Money in the Morning

THE WEEK AHEAD

July consumer spending report due out Monday, July manufacturing and construction data due Wednesday, and the August jobs report coming on Friday.

Bloomberg: "Federal Reserve officials face another round of reports projected to show weakening growth amid skepticism they have the firepower to deliver on Chairman Ben S. Bernanke’s pledge to avoid a relapse into recession." http://bit.ly/cgui7a

President Obama on NBC Sunday: "The economy is still growing, but it's not growing as fast as it needs to." He urged Congress to pass measures to increase lending to small businesses and provide them with tax breaks, but said there's no "magic bullet." http://bit.ly/abSqaa

FED RETREAT ROUNDUP

NYT: "Bernanke Tries to Manage Expectations of Fed Role"

"So even as Mr. Bernanke outlined the Fed’s options and credited stimulus packages with helping the global recovery, he appeared to be tamping down expectations for a government-led fix. 'For a sustained expansion to take hold, growth in private final demand — notably, consumer spending and business fixed investment — must ultimately take the lead,' he said.

"He added, optimistically, 'On the whole, in the United States, that critical handoff appears to be under way.' " http://nyti.ms/a6SYPI

Central bankers at the weekend Fed retreat see "slog" but expect recovery to stay on track. WSJ: http://bit.ly/d5kmk7 

Economists believe Bernanke on the right course... http://bit.ly/aNTGrQ

China relying on state-run companies for growth. NYT: "As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition." http://nyti.ms/clEfUQ 

Japan's central bank expanding loan program to stimulate economy. http://bit.ly/a7xoBa

THE WEEKEND'S MUST READ: Peter Goodman in NYT's Week in Review, "Policy Options Dwindle as Economic Fears Grow." Or... Deficit fears trump stimulus. Or... Is U.S. facing Japan-style deflation?

"This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

"The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s." http://nyti.ms/946NFr

And/but... The government has the money to borrow and spend, thanks to investors pouring money into bonds. Bloomberg: "That’s a turnaround from 16 years ago, when Bill Clinton was forced to abandon stimulus plans after his advisers said the bond market would punish him with higher borrowing costs if it sensed swelling deficits." http://bit.ly/9kavqR

States see pickup in tax revenue. WSJ: http://bit.ly/c9G2zU

Lincoln touts earmarks in reelection bid. AP: http://bit.ly/9Hwy7t

FINREG UPDATE: Reform now in hands of regulators, writes Gretchen Morgenson. Their decisions will decide whether the Wall Street bill accomplishes two of lawmakers' major goals, greater price transparency on the markets and the opening of transactions to more participants.

"The question is this: Will regulators give Wall Street’s big dealers what they want in a second bite of the apple?" http://nyti.ms/9GXQAT

Meanwhile, next month in Switzerland — Global talks on bank regulation:

"... regulators from around the world try to reach an agreement on new banking rules aimed at preventing another financial crisis... The nub of the negotiations: How much capital should banks be required to hold to absorb losses if loans or other investments go bad?" WSJ: http://bit.ly/cPVBCq

CUE THE OUTRAGE: WSJ: "Wall Street bonuses may come earlier this year.

"With the specter of higher taxes looming in 2011 and banks still reeling from last year's U.K. bonus tax, executives at some financial-services companies are considering whether to pay year-end bonuses, traditionally doled out starting in January, sooner." http://bit.ly/ame2vU