Short blog w/ great graphic on sources of U.S. Fiscal Deficit

from theincidentaleconomist.com

If you’re looking for two different perspectives on the House Republicans’ “Pledge to America,” to be officially unveiled later today, see Ezra Klein and Avik Roy. For a concise summary of what’s in it on health care and how it relates to current law, see Igor Volsky. I want to focus on just one thing, and it isn’t really about the Pledge, though it relates to something Avik wrote in reaction to it.

Importantly, the Pledge says almost nothing about the biggest and most difficult questions in health policy: Medicare and Medicaid reform. It criticizes PPACA’s “massive Medicare cuts” without offering an alternative solution for putting the program on stable long-term footing.

If there is one thing I would love for all Americans to have in mind when evaluating politicians’ pronouncements about what we have done or should do with respect to government health spending it is this graph of projected federal revenue and spending as a percent of GDP, from the CBO:

Financial Crisis Recovery - Japan vs. USA - has great Balance of Payments graphic

from Blog: Gonzalo Lira
Japan went through an equities and real estate boom during the 1980’s—a boom that was really a bubble. And like all bubbles, it eventually burst in 1990.
Since then, Japan has been lost. Equities have never again reached the heights of 1990, nor have real estate prices. The Japanese government has spent a fabulous amount of money for domestic stimulus, creating the most modern infrastructure on earth—yet it hasn’t helped at all. GDP has been anemic, as the population slowly begins to shrink. Japan is in full-on deflation—in every sense of the word.
Now that the United States has had its own real-estate bubble pricked, a lot of smart people have been selling the idea that the U.S. will experience what Japan has experienced: Persistently sluggish growth. Continued fiscal deficits, carried out by the Federal government in order to prop up aggregate demand by way of various stimulus programs. Slow and painful working out of the debt overhang. All of this happening within a deflationary environment, whereby the dollar—just like the yen in Japan—accrues value, as full-throttle deflation sets in.
In other words, this camp believes America is set to begin its own version of Japan’s Lost Decades. This camp falls for what I call the “Japan Is Us” fallacy—and they are wrong.

Jade - another indicator of liquidity preference?

By: Patrick Chovanec

 

The New York Times had an intriguing story yesterday on the skyrocketing price of jade in China. According to the article, the demand for jade among China’s newly rich “appears to have reached a frenzy in the past year or two.” The price of the finest jade has increased tenfold over the past decade, to $3000 an ounce, making it far more valuable than gold.

10 Bold (& intelligent) Predictions for the Next 12 Months

By David Sterman
Even as you continually assess current events for any impact on your portfolio, you also need to spend time thinking about what events may be on the horizon. And although none of us has a crystal ball, it's important to try to anticipate the direction of economics, sector activity, politics and virtually any other issues that may affect the investment environment.
The list below contains possible scenarios for the next 12 months that could impact your portfolio in a meaningful way.

China: Outlook for Inflation and Interest Rates

  by: China Analytics September 20, 2010  

The slight increase to China’s consumer price index (CPI) August has raised speculation that the PBOC may increase interest rates in the near future. We do not think that this is likely, as controls on credit aggregates appear to be having the intended effect of slowing growth to new investment.