Are You a Fiscal Conservative? And Coral Gables Government?

January 26, 2011 Leave a comment

Not enough has been done to protect us from the “too big to fail banks” doing it again.  It won’t be the same way but banks are good at inventing risk instruments that favor their balance sheet.

This is somewhat similar to the city of Coral Gables where decisions of the city commission did little to create a well run, efficient, honest and transparent government that protected taxpayers rather than the special interest groups allied with the mayor and commissioners, including the powerful labor unions.   Taxpayers need to confront the power of the city commission who keeping raising taxes and cow-towing to the unions.

Following President Obama’s State of the Union address, there is a great deal of discussion about whether we might now be edging our way towards fiscal responsibility.

Unfortunately, most of our political elite – both left and right – is still living in a land of illusions.  They cannot even seriously discuss what would be required to bring our true fiscal position under control – remember that most of the recent damage to our collective balance sheet was done by big banks blowing themselves up.  No one who refuses to confront the power of those banks can be taken seriously as a fiscal conservative.

via There Are Still No Fiscal Conservatives In The United States « The Baseline Scenario.

Filed under Coral Gables, Economy

Future of Economy according to Fed

January 15, 2011 Leave a comment

This is good news and bad news for Coral Gables.  The housing recession will continue unabated so property values are not going anywhere.  The city will be under pressure to increase taxes, no doubt.  Growth may increase the income and assets of the wealthy, and that will help the to 15 percent of so of our residents.  The retail district may see a slow increase in sales. All in all, the outlook for several years is not bright.   Any attempt to reduce federal spending will have a bad impact on the economy–stimulus is still needed.

The U.S. economy will expand at a 3.5 percent to 4 percent rate during 2011, as it is “increasingly supported by private spending,” Rosengren said in his prepared comments. Growth won’t top 4 percent because the housing market’s recovery is likely to be weaker than usual, given the tightening of lending standards and high vacancy rates, according to Rosengren.

“If housing-related growth is not going to boost the recovery this time around, we may need policy — particularly monetary policy — to continue playing a stimulative role,” said Rosengren, who doesn’t vote on monetary policy this year.

Growth of 4 percent would still leave the unemployment rate close to 9 percent at the end of 2011, a level that’s “far above anyone’s estimate of full employment,” Rosengren said.

via Rosengren Says Stimulus Needed to Lower Jobless Rate (Update1) – Bloomberg.com.

Filed under Coral Gables, Economy, National

Another Round of Financial Crises: Bill Daley Represents the Banks

January 12, 2011 Leave a comment

It is not “if”, it is “when” there will be another financial crisis, with the banks to be bailed out by the taxpayers yet again.

The banks are well represented in the White House.

Top executives at big U.S. banks want to be left alone during relatively good times – allowed to take whatever excessive risks they want, to juice their return on equity through massive leverage, to thus boost their pay and enhance their status around the world.  But at a moment of severe financial crisis, they also want someone in the White House who will whisper at just the right moment: “Mr. President, if you let this bank fail, it will trigger a worldwide financial panic and another Great Depression.  This will be worse than what happened after Lehman Brothers failed.”

Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis.

Bill Daley will get it done.

via The Bill Daley Problem « The Baseline Scenario.

Filed under Economy, National

Convergence by China and India

January 5, 2011 Leave a comment

It is truly amazing how fast China and India are catching up with the rest of the world and how powerful the absolute size of China and India will be (maybe adding Brazil) relative to the rest of the world.  It is worth reading this interesting article in FT on this subject.

Suppose China were to follow Japan’s path during the 1950s and 1960s. Then it would still have 20 years of very fast growth in front of it, reaching some 70 per cent of US output per head by 2030. At that point, its economy would be a little less than three times as large as that of the US…and larger than that of the US and western Europe combined. India is further behind. At recent rates of growth, India’s economy would be about 80 per cent of that of the US by 2030, though its gross domestic product per head would still be less than a fifth of US levels.

China is today where Japan was in 1950, relative to US levels at that time. But its output per head is far higher in absolute terms, since US levels have themselves risen threefold. Today, China’s real GDP per head is roughly where Japan’s was in the mid-1960s and South Korea’s in the mid-1980s. India’s are where Japan was in the early 1950s and South Korea in the early 1970s.

via FT.com / Comment / Op-Ed Columnists – In the grip of a great convergence.

Filed under Economy, International

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