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Let's Hope GOP Health Revamp Isn't Fatal for Congress

Let's Hope GOP Health Revamp Isn't Fatal for Congress
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Tuesday, 07 March 2017 07:09 AM Current | Bio | Archive

House Republicans released on Monday legislation that is intended to repeal and replace the Affordable Care Act, also known as Obamacare.

The proposed legislation changes the Affordable Care Act profoundly, especially on how health care is financed for people who do not have insurance through work, and it eliminates the mandate requiring most Americans to have health insurance.

This has been 7 years in the making in theory as the House Republicans have been trying to repeal the Affordable Healthcare Act for that long.

Of course, the details are of interest to the healthcare industry. However, from a macro-economic perspective, the big question is if the Republican Health Bill can be passed by mid-April as is the intention vs. the likelihood that the bill could be tying up Congress in such a way that it prevents anything else from happening.

Meanwhile, we also got on Monday a new Executive Order titled “Protecting The Nation From Foreign Terrorist Entry Into The United States.”

The economic impact of this revised and less restrictive travel ban is less than that of the first travel ban because with this sort of thing it is the signaling effect what matters. The signal from the first travel ban was taken negatively in the Middle East, which is a major creditor to the United States and has already affected investor behavior.

It is unlikely that the second less restrictive travel ban will change that signal, whatever it changes for the circumstances of individual travelers.

US consumer credit is also due today, which is not especially exciting perhaps as US banks are lending in a normal-like fashion. There is no evidence of excessive lending, but at the same time the overall pace of credit creation seems to support the US economy operating at or around its trend rate of growth, which is something like 2.25 percent.

With the US economy at full employment, the issue is the extent to which credit and the associated wage growth combine to support consumer spending, but also the extent to which they fuel further inflation as they might be considered to be tipping towards inflation at the moment.

Over in the Euro area, German manufacturing orders disappointed by decreasing 7.4 percent in January from the month before. Domestic orders decreased by 10.5 percent and foreign orders by 4.9 percent on the previous month.

The annual GDP growth rate for the Euro area came in unchanged at 1.7 percent in Q4 of 2016.

In the UK, the impact of the aftermath of the EU referendum result seems to be coming through with a decline in the British Retail Consortium’s retail sales on a like-for-like basis that fell 0.4 percent on the year in the four-week period from January 29 to February 25.

The UK consumer has started to experience some, though by no means all of the inflation consequences of the structural decline of the British pound that occurred in the wake of the EU membership referendum result.

This does seem to have a dampening effect on the willingness of the British consumer to consume.

Meanwhile, the G-20 has removed from next week’s communique the pledge that the G20 Finance Ministers and Central Bank Governors made at their meeting in Chengdu, China in July 2016 “We will resist all forms of protectionism” of this year’s G20 meeting’s communique that will take place on March 17-18 in Baden Baden, Germany.

The complete removal of that pledge is in my opinion another signal to the world, which includes of course the financial markets, that something has changed.

Besides that, it will also be interesting to see what at the G-20 meeting will be said on exchange rates after Trump’s administration said countries such as China, Japan and Germany are keeping their currencies artificially low and in the July 2016 Chengdu final communique we read: “We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes.”

Taking that in context of President Trump calling the Chinese 'Grand Champions' of currency manipulationthen the new G-20 final communique could be interesting.

Finally, China just unformed that its foreign-currency reserves increased by $6.9 billion to $3.005 trillion in February and stopped hereby, unexpectedly, a seven-month losing streak, all this thanks to tighter controls on capital outflows and a rally in the yuan.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

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With the US economy at full employment, the issue is the extent to which credit and the associated wage growth combine to support consumer spending, but also the extent to which they fuel further inflation as they might be considered to be tipping towards inflation at the moment.
obamacare, gop, trump, fed, investors
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2017-09-07
Tuesday, 07 March 2017 07:09 AM
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