Crisis Diary as it unfolds ….

05-Jan-09 to 11-Jan-09: New year, old worries

Summary of the week in one line – the crisis is back.
~~Another half a million jobs lost in US – but not as bad as some expected.
~~Equity markets ended lower, but bond markets, libor and VIX seem to be calming down, which is a very good sign.

Some tiny bits of much awaited Obama Stimulus are now available,
– Plan will be of the size of $775 billion and will span across two years
– 40% of the stimulus is of the form of tax cuts, but not exactly the kind of tax cuts supply siders would want to see. Though, most likely, existing Bush tax cuts will not be repealed.
– The plan for 4 million job creation is detailed by Christina Romer and Jared Bernstein here.

Who says what about Obama’s stimulus plan?
Paul Krugman is not happy about the size of the stimulus and the amount of public spending. He is more unhappy and even scared here.
Greg Mankiw doesn’t think Obama team is using right multiplier for tax-cut (0.99). This report uses 0.99 as tax-cut multiplier and 1.57 as Government spending multiplier. Greg Mankiw continues his stimulus skepticism in his NYT OP-ED as well.
Alex Tabarrok of Marginal Revolution was quite satisfied with overall composition of Obama’s stimulus plan in his initial reaction.

Crisis watch for the week:
TED spread 1.19
S&P: 890.35 (-3.8%)
VIX: 42.82 (+1.00%)


January 11, 2009 - Posted by | Weekly News | , ,

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