Lowering Budget and Increasing Taxes?

As  reported yesterday, Japan’s machinery orders rose 10.5% vs. 4.1% consensus in September. Bloomberg story: Japan Machine Orders Rise More Than Expected; Recovery May Last. Off course it sparked optimism for the bulls. Today Japan’s October producer prices came out at -6.7% vs. 6% consensus. This was 10th month in a row with negative figure. Bloomberg story: Japan’s Producer Prices Fall 6.7%, 10th Monthly Drop. Japan government bonds rose. Maybe a preview of the U.S. developments.

Interesting story on the U.S. budget in the WSJ: White House Aims to Cut Deficit With TARP Cash. Disregarding the nonsense on TARP repayment decreasing the budget deficit, the article offers some insights on the U.S. budget for the next year.

The White House is in the early stages of considering what bigger moves it might make for next year’s budget. The Office of Management and Budget has asked all cabinet agencies, except defense and veterans affairs, to prepare two budget proposals for fiscal 2011, which begins Oct 1, 2010. One would freeze spending at current levels. The other would cut spending by 5%.

White House Chief of Staff Rahm Emanuel is pressing for substantial spending cuts to go with any tax increases to try to avoid the “tax and spend” label that has bedeviled Democrats, according to administration and congressional officials.

The move could buy the Treasury Department time before it hits the so-called debt ceiling, which limits the amount of money the U.S. can borrow. Already, some members of Congress have said they won’t approve an increase in the $12.1 trillion debt cap unless efforts to reduce the deficit are included.

To translate, there is a concern on deficit and it will be addressed by the U.S. government probably with both tax increases and spending cuts. The article shows that maybe some responsibility in the U.S. government still exists.  Positive for the U.S. dollar, positive for the government bonds, negative for economic growth as it will decrease the aggregate demand.

Two interesting developments in shipping today. First, Moller Maersk A/S, the worlds largest container shipping company reported earnings loss today. WSJ story: Maersk Says Global Shipping Still Weak. Second, Nippon Yusen K.K., the biggest Japanese shipper, announced capital increase today. Bloomberg story: Nippon Yusen to Raise 142 Billion Yen in Share Sale. The stories show that the largest players in the industry don’t expect any significant improvement in both the volumes and freight rates. Overcapacity still a major problem. Global goods flows still depressed.

Some more coverage on IEA world energy outlook. WSJ story: IEA Says Rising Oil Price Risks Derailing Economic Recovery. The most interesting part:

But even higher crude prices could bring trouble, the IEA said. “The recent price spike, if further extended, risks derailing the recovery. Not only that, but oil demand itself would rebound much more slowly were the price rally sustained into 2010,” it said in its report.

For the end two stories on foreclosures in U.K. and in the U.S. Bloomberg story: U.S. Foreclosure Filings Surpass 300,000 for 8th Straight Mont. Guardian link: Repossessions rise by 3%. More pain to come for the markets.

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This entry was posted on Thursday, November 12th, 2009 at 7:05 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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