Monday, February 16, 2009
The Baseline Scenario
This evening I stumbled across a fascinating new financial blog, The Baseline Scenario. I've added it to the list of "specialty" blogs on our sidebar.
The Baseline Scenario is a meaty blog; you could spend a few hours getting through the most important posts that have gone up since its inception in October. My suggestion is that you start here, with the blog's most recent "baseline scenario" prediction for the global economy.
1 Comments:
By 
, at
Tue Feb 17, 09:37:00 AM:
There seems to be a consensus emerging, too late probably, that the stimulus will not help in changing the present day economic dynamic and may in fact hurt the economy over the next three years. Even the efforts of the White House to dampen expectations for the stimulus package seems to acknowledge the strong possibility the package is a bad idea.
If, as the post suggests, we are in a world-wide deflation, then would allowing all interest to become tax deductable increase the private demand for debt? Even if it's only for debt incurred in 2009? Combined with ongoing efforts to recapitalize banks, a positive earnings stream from new business might change the devastating psychology of deflation for the better.
In this environment only those people and businesses with excellent credit would qualify for new loans, so banks would also be improving their overall portfolio quality with these new loans. It may be true that most of the people who could actually qualify for new loans are also the ones most probably doing the lions share of the saving (and, probably, like me, doing so in anticipation of new tax demands upcoming), and so I have no idea whether new demand for debt would result in new spending at the consumer level (we seem to be no longer interested in "bling" as a society). But businesses have room to invest, even now, and lending to businesses is one area that could potentially still find both a demand side and have an effect.
