Tuesday, January 06, 2004

From the Treasury Department website, the November report is out. I missed writing about it two weeks ago when it was actually published. The amazing thing is that expenditures dropped to 161.2 billion dollars. I really cannot understand how spending was cut back so dramatically from the average of about 180 billion dollars in fiscal 2003. The good news (if you can call a yearly deficit of 375 billion good news) is that the deficit is approximately the same after two months of fiscal 2004 as it was last year. Such low expenditures in November even if there is a lot of noise in the month to month numbers can only mean the administration will be able to claim later this year that the deficit will be less than expected unless the receipts side goes down unexpectedly which I don't see happening with the economy finally showing some signs of life.


Thursday, January 01, 2004

Happy New Year.

Economic stories that must be watched in 2004:

1. The jobless recovery. Can economic growth continue with unemployment relatively high and real wages barely budging for most.

2. The federal deficit. The largest deficit ever and it's mainly structural. Stein's Law applies. "If something cannot go on forever, it will stop."

3. The value of the dollar. The recent surge in the euro may be just the beginning as China will likely revalue the yuan up in 2004. Our trade deficit cannot be sustained indefinitely. See Stein's Law again. What could replace the dollar as the worl's reserve currency? It's not like the EU is really any better at fiscal policy.

These are the top 3. I think US GDP numbers are not representative of the real state of the US economy unless looked at through the prism of these three issues.


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