The American Recovery and Reinvestment Act (ARRA) signed into law by President Barack Obama on February 17, 2009 did rewrite Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) and did provide modified rules for the Troubled Asset Relief Program (TARP). The Stimulus or Recovery Act is worth $787 billion and it contains multiple programs: Tax Cuts – $244 billion, Aids For State and Local Government – $217 billion, Relief (Extended Unemployment, Health Insurance for Unemployed) – $120 Billion, Infrastructure – $101 Billion, Energy Efficiency – $59.5 Billion, and Human Capital – $45.5 Billion. TARP allowed the US Department of the Treasury to purchase up to $700 billion of difficult-to-value assets – MBS and CDO – from banks or other financial institutions. Since the enactment of TARP in October2008, more than 360 US banks have received at least $353 billion of funds from the Treasury. Continue reading ‘TARP Barometer’
Tag Archive for 'Stimulus Plan'
According to the official data, China’s GDP has tripled since 2000, with annual growth rates ranging from 8 to 13 percent, reaching a level of $4.9 trillion in 2009. While some investors are reluctant to believe those numbers, one thing is for sure: China produced and saved while America consumed and borrowed. In 2009, the Chinese government approved a $586 billion stimulus package, equivalent to 14 percentage points of GDP. Meanwhile, the central bank has been buying dollars to prevent the yuan strengthening and to support the exports, driving foreign-exchange reserves to a world-record $2.4 trillion. Working against a market-driven system, the communist regime has exercised its command-and-control power over the banking system by fixing both the deposit and lending rates. Moreover, many experts believe that the Chinese authorities are mainly responsible for the current real-estate bubble. Continue reading ‘The Chinese Communist Bubble’
China took the entire world by surprise in the pre-crisis world economy, recording gigantic exports, consistently gigantic capital inflows, and imbalances in both stocks and real assets that could prove to be extremely harmful to the international economic stability in the short term and devastating to China in the long term. Some voices that called for restructuring were never heard in Beijing, simply because of the apparent success of high growth and low inflation economic dichotomy. However, China might have a very difficult time keeping inflation at its 2010 target of about 3 percent, after banks flooded the Chinese financial system with money in 2009. According to the median forecast of 14 economists, inflation may reach 4.4 percent this year. China’s GDP growth quickened to 10.7 percent in the fourth quarter, the fastest pace since 2007. The Chinese authorities affirmed a target of 8 percent growth for 2010, the same goal that the government has set and surpassed in each of the past five years. Nouriel Roubini said “this strong economic recovery implies that the super-loose monetary, fiscal and credit policy followed by China has to reverse itself or otherwise there is a risk of overheating and inflation”. Continue reading ‘China – The Wonderland’
Last Friday, President Barack Obama proposed massive tax credits estimated at $33 billion to encourage small businesses to hire workers and raise current employees’ wages. According to the plan, employers would receive a payroll tax credit of up to $5,000 for every net new employee they hire in 2010. The proposal also allows businesses to claim tax credits for pay raises, such that they will receive a bonus 6.2 percent tax credits on aggregate wage increases in excess of inflation. Via the new plan, the Obama administration is simultaneously seeking to stimulate employment by reducing payroll taxes and to regain some political capital after recent Democrats’ mishaps. The new initiative came hours after the authorities announced that the real gross domestic product in the United States increased at an annual rate of 5.7 percent in the fourth quarter of 2009. Continue reading ‘Growth Without Jobs’
This year, the conventional wisdom within the financial community is that the booming Chinese economy is going to pull the global economy out of recession. While the world is fighting The Great Recession, this unparallel economic system – a weird mix of communism and capitalism, records an annual GDP growth of 8.9 percent in the third quarter. During a trip to Beijing, Treasury Secretary Tim Geithner said that “China will need a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption”. Allow me to show some skepticism when dealing with the Chinese economic miracle. Continue reading ‘China – A Financial Time Bomb?’
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