Senate expected to pass agency to increase the GDP growth forecasts, but cut the deficit or high credit rating

Taking advantage of renewed debt crisis in Europe now when the U.S. came to their own price for an unknown booster. U.S. Senate may be in the United States for 15 Thursday morning in consultation with the Republican Party by Barack Obama’s tax cut bill, the Democrats control the Senate, the market expects the bill through the Senate is not a problem.

Trend of strong U.S. dollar index

Obama administration’s tax cuts this biennium, the scale of up to 858 billion U.S. dollars, after the end of 2008, the U.S. financial rescue plan, but also the scale of 700 billion U.S. dollars.

Tax cuts also include a payroll tax relief for 120 billion U.S. dollars initiative, the payroll tax that employers should pay a fee for their employees, which makes institutions and economists have raised expectations the U.S. economy. Some media pointed out that if the tax cuts passed both houses of Congress, the United States will become a large industrialized countries in 2011 to tighten fiscal policy is not the only country.

Affected by this, JP Morgan Chase will be on Tuesday fourth-quarter U.S. GDP forecast from 2.5% upwards to 3.5% significantly. Some other organizations are the United States in 2011 GDP growth upward to 2.8% -3% or more.

Benefit the U.S. economy is expected to the good stimulus, the dollar also performed strongly. The dollar index from the point of view, the quantitative easing in the second round after the announcement all the way to rebound by the end of November was 80 points back in September over the level, then slightly down, but 14 is still closed at 79.393 points.

Although the U.S. tax cuts could stimulate the economy, but the United States may experience lower credit ratings. International credit rating agency Moody’s 13, said that if the Obama administration’s tax cuts approved by Congress, the company may cut the credit rating of the United States.

The high deficit of the U.S. government, the tax cut is no doubt the worse.

Moody’s believes that tax relief bill to become law, will push the government debt burden, an increase in the next two years, Moody’s rating outlook to the United States the possibility of negative positioning. Once the negative rating outlook is positioned, it means that the next 12 to 18 months, the U.S. long-term sovereign debt rating of Aaa is likely to be reduced.

Obama tax cuts announced last week, the U.S. Treasury prices fell sharply, bond yields rose to six-month highs, an indication of U.S. concerns about the level of debt is increasing.

However, there are economists that the U.S. tax cuts at this time to pick a good time. China’s central bank monetary policy committee member Li Daokui forum that the Fidelity Fund, the European debt market crisis has attracted attention, stimulation of the United States did not rise to the second round of volatility in the Treasury market.

U.S. economic growth next year is not low

The essence of taxes agreement, is the fiscal expansion. These include tax cuts on individuals and families to continue to reduce payroll taxes, maintenance capital income tax. Fiscal expansion, the U.S. budget deficit will still be high. But in the second round of fiscal stimulus and the superposition of the second round under the quantitative easing, the U.S. economic growth next year will not be too low.

Europe’s overall financial position is actually better than the United States, European debt once the dust settles, the financial market’s attention will go to the U.S. dollar will continue to decline. Europe and the United States at this time is to take advantage of disorder in the implementation of the second round of stimulus bonds before the bond market did not cause significant fluctuations.

European debt crisis more chaotic, more optimistic about the U.S. market, the more optimistic about the U.S. Treasury, U.S. Treasury bonds but will lower interest rates, and this is the greatest beauty of the international monetary control.

Long-term U.S. dollar will depreciate

Although there are many short-term bullish for dollar stimulus plan, but the dollar long-term depreciation trend even more.

U.S. debt is one important reason. The United States now has very high debt levels, while the U.S. economic vitality and the late 90s of last century’s “new economy” period can not be compared, so unless a major crisis, the dollar will not raise the attraction of international capital.

U.S. deficit depends on the international capital inflows. The dollar’s international currency status, the current U.S. Treasury bonds, about 70% of foreign investors.

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