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The euphoria that followed word from China over the weekend that they will allow the yuan to appreciate – a move that was no doubt timed to focus attention on the euro and take the heat off of their currency issues at the upcoming G-20 meeting – sure has faded fast.
From the Scott Stantis archive at the Chicago Tribune.
Reuters has a report out on what it’s like inside the White House when the economics wizards meet to try to make sense of the U.S. economy. As might be expected, Larry Summers, Director of the White House’s National Economic Council, is the focal point.
Debates within Obama’s economic team can approach a World Wrestling Federation smackdown. In stories leaked to the press, Summers has been accused of shutting key people out of meetings, including Paul Volcker, Council of Economic Advisers Chairman Christina Romer and CEA member Austan Goolsbee.
In his book, “The Promise: President Obama, Year One,” Jonathan Alter describes an especially heated exchange between Summers and Romer. “Don’t you threaten me!” Summers blurted at Romer, who shot back: “Don’t you bully me!”
Such reports have helped to fuel speculation about Summers’ clout within the administration. His past foibles and successes have made him a particularly intriguing figure in Washington’s favorite parlor game of guessing who’s up and who’s down.
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“The conventional wisdom seems to be that Summers’ power has faded somewhat as Geithner has burnished his image and Volcker has taken on more prominence,” said Stephen Stanley, chief economist at Pierpont Securities. “He has generally been much lower profile in 2010 than in 2009.”But that view fails to take into account the breadth of Summers’ portfolio within the White House, not to mention the face time he has with Obama.
There’s a lot more detail about Summers’ background and his current role in the Obama administration – this could have been one of those stories sitting on the shelf, rushed to print today after it was announced that Budget Director Peter Orzag is leaving.
It’s hard for a lot of people to imagine that the guy who was on the cover of Time Magazine with Alan Greenspan and Robert Rubin in 1999 as the “Committee to Save the World” still has a prominent role in making policy given what has happened over the last few years.
Much to the surprise of those who thought the U.S. housing market would enjoy another buying surge during the final two months of the homebuyer tax credit, the National Association of Realtors reported that home sales fell last month and remain far below the levels reached late last year when the first round of tax credits expired.
Of course, seasonal adjustments play a big role in the November-May comparison shown above since, normally, late fall sees the beginning of a dramatic slowdown in buying activity and the raw data is typically adjusted upward. But, nevertheless, the comparison is still quite striking and one can only imagine where the sales totals will go in July when no government money gets handed out with each home purchase.
The age of British “austerity” begins today a new budget from Chancellor George Osbourne and the question of how much governments should borrow and spend will no doubt be the subject of much discussion at this weeks’ G-20 gathering in Tornonto. This Paul Kugrman interview as recounted in Germany’s Spiegel Online is not likely to grease the wheels:
In his comments to Handelsblatt, Krugman was also critical of the European Central Bank (ECB) and of ongoing speculation that Axel Weber, president of the German central bank, will take over from ECB President Jean-Claude Trichet when his eight-year term expires in October 2011. Weber, Krugman said, represents a risk to the European common currency.
“The danger that we could see a domino effect from Greece via Spain and Portugal to Italy is much greater should the ECB end up with such a conservative president (as Weber),” Krugman said. He criticized Weber for being overly focused on inflationary dangers and not worried enough about an extended economic stagnation.
The American economist blasted the European Union for its ongoing attempts to ratchet up the severity of the Stability and Growth Pact in response to ballooning national debt in several countries belonging to the European common currency area.
“The proposals are coming from some fantasy world,” Krugman said. “They are going in the wrong direction. A stricter Stability Pact maybe would have saved Greece from almost going bankrupt. But Spain fulfilled all of the pact’s criteria and was a fiscal policy star. The changes are aimed at solving a pseudo problem without going after the real roots of the crisis.”
That’s just what the world needs – a German in charge of the European Central Bank…
Following in the footsteps of that dopey eagle cartoon at the Federal Reserve in Washington is a whole series of cartoons at the New York Fed, the one below on inflation making the rounds lately as it does a pretty good job of dumbing down inflation.
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From page 8: “…inflation results when there is too much money and credit around in relation to the amount of goods and services … It’s the job of the Federal Reserve System to make sure that money and credit don’t grow too rapidly and lead to inflation.”
Of course, inflation readings are highly dependent on what you include as “goods and services”, so, if you strip out things like house prices, you get growth in money and credit leading to asset bubbles and financial collapses, which, apparently aren’t the Fed’s job…
MUST READS
World stocks down as Europe debt fears creep back – AP
Facing Deficit, Britain Unveils Emergency Budget – NY Times
Obama’s Budget Director Orszag to Leave Post – BusinessWeek
China state-owned banks buying dollars heavily: traders – Reuters
Fewer enrollees, more dropouts in mortgage relief program – Washington Post
Wall Street’s Invisible Gorilla is killing America’s soul – MarketWatch
IMF: Easy Money Now Priming The Next Mega Bubble – Business Insider
Poll Finds Deep Concern About Energy and Economy – NY Times
Are We Going Down Like the Soviets? – Alternet
MARKETS/INVESTING
Oil futures drop as concerns over European banks weigh – AP
Gold up as haven appeal as lower prices tempt buyers – Reuters
When Will the Bond Auctions Begin to Fail? – Pragmatic Capitalist
‘Gold bull run to continue, target $1300-1500′ – Commodity Online
Random Musing From a Summer Vacation – Saut, Raymond James
Will Bond Funds Come Back to Bite Investors? – Time
MISCELLANY
Instant Inflation: Paging Sumner & Krugman – Master of None
A Little Deflation Is Recipe for Price Stability – Baum, Bloomberg
Japan lifts growth forecast, aims for balanced budget – MarketWatch
Dismantling Factories in a Dreamweaver Nation – Xie, Caixin
Lawler: Home Sales in May: A Look at the Data – Calculated Risk
Time For A Serious Look At Housing Problems And Policy – Mortgage News Daily
Frank Agrees to Put Consumer Finance Bureau at Fed – Bloomberg
The New York Fed Launches Propaganda Comic Book – Zero Hedge
By Tim Iacono, Since 2005
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