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Market Talk

September 2, 2010 | Real Time Economics
Federal Reserve Bank of Dallas President Richard Fisher said Wednesday the recovery of the U.S. economy “will take quite some time,” and that improved regulatory and fiscal policies are needed in order to help the process. Fisher, who isn’t a voting member of the interest-rate-setting Federal Open Market Committee this year but will be a voting member in 2011, said that an improved regulatory and fiscal environment should help to activate the economy. Business owners will accept policies they are not “happy” with because at least they will be more certain about the rules, he said.
September 2, 2010 | Morgan Stanley
We are downgrading our outlook for 2H US real growth to 2-2.5% from 3-3.5% previously. This downgrade from above-trend to below-trend 2H growth has important implications for forecasts of the unemployment rate, inflation and monetary policy. If policy does respond to this near-term weakness, the outlook in 2011 could be better than our current 3% baseline.
September 1, 2010 | Roubini Global Economics
All the tailwinds of H1 will become headwinds in H2. As state and local governments keep retrenching and even the federal stimulus diminishes, the fiscal stimulus will turn into a fiscal drag that will be much more pronounced in 2011 and after some of the 2001-03 tax cuts expire. The base effects from the lousy economic activity figures of 2009 are gone, temporary census hiring is finished and tax incentives—cash for clunkers, the investment tax credit, the first-time homebuyer tax credit and cash for green appliances—have all expired after “stealing” demand and growth from the future.
September 1, 2010 | Financial Times
JPMorgan Chase is to close the commodity unit that trades with the bank’s own money as Wall Street moves to comply with new US financial services rules banning proprietary trading. A person familiar with the matter said that the traders in the unit were told on Friday their jobs were on the line because of the bank’s decision to stop trading commodities on its own account.
September 1, 2010 | Wall Street Journal
Currency trading volume around the world has hit $4 trillion a day, fueled by investors in the wealthiest nations looking to diversify beyond their home markets in a time of economic turmoil. The $4 trillion mark represents a 20% gain from $3.3 trillion in 2007, the last time the global foreign-exchange markets were surveyed, according to the Bank for International Settlements. The debt crisis likely boosted trading volumes in the euro in the latest survey. But the continued rise in trading reflects the increased globalization of investing.
August 31, 2010 | A Helicopter Drop for the Treasury
The US may be near a liquidity trap. This column argues that the ineffectiveness of monetary policy can be turned on its head by using money creation to finance fiscal policy stimulus – such as a large but temporary cut in sales taxes. To avoid future problems, the Treasury could commit to transfer resources back to the Fed when the economy is back to full employment. This would be a helicopter drop with a drainage contingency.
August 31, 2010 | Financial Times
The pace of consumer spending picked up in July, even as income growth remained tepid, signalling that demand is holding up in spite of persistent unemployment and a wavering economic recovery. Personal consumption expenditure rose 0.4 per cent last month. The increase was bigger than economists had projected and purchases were concentrated on long-lasting durable goods such as cars.
August 30, 2010 | DMarron.com
As expected, BEA’s second stab at GDP growth for the second quarter was even less inspiring than the first. Headline growth was a tepid 1.6%, down from the 2.4% previously reported. Consumer spending and business spending on equipment and software were actually stronger than earlier estimates, but business structures, inventories, and exports all weakened, while imports (which deduct from GDP the way BEA calculates it) grew faster than previously expected.
August 30, 2010 | Wells Fargo
Subpar recovery in housing had been our expectation but this week’s existing and new home sales data reinforced that the old themes of consumer deleveraging and the long-term workout for the U.S. economy remain in place. Our outlook for the second half of this year is for sub 2 percent growth and housing continuing its slow workout. Real growth in the second quarter was revised down to 1.6 percent due to weaker trade and inventories.
August 27, 2010 | Washington Post

A widening U.S. trade deficit has become a substantial drag on economic growth as the country's exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods. The rise in the trade deficit, including an abrupt 16 percent spike in June, is a chief reason economists are downgrading estimates for recent U.S. economic growth.