Republicans say he will bankrupt the country... Inspite of Obama scrambling to woo top bankers and financiers to back its latest bailout plan, including the famous/infamous 'not acting in anger'maxim for the AIG bonuses, he could not escape the skeptical Americans, with the businesses from startups to global giants to drugmakers and farmers gearing up to fight the Prez's spending plan with ad campaigns and public protests...
The question: Can the markets digest this enormous amount of new paper without pushing up interest rates on longer-term securities or crowding out private sector borrowings, as investers choose the relative safety of Treasury notes over corporate bonds? If this flood of new supply hits the bond maket amid insufficient demand, bond prices will fall, driving their yields higher in order to attract buyers. The yield on 10-year Treasuries has risen from 2.1% two months ago to 3% on Mar 4, a factor that has kept fixed-mortagage rates higher than they would be otherwise.
In the current economic climate, however, the administration should be able to finance its stimulus efforts with little difficulty. That's because Treasury rates turn on two things: investors' expectations of inflation and their appetite for risk. Deflation is more of a concern right now.
By asking only the richest 2% of Americans to pay more, Mr Obama is building his vision of a more activist govt on a shaky foundation.
Then there is another school of thought which opines that it is hard to fathom how they are going to make a profound impact on reducing the deficit at a time when they don't know the extent to which govt. will need to ensure the stability of the markets and economy...
The massive spending plan in the midst of a prolonged recession.. would it actually leave the next generation with a country too inexpensive to live in ?
The question: Can the markets digest this enormous amount of new paper without pushing up interest rates on longer-term securities or crowding out private sector borrowings, as investers choose the relative safety of Treasury notes over corporate bonds? If this flood of new supply hits the bond maket amid insufficient demand, bond prices will fall, driving their yields higher in order to attract buyers. The yield on 10-year Treasuries has risen from 2.1% two months ago to 3% on Mar 4, a factor that has kept fixed-mortagage rates higher than they would be otherwise.
In the current economic climate, however, the administration should be able to finance its stimulus efforts with little difficulty. That's because Treasury rates turn on two things: investors' expectations of inflation and their appetite for risk. Deflation is more of a concern right now.
By asking only the richest 2% of Americans to pay more, Mr Obama is building his vision of a more activist govt on a shaky foundation.
Then there is another school of thought which opines that it is hard to fathom how they are going to make a profound impact on reducing the deficit at a time when they don't know the extent to which govt. will need to ensure the stability of the markets and economy...
The massive spending plan in the midst of a prolonged recession.. would it actually leave the next generation with a country too inexpensive to live in ?
M a Keynesian n believes in doin smthin in present rather than thinkin bout future. May be d efforts by obama may nt be sufficient enough 2 save d economy bt HOPE is wat v live fr.........
ReplyDeleteSory bt i go wid Obama nt Gobama.....
great and much awaited article.
ReplyDeletei think they are right according to the principals of macroeconomics. AIG bonus- i don't think that this can make any change to the working style of the peoples there and more importaint the cost of living and the cost of labour there. the AIG bonus is an short term strategy for giving some cousins to the pblic, but this will shows its effect in the long run also, and that will surely a dramatic one, because what happen in the past can again repeat itself in future and trully this time america will die.
well said that when your foundation stone is weak, how could you think about the stregth of your building.
Forget about the deficit, the pertinent question that should be addressed is; where is all this money that is being pumped into the US economy going into, private coffers or to the same 2% of the affluent Americans?
ReplyDeleteIt cant be said that obama is wrong though many may argue that what he did will not Work for USA.speaking broadly he is trying to implement a multiplier effect in the economy.it would be interesting to see how his ideas n strategy work...
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