The Federal Reserve is continuing its quantitative easing policy as part of its monetary strategy. Despite an abundance of critics advocating for a reevaluation of QE2, the recent FOMC statement did not address these concerns. It stated, “To promote a more vigorous economic recovery and ensure that inflation remains aligned with its mandate, the Committee has decided to keep expanding its securities holdings as announced in November.”
Retail sales have experienced another increase in November, marking the fifth consecutive month of growth, according to the U.S. Census Bureau’s report. Last month’s 0.8% rise brings seasonally adjusted retail sales to just under the all-time peak achieved in November 2007, right before the onset of the Great Recession. It’s becoming increasingly difficult to argue that consumer spending is settling into a pattern of self-imposed saving and austerity. While it’s still premature to completely discard that idea, the current trends suggest it is a less likely outcome.
►Senate vote sets stage for approval of tax-cut bill
Shailagh Murray and Lori Montgomery/Washington Post/Dec 14
In an unprecedented bipartisan effort, Republicans and Democrats in the Senate advanced a plan to extend tax cuts for nearly all Americans, promoting economic recovery. This package is projected to increase deficits by $858 billion over the next ten years, with around $545 billion attributed to a two-year extension of income tax reductions introduced in 2001, along with adjustments to the alternative minimum tax for inflation through 2011, shielding over 20 million primarily middle-income taxpayers from significantly higher taxes.
►Summers Warns Against Permanent Tax Cuts
Damian Paletta/Wall Street Journal/Dec 13
Lawrence Summers, a leading economic advisor to President Obama, acknowledged the benefits of the tax-cut compromise but cautioned Congress against making some cuts permanent when they are set to expire in two years.
This time of year is synonymous with predictions. Although forecasts abound throughout the year, the close of the calendar often spurs an increase in such predictions. This year is no exception, with a plethora of newly minted forecasts appearing as the year winds down. The challenge remains—determining which forecasts hold substantial validity for the months and years to come.
● Uprising: Will Emerging Markets Shape or Shake the World Economy?
By George Magnus
Review via Financial Times
Unlike many investment bankers today, Magnus adopts a cautious stance toward emerging markets. The rush to invest in China, India, Brazil, and others often overlooks significant risks. He rightly emphasizes that financial instability frequently coincides with excessive optimism, leading to disastrous outcomes.
● Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
By Anatole Kaletsky
Summary via publisher, Public Affairs
In this thought-provoking book, Kaletsky reinterprets the financial crisis as part of the evolutionary trajectory inherent in democratic capitalism. He argues that capitalism is resilient, having evolved through distinct phases: Capitalism 1.0, characterized by classical laissez-faire principles from 1776 to 1930; Capitalism 2.0, the New Deal Keynesian model from the 1930s to the 1970s; and Capitalism 3.0, marked by Reagan-Thatcher market fundamentals, which culminated in the 2009-10 recession. As we move forward, Capitalism 4.0 is set to emerge, promising a transformation that diverges from both the deregulated approaches of Reagan/Thatcher and the Roosevelt-Kennedy era.
►Obama ‘Confident’ Congress Will Pass Tax Deal
Scott Horsley/NPR/Dec 10
Despite strong pushback from members within his own party, President Obama expressed confidence that Congress will ultimately approve the tax cut deal he brokered with congressional Republicans.
►Liberal Democrats: We won’t support tax deal without changes
Todd Spangler and staff/Detroit Free Press/Dec 10
Liberal Democrats in the House issued a stern warning, stating they would not endorse the President’s agreement with Senate Republicans to extend unemployment benefits and maintain stable tax rates without modifications.
Last week we made the case that a recent drop in new jobless claims was not merely a result of statistical anomalies. This assertion faced scrutiny after examining figures through November 27, which showed a notable spike. However, we maintained our perspective on an overall downward trend, a viewpoint that was reinforced by this morning’s updated statistics. Indeed, the latest report indicated an encouraging decrease of 17,000 in initial jobless claims last week. Yet, while the seasonally adjusted figures offer a glimmer of hope, a potential new challenge to job growth may arise when we consider the unadjusted jobless claims data from last week.
Is the agreement to extend the Bush tax cuts in jeopardy? Growing concerns are surfacing today, raising questions about the anticipated economic stimulus effects that the markets expected following the tax deal announcement earlier this week.
During his “60 Minutes” appearance on Sunday, Federal Reserve Chairman Ben Bernanke highlighted the central bank’s capability to raise interest rates within a mere 15 minutes. The bond market, similarly, can swiftly influence the prices and yields of fixed-income assets, as demonstrated in this week’s trading.
The Bush tax cuts will be extended for an additional two years, along with a one-year reduction in the payroll tax. Harvard economist Greg Mankiw expressed general satisfaction with the compromise reached between the President and Republicans. However, an informal survey of reactions reveals that pleasure is not the prevailing sentiment.
In this revised version, the article presents a clearer and more cohesive narrative, maintaining all key elements and original structure, while enhancing readability and flow. The content now effectively captures the economic landscape, including the Federal Reserve’s policies and market reactions, while providing a well-rounded conclusion.
