Where Did the Recession Trigger Go?
Do you remember back in the good old days when all the great minds in Washington were issuing measured pronouncements about the risk of recession and the possible need for a stimulus package? For example, just last week the Washington Post editorial page urged caution. They told readers that any stimulus package should be timely, targeted and temporary. They even proposed a trigger mechanism under which the data would have to show three consecutive months of job loss before any stimulus went into effect.
>Well that was yesterday's news. The word for today is "panic." Fed Chairman Ben Bernanke is calling for stimulus as is the Bush White House and the Republicans in Congress. And the number is now between $100 and $150 billion, not that piddling $70 billion that the level-headed types were talking about last week. Bernanke's phrase for the day was "quickly implemented." Whatever happened to the wait and see approach and the trigger mechanism?
Addendum (1-19): The Washington Post editorial board's new line on stimulus is "Everyone agrees the economy needs a boost." and their number for stimulus is $150 billion, more than twice last week's conventional wisdom of $70 billion.
You couldn't make this stuff up. One can admire their flexibility, although an occasional admission of error might be nice.
Comments (50)
The GOP at least wants the economy growing again by November (and obviously growing, not just seen that way six months later when the final numbers are crunched). It will hard enough for the GOP to hold the White House let alone make headway in Congress. A rotten economy could make for as big a blowout as 1932 was.
January 17, 2008 3:17 PM | Reply | Permalink
It would seem that the financial firms will be bailed out by infusions of foreign cash, so the panic is just that: a panic. They are "too big to fail".
What we don't know is to what extent the wealthy who have been cleaning up from the moves by the hedge fund and private equity firms are in a squeeze. There is a difference between the net worth of Bill Gates going down (on paper) when Microsoft stock drops in price and a highly leveraged investor getting margin calls when his investments drop.
The Fed is still devoted to protecting the interests of the wealthy. That's why they focus on inflation rather than on employment as their primary responsibility. Their patrons are now hurting and that's why we are hearing about "quick" fixes; margin calls don't wait.
--- Policies not Politics
Daily Landscape
January 17, 2008 3:27 PM | Reply | Permalink
The Fed doesn't focus on inflation, they focus on protecting stock and any other assets of the wealthy. Since when has any fiat currency held it's value over time. The little guy who puts his money in the bank loses value each year, the gov't inflation figures are as honest as a kid writing his own report card. This time lower interest rates, the printing of more dollars and incurring more gov't debt won't stop our economy from going into recession. Thanks to Greenspan and his serial bubble blowing and 1% interest rates a few years ago, and thanks to Bush for flooding the world with US dollars for his pointless bloody war.
January 17, 2008 3:58 PM | Reply | Permalink
Yet another financial company presenting with arterial bleeding, Merrill-Lynch writing off billions along with everyone else, and a market showing intentions of sinking below a Dow of 12,000. That might be enough, I'd say.
Those grownups on Wall Street forgot stuff has to be paid for---war and oil, just like Vietnam and the 70s. I'm hearing "stagflation", too.
That took almost 20 years to dig our way out of. This time we don't have the luxury of that kind of time scale. We lack the manufacturing base and export balances. The national house is mortgaged to the max.
January 17, 2008 3:30 PM | Reply | Permalink
Mmm, wonder who's going to foreclose?
January 17, 2008 4:57 PM | Reply | Permalink
The holders of US dollars aren't foreclosing, they are buying up American assets, from factories on main street to finance companies on Wall Street. The sinking value of the Bush dollar makes it that much easier.
January 17, 2008 6:42 PM | Reply | Permalink
Re: That took almost 20 years to dig our way out of. This time we don't have the luxury of that kind of time scale.
Is the world going to end in less than 20 years?
January 18, 2008 3:04 AM | Reply | Permalink
The world has nearly 30 years of improvement in infrastructure, both financial and otherwise, to take advantage of the opportunity that "our" irresponsibility has given them.
Digging out of this situation will be far more challenging than before, given the world economic situation.
January 18, 2008 6:24 AM | Reply | Permalink
Climate ring a bell? China growing stronger? Russia growing rich on oil?
Where will those issues be in 20 years? The point is that instead of getting knocked back from a leading position to just equal or barely ahead, we are going to fall truly behind.
January 18, 2008 6:50 AM | Reply | Permalink
You and the poster above you seem to think this is a zero-sum game, so that if China and Russia are stronger, the US must be weaker, in absolute terms. Sorry, but that's not true. (Also Russia is most certainly not stronger than it was 30 years ago! It's recovered somewhat from its Yeltsin era basketcase state, but is still a far cry from the big old Soviet bear it was in the past) Precisely because the US economy is NOT so isolated any more I think we will have an easier time today than we did the times past. Mind you, I am not trying to play Polyanna, but I do think that we are in much better shape today than we were in 1979 (though if we hadn't had a fool in the White House for the last seven years we'd be even better off).
January 18, 2008 1:53 PM | Reply | Permalink
True it's not zero-sum, and also true that China and Russia are not exactly dominant. But If we run out of steam, it is not clear that those folks will wait for us to get going again.
And there is an elephant you neglect---climate, which subsumes national security, because of subsequentwars and terrorism, and economy, because of the growing market in energy replacements. If we are too broke to pour cash into developing new business the other folks will be there already, when we climb up out the crap. And if enough people lose land area, or suffer wild-weather-caused disaters, they may come gunning for us.
I'd rather we were in the lead on both the new business and the climate mitigation. Let China and Russia fend off the Bangladeshi or Miami residents.
January 18, 2008 2:31 PM | Reply | Permalink
Re: And there is an elephant you neglect---climate, which subsumes national security
I am not ignoring it. I don't however see that it has much bearing on discussing the economy over the next 12-18 months, unless you have good reason to believe we will suffer some extreme weather event in that time frame. Obviously long term we and the rest of the world need to wean ourselves off oil, for several reasons, CO2-stimulated climate change being one of them, perhaps even the most pressing. But I don't see that as having much bearing for the more immediate question of what sort of stimulus (if any) should be applied against a looming recession, which is the topic of this thread.
January 18, 2008 5:31 PM | Reply | Permalink
As you pointed out, the time frame under discussion was my 20 years of post-Vietnam recovery.
I doubt any fast stimulus will accomplish much. Restructuring is needed.
January 18, 2008 5:58 PM | Reply | Permalink
The British had coal as the resource that drove their Industrial Revolution. The United States had oil that drove it's heyday through the Industrial Revolution and onwards into the Computer Revolution. Someone (China, Russia, who knows) will have some other resource and some other Revolution. This certainly appears to be the trend in the lives of modern nations. A resource is used as the backbone of the nation's engine and it is heavily invested in. This proves beneficial for a time but eventually it proves the bane of said nation because when times & markets change it finds itself unwilling or unable to adapt or change with them. It's simply too expensive or the profits are not "big" enough to encourage people to implement change. And so the decline begins.
If China or Russia base their futures on oil then I would say that they pose less of a threat in terms of becoming the next "power". At least not on their own. The nation that will, in the end, knock us off that perch will be a nation which adopts the future resource trend - a trend which would ideally prove to be as cheap or cheaper than oil (probably cheaper in the long term). That's how we topped England, it was a "right place at the right time" thing. The threat China and Russia pose to us right now is only serious if we continue to act stupidly and bleed ourselves to death while simultaneously opposing change. And lying to ourselves so that we can sleep at night with visions of large homes and glamourous new gas hog cars dancing over our heads is not going to help nor will it change the inevitable crash that is sure to come if we don't get our collective heads out of our collective posteriors.
I think it's possible for our country to not utterly fail but to continue to play a part in future revolutions much like England is still around and participating in a diminished role today. Make no mistake though, our role will be diminished. I think it's foolish to expect the United States to somehow remain the big man on campus. It's simply not realistic through any observational evidence. And it is especially true given our shortsighted unwillingness to accept change or to promote it in a wide number of areas (environment, education, economics, etc.) I'm not talking about our ridiculous attempts to "change" other people but rather our unwillingness to change ourselves.
January 18, 2008 3:19 PM | Reply | Permalink
Re: I think it's foolish to expect the United States to somehow remain the big man on campus
I agree with you. I also do not expect the US to remain "THE" great power indefinitely. But I also cannot imagine a future (as in, within our lifetimes) where the US is not "A" power, much as England and France and even Russia have remained powers despite losing their overwhelming dominance of past eras.
January 18, 2008 5:17 PM | Reply | Permalink
Exactly. I knew we agreed on this.
But I want to add that we do have the ability to make it NOT happen and by than I mean to make us NOT a power. If we do not correct our policy failures and allow them to run amok then we run the risk of doing just that. It's not a certainty but it is a risk. We can not continue to dig disastrous economic holes and expect the next generation to fill them in continually. It's bad policy domestically and internationally.
January 18, 2008 6:29 PM | Reply | Permalink
. . . the Washington Post editorial page urged caution. They told readers that any stimulus package should be "timely, targeted and temporary." Dean Baker
"Instead, the Fed chairman echoed the concept if not the precise words of economists like Lawrence H. Summers, a former Treasury secretary under President Clinton, who have called for any plan to be 'timely, targeted and temporary.'" NYTimes 1/16/2008
Looks like Summers and Bernanke are reading the Washington Post, faithfully.
January 17, 2008 5:00 PM | Reply | Permalink
Bernanke's phrase for the day was "quickly implemented." Dean Baker
Perhaps, Baker's correct, but I couldn't find that "phrase" in the linked article. And too, isn't it a fact that Bernanke's not forecasting a recession?
Before these turkeys in Congress start throwing red meat to their favorite contributors, it would be nice to know there's a purpose behind it other than getting reelected.
January 17, 2008 5:34 PM | Reply | Permalink
I think you are mistaken. I believe the danger to the economy (worldwide) is very great; I think they have been very slow (Roubini for one says it is too slow) and the situation is getting away from them. With inflation running so high, it is hard to see how they will be able to put into effect sufficient stimulus without inflation running up. And more to the point, there is the serious, very serious threat of spiraling insolvencies, starting in the financial (and insurance) sectors. I think the stock market will test 10,000 before (if?) it recovers; we may really be facing an economic breakdown of historic proportions. But at least we've got fiddlers to accompany the decline. For what its worth, I cannot recall this level of panic among the economic pooh-bahs since the Savings and Loan crisis; what is particularly striking is just how transparent the panic is and how Bush was given serious orders that a stimulus is essential.
January 17, 2008 6:00 PM | Reply | Permalink
Wall Street sells a few less exotic financial instruments; Face Book doesn't sell for $100 billion; there are a few less lasic surgeries; the DJIA falls to a realistic P/E; home prices drop until they're affordable by the average family. What's the big deal?
January 17, 2008 6:25 PM | Reply | Permalink
The big deal is that hundreds of thousands of people live on a fixed income, are jobless, or will soon be ready to retire. They aren't going to have any money. Social security is nice, but not enough.
January 17, 2008 7:19 PM | Reply | Permalink
Why aren't they going to have any money? Because they depended upon a bubble? And therefore, we're supposed to keep the bubble inflated?
January 17, 2008 7:35 PM | Reply | Permalink
I have to agree here. So your house is "only" worth what it was worth in 2001. Does that make you a beggar? Houses in 2001 weren't exactly dirt cheap. And overall we will certainlty be better off if housing prices realign with income again.
I've said this before: the sky is NOT falling (but we are probably due for some stormy weather). Except for the GOP, that is: their sky is falling and they don't dare go into this election with a poor economy.
January 18, 2008 3:09 AM | Reply | Permalink
This is altogether crazy. You do not just wipe out billions and trillions of dollars from the world economy and start at a "lower, more realistic" level. Instead you have widespread defaults and bankruptcies leading to still bigger defaults and bankruptcies. You no longer produce as much, you no longer have jobs. In capitalism, the system in place here, such serious downturns (and in my mind, this one looks very serious) produce widespread misery.
January 18, 2008 5:59 AM | Reply | Permalink
Yup. "It's only when the tide goes out you discover who's been swimming naked." Warren Buffet
And that tide will respond to the desires of Bernanke, Paulson, George W. Bush, and Jean-Claude Trichet just about as it did to King Canute's. Not!
January 18, 2008 6:24 AM | Reply | Permalink
If a giant asteroid landed or someone started flinging nukes around we'd be wiping our value really and truly. But the type of value you are talking about is largely fictitious. Sure there will be some hard bumps along the way: even a vacuum can fluctuate. But we haven't lost anything real, just wealth that only existed in people's imaginations. And please, please bear in mind that the vast majority of mortgages will not default, nor will most people lose their jobs. Recessions are things that happen at the margin. Again: stormy weather, but the sky is not falling. Get a grip.
January 18, 2008 1:49 PM | Reply | Permalink
thanks for the upbeat prognosis. I presume you've studied downturns in the past because I continue to have a very different viewpoint of the danger. I hope you are right. Out of curiosity, how old are you? I am on the far side of 60 and I wonder if the differences in our viewpoints might be generational.
January 18, 2008 2:30 PM | Reply | Permalink
I am 40. Oddly emough I mistook you for someone who was very young and had no memories of previous recessions so that "The sky is falling" might be credible to you. You've been through, what?, two more recessions than me that you can remember? I've been through the recessions of 2000-01, 1990-91 and (as a teenager) 1980-82 though the latter was just a news story not something I had much personal contact with (but I grew up in Michigan where that recession was a VERY BIG news story). Recessions are ugly, like a bad, bad hangover is ugly. The last one clipped my wings a fair bit (my income went from c 50K in 2000 to a little over 30K in 2002, and only recovered to 50K in 2004). But recessions don't last; nothing does in this world, and in the end what cannot be cured must be endured until it's over. Surely you've reached an age where you've absorbed those lessons?
January 18, 2008 5:42 PM | Reply | Permalink
I hope I have absorbed the lessons. I am not certain. You seem to believe the lessons are: recessions are a part of our life, don't panic, don't worry, let them run their course. But I am not as sure as you are that every case looks like the last. Nor do I share your confidence that nothing worse than having our wings clipped a little can occur. The verbal accounts my parents and other seniors told me of the crash and depression are also a part of my understanding. I fail to understand why you assume a real crash could emerge from a very severe recession. I tried to indicate why I think matters may be worse now than in the cases of the earlier recessions you refer to; I do not think you addressed that at all. Instead you give a timeless homily as if it were the way of the world, a natural law if you will. Again I am by no means certain we are heading into disaster; but I do think an economic crash could happen. The previous recessions I experienced were in times where a great number of options for dealing with them; my worry now is that so much flexibility has been sucked out of the system by tax cuts, the war spending (and consequent inflationary pressure) and the speculative excesses.
January 18, 2008 9:01 PM | Reply | Permalink
Re: The verbal accounts my parents and other seniors told me of the crash and depression are also a part of my understanding.
My parents lived through the Depression too. (My mother was born the year it began; my father a few years before). My own relatives seem not to have suffered much in that era: both grandfathers kept their jobs, indeed my father's father ended up helping out several other families in his neighborhood. But going back further my great-great grandfather fought and died in the Civil War (Union cavalry). Should I fear a repeat of that era too? There are major changes which have occured which make a repeat of either the Civil War or the Great Depression wildly unlikely, absent some cataclysmic external disaster. Today's economy is radically unlike the economy of the 1920s just as today's political structures are unlike those of the 1850s. And if we chide the righwtingers for their Munich obsession in the War on Terror (everything with them is always just like Hitler ravening unchecked in the 1930s) isn't it just as silly to insist that today is "just like "1929"?
Re: I tried to indicate why I think matters may be worse now than in the cases of the earlier recessions you refer to
Well, I do not see why things are "worse now". Some things are (housing obviously was not in this shape in 1990), but some things are not (unemployment is at the level that used to be considered full employment). What I do see in this "Sky is falling" meme on the Left is a transference of Bush hatred. Some people actually want the sky to fall in order to punish George Bush-- not pausing to think that he himself would take no worse hurt from such a calamity than having his already shredded reputation ruined while the real suffering would affect almost everyone else. Now mind you, I am marking the days off on my calendar too till Bush leaves office, but I refuse to let my severe dislike of that man and all his deeds color my whole world.
And let me also mention something else I remember: the Crash of 1987. When the stock market tanked that October (with the S&L crisis looming large on the horizon) everbody was talking 1929; there was an air of panic abroad, and Herbert Hoover's picture was showing up on the news. And yet-- we survived the "Great Depression of 1987" quite easily!
As for my prediction for the economy: we shall have a downturn lasting into the summer, followed by several years of anemic growth. Though too much beyond this year is of course uncertain due to the looming change in government next January. And some wild cards: the price of oil: if the US stops meddling in the Middle East and a new administration gets serious about checking speculation, I expect it to fall quite a bit, at least down to around $50/bbl; if not, then it will remain fairly high (with deleterious effect on our economy) for the foreseeable future. Any new major terror attacks in the US (unlikley but possible). Outbreak of war between India and Pakistan, perhaps becoming nuclear (also unlikely, but with an unpleasantly high possibility). Technological breakthroughs in alternative energy (these are already happening but not on a sufficiently large scale to be transformative yet-- but remember, no one in 1990 saw the Internet revolution about to happen either). Major reform of healthcare (probably not a complete overhaul, though we may get to something like universal coverage). A crash in the Chinese economy (more likely than a crash here because China lacks the stopgaps we have, and is dependent on its exports-- if the US catches cold China could get pneumonia). A serious pandemic of influenza or possibly some other disease (also unlikely but also more possible than I would like).
January 19, 2008 4:59 AM | Reply | Permalink
Depended on a bubble? Do you actually think the average person who puts a modest amount of money in a retirement account, and watches it grow, and thinks there's enough in there to support him/her for a certain amount of time, because it seems reasonable to think that - do you think that person is thinking about whether we're in a "bubble" when the money isn't worth anything anymore? You're ridiculous, unrealistic or completely heartless. And you probably have plenty of money yourself, so you don't really care.
January 18, 2008 10:42 AM | Reply | Permalink
I'm afraid that the somewhat limited effort, sacrifice, and struggle which goes into "watching one's money grow" doesn't give one a terribly strong moral claim on the increase.
Now, if one made one's money the old-fashioned way ("we earn it"), that would be a whole 'nother kettle of fish.
January 18, 2008 12:20 PM | Reply | Permalink
Well, as I said, I'm assuming, Ellen, that your circumstances are different than many people's. Maybe you "earned" your money more than someone who may have "earned" less than you? Or maybe you were able to save way more of the money you "earned" so you were able to put it into a safe money market fund and still have enough, and didn't rely on the stock market to hope that it would earn dividends and value? I might be with you on "earning" money to live on while you're able bodied and have a job, but lots of people thought they were earning money, invested a meager savings (because, after all, real "earned" income has decreased for most people over the last many years and savings money is pretty scarce for lots of people) and thought that the market was reflecting the value of their investment acumen. As to "earning" money, the remuneration of most jobs is such that who actually "earns" their salary, and why, is the subject of a whole other conversation.
January 18, 2008 3:04 PM | Reply | Permalink
Face Book doesn't sell for $100 billion;
pyramid schemes start crashing!
if I'm reading the charts right:
if you're running a pension fund, I'd imagine you're a little paniced! i.e. A LOT OF SECTORS are being hit hard and if you're a boomer and seeing your 401k drop, you're not going to spend and that will cause earning misses and bigger drops in market cap and, ultimately, pension fund managers will be even more nervous!
Welcome to h-ll everyone! i.e. Bernake looked scared as h-ll because, perhaps, big strains are starting to literally cause people to shake!
i.e. with homes sitting on the market forver these days "mark to market" will happen and cities, and even states, might go bankrupt as their tax bases collapse and more folks need help-- as people lose jobs.
as dickens wrote: "these are the best of times, these are the worst of times!"
To boldly go...
January 17, 2008 7:36 PM | Reply | Permalink
"(Roubini for one says it is too slow)"
Well yes, then again he is at least a year late on timing the recession. Shorts, bears and goldbugs will always be justified after the fact by selective picking of data points, but in these matters timing is everything.
Were certain people right when they pointed to an impending housing bubble four years ago? Well yes. Would everyone have been well served by selling out and moving to an apartment? Well in a couple of markets yes, in most markets the answer would have been 'not yet' and in some markets including the one I happen to live in the answer would be 'hell no'.
I am not much impressed by Roubini's track record as it relates to investments. Moreover I am less than impressed by this panic which seems to be characterized by the typical definition by the financial world of 'crisis', which largely boils down to 'rich people losing money'. Foreclosures spiked in Michigan a few years back, there was plenty evidence of predatory lending, yet nobody said boo. Well some of us suspect that is because people were still buying CDO's at the time. From my perspective a lot of this looks to be Wall Street led, certain end investors got cold feet, and the Street overreacted in shutting down credit with cascading effects now stretching through the whole economy. Because mortgage lenders were the first victims, they started dropping like flies overnight about a year and a half ago as their access to funds was abruptly cut, which activity led rather than trailed wide reporting of foreclosures.
Causes and effects are seriously muddled this time around and I fear it will end up as these 'crises' often do - with the middle class bailing out the rich with a few crumbs thrown to the poor to show how 'fair' it all is.
January 18, 2008 7:54 AM | Reply | Permalink
Thanks for pointing that out, made me read it. :-) Not only that, in my reading of the article as a whole, the opposite of anything related to "quick" or "panic" themes is implied. Now it may be the WSJ reporter's spin on the testimony and Baker may have that idea from somewhere else, but I don't see it in the article.
January 17, 2008 6:43 PM | Reply | Permalink
"quick" is clearly implied (although I think it has been stated explicitly by Bernanke) simply because he is calling for such a package publicly. When is the last time a Fed chairman has been forced, despite numerous rate cuts, to call publicly for such an additional stimulus package? I do not remember a previous case. Also, orchestrating the idiot-in-chief's attention on this matter, getting him to focus, immediately on his return (from his successful trip in the Middle East) indicates the panic. Finally the fact that Bernanke is making it clear that he is not talking about "making tax cuts permanent" flies in the face of the right wing free market, trickle down, crazies...indicating a problem that cannot be sorted out by the usual "political" process of Republican adherence to ideological Ayn Rand fairytales combined with their disciplined obstructionism. He would avoid this fray unless the issue were not critical to the economy right now.
January 18, 2008 6:27 AM | Reply | Permalink
That's funny, they must have edited the piece, because I had not read Bernanke's written statement at the time of my initial post. Anyhow, in his written statement, Bernanke said "To be useful, a fiscal stimulus package should be implemented quickly."
January 17, 2008 6:55 PM | Reply | Permalink
Notice too, that the Republicans, prior to today’s press releases, were seeking further tax cuts. Now evidently that’s off the table.
Where are all the gurus who claimed 6 years ago that the tax cuts would, bring economic prosperity to America, but oops! They forgot to tell you, that sometime in the future, economic Armageddon, would be upon the US economy.
Now the Democrats want to ingest money to the poor and middle class, the Republicans want to help businesses.
The Republicans just don’t get it. So a restaurant owner decides to buy a new dishwasher, a manufacturing plant decides to buy a new piece of equipment. But if consumer confidence doesn’t rise, those expenditures will have been a waste of money. Those pieces of equipment will be sold for 10 cents on the dollar at the next auction.
Get back to basic priorities; people are now strapped, and are readjusting buying principles. The smart consumer is recognizing, the difference between needs and wants.
Without the consumer, business fails. Ask the retailer.
We are always questioning which is first, labor or business? Chicken or the egg?
Labor first, business second.
Suspend all trade agreements detrimental to the US economy. America first.
I see a direct link with the fears the Fed has about inflation. It’s easy to see, who’ll rape the consumer again and again though. The oil companies, along with the petrol-chemical industry will squeeze every last dime out of fuel and packaging materials.
Unless we come together, as a Nation, represented openly and not by secrecy with Dick Cheney as our representative, and address our dependence on energy. The oil companies will bleed us dry.
This recovery will fail to achieve anything but a quick fix, needing more infusions. The foundation is shaking. and our government is looking for the whitewash.
January 17, 2008 8:23 PM | Reply | Permalink
Ludwig von Mises was right.
I'm still proud to be a Ron Paul supporter, and the collapsing Fed-induced economy makes my conviction that much stronger.
"You say I'm a dreamer. We're two of a kind. Looking for some perfect world that we both know that we'll never find." - Thompson Twins, "Hold Me Now"
January 17, 2008 8:24 PM | Reply | Permalink
They already pulled the trigger....
"Stocks Surge on Big Fed Rate Cut"
Business Week, September 18, 2007
Well, we're now in the short term (3-4 month), and this little pump did it's best to get Wall Street through the "holiday shopping season". When this whiz-bang economy didn't restart in the giving season and now that most of the numbers are in, we can officially panic and come up with some more pork for the corporate investor class. We promise to give several hundred bucks to everybody so that they can go spend it. On what? People will still go to Wal-Mart and Target, but they will probably use that money to stay current on their debt.
My bigger worry at this point is our arrogance toward China and the level of critical infrastructure needs. How do I connect these two? Well, if BushCo is going to resort to the "just go shopping" School of Economic Theory, then maybe they won't shift their currency basket to favor the Euro. After all, we've gotten some benefit from China becoming manufacturer to the world. But to allow ourselves to believe that China has not been kicking our butts all over the world with investment and trade would be the arrogance of this equation. I think China could survive without the US as a customer...it might even cool off their own overheated economy. What would happen if China decided to dump some (or a lot) of our paper for Euros? Maybe that was why Bush was in the middle east, to shore up confidence in the dollar to keep it the coin of the oil realm.
So in my last post, Dean screamed "DEFICITS WE WANT DEFICITS!" in my ear so loudly that I'm just now able to hear the report calling for a $.40 a gallon tax to take care of critical infrastructure needs. Well, Dean, I must have been listening because my paltry $.05 a gallon increase for my WPA-2008 program would have given you all the deficit spending you could want, given all the need cited in that report.
So, once again, it's really all in the presentation. If Bush were to bring the Dems and Repubs up to the big house and push this critical infrastructure plan out, and then get on the bi-partisan horn to the public and announce it loud and clear, things would settle down pretty quick.
Alphonse ( Al ) Kada
Iranians are fighting the Americans in Iraq so they don't have to fight them on the streets of Tehran
January 17, 2008 8:42 PM | Reply | Permalink
Trickle-down, voodoo Reaganomics -- i.e., borrow and squander -- has come home to roost. But never mind. "Permanent" tax cuts for the deadbeat gamblers and militarists who've caused this disaster will fix everyting; but even "temporary" help for the working-class victims will only make things worse. There you have it: America at its "prioritizing" worst.
Oh, yes. And another decade or so of $15 billion per month blowing up Iraq while helping grow heroin poppies for our warlord buddies in Afghanistan -- yes -- that ought to really help America a lot, too. Turn out the lights. This American party has already ended with the biggest party-goers gone off-shore after auctioning the place off to the Chinese who loaned them their golden parachute bonuses.
January 17, 2008 9:17 PM | Reply | Permalink
I just followed a link and read a little Q&A from yesterday afternoon on WaPo with Joel Naroff ~ Chief Economist, Commerce Bank and President, Naroff Economic Advisors (Thursday, January 17, 2008; 1:00 PM). I have to admit that I was more than a little disgusted by it. It was informal and the questions were generally from people like myself who are not economists. Here are two examples of people bringing up our spending on these insane wars ($15 billion a month now at least)
Now as I've said many times before, I'm no economist but doesn't this sound not only evasive but also incredibly unhelpful? ... we need to expand the economy, grow faster and control our spending. Yeah great. And we also need to save more, spend less and not go into debt. WOW! Let me take that back, I guess I AM an economist, that was easy!
Then the guy gets to pointing fingers - it's Congress's fault. This is a major challenge facing Congress and action needed to be taken before today. Yep. Congress will need to do something quick because they should have done something earlier and didn't. Bad Congress. Oh and the war and the companies raping our nation are not involved in this. Nope it's not the President and his administration that are to blame for cutting taxes for the rich and for making shit up and taking our nation into a ruinous war. No sir. It's Congress's fault. And it's the Democratic part of Congress's fault (don't mind the Republicans who were in charge when this disaster began and ran it's course and who are now simply obstructionists or working for lobbying firms. No it's the Democratic Congress who should be blamed for all this, aren't they useless?
He also throws in the 3 T's too! Sweet! How the hell can anyone do anything when we're spending $15 billion dollars a month (that we don't have) on stupid wars that are accomplishing little and nothing good? Oh and whoever is closest to the President when he throws out his "ideas" for fixing the economy - punch him right in the face...twice.
January 18, 2008 10:05 AM | Reply | Permalink
Remember kids, 'growthies, growthies'!
January 18, 2008 3:11 PM | Reply | Permalink
Market heading way south---I expect below 12,000 today.
Update: I'm not hanging a shingle advertising my predicting prowess. But we came close. The market laughed at both Bernanke and the Pres., with the numbers dropping right after Bush began speaking.
January 18, 2008 4:46 PM | Reply | Permalink
Why don't they make the tax "rebate" for 666 dollars so people will finally know who and what we are dealing with?
P.S. In some states, not sure how many, when banks foreclose on and take possession of homes, they DON'T pay the property taxes on the recently acquired properties.
Just wait until your local school district starts screaming about the need for more income and you'll know why they need the increase.
January 19, 2008 2:00 AM | Reply | Permalink
Republicans face the all too certain reality of an uphill battle in November and need some ammo to help stave off a potential lanslide victory in favor of democrats.
It makes no difference at all to George Bush or to republicans that this will drive the nation deeper in debt. If it helps their cause, even minimally, they're all for it. Besides, Bush has no claim to being a fiscal conservative so what the heck. They know the WH is going to go to whoever is the democrat of choice and they're perfectly happy to leave democrats holding the bag. I'm sure they figure the tougher they make it for whoever takes over the WH after Bush the easier it will be for them to take it back in 2012. This is about power/money for the sake of power/money and is in no way related to what may be good for America. If that were the case republicans would be against it.
January 19, 2008 3:45 AM | Reply | Permalink
Not that I have any facts to back this up, but I get the feeling that the hopes for this stimulus are as follows:
1) Make it look like the economy is doing better so Republicans can win the house, senate and WH in November.
2) Same as above, but provide wins in 2 out of 3 or, worst case, one out of 3.
3) To fall apart a few months after the election so that if the Democrats win some or everything, Repubs can blame them for screwing up the "recovery."
Seems to me like the economic equivalent of "the surge."
Of course, it's possible that there may be some people in power who have noticed that over the last eight years we've lost the opportunity for a relatively "gentle slide" into synch with the world economy (which would have involved lifestyle changes for Americans no matter what). Maybe they've seen that the choice to finance two wars and eight years of excess on debt was exactly the wrong thing to do. Maybe they're genuinely trying to control the damage of our eventual realignment with the world economy.
Nah, it's about the election. Get Potemkin in here quick--we've got work to do!
January 19, 2008 5:10 AM | Reply | Permalink
Re: Make it look like the economy is doing better so Republicans can win the house, senate and WH in November.
They have a chance at the White House, mostly because of the Electoral College. Their chances of winning back the House or even holding their own in the Senate are excedingly remote and they probably know this. At best they will keep their losses minor (2-3 seats) in the Senate and hold the line in the House. So, IMO, it's all about the presidential race.
January 19, 2008 2:33 PM | Reply | Permalink
History is repeating itself. During the Hoover administration the nation was on the precipice and were looking to the Congress to head off the inevitable collapse of the Economic engine, that made the American dream possible.
But the Republicans would not intervene, in fact the Chambers of Commerce, wrote a letter to President Hoover and in no uncertain terms told him that Government needed to stay out of the Free market.
6 months later the Chicago Mercantile, wrote to Hoover expressing concern that things were worse than expected and that immediate action be taken. To no avail
Early response Secretary of the Treasury Andrew Mellon advised President Hoover that shock treatment would be the best response: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.... That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."[15] Hoover rejected this advice, not believing government should directly aid the people, but insisted instead on "voluntary cooperation" between business and government.
http://en.wikipedia.org/wiki/The_great_depression#Federal_Reserve_Chairman_Marriner_Eccles:_Inequality_of_Wealth_and_Income
Marriner S. Eccles who served as Franklin Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951):
Speaking of distribution of wealth
"Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy. ……speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.
It's not RECESSION we should fear, it's DEPRESSION
STOP SHIPPING OUR JOBS OVERSEES!
STOP SHIPPING OUR JOBS OVERSEES!
STOP SHIPPING OUR JOBS OVERSEES!
All my screaming will be to no avail, Mad as hell, and I got to take it.
If America goes into a depression will we then, STOP SHIPPING OUR JOBS OVERSEES!
January 19, 2008 8:28 PM | Reply | Permalink