Has the U.S. government created unsustainable deficits?
*Bloomberg, by Monica Bertran and David Yong, January 24, 2008:
"The Fed underestimated the extent of the housing-market slump and
the subprime mortgage crisis that has led to $133 billion in losses,
Roubini said in a Bloomberg Television interview in Davos, Switzerland.
The central bank lowered its target rate for overnight loans between
banks by 75 basis points to 3.5 percent on Jan. 22 in its first
emergency cut since 2001.
`It's too little, too late,' Roubini, who is also a professor at New
York University's Stern School of Business, said yesterday. `Whatever
the Fed does, it cannot prevent the recession. They got it wrong and
now they are cutting rates.'
Sales of existing homes in the U.S. declined in December to the lowest
since at least 1999, economists surveyed by Bloomberg News forecast
before today's report from the National Association of Realtors. Global
stock markets have lost $7.6 trillion, or 12 percent of their value
this year, on concern that a housing recession and losses tied to
defaulted mortgages will shrink the U.S. economy for the first time
since 2001.
Reports this month showed U.S. unemployment reached a two- year high in
December, while the Institute for Supply Management's manufacturing
index showed a contraction for the first time since January 2007.
`More Severe'
President George W. Bush on Jan. 19 proposed a $150 billion
fiscal-stimulus plan, equivalent to about 1 percent of gross domestic
product, to help revive economic growth.
`The fiscal package is just peanuts,' Roubini said. `We have squandered
our surplus, we have run out of fiscal bullets. It's not going to make
any difference.'
Roubini has said the U.S. would enter a recession since July 2006
because the current account and budget deficits were unsustainable and
losses tied to subprime loans would hurt the banking system."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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