Wednesday, September 23, 2009

The risk has always been that they would take away support too soon, and that's what they're doing



Headline speaks for itself. This weekend Obama will promise to the G20 that he will reduce the U.S. deficit. Bye bye rally!!

3 comments:

Mike Sandifer said...

Was it '37 or '38 when Roosevelt did much of the same thing? Oh well, at least they're not bowing to political pressure.

Mike Norman said...

Mike, yeah...'37 and we went into the mini depression of 37-38.

googleheim said...

This is strange.

Obama is asked to do something that hinders the USA performance and makes the dollar stronger against said other G20 members ?

This is mixed up.

1. A deficit would make the dollar weaken promoting exports and raise oil prices.

2. Why would the USA listen to competitors who are telling the USA not to create credits or funds which build assets instantaneously ? It's like Michael Jordon sitting on the bench because Team Argentina told him not to play hard and party hard since that would make him tired or something.

3. Not creating the temporary deficit means no growth for the USA and therefore for everyone and we're back to a run on the dollar.

I'd like to point out that somehow Frischberg and Lauffer might think that the monetary base ballooned due to printing of money - but that is not true since the run to the dollar expanded the monetary base - vis a vis late last year.