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Market Talk

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.

A Helicopter Drop for the Treasury

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.

US Spending and Incomes Pick Up In July

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.

Further Signs of Slowdown

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.

Weekly Economic Commentary

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.

Flow of Imports Drags Down Economic Growth

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.

Focus Sharpens on Fed Chairman

August 27, 2010 | Financial Times

A steady decline in the economic data, coupled with sharp falls in the markets since the Fed’s surprise move on August 10 to stop shrinking its balance sheet, mean a ferment of interest in what the US central bank will do next. The spotlight on Ben Bernanke, Fed chairman, will therefore be even brighter than usual when he opens the conference on Friday morning with a half-hour speech on the economic outlook and the Fed’s policy response.

As Economy Slows and Fed Voices Conflict, Markets Look to Bernanke for Guidance

August 26, 2010 | Washington Post

With the housing market retreating, unemployment lingering and top officials at the Federal Reserve in open disagreement over what to do, Fed Chairman Ben S. Bernanke is under rising pressure to offer solutions in an address Friday that is likely to be his most important since the end of the financial crisis. The central bank's policy intentions have been unusually muddled in the past two months, according to a widespread view among economists and people in the financial world.

Durable Goods Orders Surprisingly Weak

August 26, 2010 | Wells Fargo

Durable goods orders for July increased a meager 0.3 percent in July, which were far weaker than consensus expectations. Even worse, excluding volatile transportation, new orders fell 3.8 percent. Outside of the increases in non-defense aircraft orders and vehicles and parts orders which rose 75.9 percent and 5.3 percent respectively, durable orders hit a rough patch in July. Though it is important to note that orders can be volatile month to month and are still up 8.6 percent from a year ago.

Another Record Low for Housing

August 26, 2010 | Economix

New-home sales were at their lowest level in July since the government began keeping track in 1963. This follows a comparably terrible report on Tuesday on existing-home sales. It’s now looking increasingly as though residential investment will be a strong drag on economic growth in the third quarter. As a result of the housing and durable goods reports on Wednesday, Macroeconomic Advisers, a respected forecaster, has lowered its third-quarter gross domestic product estimate to an annual rate of 1.7 percent. On Tuesday, its forecast was 2.1 percent.