The primary drag on economic recovery is the sheer size of US household debt. It will take many years to bring the averages down. The following excerpt tells us a lot: “From 1952 to 1979, the average ratio of household debt to gross disposable income was 57%, but over the past three decades the averages steadily, and then dramatically, climbed higher. In the 1980s, it averaged 69%; in the 1990s…
Despite the negative economic outlook by the Fed on US and global growth, as well as the concerns in Europe regarding sovereign defaults, US leading economic indicators actually rose last month. The primary reason is due to an increase in the money supply, because consumers are reserving their cash, keeping it in bank accounts. This is a long-term positive, because it will lead to more money to lend in the…
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A budget deal and an increase in the debt limit. Both need to happen. The question is what is the time-frame and is it credible? The longer the country waits for a solution, the more volatile US treasuries and the equity markets become. The one thing the markets do not like more then anything else, is uncertainty. (Click here to read Bloomberg.com article)
In emerging markets, a deficit greater then 4% of GDP is high. While a developed economy has more consistent revenues and a more diversified economy, a deficit to GDP ratio of 10% is detrimental to growth. MAJOR deficit reduction initiatives must be enacted to meet this short-fall. If last week’s budget battle was an indication, its going to be rough-riding for all. (Click here to read Bloomberg.com article)
Encouraging: “Installation of solar PV systems will almost double to 32.6 gigawatts by 2013 from 18.6 gigawatts last year, New Energy Finance estimates. Manufacturing capacity worldwide has almost quadrupled since 2008 to 27.5 gigawatts, and 12 gigawatts of production will be added this year. Canadian Solar has about 1.3 gigawatts of capacity and expects to reach 2 gigawatts next year, Qu said.” (Click here to read Bloomberg.com article)
The level of global financial market integration is truly underestimated by most investors: “Overseas banks accounted for about 70 percent of discount window loans when borrowing reached its peak of $113.7 billion in October 2008, according to the Fed’s data. The discount window, established in 1914, is known as the lender of last resort.” (Click here to read Bloomberg.com article)
The unemployment rate dropping to 8.8% is a milestone. Combine this data with the continued strength in manufacturing and you have an optimistic outlook for continued growth in employment. Despite the ugly real estate outlook, the economy continues to expand and employment is growing. Biggest hurdle left is the deficit and what moves can be made to lower it, without slowing economic progress. (Click here to read article)
This is good perspective on how the US recovery is shaping up, relative to our European counterparts. The focus is on an expansive fiscal and monetary policy approach verses austerity measures or less expansive fiscal and monetary policy approach. (Click here to read Fidelity article)
The drop in the unemployment, despite the slow growth in farm payrolls, is a good sign for the economy. I think it is likely we’ll see this number drop to close to 8% by year-end, but given the structural unemployment issues, extended unemployment benefits and older generations not retiring, these issues create a lot of upward pressure on that number and will take time to drop below 8%. (Click here…
