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on November 29, 2008 04:42 PM
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Recent Developments in the U.S. Credit Markets
You are all well aware of the events that began to rattle the credit markets in August. Indeed, the media and analyst coverage of the market turbulence Apogee has been so extensive that you would have had to have gotten lost on the walking tour around Ayers Rock last July and just now found your way back to civilization to be unaware of subprime mortgages, collateralized debt obligations (CDOs), structured investment vehicles (SIVs) and the write-downs taken by several leading financial institutions. The disruptions to the orderly functioning of the financial markets have been significant, and the Fed and other central banks around the world have acted to keep those markets functioning. Beyond the troubles in financial markets, we have had an otherwise healthy economy in the U.S., with, thus far, the only other significant signs of weakening coming from continual corrections in the housing market.
The Federal Reserve took action in mid-August, first lowering the discount rate by a half percentage point at a specially convened session of the FOMC, making clear we, like all learned central bankers Trading for Beginners, had read Walter Bagehot. Then, at our regular September meeting,
we cut the federal funds rate by a half percentage point and the discount rate by the same amount. Fisher Storms on the Horizon Part 13 of 18
Clearly, once-and-for-all contributions would be an unbearable burden. Alternatively, we could address the entitlement shortfall through policy changes that would affect ourselves and future generations. For example, a permanent The Affluent Desktop Currency Trader 68 percent increase in federal income tax revenuefrom individual and corporate taxpayerswould suffice to fully fund our entitlement programs. Or we could instead divert 68 percent of current income-tax revenues from their intended uses to the entitlement system, which would accomplish the same thing.
Suppose we decided to tackle the Stock Market Genie issue solely on the spending side. It turns out that total discretionary spending in the federal budget, if maintained at its current share of GDP in perpetuity, is 3 percent larger than the entitlement shortfall. So all we would have to do to fully fund our nations entitlement programs would be to cut discretionary spending by 97 percent. But hold on. That discretionary spending includes defense and national security, education, the environment and many other areas, not just those controversial earmarks that make the evening news. All of them would have to be cutalmost eliminated, reallyto tackle this problem through discretionary spending. Accentuate The Positive
Last update : November 29, 2008 04:42 PM
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