CBO’s FY 2010 final budget estimates hint at short-tem direction of U.S. business outlook; Potential for foreign currency war begins to percolate
ByOct. 11, 2010 | Written by Jeffrey Winograd
FY 2010 federal deficit “slightly lower” than expected – The federal budget deficit for fiscal year 2010 was a tad under $ 1.3 trillion, down $ 125 billion from the figure for FY 2009, according to the Congressional Budget Office’s Monthly Budget Review that was published on Oct. 7. Of particular interest, however, was the increase in federal receipts in September – $ 26 billion entered the Treasury Department’s coffer during the month, an increase of 12% when compared to September 2009. Corporate income tax receipts showed a healthy $ 20 billion increase for the month. For the full FY 2010, corporate income tax receipts jumped by $ 53 billion, a 39% increase over 2009. On the downside, total receipts of individual income and payroll taxes sank by $ 43 billion, which was a 2% decline from the previous year. Income and payroll taxes that were withheld took a slight drop of $ 13 billion, or 1%, compared to 2009. Nonwithheld receipts fell by 10% or $ 35 billion. These figures suggest the growth in taxable corporate income is not linked to a corresponding growth in employment. This is an indicator that forex traders should keep on file in their memory banks.
Upcoming G-20 meeting could be explosive – Despite pledges of international cooperation, the long-simmering dispute over currencies and exchange rates was not resolved at the just-concluded annual meeting of the International Monetary Fund. Once again, China was in the cross-hairs of U.S. and European small arms fire. However, Treasury Secretary Timothy Geithner and Jean-Claude Trichet, president of the European Central Bank, were subdued in their criticism of China and steadfastly refused to bring their heavy artillery into play. As countries with undervalued currencies “lean against appreciation,” global economic recovery is placed in jeopardy, Geithner warned. Once again, the Chinese likely view the Western economic powerhouses as “paper tigers.” Jawboning the Chinese over their undervalued renminbi does not seem to work. National leaders are set to convene in Seoul, South Korea next month for the wrap-up of the G-20 confabs which feature preparatory meetings involving finance ministers and others. According to news reports, South Korean President Lee Myung-bak, in reference to the ongoing disagreements over foreign exchange, said on Oct. 11: “If each country insists on its own interest during the recovery phase, it will bring about trade protectionism and will cause the world economy very big problems.”
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