Showing posts with label Peter G. Peterson Foundation. Show all posts
Showing posts with label Peter G. Peterson Foundation. Show all posts

Tuesday, May 23, 2017

2017 Fiscal Summit by Henry Zhang, Impact Investing Intern, University of Toronto

The US is in major trouble, this being the gigantic amount of debt it has issued. The debt burden is getting bigger by the second and shows no sign of stopping.

For those that aren’t sure what this means, it means less public spending in the future, more inflation, and a large scale economic crisis ahead.

Major trouble attracts major attention, so on May 23rd, 2017, the well known Peter G. Peterson Foundation hosted the 2017 Fiscal Summit, with prominent speakers like Senator John McCain, Senator Mark Warner, House Democratic Leader Nancy Pelosi (and many others) all convening to discuss the national debt, the current political landscape, and implications of the debt for the nation's future.

The key message from the conference is this: nothing can be done and nothing will be done unless the Republicans and the Democrats work together. Right now, there’s little hope for that.

Bipartisanship is an unknown land at this point, and very, very far away, since each party sees the other as the major threat to the nation's well being. In Congress, there is a lot of quarreling going in and nothing coming out. Whatever the Democrats propose, Republicans oppose. The problem is further complicated by tension between the new White House and the Congress. When the White House tries to propose legislation to the Congress, it is met by fierce opposition and disapproval. Healthcare reform is a good example. Tax reform is another.

Even with Republicans controlling the White House, the Senate, and the House of Representatives, problems aren’t solved and in fact the situation is made worse. And remember, this is not the right time to do nothing. The national debt is at a dangerously high level and it keeps on rising. Interest charges are growing at an alarming rate and eating away a major chunk of tax revenue. The result: public spending’s are getting squeezed by interest payments.

Things need to be done right now, even at the cost of some pain-there are no painless solutions at this point: either you cut spending, increase taxes, or print more money. Each has its adverse effects on parts or all of society. However, it would be less painful to fix the problem right now than to fix the problem later by "kicking the can down the road."

The longer the wait, the harder the fix.

Another complication is the Trump/Russia investigation, made ever more difficult by the firing of FBI director James Comey. During one of the sessions, Senator Mark Warner gave a firm stance on the issue, he will relentlessly pursue the investigation until things are made clear. (Just moments ago, news of the Senator issuing a new request for documents from Michael Flynn came out.)

A tough, tough issue.

Edited by William Michael Cunningham

Thursday, May 28, 2015

US GDP Forecast

The Bureau of Economic Analysis at the U.S. Department of Commerce will release the second estimate of First Quarter 2015 US GDP on Friday at 8:30 am. Gross Domestic Product (GDP) is the the broadest measure of economic activity. Most forecasters are predicting GDP will decline by 1.0% from the earlier quarter (4th Quarter, 2014.)

Our 2015 Fully Adjusted Return® forecast for GDP suggests there will be no change, in other words, we will have a first quarter 2015 GDP estimate that reflects virtually no change, or negative 0.5%." 

The US economy is strong and getting stronger. The only thing that can damage it are policy mistakes (like raising interest rates too soon) by officials at the Federal Reserve, and this is reason to be concerned. 

Fed economic policymakers, especially the group at left: MODERATOR: BETTY LIU ANCHOR, “IN THE LOOP WITH BETTY LIU,” BLOOMBERG TELEVISION, ALAN GREENSPAN PRESIDENT, GREENSPAN ASSOCIATES; FORMER CHAIRMAN, FEDERAL RESERVE BOARD, RICHARD W. FISHER FORMER PRESIDENT AND CEO, FEDERAL RESERVE BANK OF DALLAS, LAWRENCE B. LINDSEY PRESIDENT AND CEO, THE LINDSEY GROUP; FORMER DIRECTOR, NATIONAL ECONOMIC COUNCIL UNDER PRESIDENT GEORGE W. BUSH; FORMER GOVERNOR, FEDERAL RESERVE BOARD. (At the 2015 Fiscal Summit sponsored by the Peter G. Peterson Foundation.)

These guys collectively have, as one analyst noted, made some of the worst economic forecasts EVER.  

For example, in a speech titled The Great Moderation given on February 20, 2004, Ben Bernanke, not shown above, but another former Chairman of the Federal Reserve, failed to note the risk of the then soon to be felt Great Recession that started in 2006.

We note that Bernanke now says "China's economic slowdown should not worry markets as there was no risk of a hard landing, and emphasized that a move to raise U.S. rates should be viewed as a positive sign for the world's largest economy."

As I said, reason to be concerned.