When one travels in economists' circles, one tends to tap into the issues, controversies and policy ideas 'dismal science' practitioners are debating.

And one issue economists have rattled around concerns the speed of fiscal policy stimulus, or more accurately, the lack thereof. In the digital age, the internet has propelled a host of speed-enhancing changes, and it occurred to this group of economists that U.S. Government policy is decidedly behind the curve in this area.

Here's why: economist David H. Wang noted that the U.S., in an attempt to jump-start its economy stalled by the nation's worst housing slump in more than 15 years, has implemented a host of monetary policy changes to provide monetary stimulus quicker. The U.S. Federal Reserve cut key, short-term interests multiple times during a 10-week span (and later implemented additional rate cuts), and devised two, new, Fed-administered institutions to address the credit crisis, provide liquidity, and ensure the orderly operation of financial markets.

An International Monetary Fund steering committee is urging global leaders to cooperate to deal with the current financial crisis, which the IMF concludes is global in scope.

In its communiqué following its spring meeting, the IMF said it was meeting at a time of "unusual uncertainty regarding global economic and financial market prospects." The IMF added that the challenges facing the world economy are of a global nature, requiring strong action and close cooperation among the membership.

Cites financial instability, credit crunch

The IMF said global financial instability has increased since its last meeting. Further, global economic growth has slowed and growth prospects for 2008 and 2009 have deteriorated, adding that risks to the outlook come from the still unfolding events in financial markets and from the potential worsening of the housing and credit cycles. (Earlier this year the IMF cut its 2008 global GDP growth forecast to 3.7% from 4.2%)

Meanwhile, for developed economies, the IMF said monetary policy should continue to aim at medium-term price stability, while responding flexibly to signs of a more pronounced and prolonged economic downturn. The IMF also endorsed fiscal stimulus, at least temporarily, as an appropriate engine of growth and as a stimulus tool, saying fiscal policy can also play a useful, counter-cyclical role. In the United States, "temporary fiscal easing will help to counter downside risks to growth," the IMF said.

Billionaire investor George Soros believes the current financial crisis is the worst since the Great Depression, and said stocks have not bottomed yet, Bloomberg News reported Thursday.

Soros said the most recent market bottom "will probably not prove to be the final bottom," adding that the current stock rebound will last six weeks to three months as the United States moves closer to recession, Bloomberg News reported.

Further, Soros, in an op-editorial column in The Financial Times, argued that the cause of the market's current problems is a flawed premise: the belief that markets are self-correcting and tend toward equilibrium. They aren't and don't, Soros argues, and the laissez-faire policy creates bubbles, including the most-recent housing bubble, which, in turn, when it started to burst, led to the current credit crunch.

Soros cites deregulation

Soros added that the market's current troubles originated in 1980 when U.S. President Ronald Reagan and United Kingdom Prime Minister Margaret Thatcher led a laissez-faire movement that reduced/eliminated regulation of banks and financial markets, the FT reported.

The ever-incisive FT columnist Martin Wolf offers a stark and sober analysis of the United States' current financial and economic predicament, but it's an analysis well-worth reviewing, if one has the time.

A synopsis is provided here, but first, full warning: read the analysis when you're feeling well and in a good mood, not during other times.

Groucho Marx once remarked that whenever things start to look really dark, remain calm, don't panic, and above all, turn on a light.

Given the barrage of financial stresses battering the credit and equity markets these days, consumers, economists and investors alike could use some of Groucho's levity, and some light. In this case the light may appear in the form of the Federal Housing Administration.

What's old is suddenly new

The Federal Housing Administration, the once-viewed-as-antiquated, irrelevant Great Depression-era government agency, is suddenly emerging as the centerpiece of government efforts to bolster the U.S. housing market, reported The Wall Street Journal (subscription required.)

The FHA has become the cheapest, and in many cases, the only alternative for borrowers who can make only a small down payment, and the agency is rapidly gaining market share.

The ever-incisive FT columnist and economist Martin Wolf has some good news for investors, who are no doubt weighed down by the cacophony of pessimism permeating the U.S. stock and bond markets these days.

Wolf argues that the U.S. housing recession and accompanying credit market concerns are huge dangers, for the U.S. and for the rest of the world, and a bumpy road is ahead, but the public sector, led by the U.S. Federal Reserve, is now coming to the rescue.

Before offering his likely scenario for a return to economic health, Wolf summarizes a worst-case-scenario from Nouriel Roubini, economics professor at New York University and founder of RGE Monitor. (Fair warning: Roubini's scenario represents the bleakest of the bear views, hence it's best not to read it on a day when the Dow is down 300 points, etc.)

While recognizing that Roubini's scenario is plausible, Wolf argues that it's not likely to occur, at least not to the degree Roubini suggests.

What's the new president - - Republican or Democrat -- likely to face after taking the oath of office in 2009?

Daunting fiscal problems -- and right at a time when Congress may have to consider more fiscal stimulus to jump-start the U.S. economy, one economist observed.

The biggest problem, economist Glen Langan said, will be the federal government's budget deficit. The United States is on-track to record a $200 billion deficit in Fiscal 2009 and a $241 billion in Fiscal 2010 -- and that's if the U.S. economy doesn't fall into a recession, Langan said, citing Congressional Budget Office data.

"The baseline CBO projections present a large budgetary task for the new president, but by itself it's not an impossible one, absent a major recession. The problem is there's no money available to tackle any other problems, including ones a Democratic president would address -- health care, energy policy, education and infrastructure. And don't forget the Iraq War, anti-terrorism efforts, and potential mortgage assistance programs," Langan said. "If there aren't changes to the tax code, given the current revenue structure and tax rates,to say the next president's hands are tied regarding new programs, would be an understatement."

A new survey has found that the percentage of economists forecasting a recession has more than doubled, Bloomberg News reported Monday.

The National Association for Business Economics' survey of 49 economists done January 29-February 13 found that 45%, a majority, expected the downturn to be relatively muted, up from less than 20% during a previous poll in November. The economists surveyed expect the U.S. economy to grow 1.8% in 2008, down from 2.6% in the previous survey.

Economist Steve Affinito, who was not a part of the survey, told BloggingStocks Monday the more somber view of is not a positive sign for the U.S. economy.

"Economists tend to be pretty cautious with their forecasts and projections, I can speak from personal experience with that, so the fact that the statistic doubled is an eye opener," Affinito said. "The economy has several large, formidable hurdles to mount in this economic cycle, so it's understandable why economists are taking a more-reserved view."

Democrat presidential candidate Sen. Barack Obama, D-Illinois, today unveiled a new $210 billion federal spending plan that he says would create jobs in construction and environmental services.

The Obama proposal would invest money over 10 years in two programs, the largest of which would be a $150 billion effort to create 5 million "green collar" jobs to develop more-environmentally friendly energy sources.

The remaining $60 billion would fund a National Infrastructure Reinvestment Bank to rebuild the nation's highways, bridges, airports and other public facilities. Obama said the construction fund would create nearly 2 million jobs, many of them in construction directly - - a sector hard-hit by the housing sector's correction - - the nation's most severe housing slump in more than 20 years.

Rival Democratic Sen. Hillary Clinton, D-New York, called Obama's effort unoriginal. Neera Tanden, Clinton's policy director, said Obama was offering ideas Clinton proposed months ago. "Voters may ask themselves that if Senator Obama cannot produce his own ideas on the campaign trail, how will he solve new problems as president?" Tanden said in a memo e-mailed to reporters, The Associated Press reported.

Furthermore, the Republican National Committee, which seeks to portray Obama as a tax-and-spend liberal, included Obama's plan on its 'Obama Spend-O-Meter.' The Republicans assert that Obama's announced programs would add $850 billion in federal spending over four years, including health care, education, national service and foreign aid programs, among others. The RNC's web site did not break down the asserted total by year, but economist Steve Affinito told BloggingStocks Wednesday, assuming equal, annual appropriations of $212.5 billion, the total would not be an unreasonable nor an unwarranted outlay, from an economic standpoint, in his interpretation.

"I don't know where the RNC obtained its $850 billion total, but for the sake of argument, even it was $220 billion per year, that's fairly modest, given the services it includes, including universal health insurance," Affinito said. "Also, given the current state of the economy we may find we may need another $150-$200 billion economic stimulus this year, just to keep the economy growing. So in that regard, Sen. Obama's proposal is insinc with the times and a net positive for the U.S. economy."

The ever-incisive FT columnist and economist Martin Wolf offers fairly harsh advice for those in the United Kingdom (and the United States) considering a house purchase, on the belief that home prices have bottomed and will recover soon: that recovery is not happening any time soon. Nor should it, he argues.

The U.K. Government, Wolf said, should not try to protect banks to save the housing market. To do this would encourage innocent prospective buyers (new borrowers) to buy at what is probably the top of "a hugely stretched market."

And the characteristics of the U.K.'s housing bubble versus the United States' deflating housing balloon/bursting bubble? Tax laws differ by nation, of course, but there are strong indications the U.K.'s bubble may at least be equal to the U.S.'s: U.K. home prices have increased 150%, in real terms, since 1996. At the same time, the ratio of U.K. household liabilities to disposable income is 175% in 2008, compared to slightly more than 100% in the mid-1990s. Wolf's conclusion: that's an unsustainable growth in debt that is coming to an end.

The U.S. economy could be growing faster before the inauguration of the new U.S. president. Bloomberg News reported Monday.

The forecast is based on the rise in the 5-year U.S. Treasury yield from its lowest level relative to the 2- and 10-year notes since 2001. The last two times that occurred, during the 1990 and 2001 recessions, the economy started to expand within nine months.

Famous last words

Economist David H. Wang agreed that the indicator has accurately predicted previous recoveries. "It's been an accurate indicator, famous last words," Wang told BloggingStocks Monday.

However, Wang cautioned that the nation's public officials, corporate America and individuals can't overlook, or neglect to prepare for, what's in-between.

Initial jobless claims fell to 356,000 to for the week ended February 2 from the previous week, but came in above the 344,000 consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised up 3,000 to 378,000.

Also, the four-week moving average jumped 11,000 to 335,000. Economists view the four-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

The largest increases in initial claims for the week ending Jan. 26 were in Wisconsin, +2,325; North Carolina, +715; Maryland, +504; Virginia, +340, and California, +233. The largest decreases were in Michigan, -7,546; Illinois, -4,483; Florida, -4,127; Ohio, -3,038; and Texas, -2887.

Meanwhile, the number of continuing claims increased by 75,000 to 2.785 million from a revised 2.710 million for the week ended January 26, the latest period for which figures were available.

Economic Analysis: Another poor weekly jobless claims statistic, one that continues to show a deterioration in employment conditions. Further, the four-week moving average continues to rise and is approaching the U.S. Federal Reserve's danger zone of 350,000. The U.S. Federal Reserve considers a four-week average above 350,000 a signal of soft labor market conditions. In addition, the rise in continuing claims, which measures the seasonally-adjusted uninsured, to 2.785 million, also indicates a tepid job market. If jobless conditions continue to worsen, additional monetary and fiscal measures undoubtedly will be needed to stimulate the U.S. economy.

The $150 billion fiscal stimulus package that's winding its way through the U.S. Congress will not represent a panacea for the U.S.'s economic ills, an economist argued, but it will represent modest good news for one segment -- the beleaguered housing sector.

The fiscal stimulus bill currently under discussion in the U.S. Senate calls for raising Fannie Mae and Freddie Mac's conforming loan limit to $729,750 through 2008 from the current $417,000.

Conforming loans are conventional, fixed-rate mortgages for good credit borrowers that banks make that are eligible for purchase by Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). When Freddie and Fannie purchase these loans from banks, it "frees-up" money that the banks can use to grant mortgages to future borrowers, thus expanding the pool of funds available for mortgages.

Economist Steve Affinito told BloggingStocks Thursday that while it's important to underscore that the higher conforming loan ceiling will not eliminate the U.S. housing sector's recession, it is "a critical, essential step in the right direction," in his interpretation.

The compelling question, following the U.S. Federal Reserve's 125-basis-point cut in short-term interest rates in 8 days, is whether the Fed has done enough.

"Probably not," economist David H. Wang told BloggingStocks Thursday. "But they've done all they can do, politically and practically, until the next meeting in five or so weeks."

By practically, Wang means that barring another market plunge or a capitulation day, the Fed is not prepared to lower rates before its next meeting. The Fed is already facing criticism that it responded earlier not to economic conditions, but to Wall Street's demands -- perpetual demands in the view of some -- for interest rate cuts. In this climate it would take an extraordinary event to secure another Fed emergency cut, he said.

By politically, Wang means the Fed is, similarly, facing criticism that its current easing policy will increase inflation pressure. "Some in Washington believe in inflation will accelerate so much that by year's end the Fed may be forced to raise rates. And I grant you, it's not a baseless concern," Wang said.

Durable good orders jumped 5.2% in December 2007, well above the 1.6% consensus estimate. The U.S. Congress and the Bush Administration are progressing full-speed-ahead, albeit with some Senate tweaking, toward a $150 billion fiscal stimulus package that will, at minimum, provide a modest boost in GDP. Meanwhile, the Dow Jones Industrial Average, as the late financial talk show host and journalist Louis Rukeyser would say, amid all of the financial world's tumult and write-downs and restatements and remonstrations, has dropped... less than 15%.

With the above as backdrop, is this a time for the U.S. Federal Reserve to deviate or perhaps pause from its monetary policy easing path on the thesis that maybe there's enough stimuli in the system?

"Not on your life," economist David H. Wang said Tuesday. "The Fed's 'clear and present' danger threshold has been met and we're going to need an accommodative monetary policy for awhile." Wang argued that four factors will continue to act as contractionary affects on the U.S. economy for at least the next 6-9 months: more mortgage/MBS defaults, a renewed recognition of risk by investors, tepid job growth, and that nemesis of free world economic growth: high energy prices (primarily oil).