Skip to comments.BoA sees US double-dip danger from `fiscal chicken' [Fiscal Tightening]
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."
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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 ...
When did the recession end?
We just keep swirling down the bowl.
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.
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.
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.
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!
I thought we had a fiscal chicken in every pot?
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.
I see lots of men out scrapping.
40 year olds asking to cut the grass for $25
Did I mention it was 107 deg today?
People are beating themselves to death to get a piece of work.
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.
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.
Choking the fiscal chicken?
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.
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.
I had to laugh! I woke up one morning and they said the recession was over while they fidgeted and fudged with the numbers.
We build bridges with 25 men and a lot of heavy equiptment.
It will take a new President 10 minutes to undo most of the damage. Then the recovery can begin.
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.
The shovels are huge Manitawoc and American Cranes. Earth Movers and Backhoes.
It’s only a double dip if you use the cooked govt data.
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