Here are the highlights from this weekend’s editorials on fiscal and budget policy:
The OECD (the Organization for Economic Cooperation and Development, the Paris-based think tank for the 31 richest countries) released its twice-a-year economic outlook yesterday. It presented a bleak fiscal picture for many of the member countries (including the United States) unless governments make policy changes, but, constructively, it also presented possible ways forward for countries to get their fiscal house in order.
Larry Summers gave a very interesting and thoughtful talk in Washington recently (May 24).
But it was delivered in High Oracular Econospeak, so many people may never get it.
And reasonable people can come away with very different interpretations of Dr. Summers’ High Oracular Econospeak.
Throughout the week, U.S. financial markets continued to be dominated by a global market “flight to quality” in response to perceived EU policy weakness in addressing the Greek and eurozone fiscal crisis.
U.S. markets continued to be dominated this week by the continuing roller coaster ride from the Greek (and eurozone) debt crisis. More positive U.S. economic news appeared to be less important. The cause of last week’s stunning drop and subsequent recovery in the U.S. stock market is still not well-understood.
It wasn’t enough that we had a lot of impressive economic news this week (including today’s solidly positive employment numbers – even though structural unemployment remains a huge problem). It appears that the recovery is finally on track, although perhaps subpar compared to other recoveries. Moreover, structural unemployment will remain a tough nut to crack for awhile.
But US markets did not on balance reflect the good economic news.
On April 30, the Bureau of Economic Analysis released its first estimate of first quarter real GDP. Typically, the first estimate is revised a lot in the two follow up estimates, but it is still useful as the first nearly complete snapshot we have of the economy this year.
As of mid-day Friday, April 30, the government bond market was on track to have a good week, with prices up (and therefore yields down, because they move in opposite directions).
According to the financial press, a key driver was end of the month effects (managers needed to buy newly auctioned Treasury instruments, to close the loop on their monthly portfolio strategies).
Safe haven effects from the sovereign debt crisis in Greece were also thought to increase demand for U.S. Treasury instruments.
Be sure to join America Speaks this afternoon from 3 - 4:30 pm for a National Briefing on Our Budget and Economy. A panel of experts, including Maya MacGuineas, Alice Rivlin, David Walker, Alison Fraser, and Bob Greenstein, will discuss the country's fiscal health and will respond to questions posted by viewers over the internet.
The webcast of the event is below.
As of mid-day Friday, April 23, the yield curve looked steeper for the week (that is, interest rates rose on Treasury instruments at the longer end of the maturity spectrum). Market commentary was cited as the main driver, the response of investors to stronger than expected U.S. data suggesting that the recovery was taking hold. As the U.S. and global economies show signs of returning to some sort of normal, investor interest in U.S.