World-Wide Factory Activity, by Country – Manufacturing growth slowed in the U.S. in November but activity picked up in other major economics, including China and the euro zone. Strength in the euro zone was led by France and Germany. Contraction, meanwhile, continued in the factory sectors in Brazil, Greece and Japan. Click on the top of any column to resort the interactive chart.
Can We Do the Non-Crazy Thing with the Bush Tax Cuts? – I am no longer going to “let the perfect be the enemy of the good.” I am no longer going to try to talk people into seeing that the “right” thing to do with the Bush tax cuts would be to let them all expire. (The even “righter” thing would have been to never have enacted them in the first place.) I am just going to urge the policymakers to avoid doing something with the Bush tax cuts that seems totally contradictory to the fiscal policy goals–both shorter-term and longer-term–that they claim to have. In other words, let’s try to avoid doing something with the Bush tax cuts that seems totally crazy given what we say our fiscal policy goals are for both adequately supporting the (still fragile) short-term economy and better encouraging economic growth by reducing the deficit over the longer term. The fiscal policymaking in this town seems totally schizophrenic right now. What a juxtaposition to have President Obama’s deficit-reduction commission release its final report while the Administration “negotiates” with Congress on whether all of the Bush tax cuts, or just most of them, should be permanently extended (and deficit financed). The media has been reporting that whether the bulk of the Bush tax cuts will be extended or not is not the issue–it is whether the upper-bracket ones benefitting only the rich will be included as well, and what constitutes “rich.”
Foreign banks and the Fed – I am surprised this has not really hit the U.S. headlines yet: The biggest cumulative borrower from the Term Auction Facility was Barclays of the UK, which bought the US broker-dealer unit of Lehman Brothers out of bankruptcy in September 2008. Barclays borrowed a cumulative $232bn from the TAF through various subsidiaries. The TAF provided one or three-month loans to banks from December 2007 until it closed this year. ..Bank of Scotland and RBS of the UK, Societe Generale of France, Dresdner Bank and Bayerische Landesbank of Germany, and Dexia of Belgium were all amongst the top 10 users of TAF. The second largest user was Bank of America, which bought Merrill Lynch during the financial crisis, and borrowed a cumulative $212bn. The biggest seller of commercial paper to the Fed’s Commercial Paper Funding Facility, which bought up illiquid paper, was UBS of Switzerland followed by the insurer AIG. Five of the top 10 CPFF users were European banks.