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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Washington in the Obama era seems bent on imposing “solutions” that not only fail to solve Americans’ problems, but make us poorer in the bargain.

In a direct attack on Wall Street, the president and his ally, Sen. Blanche Lincoln (D., Ark.), are bent on imposing the “Volcker rule,” which would prohibit banks from making speculative investments with their own funds, and on requiring banks to divest their derivatives trading desks, or at least put them in a separate subsidiary owned by a parent holding company. Five major banks–Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley–do 90% of U.S. derivatives trading.

This may ultimately make banking less stable, while forcing a good deal of securities trading out of New York to offshore locations.

The recent credit crisis was caused by: 1) banks (small and large) writing shoddy mortgages, and 2) inadequately backed derivatives, called swaps, that insured the mortgage-backed securities that financed those loans.

Money was lent to homeowners who simply did not have the ability to repay their debts–and instead relied on a continuous cycle of refinancing, borrowing more and more as housing prices rose. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The U.S. Commerce Department reported the April deficit on international trade in goods and services increased to $40.3 billion from $40.0 billion in March.

The trade deficit, along with the credit and housing bubbles, were the principal causes of the Great Recession. Now, a rising trade deficit and continued weakness among regional banks, still burdened by bad loans, threatens to stifle the emerging recovery and keep unemployment near 10% through 2011.

At 3.3% of gross domestic product, the trade deficit subtracts more from the demand for U.S.-made goods and services than President Barack Obama’s stimulus package adds to demand. Moreover, Obama’s stimulus is temporary, whereas the trade deficit is permanent and growing again.

Subsidized manufactures from China and petroleum account for nearly the entire deficit, and both will rise as consumer spending and oil prices rise through 2010

Money spent on Chinese coffee makers and Middle East oil cannot be spent on U.S.-made goods and services, unless offset by exports.

When imports substantially exceed exports, Americans must consume much more than the incomes they earn producing goods and services, or the demand for what they make is inadequate to clear the shelves, inventories pile up, layoffs result, and the economy goes into recession.

To keep Chinese products artificially inexpensive on U.S. store shelves and discourage U.S. exports into the Middle Kingdom, China undervalues the yuan by 40%.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Commerce Department reported the February deficit on international trade in goods and services increased to $39.7 billion from $37 billion in January. Chinese President Hu Jintao has told U.S. President Barack Obama that China will not revalue its currency in response to U.S. requests.

This leaves Obama with the difficult choice between acting unilaterally or appeasing Chinese mercantilism to the great detriment of U.S. businesses and workers.

Subsidized manufactured goods from China and petroleum account for nearly the entire deficit, and both will rise as consumer spending and oil prices rise through 2010.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Tuesday, the Commerce Department will report the February deficit on international trade in goods and services. Analysts expect it to increase to $39.0 billion from $37.3 billion in January. My forecast is in line with the consensus.

The trade deficit, along with the credit and housing bubbles, were the principal causes of the Great Recession. Now, a rising trade deficit and continued weakness among regional banks threatens to stifle the emerging recovery and keep unemployment near 10% through 2011.

At 3.1% of gross domestic product, the trade deficit subtracts more from the demand for U.S.-made goods and services than President Barack Obama’s stimulus package adds. Moreover, Obama’s stimulus is temporary, whereas the trade deficit is permanent and growing again.

Subsidized manufactures from China and petroleum account for nearly the entire deficit, and both will rise as consumer spending and oil prices rise through 2010.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Labor Department announced the economy added 162,000 jobs, confirming my earlier, more conservative than the consensus forecast of 150,000.

As expected, temporary census jobs contributed a significant but not overwhelming 48,000 to the jobs total.

The private sector gained 128,000 new positions. This reflects moderate gross domestic product growth–something in the range of 3% for the balance of 2010. Not enough to bring down unemployment, which remains at 9.7%.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, the Labor Department will release March employment data, and economists have been optimistic the economy is finally gaining jobs and the recession has ended.

The consensus forecast, based on surveys of economists taken at the end of last week, is for a 200,000 jobs gain in March. The economy shed 36,000 jobs in February. The unemployment rate is expected to remain steady at 9.7%.

The ADP estimate for private sector jobs creation, released Wednesday, indicated a 23,000 loss, but that estimate does not include government workers and does not always track more comprehensive Labor Department estimates of private employment. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Stocks are tumbling, as investors realize President Obama is simply not offering policies that will fix the U.S. and global economies.

Each week more than 450,000 Americans apply for new unemployment benefits, and 17% of adults can’t find a full time job or have quit looking for work altogether.

Since Massachusetts voters sent Democrats a vote of no confidence, President Obama has been doubling down on bigger government and class warfare as the road to prosperity.

Meanwhile, the two biggest problems that block economic recovery go unaddressed-most businesses lack enough customers and access to bank credit to create jobs. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Barack Obama is seeking to double U.S. exports and create 2 million jobs over the next five years. The new Commerce Department program to accomplish this goal is simply inadequate.

The Commerce Department initiative merely consists of redoubling existing efforts and not addressing the fundamental issues–the undervalued Chinese yuan and high tariffs, and other regulatory barriers that block U.S. exports in much of Asia.

Commerce Secretary Gary Locke is launching a program by increasing Export-Import Bank funding for small businesses from $4 billion to $6 billion; boosting Commerce Department personnel that assist exporters at U.S. embassies and consulates in China and India; and strengthening enforcement of trade laws and agreements. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The U.S. now confronts its greatest economic challenges since the Great Depression. In addition to resolving crises in financial and housing markets, trade deficits with China and on oil must be addressed for the U.S. economy to achieve robust growth. Fixing credit markets and energy policy are largely domestic challenges, whereas recalibrating trade with China requires cooperation from Beijing. However, such cooperation requires fundamental changes in Chinese industrial policies and a departure from maintaining an undervalued yuan currency to spur industrial development.

Chinese Industrial and Currency Policies

Since the late 1970s, China has transformed from a centrally-planned economy dominated by state enterprises to a public-private economy highly responsive to global market opportunities.

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