How Budget Deficits Reduce Investment

A identity is a equation that is true because of the way the terms are defined. Thus, when an economist says that “gross national product is equal to the sum of consumption plus investment plus government spending on goods and services plus exports minus imports,”

Terminal Velocity (28) “Disintermediated”

Written by Adam Whitehead, Terminal Velocity (27) “Held Hostage By a Fortune” explained how President Obama had turned the Republican soldiers of fortune from hostage takers to hostages. Then the President emerged from captivity to signal that the Debt Ceiling can of worms had been kicked down the road. By employing accounting sophistry the …

Persistent Shutdown Will Increase Initial Claims

Initial Claims of Disaster To Be Taken With A Grain of Salt by Lee Adler, Wall Street Examiner First time unemployment claims continued their strength in late September but that should change radically in the weeks ahead as the effects of the chaos in Washington (pictured, click to enlarge) begin to ripple through the economy. …

How Safe Are Money Market Mutual Funds?

Written by Steven Hansen I really have two focus discussions this week and will start with the headline topic.  Most of us have a few coins parked in our brokerage account – and usually this money is swept into a Money Market Mutual Fund (MMMF).  A little reported study was issued this past week by …

The Trillion Dollar War of Choice and the Constraints on Macro Policy

by Guest Author Menzie Chinn

The cost of the Iraq War has reached almost trillion dollars – at least $805.6 billion as of the end of September, not including debt service and additional reset costs; around $940 billion including interest payments.

As the US economy faces the prospects of stagnant growth or recession, it is of interest to see why the scope for fiscal policy is so circumscribed — that is, why is the debt level so high given that in the last year of the Clinton Administration we were paying down debt? Figure 1 depicts part of the answer (other parts, here).