EconomicCrisis.US

Everything we know about classic economic theory suggests the U.S. economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the U.S. Federal Reserve has pumped into the system.

But we’re not…yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward – all in a desperate bid to make Americans feel better about the global financial crisis.
Read the rest of this entry »

US consumer spending fell for the first time in five months in September after a government program boosting auto sales ran out, official data showed Friday.

Personal consumption expenditures decreased 47.2 billion dollars or 0.5 percent last month, as expected by most economists, following a revised 1.4 jump in August, the Commerce Department said.

The fall in spending came as Americans’ income turned flat in September following a 0.1 percent increase the previous month, the department said.

The highly popular “cash-for-clunkers” program, which gave consumers a credit of up to 4,500 dollars toward the price of a new car or truck if they turn in an older vehicle with lower gas mileage, ended in August.
Read the rest of this entry »

Global imbalances — roughly defined, the different emphasis the world’s leading economies place on savings, spending and debt — is a phrase much used and little acted upon.

Well before the current financial crisis began, world leaders pledged to address this disconnect. At an International Monetary Fund meeting in 2007, for instance, representatives of the United States and the European Union agreed they should change economic incentives to encourage more savings and less spending; officials speaking for China, Japan and Germany, meanwhile, pledged to take steps to encourage spending. At the end of the day, nothing much happened, and these imbalances helped grease the skids for the global decent toward the economic abyss.
Read the rest of this entry »

In unprepared remarks given at a Wall Street conference hosted by The Economist magazine yesterday, Treasury Secretary Timothy Geithner delivered this eye-brow-raising comment: “We’ve got unsustainable deficits over a five- to 10-year window.”

The statement came at a time when the White House and Congress are under fire for their massive, unconventional deficit spending to rescue the economy. The US dollar is fluctuating dramatically against the euro and other currencies, and world leaders are increasingly demanding that world trade, notably in oil, be executed in another currency besides the US dollar, which economists forecast will weaken further.
Read the rest of this entry »