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Economic and and financial news and analysis

Fed Has Acted Before Elections Before – NY Times

WASHINGTON — In September 1992, the Federal Reserve culminated a long-running effort to stimulate the sluggish economy by cutting its benchmark interest rate to 3 percent, the lowest level it had reached in almost three decades. The cut was avidly sought by the administration of President George H. W. Bush, but it was not enough…

China’s U.S. Debt Holdings Aren’t Threat, Pentagon Says

China’s holdings of more than $1 trillion in U.S. debt and the prospect that it might “suddenly and significantly” withdraw funds don’t pose a national security threat, according to a first-ever Pentagon assessment. “China has few attractive options for investing the bulk of its large foreign exchange holdings out of U.S. Treasury securities,” given their…

52% of investors say Fed won’t act- Conomists say 65% odds it will, but Fed still gets benefit of Synthetic QE

CNN says that about half of investors think that the Fed will not do QE. I was listening to Bloomberg Radio yesterday and the pros interviewed seemed to be unanimous in asserting that the Fed would do “something” because it “had to.” There have even been many cases of pundits and seers who were quoted…

Moody’s warns on US credit rating – FT.com

The US could lose its top credit rating status if policy makers fail to agree on measures to reduce the country’s debt to gross domestic product ratio next year, Moody’s Investors Service warned on Tuesday. Budget negotiations during the 2013 congressional legislative session “will likely determine the direction of the US government’s Aaa rating,” Moody’s…

AIG bailout “profits” assure moral hazard will continue

Last month the Federal Reserve Bank of New York sold Maiden Lane III, a portfolio of AIG’s assets for a profit of $17.7 billion, an almost shocking figure considering many thought the N.Y. Fed would take sweeping losses on the assets estimated at $62 billion at face value. Though some analysts have suggested the government…