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Tag Archives: fiscal stimulus

Will Monetary or Fiscal Stimulus Turnaround the Next Recession?

A recession is emerging with interest rate curves inverted, the end of the business cycle at hand, world trade falling, and consumers and businesses beginning to pull back on spending.  The question is: will monetary or fiscal stimulus turn around a recession?  In this post, we find both stimulus alternatives likely to be too weak to have the necessary economic impact to lift the economy out of a recession. Finally, we will identify the key characteristics of a coming recession and the...

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Germany’s Superstimulus; Or, The Familiar (Dollar) Disorder of Bumbling Failure

The Economics textbook says that when faced with a downturn, the central bank turns to easing and the central government starts borrowing and spending. This combined “stimulus” approach will fill in the troughs without shaving off the peaks; at least according to neo-Keynesian doctrine. The point is to raise what these Economists call aggregate demand. If everyday folks don’t want to spend – because a lot of them can’t – then the government will spend on their behalf. And the central bank...

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China’s Blowout IP, Frugal Stimulus, and Sinking Capex

It had been 55 months, nearly five years since China’s vast and troubled industrial sector had seen growth better than 8%. Not since the first sparks of the rising dollar, Euro$ #3’s worst, had Industrial Production been better than that mark. What used to be a floor had seemingly become an unbreakable ceiling over this past half a decade. According to Chinese estimates, IP in March 2019 was 8.5% more than it was in March 2018. That was far more than was expected, and much improved from...

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More Ugly Chinese Economic Data

The fiscal stimulus and trade concessions cometh? The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for December, released on Wednesday, fell to 49.7 from 50.2 in November, marking the first contraction since May 2017. Economists polled by Reuters had forecast only a marginal dip from November to 50.1, just above the neutral 50-mark dividing expansion from contraction on a monthly basis. New orders — an indicator of future activity — fell for the first time in two and a...

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The Austerity Path

What happened to the recovery? It’s a complex question with a surprisingly simple answer. The density of the topic, particularly entangled as it was in close proximity to the calamity of the Great “Recession”, clouded the diagnosis. If you ask ten different academic economists you might get ten different answers, though I suspect seven or eight of them would be variations on one general theme. Writing in November 2015, New York Times political columnist Paul Krugman (he long ago departed...

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Fiscal ‘Stimulus’ Will Be Starting From Less Than Zero

For a “reflation” regime predicated as much on government spending, it was an inauspicious start. Construction spending fell sharply in January, as lackluster growth in the private sector could not offset sharp declines in government activity. At the state and local level, construction spending fell nearly 5% from December (seasonally-adjusted), while at the federal level spending dropped more than 7%. There isn’t any great mystery here as to why that was, since particularly federal activity...

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