Mark Vitner
Mark Vitner
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The upward revision results from the slightly lower than previously estimated trade deficit. We've already seen in July data that trade deficit has worsened in the third quarter.
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Demand in the U.S. economy is reasonably strong and retailers are probably optimistic about the holiday shopping season so they are starting to order from abroad now. The trade deficit is going to take some time to turn around. It may not happen until next year.
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Exports are off in virtually every category. I don't see much near-term improvement for the trade deficit. The trade deficit will probably shave about 0.5 percent off of third quarter Gross Domestic Product.
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When the federal government increases the budget deficit it increases interest rates on everybody, so it is like a tax increase on borrowing. What that means is that mortgages will be more expensive.
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Inflation at the end of the day is headed higher, it's just not going to happen that dramatically this year.
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it's somewhat surprising how resilient the economy has been, despite higher energy prices.
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The biggest mistake of economists over the past 20 years ... We've consistently underestimated growth.
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They would like to raise rates, but right now, keeping rates a little too low would cause the least harm in the economy. If they raise rates after this weak employment report, people will be hollering. George Bush would be hollering the loudest.
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The federal response has been much larger than we thought it would be, ... And the money is being spent much more quickly.
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(The Fed) would rather see slower economic growth over the next two years than the return of stagflation three or four years down the road. And I think they'll do everything they have to make sure we don't have stagflation.
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The Fed will probably cut rates in both August and October by 25 basis points (a quarter-percentage point) each. We really don't know what they will do beyond that.
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The federal government is going to spend whatever they need to, to make some visible progress before next year's mid-term elections, ... And what that's going to do to an economy that's already at full employment is drive up the cost of cement, drive up the cost of steel, drive up the cost of labor.
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The Fed can't wait for core inflation to pick up before they act,
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I'm not too sure we're going to hear that much that will disturb markets, but I'm sure he'll say at least something hinting that long-term interest rates are too low,