Saturday, April 4, 2009

How Bad Is It?

Who’s Most Indebted? Banks, Not Consumers

New York Times — Fifty years after executives at Bank of America had a clever idea — issue credit cards to ordinary consumers — the leveraging of America may finally be over. The amount owed by consumers, in relation to the entire American economy, has started to fall.
But it is not consumers whose willingness to take on debt was most notable during the half-century. It is the financial sector itself, The New York Times’s Floyd Norris reports. The banks that made the loans proved to be much more willing to borrow than their customers, whether corporate or consumer.
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What If Keynes Is Wrong?

Philadelphia Bulletin — I had a hard time sleeping the other night. I am worried. The ghost of Keynes is hovering all over the ‘stimulus’ package. You know, that English economist who died in 1946 who wrote a book in 1936 about government deficit spending being good for the economy. These ideas are the cornerstone of the current ‘stimulus’ plan. For some, it is a policy direction; for others an excuse for implementing socialistic government programs; and for most citizens of this great nation of ours, a hope and a prayer that this path is the road to recovery. There are some thoughtful people, with me among them, who think Keynes may have been wrong. I read all the articles about this guy Keynes and his theory that government spending solves all downturns. I found it hard to believe that you can spend your way out of financial disaster. I know my neighbor Harry, who was a plumber, thinks so. That gave me an idea to check around the neighborhood for an answer to my worries. I remembered that one of my neighbors had been a professor of economics at some big university. Everybody said he was famous, but to me, he was just a regular guy who walked around the neighborhood like I do. On my daily walk recently, I looked for him and found him in the park kibitzing some guys playing checkers. He was leaning over a bench when I went up to him.
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U.S. debt: Don't worry, be happy (till 2017)

Globe and Mail Canada — When Standard & Poor's maintained its triple-A rating on the sovereign debt of the United States last September, it listed three principal characteristics that (according to S&P) make U.S. government bonds one of the safest investments in the world. “The U.S. has arguably the most flexible economy of any high-income nation,” the credit rating agency said, “with exceptionally adaptable labour markets and a long track record of openness to capital flows – as well as minimal government interference.”
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