What A Relief

As in taxes. It appears more than likely that the tax cuts will be extended for an additional 2 years, which has sent the markets higher this morning as one piece of uncertainty that has been looming heavily appears to be rectified.
One thing I must say though is that serious tax reform is needed and I can’t stand how government makes it seem like they are doing us some sort of favor by allowing us to keep more of OUR money. It’s like they think the tax revenue is really theirs and that it is going to somehow “cost” the government.
This has induced some major risk taking this morning, most notably in stocks and commodities.
In both Australia and Canada, interest rates were kept unchanged as dovish comments emerged from both Central banks.
In the Euro zone, Ireland will vote today on the austerity measures and budget cuts that will allow them to receive the bailout money. Separately, the EU has decided not to increase the size of emergency bailout fund.
In the forex market:
Aussie (AUD): The Aussie is mostly higher despite the RBA keeping rates unchanged and hinting that inflation should be tame into the first half of 2011. Euro debt crises still pose the biggest risk top global economic stability therefore no hikes were necessary at this time.
Kiwi (NZD): The Kiwi is mostly higher on risk appetite as well as receiving some commodity currency money flows from both the Aussie and Loonie where rates were kept steady.
Loonie (CAD): The Loonie is lower across the board despite risk appetite after it approached parity with USD. The BOC left interest rates unchanged, citing weak exports and the European debt crisis as prohibitive factors. In addition oil is trading lower after reaching a 90 handle earlier this morning. (Click chart to enlarge)
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Euro (EUR): The Euro is mostly higher, relying on its anti-Dollar stance as Ireland votes today to accept budget reductions and consequently the bailout package.
Pound (GBP): The pound is higher across the board as positive economic data keeps rolling in. Retail sales figures were positive and lower industrial production figures were negated by higher manufacturing production figures. GDP estimates came in .1% higher to .6% (Click chart to enlarge)
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Dollar (USD): Everything up, Dollar down. Now that the tax monkey is (seemingly) off the market’s back, tax benefit selling does not need to take place so the effects of QE2 can tank the Dollar without further “complications”.
Yen (JPY): The yen is lower across the board as rhetoric heats up that the finance minister will be watching the Yen for perceived “one-sided” moves. Think Yentervention part deux. At least that’s what he wants us to think to halt a strengthening Yen.
I hope people remember this day as the one where the administration first compromised on the economy and the one we can look back on as the start of pro-business policy intended to put people back to work.
Just think, had this been the FIRST issue tackled, we may not have reached 9.8% unemployment at all. Economic uncertainty is not helpful in job creation and the priorities in Washington DC came unfortunately at the expense of those unemployed and the economy in general.
Now if we can just get some meaningful reductions in spending (like every other nation around the globe) then it is possible that the economy can grow and tax revenue can increase despite lower rates. This concept is one that that the Left refuses to acknowledge, as it makes them seem less important in the grand scheme of things.
Economics trumps politics—always. Don’t let them tell you otherwise.

1 Response to "What A Relief"

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