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Thread: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by washunut View Post
    I think you missed another key point.

    Business spending on equipment and software has risen significantly.

    So the key question for the Fed is if it has enough independent thinking/ actions to avoid another bubble and perhaps horrible inflation.
    Washunut,

    That is an important point. However, I didn't mention it, only because that encouraging situation remained the same since the March 16 FOMC statement. I was only highlighting improvements since March 16.

    FWIW, the March 16 statement's discussion of business spending on equipment and software showed improvement from the January 27 FOMC statement, which noted, "Business spending on equipment and software appears to be picking up..."

    I believe it is increasingly clear to objective observers that the economy is in the midst of a recovery. The 2010 Q1 GDP report, which will be released on Friday, should show another quarter of growth. I suspect that Q1 had annualized real GDP growth in the vicinity of 3.5% +/- a few tenths of a percent. It is not completely out of the question that a 4.0% figure might be reported, as an upward suprise is probably more likely than a downward one.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by donsutherland1 View Post
    Washunut,

    That is an important point. However, I didn't mention it, only because that encouraging situation remained the same since the March 16 FOMC statement. I was only highlighting improvements since March 16.

    FWIW, the March 16 statement's discussion of business spending on equipment and software showed improvement from the January 27 FOMC statement, which noted, "Business spending on equipment and software appears to be picking up..."

    I believe it is increasingly clear to objective observers that the economy is in the midst of a recovery. The 2010 Q1 GDP report, which will be released on Friday, should show another quarter of growth. I suspect that Q1 had annualized real GDP growth in the vicinity of 3.5% +/- a few tenths of a percent. It is not completely out of the question that a 4.0% figure might be reported, as an upward suprise is probably more likely than a downward one.
    I am totally in line with your thinking. I do have a concern that the Fed is continuing the easy money policy for to long. Amazing to me, since so much of the root cause of the mess we are just getting out of was easy money and the quest for returns.

    I think we should be especially concerned with the Fed's balance sheet. With so many mortgage loans they will have a hard time pivoting quickly when needed. Conservative ( fiscally) folks like myself think they are already late in starting their balance sheet clean up.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years


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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by The Prof View Post
    The DOW was up.
    "This Administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country."" GWB

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by washunut View Post
    I am totally in line with your thinking. I do have a concern that the Fed is continuing the easy money policy for to long.
    I believe the Fed will need to be careful not to prolong the period of extraordinarily low interest rates. It was encouraging to note that the Fed will be closing down the rest of its Term Asset-Backed Securities Loan Facility on June 30.

    I would like to see the Fed begin to pare its mortgage-related securities holdings on or very shortly after that date.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by donsutherland1 View Post
    I believe the Fed will need to be careful not to prolong the period of extraordinarily low interest rates. It was encouraging to note that the Fed will be closing down the rest of its Term Asset-Backed Securities Loan Facility on June 30.

    I would like to see the Fed begin to pare its mortgage-related securities holdings on or very shortly after that date.
    The last part you wrote is the tricky part. If the Fed stops buying mortgages they can only control short term rates. People are questioning whether they will show independence and do the right thing as interest rates rise and the rates for new mortgages rise. Or will they give in to political pressure and risk putting the economy on steroids for too long.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by washunut View Post
    The last part you wrote is the tricky part. If the Fed stops buying mortgages they can only control short term rates. People are questioning whether they will show independence and do the right thing as interest rates rise and the rates for new mortgages rise. Or will they give in to political pressure and risk putting the economy on steroids for too long.
    I agree. IMO, the Fed will need to proceed carefully in reducing its mortgage-related securities holdings. In doing so, it will need to be careful to avoid destabilizing the housing sector.

    For a rough guide, it could use, among other indicators, the annualized change in quarterly home prices, as one measure for how fast to proceed e.g., it should shoot for relative stability in home prices during its balance sheet reduction efforts. If home prices begin to fall, it would need to slow its pace. If home prices are rising at more than a modest pace consistent with price stability (usually defined as > 2% per year), it would have room to accelerate its unloading of such securities. Keep in mind, that's just one example of a possible indicator. It would be prudent for the Fed to employ multiple indicators to reduce the risk of error.

    In any case, I suspect that the process will need to be a gradual one, starting very slowly and then proceeding faster in future years. It will probably take at least 3-5 years at the earliest before the Fed has sold off such securities. The process could take considerably longer. Caution not speed should define the Fed's balance sheet reduction efforts.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    hrmph

    in 3 to 5 years, servicing debt, mere interest alone, will approach ONE TRIL PER YEAR

    News Headlines

    just like greece, way too little way too late

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    meanwhile, "the federal reserve's promise to keep short-term interest rates low for an extended period has become boilerplate..."

    What the Fed's 'extended period' on low interest rates might really mean | Money & Company | Los Angeles Times

    ie, no one's listening to all these polysyllabic expressions of 2 + 2 = 4

    maybe they don't understand all the hi falutin terminology

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    why can't president pie-in-the-face budge hu?

    On China, Obama says US must address currency rates | Reuters

    why does geithner grovel?

    Geithner Delays Currency Report, Urges Flexible Yuan for China - Bloomberg.com

    as fluent (LOL!) an observer as bernanke testifies that the "undervalued" yuan is one of the factors that led us all here

    Bernanke says rates to stay low for extended period | Reuters

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