Salient to Investors: Austerity policies are self-defeating because they cripple growth and reduce tax revenues. Cutting government spending causes output to fall, tax revenues to fall, and benefit spending to rise, ending almost invariably in slower growth or recession, and high budget deficits. The proper reaction to a negative external shock is to loosen fiscal policy,
READ MORE... →Salient to Investors: Bradley Belt and Jared Bernstein at Milken Institute, William Gale at Brookings, Phillip Swagel at Milken Institute and University of Maryland say: Avoiding the fiscal cliff may be beyond the strained US political system – even kicking the can down the road requires one side to give ground on a core belief. Let all tax cuts
READ MORE... →Salient to Investors: Caroline Baum says: the effect of raising tax rates on labor supply is small since most don’t have the option to work less. the cut in marginal rates is minimal compared with earlier cuts from 70 percent to 50 percent to 28 percent in 2001 and 2003, which were followed by a decade of mediocre
READ MORE... →Salient to Investors: David Rosenberg at Gluskin Sheff said: the economy is stuck in the mud and it will be a wageless recovery – the fiscal cliff would trigger a recession. Housing is bottoming out. and banking is on the mend and banks are more willing to lend money. likes gold-mining stocks and utilities, dividend-paying healthcare, utility and consumer-staples stocks. likes
READ MORE... →Salient to Investors: A Bloomberg Government study says $4 trillion of spending cuts and tax increases over 10 years envisioned by Democrats and Republicans would be inadequate as a long-term fix – $6 trillion in deficit reduction will be needed in the next decade as a minimum down payment for a sounder fiscal footing.
READ MORE... →Salient to Investors: Robert Gates said: While ground forces will undoubtedly get smaller, we must not get fixed on the idea that high technology is the only answer to military challenges. “No matter how a war starts it always ends in mud” – General Stillwell WWII Pentagon bureaucracy is structured to plan for
READ MORE... →Salient to Investors: Joshua Shapiro at Maria Fiorini Ramirez the US economy will grow 1.5 percent in 2013. monetary policy is having a limited near-term impact on growth the $1 trillion U.S. fiscal deficit is an important drag on future expansion. adjustments that affect the economy are all very long-term and are
READ MORE... →Salient to Investors: Jan Hatzius at Goldman Sachs said the private sector surpluses is the mirror image of public sector deficits. Hatzius says the economic crisis will end in 2013, followed by US growth over 3%. After 2013, the US economy will benefit significantly from a relevering private sector (lower savings) with the worst of the fiscal drag coming to
READ MORE... →Salient to Investors: Jeffrey Gundlach at DoubleLine Capital says: The first phase of the coming debacle was the 27-year buildup of corporate, personal and sovereign debt to 2008. The third phase will be deeply indebted countries and companies defaulting sometime after 2013. Buy gemstones, art and commercial real estate and other hard assets. Chinese
READ MORE... →Salient to Investors: Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ said the economy is growing moderately, and the disappointing pace of consumer spending is less worrisome as other sectors of the economy are doing better, like housing. The median economist expects consumer spending to be at a 1.9 percent pace in Q3, and GDP to
READ MORE... →