reaper
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To: TheThinker
"This isn't 1930. Everyone's not going to go out and grab a shovel and start building dams. People today are not going to get their hands dirty and revive America."

Agreed that this is not 1930. ;-) Also agreed that not everyone will do hard labor.

But due to regulations, it's illegal in my state for most landowners to build even small dams for ponds, to build sturdy wind turbines, or to do any auto repairs on their properties for profit. After the government defaults and closings of regulatory enforcement offices, many American men will start working. Lazy revenue-suckers won't be working then, but they're not working now, either.


8 posted on 08/23/2010 9:21:32 PM PDT by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: MadMax, the Grinning Reaper

I thought we had a fiscal chicken in every pot?


9 posted on 08/23/2010 9:23:51 PM PDT by DeaconBenjamin (A trillion here, a trillion there, soon you're NOT talking real money)
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To: familyop

My point is that the Democrats have posited an indefensible position, a straw man, instead of a worthwhile idea that might actually bring America out of its economic doldrums.


10 posted on 08/23/2010 9:27:24 PM PDT by TheThinker (Communists: taking over the world one kooky doomsday scenario at a time.)
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To: familyop

I see lots of men out scrapping.

40 year olds asking to cut the grass for $25


11 posted on 08/23/2010 9:28:34 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: TheThinker

Agreed.


12 posted on 08/23/2010 9:28:55 PM PDT by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: All

Did I mention it was 107 deg today?

People are beating themselves to death to get a piece of work.


13 posted on 08/23/2010 9:31:06 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: mylife

I’ve heard of neighbors (younger men) doing the same in construction and technical work. It appears that they’re replacing those who were licensed and working during recent years past.


14 posted on 08/23/2010 9:34:03 PM PDT by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: mylife

Recession will end when the true prices of goods hit real bottom and a reasonable amount of debt is paid off by real profits and savings. Judging from the size of private, government and business debt, experts say about 10 years assuming the three groups do not add more debt to the existing total. Wall Street banks are the ones that will take severe losses because they overleveraged and borrowed. They are fighting hard to have government cover their losses and prevent further drop in stock and asset prices which is impossible given demand has dropped and there is excessive production capacity and supply of goods. As long as the Wall Street bankers resist deflation by lobbying government to keep stimulating and printing currency, our recovery will be delayed. People who have money will sit on the sidelines because they will not buy assets that will drop in value. Hitting rock bottom will not be pleasant because there will be more losses and unemployment. We need to go thru this process before money on the sidelines will step in and buyout the bankrupted companies and reset the economy financialy.
It is like having something in your stomach that will make you want to puke. Resisting the unpleasant act of putting your head over the toilet to throw up will delay your recovery.


15 posted on 08/23/2010 9:43:33 PM PDT by Fee
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To: DeaconBenjamin

Choking the fiscal chicken?


16 posted on 08/23/2010 9:53:29 PM PDT by Wally_Kalbacken
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To: Fee
I agree with every point in your post.

It makes sense to me that the deeper we go in debt to prop up failures, the worse the inevitable hangover will be. My understanding is the measures we took in the 1930's are dwarfed by what we are doing now.

If both of the above are true, that means we're in for a nasty, prolonged depression.

17 posted on 08/23/2010 9:56:12 PM PDT by Ken H
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To: mylife

During a brief period sometime in the second half of last year, the economy experienced a stagnation-recovery characterized by modestly negative economic growth and slower than shockingly escalating unemployment. The economy now is heading toward full-scale collapse, a situation largely hidden from the American people until the first Wednesday after the first Monday of November, whence the Democrats in Congress will have secured their reelections.


18 posted on 08/23/2010 9:58:28 PM PDT by dufekin (Name our lead enemy: Islamic Republic of Iran, Mahmoud Ahmadinejad, Islamofascist terrorist dictator)
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To: dufekin

I had to laugh! I woke up one morning and they said the recession was over while they fidgeted and fudged with the numbers.


19 posted on 08/23/2010 10:05:02 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: Ken H
von Mises of the Austrian School nailed it. Its the DEBT, folks...
20 posted on 08/23/2010 10:32:09 PM PDT by April Lexington (Study the constitution so you know what they are taking away!)
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To: TheThinker

We build bridges with 25 men and a lot of heavy equiptment.


21 posted on 08/23/2010 11:36:37 PM PDT by screaminsunshine (m)
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To: Ken H

It will take a new President 10 minutes to undo most of the damage. Then the recovery can begin.


22 posted on 08/23/2010 11:39:09 PM PDT by screaminsunshine (m)
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To: screaminsunshine
We build bridges with 25 men and a lot of heavy equiptment.

Your right, we don't need that many workers. There's not going to be as many construction jobs as in the Great Depression because machinery replaced all the workers.

23 posted on 08/24/2010 12:09:24 AM PDT by TheThinker (Communists: taking over the world one kooky doomsday scenario at a time.)
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To: TheThinker

The shovels are huge Manitawoc and American Cranes. Earth Movers and Backhoes.


24 posted on 08/24/2010 1:02:16 AM PDT by screaminsunshine (m)
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To: mylife

It’s only a double dip if you use the cooked govt data.


25 posted on 08/24/2010 1:18:30 AM PDT by rawcatslyentist (Jeremiah 50:31 Behold, I am against you, O you most proud, said the Lord God of hosts.)
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