The push to stimulate is underway globally. No one stopped to figure out we are in this mess because of prior pushes to stimulate.
Stimlatin’ US Style
In the US, Democrats say Obama Will Get Stimulus Bill First Day.
Congress will send President-elect Barack Obama an economic stimulus package the day he takes office Jan. 20, two Democratic lawmakers said today.
Senator Charles Schumer of New York said on ABC’s “This Week” program that the package will be between five and $700 billion. House Majority Leader Steny Hoyer, of Maryland, said on “Fox News Sunday” that he believed the Inauguration Day goal would be met, but he declined to put a price tag on the bill.
“I think Congress will work with the president elect starting now and will have a major stimulus package on his desk by Inauguration Day,” Schumer said. “I think it has to be deep. My view it has to be between $500 and $700 billion.”
Obama said yesterday he aims to save or create 2.5 million jobs in his two-year plan to stimulate an economy facing a “crisis of historic proportions.”
House Speaker Nancy Pelosi said any stimulus package must be several hundred billion dollars. “The sooner we do one, the smaller it can be,” she said on the CBS “Face the Nation” program.
Senator Richard Shelby, the Alabama Republican who is the ranking member of the Senate Banking Committee, said he wants to see the details of a stimulus package before deciding whether to back it. “I want to support things that are meaningful for the economy,” Shelby told ABC.
Obama strategist David Axelrod suggested that Obama might consider delaying a repeal of Bush administration tax cuts for the wealthy by allowing them to expire as scheduled at the end of 2010. “Those considerations will be made,” he said.
The president-elect is “committed to getting middle-class tax relief in the pipeline quickly, and there’s no doubt that we’re going to have to make some hard decisions in order to pay for the things we need,” Axelrod told Fox today. “The main thing right now is to get this economic recovery package on the road, to get money in the pockets of the middle class.”
Senator Carl Levin, a Michigan Democrat, opposed allowing the tax cuts “for the upper brackets” to expire, saying on CNN’s “Late Edition” program that Congress should move more quickly to end them. “We just can’t afford to continue them,” he said.
Policy makers have “to get banks to start lending money again,” Lieberman said. “They’re not lending money, and, until they do, this economy is going to go nowhere.”
Lieberman is a complete fool. Banks are in poor shape because of reckless lending. Attempts to force banks to lend will increase bank writeoffs.
Extraordinary Stimlatin’ In Pacific Rim
In Asia, the Pacific Rim Leaders Vow Further ‘Extraordinary’ Steps on Crisis.
Leaders of Pacific Rim nations promised to work together on further “extraordinary” steps to combat the global economic crisis and pledged to refrain from erecting new barriers to trade and investment.
Leaders of the 21-nation Asia-Pacific Economic Cooperation group, which includes the U.S., China and Japan and accounts for half of world output, also called for improved corporate governance and backed efforts to thaw frozen credit markets.
“We have already taken urgent and extraordinary steps to stabilize our financial sectors and strengthen economic growth and promote investment and consumption,” the group said in a statement during its meeting in Lima, Peru. “We will continue to take such steps, and work closely, in a coordinated and comprehensive manner, to implement future actions.”
Statements of individual leaders, including Mexican President Felipe Calderon, reflected unease over the political transition in the U.S., where President-elect Barack Obama has expressed reservations about free-trade agreements.
Calderon warned Obama against trying to renegotiate the North American Free Trade Agreement, saying restricting commerce would only encourage illegal Mexican emigration to the U.S. “The day access is closed, workers will jump over whatever river or wall you put there,” Calderon told business leaders yesterday in Lima.
President George W. Bush, whose term expires in January, complained that Congress hasn’t approved pending trade deals with Colombia and South Korea. “One of the enduring lessons of the Great Depression is that global protectionism is a path to global economic ruin,” Bush told the summit.
Asia-Pacific governments and their counterparts around the world are spending hundreds of billions of dollars and implementing new policies to prevent the financial and economic crisis from worsening.
China this month announced a $586 billion economic stimulus, while South Korea unveiled a 14 trillion won ($9.3 billion) package of extra spending and corporate tax breaks, adding to almost $20 billion in income-tax reductions announced in September.
In Australia, the government is guaranteeing all bank deposits held by regulated institutions and investment funds in the nation. Japanese lawmakers last month approved a 1.8 trillion yen ($19 billion) supplementary budget as part of a stimulus package and Prime Minister Taro Aso promised Oct. 30 to pump an additional 5 trillion yen into the economy.
The biggest member economies in APEC are the U.S., Japan, and China. Other members are Australia, Brunei, Canada, Chile, Hong Kong, Indonesia, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, and Vietnam.
UK Economic Stimlatin’
In the UK, Darling Set for Fiscal Package to Tackle Recession.
Chancellor of the Exchequer Alistair Darling was putting finishing touches to a fiscal package for tackling the U.K. recession, with measures to help consumers and drivers.
Officials from the Treasury and Downing Street said newspaper reports that Darling will cut value-added tax rate, a sales duty on goods and services, were “speculation.” Accountancy firms and economists said the government has the scope to cut the tax from 17.5 percent to 15 percent, costing 12 billion pounds ($18 billion) a year.
Prime Minister Gordon Brown is seeking to prevent the recession from worsening. Economists, including George Johns at Barclays Capital, estimate the package may be about 1 percent of gross domestic product, or 15 billion pounds.
Darling has the scope to cut VAT by 2.5 percentage points to the lowest rate allowed by the European Union. That would cost the Treasury about 12 billion pounds, according to estimates by John Whiting, a partner at PriceWaterhouseCoopers LLP in London. It would leave an average earner about 200 pounds better off a year, said Bill Dowell, head of tax for Deloitte & Touche LLP in London.
Brown Defends Stimlatin’
In a pre-budget report Gordon Brown Defends Tax Cuts.
Responding to a pre-emptive attack launched by the Conservatives, Mr Brown denied the measures are a gamble, saying they would need to be “substantial” to have an impact on the downturn affecting the UK. He told BBC1’s The Politics Show world leaders agreed the need for an injection of cash into the economy.
“Everybody generally agrees that the fiscal stimulus – and what we mean by fiscal stimulus is real help for businesses and families now – has got to be substantial to have an impact.” The Government is expected to pump between £15 and £20 billion into the economy in a bid to spend Britain out of the downturn.
David Cameron had earlier warned that the public faces a “tax bombshell when as a result of the plans set out in the Pre-Budget report.
Mr Cameron told BBC1’s Andrew Marr show: “I think people are going to be shocked tomorrow when they see the extent of Government borrowing. “Maybe £80 billion this year, before the recession’s even properly started, and possibly over £100 billion next year. “And next year that is over £4,000 extra for every family in the country.
“So I do have a real concern about a Government going on a borrowing binge that even they are now admitting is going to lead to much higher taxes later.”
Stimlatin’ In Saudi Arabia
The oil producing states are in the stimulus parade as Saudi Arabia cuts interest rate.
Saudi Arabia has cut a key interest rate and taken steps to encourage lending as it faces the slowdown. The central bank reduced the repo interest rate from 4% to 3%, in an attempt to boost liquidity. It also reduced the cash reserve requirements for banks, seen as a way to improve the availability of credit.
The move came a day after the benchmark Tadawul All Share Index fell to its lowest level in five years, hit by the global slowdown and falling oil prices.
The index shed 9.2% on Saturday, the start of its trading week. Since the start of the year the index is down more than 60%.
Stimlatin’ In Canada
Canadian Finance Minister Flaherty Says Canada May Have Joined Rest of G-7 in Recession.
Finance Minister Jim Flaherty said the nation’s economy may have entered a recession, joining the rest of the members of the Group of Seven industrialized nations.
Next year’s budget won’t “abandon” already-announced tax cuts, and may have other types of “stimulus” to boost growth, Flaherty told CTV.
Stimlatin’ In Italy
The IMF says Italy Must Counter Crisis, Debt, Low Productivity.
The Italian government should tailor any economic stimulus to counter the global slowdown to the country’s “specific circumstances” such as declining productivity and Europe’s highest debt, the International Monetary Fund said.
The euro region’s third-biggest economy slipped into its worst recession since 1992 in the third quarter as the fallout from the yearlong credit crisis choked growth. The government will present next week an 80 billion-euro ($101 billion) plan to support consumers and companies. Finance Minister Giulio Tremonti said the package won’t increase the debt, currently 104 percent of gross domestic product.
Any fiscal stimulus will be limited by Italy’s “large debt, spiking spreads over bunds, and the prospect of debt issuance rising globally, delays in adjustment will likely raise interest costs and undermine confidence,” the IMF said.
The spread, or premium that investors demand to buy Italy’s benchmark 10-year bond instead of a similar German bond, rose to 125 basis points on Oct. 31, the highest since the start of the single currency.
Pro-Active Stimlatin’ In China
Touting a “pro-active fiscal policy”, China Announces 4 Trillion Yuan Economic Stimulus.
China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world’s fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.
The funds, equivalent to almost a fifth of China’s $3.3 trillion gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said today on its Web site. China will adopt a “pro-active fiscal policy” and pursue a “moderately loose” monetary policy, it said.
“We have long-awaited this stimulus plan,” said Ken Peng, an economist at Citigroup Inc. in Shanghai. “The measures may stimulate domestic demand, but they won’t prevent China’s economy from slowing further as the global economy is certainly in a recession.”
Manufacturing contracted by the most since at least 2004 in October and export orders dropped to their lowest, according to CLSA Asia Pacific Markets. Home sales have plunged in major cities including Beijing and the stockpile of unsold new vehicles was at a four-year high in September.
“The golden years have shuddered to a dramatic halt,” said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai.
In addition to the previously mentioned $586 billion stimulus, China’s Quake-Hit Sichuan to Invest $439 Billion in Rebuilding.
China’s southwest Sichuan province plans to spend more than 3 trillion yuan ($439 billion), triple the amount previously pledged, to rebuild houses, highways and railways destroyed by an earthquake in May.
The province will spend 790 billion yuan this year and 1.2 trillion yuan next year, as part of China’s stimulus plan announced earlier this month, Sichuan Vice Provincial Governor Wei Hong said today in Beijing, according to a statement on the State Council’s Web site.
The central government will spend about 800 billion yuan and other funding will come from bank loans, financing from capital markets and private donations, Wei said.
Does Anyone Feel Stimulated?
If no one feels stimulated yet, perhaps a classic Jerry Lee Lewis Song will help.
Well I said come over baby
we got chicken in the barn
Come over baby
babe we got the bull by the horn-a
We ain’t fakin’
Whole lot of Stimlatin’ goin’ on
Three Points On Global Stimlatin’
1) Dollar bears need to “Think Outside The US” when it comes to monetary problems. The US does not have a monopoly on problems.
2) With every country in on the act, those expecting to see a complete collapse of the US dollar over this Stimlatin’ are most likely severely mistaken.
3) As far as Stimlatin’ goes, gold is likely to be one beneficiary.
Mike “Mish” Shedlock
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