FXstreet.com

Research US

This report has been deactivated

9

0

US: How much bang for the Obama buck?

Wed, Jan 28 2009, 09:18 GMT
by Peter Possing Andersen, Signe Roed-Frederiksen

Danske Bank A/S


• The US economy is currently in one of the deepest economic recessions since WWII, and a self-reinforcing contraction in employment and consumption makes policy action crucial. The Federal Re-serve has already taken unprecedented steps to unlock the credit markets; further credit easing measures are likely to be implemented as credit markets are still a long way from normal functioning. However, monetary policy is weakened by the breakdown of the monetary transmission mechanism. This leaves fiscal policy with a greater role in getting the US economy back on track.

• President Obama's administration has put forward a substantial recovery package amounting to USD 825bn so far, or approximately 6% of GDP. The package consists of tax relief for households and businesses combined with government spending on investments and state fiscal relief. We estimate that such a package would have a significant effect on growth and could boost GDP growth by ap-proximately 0.7%-point in 2009 and 1.0%-point in 2010. Even with a fiscal boost of this size, we do not expect the US economy to move above trend growth before Q1 2010.

• The cost of the recovery package adds to the already surging budget deficit, which we expect to reach 9% of GDP in FY 2009 and 6% in FY 2010. The flipside of the deficit is a flood of new supply of Treas-ury securities in 2009. We estimate that the combined borrowing needs from the underlying budget deficit, buying of TARP related assets, GSE funding and the Treasury's MBS purchase programme amounts to USD 2.0trn in FY 2009. While the surge in supply will put a floor under Treasury yields, we continue to see the main risk for a renewed surge in bond yields to be a surprise rebound in activity indicators.

Published on  Wed, Jan 28 2009, 09:25 GMT


Archive

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

Legal disclaimer and risk disclosure

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Related reports

US: employment, not as bad as it looks by Danske Bank A/S
Fri, Nov 6 2009, 18:50 GMT

FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
Fri, Nov 6 2009, 18:41 GMT

Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
Fri, Nov 6 2009, 18:31 GMT

US Employment: Skills and Policy Issues—Beyond Stimulus by Wells Fargo Investments, LLC
Fri, Nov 6 2009, 15:25 GMT

Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
Fri, Nov 6 2009, 14:35 GMT

employment, obama, gdp, eurusd, crisis, us, recession, bailout, gbpusd, usdjpy

View All

Related content


Interested in forex trading? forex brokerage firms!


FX Solutions LLC
Contact the broker/FDM
Open a demo account
Forex Capital Markets, LLC (FXCM)
Contact the broker/FDM
Open a demo account
GFT
Contact the broker/FDM
Open a demo account		City Credit Capital (UK) Limited
Contact the broker/FDM
Open a demo account		Saxo Bank A/S
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.