Quotes from Societe Generale Cross Asset Research: -The US economy is experiencing a fiscal contraction worth 1.75% of GDP this year. There is still some concern about a delayed impact on the real economy. However, the risk that new austerity will be legislated is extremely thin. The tax increases and the sequester have effectively stabilized the debt/GDP trajectory which is on track to remain near 75% for the next 10 years. -Beyond that, the trajectory explodes on the back of aging population and healthcare costs. In a perfect world, these issues will be addressed sooner rather than later. There is a remote possibility of entitlement reform being legislated later this, in connection with raising the debt ceiling. -The ceiling was reset in late May and the latest projections suggest that "extraordinary measures" will be exhausted around October. The most likely scenario is that Democrats agree on a token down payment on future entitlement reform, giving the Republicans sufficient cover to raise the debt ceiling. In any case, there are very slim chaces of new austerity triggering downward revisions to near-term GDP projections.
Posted on: Thu, 13 Jun 2013 15:32:31 +0000
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