Archive for July 19th, 2010
Niall Ferguson: Ignore Low Bond Yields, The US Debt Crisis Will Come Suddenly
The easiest (and arguably laziest) retort to the deficit fear-mongers is to point to uber-low yields on US debt.
In his latest column for FT, Niall Ferguson is having none of it.
The Keynesians retort by pointing at 10-year bond yields of around 3 per cent: not much sign of inflation fears there! The anti-Keynesians point out that bond market sell-offs are seldom gradual. All it takes is one piece of bad news – a credit rating downgrade, for example – to trigger a sell-off. And it is not just inflation that bond investors fear. Foreign holders of US debt – and they account for 47 per cent of federal debt in public hands – worry about some kind of future default.
The Keynesians say the bond vigilantes are a myth. The anti-Keynesians (notably Harvard economics professor Robert Barro) say the real myth is the Keynesian multiplier, which is supposed to convert a fiscal stimulus into a significantly larger boost to aggregate demand. On the contrary, supersized deficits are denting business confidence, not least by implying higher future taxes. And so the argument goes round and around, to the great delight of the financial media as the dog days of summer set in.
As we’ve argued, this Keynesian vs. Anti-Keynesian debate is getting a tad boring, though Ferguson adds a twist, suggesting this isn’t really about stimulus vs. austerity about about policies that promote growth vs. those that stifle it.
And in Ferguson’s view, it was the lean, pro-market governments of Thatcher and Reagan that out to win out, rather than the bloated version advocated by the Krugmanites.
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Stocks Slide After Hours, As IBM Contributes To Slowdown Fears
Already markets are selling off post-bell.
Earnings from IBM aren’t helping.
FT:
Hopes for a quicker rebound were fueled last week by strong earnings from Intel. The chip company put its performance down to better demand from corporate customers, which account for the lion’s share of spending on technology.
However, IBM’s revenues grew by only 2 per cent in the second quarter of the year, half the growth rate most analysts had been expecting, prompting a 4 per cent fall in its shares in after-market trading.
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Please Obama, Don’t Spend Another Penny!
Deficit “stimulus” is not the road to economic recovery. It’s the problem, not the solution, writes Nobel laureate economist Vernon L. Smith, who grew up in Depression-era Kansas.
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Redrow leads hombuilders lower in reaction to US data
European equities markets were lower Monday after Moody’s Investors Service downgraded Ireland’s credit rating from Aa1 to Aa2, and after the US National Association of Home Builders and Wells Fargo reported that their index of home builder confidence is at 14 in its last reading, its lowest in 15 months.
The FTSE 100 was down 0.2 [...]
US home builder confidence slumps in July
The National Association of Home Builders (NAHB) today revealed a fall in confidence, sending shares lower.
Wall Street experienced falls after the US home builder sentiment index fell in July to the lowest level since April 2009 after the Government tax credit incentive expired a few months ago.
According to the index, confidence among US home builders [...]