Mehran, I think u misunderstood me. I didnt say "obama should reduce the deficit Now, at this time, AND help an ailing economy." USA Economy have simply not recovered yet, so it just doesnt make sense to think about reducing deficit now(and bc of it sorting to different routs such as increasing taxes, eliminating/reducing public programs,etc).
I criticized obama's recent statement about raising taxes soon in USA. As said, its only natural when all countries raise their taxes/reduce program costs, to make up for huge deficits, but USA economy is behind lots of leading Economies right now. so really there is no point in rushing into thinking far ahead, after recovery as of now!
oh of course thats the reason dollar is devalued right now, but also the fact that not only USA Central Bank have printed much more $ than lots of other leading Economies, but also bc of carring on and facing increased deficit, again much larger than other leading Economies. so thats why US $ right now is much weaker than other major currencies. Its not like other foreign countries' currencies have improved, its US $'s curreny that is losing its value vs almost other currencies. but lets 30 if there is any end to it?
hopefully it is, bc if in fact Obama is thinking about devaluating US$ even more(as stupid Bush was doing for last few yrs) to increase export(if he is in fact serious about doubling Export level in 5 yrs as he just announced), then that means US $ devaluating even further..and thats not good at all for Average American and American Economy in general.
oh that would be an ideal case Mehran. but in reality it didnt work that way in the last yr in USA. The Stimulus package was not distributed properly, still its not clear(and cant even be confirmed by govt), how much and where exactly this Stimulus package has been spent so far, and more imp, how many jobs in fact was created as a result of it.
When U.S govt explicitly provides details of Stimulus package expenditure and its results, then we can think ideally..other than that, we can only witness an increasing Unemployment rate despite Stimulus package supposedly creating "Up to 3million jobs" for Americans!
oh I hope so Mehran. I really hope so..it would simply be a disaster if they raise taxes now at this time, before full recovery.
btw, here is very interesting Report by a key "govt overseer" which reported on outcome of USA Bailout money so far, and see how it is critical of the bailout outcome, and in what areas:
http://www.marketwatch.com/story/overseer-bank-bailout-program-has-mixed-results-2010-01-31
TARP overseer says bank bailout program has mixed results
TARP stabilized system, but bailed out banks lend less; more foreclosures soon
By
Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) -- The government's $700 billion bank bailout bill has met its goal of helping bring the financial markets back from the brink, but has so far failed to increase lending from the banks who received the taxpayer assistance, a key government overseer reported Sunday in a generally critical review of the program.
"On the positive side, there are clear signs that aspects of the financial system are far more stable than they were at the height of the crisis in the fall of 2008," according to a quarterly report to Congress submitted by the office of the Special Inspector General for the government's $700 billion Troubled Asset Relief Program.
The report, which was authored by TARP's Special Inspector General, Neil Barofsky, also warned that the Obama administration's and the Federal Reserve's policies to support the mortgage market could in fact be creating another dangerous housing bubble.
"Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," said the report.
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The review argues that the TARP program, so far, has failed in many other goals. For example, participating banks' lending to businesses and consumers, has decreased, the report said. The report points out other problems for the TARP program, including continued high unemployment and expanding home foreclosures for the foreseeable future.
Read the SIGTARP report.
"Lending continues to decrease, month after month, and the TARP program, designed specifically to address small-business lending -- announced in March 2009 -- has still not been implemented by Treasury," according to the report.
It pointed out that the Obama administration's mortgage modification program for troubled homeowners has so far only helped a small fraction of the three to four million homeowners the Treasury Department hopes it will assist.
Read about changes made to the White House's mortgage modification program.
Could we be creating another housing bubble?
In the report, Barofsky indicated that the government's emergency lending programs could re-inflate the housing bubble that helped create the financial crisis.
"To the extent that the crisis was fueled by a "bubble" in the housing market, the Federal government's concerted efforts to support home prices risk re-inflating that bubble in light of the government's effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market," the report said.
The report charges that high prices for homes between 2004 and 2007 were the result of unrealistic expectations for house values, low interest rates, in-accurate high ratings for mortgage securities, lax standards by lenders for mortgages.
It argues that that the Federal Reserve could be creating another housing bubble with its response to the crisis by keeping short-term and long-term interest rates low, setting up programs to support the mortgage market that also keep rates low, as well as a first-time homebuyer tax credit and a program near completion to purchase $1.25 trillion in mortgage-backed securities.
"Because increasing access to credit increases the pool of potential home buyers, increasing access to credit boosts home prices," the report wrote. "The Federal Reserve can thus boost home prices by either lowering general interest rates or purchasing mortgages and mortgage-backed securities."
"Both actions, which the Federal Reserve is pursuing, have the effect of lowering interest rates, which increases demand by permitting borrowers to afford a higher home price on a given income. Similarly, the administration is boosting home prices by encouraging bank lending and by instituting purchase incentives such as the First-Time Homebuyer Tax Credit. All of these actions increase the demand for homes, which increases home prices," said the report.
However, critics argue that long-term interest rates could increase in response to the Fed's decision to wrap up its $1.25 trillion mortgage-backed securities purchase program by March 31, along with other federal actions, could result in higher interest rates at a time where many regions continue to experience a depressed housing market and record foreclosures.
