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July 5, 2011

Fundamentals 7/5: Politics Ruin Fiscal Policy

July 5, 2011

Fundamentals 7/5: Politics Ruin Fiscal Policy

Factory Orders for May were +0.8% which almost makes up for a -0.9% in April. This datum however is below consensus.

The ongoing discussion about the Greek debt situation misses the point that there is continuing concern about much sovereign debt be it Greece, the other PIIGS nations, Japan, China, or the U.S. Default of Greek debt could have the short-term effect of causing flight-to-quality buying of U.S. Treasuries but then call into doubt the ability of the U.S. to service its debt without high inflation. A plan for fiscal sustainability is necessary but impeded by politics.

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