CNBC Guest Blog

Published: Tuesday, 7 Jul 2009 | 11:18 AM ET

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Andrew Busch
Global Finance Strategist
BMO Financial Group

As the WSJ points out, the stimulus package Congress constructed has a heavy dose of spending on infrastructure projects, which roll out too slowly to be much help in fighting short-term unemployment. "The Congressional Budget Office estimates that only 11% of the $308 billion of stimulus spending on discretionary programs will be spent in the current fiscal year, and only about half by the end of fiscal 2010." Too little, too late? This is why there will be stronger calls for more as the unemployment rate continues to rise.

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If that comment by Tyson wasn't disturbing enough, she went on to say that the US dollar ought to decline in the longer-term on a trade weighted basis. Tyson believes the US should focus on generating exports and that a lower US dollar would aid in this venture. While the FX markets ignored her commentary, I would wager that China and Russia did not. Given that she was speaking in Singapore and in their backyard, I would say they must feel their worst fears are getting confirmed.

First, she's advocating expanding the fiscal deficit beyond it's current distended fiscal bloat. Second, she saying the US should devalue its currency and therefore the value of the government bonds as well. For a foreign holder of US dollars and US government securities, could you have possibly said anything worse? Maybe, she could have said that the health care bill will put a 4% surcharge tax on wage earners over $200k. Oops, that's what's being floated by Congressional Democrats now.

As the summer wears on and discontent grows, I expect calls will be louder and louder for additional stimulus from Congressional Democrats to put more Americans to work. I also expect the bond market to become more volatile as the Congressional Budget Office calculates the effects of health care, energy, and the current spending on the deficit. If more Obama officials talk down the US dollar, we'll create the risk of a fall exit that will neither create jobs nor boost the economy.

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Andrew Busch
Andrew B. Busch is Global FX Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him here and you can follow him on Twitter at http://twitter.com/abusch .

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