The Economy, stupid

[kapkomet]

I think because there's so much money being printed, inflation will come back faster then either one of the two recessions they are looking at. Which could result in stagflation, which is really a bad deal.

 

Truth is, I don't think ANYONE knows what's going to happen, but I will say that to me it's a huge mistake to have the government take over every damn industry in the US. And that's practically where they are. Automotive, steel, energy, healthcare, banks, financial, service sector regulations, home builders, where the hell does it stop?

 

 

[southsider2k5]

The problem with your whole line of thinking though is that it assumes that the recession is going to end on its own rather than move in to a spiral. So far, we are in the liquidity trap spiral stage. Right now, if every single person makes the rational spending decision for his or her family, and every state makes the rational decision to cut back on spending, and every business seeing its sales drop cuts back on spending, and the federal government also cuts back on its spending, then there will be absolutely no reason for the recession to end. As people, businesses, and governments spend less, that provides incentive to continue cutting back, which provides even more incentive to spend less.

 

In a typical environment, the federal reserve can cut interest rates enough to make it a rational choice for people to resume spending because they can once again turn a profit by doing so if money is cheap enough. But given that interest rates are essentially sitting at zero, all of that ability to make it a rational choice for someone to spend more has gone away.

 

If you don't do this, then there is no reason for those estimates of when you're pulling out of the recession to be right, because there will be no reason to pull out of it. Right now, everyone making the rational economic decision winds this country up in a depression. The only one left who can spend money irrationally is the federal government.

 

The problem with your assumption is that they are locking into 5 years worth of a spending plan when they don't know that they might need this money sooner, not at all, or again later. No one know what is going to happen, I think that much is clear, and I would imagine we actually agree on that point. We are also both saying that something needs to be done, and it needs to be done quickly to be effective. A 5 year spending plan is the least effective way of stopping things from spiraling out of control. If things recover on their own, which most economists seem to think growth will return in the 18-24 month window, the last 4 years of spending will be literally wasted in an era of record deficits.

 

If we stay in a death spiral, the assumption that the government is going to spend less is laughable, especially in a situation where we are getting close to a re-election in time frame. There are a million case studies on how the Great Depression was screwed up, and the lack of money is the system is always the biggest thing. There is zero chance of that actually happening in reality. We will just spend more, deficits be damned.

 

The final scenario is that they pass this plan, and they end up needing the money sooner than 2010-2013 because something else goes wrong. At that point the choices are spend more on top of the spending, and risk an inflationary cycle when the money all pushes through the system, or do nothing and suffer until the spending actually works through the system.

 

The most effective things for immediate relief are pointed temporary tax relief, along with pointed single occurance government spending that works immediately. Highway projects in 2013 don't do that. Both of these things don't lock the government into a long term plan that depends on everything going exactly like they planned, in an event no one can agree on the end game in. This is the same federal government that by and large got us into this mess in a very bipartisian manner, and they are supposed to now be experts in an area, where even the experts aren't sure about? Um, no thanks. Its the baseball equivilant of giving a guy a one year contract, versus locking into an eight year deal for a pitcher that expires when the pitcher is 40. It gives the US the flexibility it needs to adjust on the fly instead of using up much of their ammunition.

 

I also love that you are trying to explain to me how a recession ends. I have had gradute level classes on this, and studied all of the historical US recessions, depressions, and panics. I think I know how this works

[Cknolls]

Just reading a quote from an astute bond mkt man:

 

"Is it me or does GS run in front of every major piece of news and major announcements as it regards the credit crisis? Like bad bank idea. I guess its just me......Or...perhapsnot and we should just use it as a barometerfor future economic stimulus/manipulation. Call me a cynic, but there is most definitely a correlation."

[Cknolls]

The bond mkt loves the idea of the stimulus, no? ..... Corporates are trading inside of Treasuries. How can corporates trade with a yield BELOW treasuries? Aren't Treasuries safe? Perhaps, perhaps not. When you look at JNJ's balance sheet, you know what you are getting. When you look inside the Treasury, particularly if you chuck in all of the bad bank assets inside of FDIC/TREASURY, you see a hunk of junk. Still very bearish on treasuries. Even with the gov't. saying they will purchase more to keep rates down. That didn't work so well the first time. So if there is a pop in 30's i would sell into it. This is the next bubble waiting to pop.

[Balta1701]

It's a good thing the Democrats listened to the Republicans' objections on the Stimulus bill and pulled out some of those egregious things like repairing the national mall and covering contraceptives while adding $20 billion or so in non-stimulating corporate tax breaks rather than spending additional money on things like rails. Otherwise, the vote might have been much less bipartisan.

[kapkomet]

It's a good thing the Democrats listened to the Republicans' objections on the Stimulus bill and pulled out some of those egregious things like repairing the national mall and covering contraceptives while adding $20 billion or so in non-stimulating corporate tax breaks rather than spending additional money on things like rails. Otherwise, the vote might have been much less bipartisan.

This whole thing is a clusterf*** of epic proportions, but as long as Obama gets what he wants, it's the best thing for "AmeriKKKa" ever. I'm so nauseated at this whole thing already - I don't care WHAT party you are, this thing is terrible legislation.

[Balta1701]

This whole thing is a clusterf*** of epic proportions, but as long as Obama gets what he wants, it's the best thing for "AmeriKKKa" ever. I'm so nauseated at this whole thing already - I don't care WHAT party you are, this thing is terrible legislation.

Given the circumstances, overall, I'd say it looks like a decent bill. Could have been better, could still get worse if the Senate includes the AMT stuff they're talking about and that costs some of the spending package, but compared to dumping out more as tax cuts and getting a boost as weak or weaker than the one we got in the summer of last year, it's a decent move.

[kapkomet]

Given the circumstances, overall, I'd say it looks like a decent bill. Could have been better, could still get worse if the Senate includes the AMT stuff they're talking about and that costs some of the spending package, but compared to dumping out more as tax cuts and getting a boost as weak or weaker than the one we got in the summer of last year, it's a decent move.

Yea, we have to tax those evil rich bastards more!

 

Listen, can you just go ahead and hand me your paycheck, since I'm unepmployed, have no insurance, and my kids are starving? I'm not sure how much Kaperbole ™ is in this sentance... I figure if I just start looking for handouts, it will all be better.

 

[Mr. Showtime]

I don't post here much, but just came across this on yahoo. Which sounds like it'll be on top of this 800 billion deal...

 

Billions more needed for financial rescue

http://news.yahoo.com/s/ap/20090129/ap_on_...own_what_s_next

 

Outside of the fact that the taxpayers are going to be humbled the old country way here, please explain to a fool like myself.

[southsider2k5]

Given the circumstances, overall, I'd say it looks like a decent bill. Could have been better, could still get worse if the Senate includes the AMT stuff they're talking about and that costs some of the spending package, but compared to dumping out more as tax cuts and getting a boost as weak or weaker than the one we got in the summer of last year, it's a decent move.

 

That's just it. Most of this bill didn't come about because of the economic downturn. I posted that study 6 months ago or so that was talking about the over one trillion dollars in spending plans that Obama had already said he would do if he got into office. He just walked into a perfect excuse to push through a bunch of them, when in reality they won't do what he is saying they will do, and that is hurry up and save the economy now. He could have waited 6 months for the majority of this spending plan and it wouldn't have made much of a difference in an economic sense.

[NorthSideSox72]

The argument over this stimulus bill as good and bad is an exact illustration of what we were discussing earlier - blanket bills are bad.

 

Put yourself in the position of a House Rep, from whatever party and district you are affiliated with. You see this bill, which does some good things, and some bad things. What do you do? If you vote for it, a GOP rival will eat you alive later for having spent such ridiculous sums of money, some of which was utter trash. If you vote against it, a future Dem rival will eat you alive because you chose to let the economy get worse, so that you could make a political point.

 

There is no winner. Its bad legislation, even if its is motivated by an attempt at good deeds.

 

[ChiSox_Sonix]

The argument over this stimulus bill as good and bad is an exact illustration of what we were discussing earlier - blanket bills are bad.

 

Put yourself in the position of a House Rep, from whatever party and district you are affiliated with. You see this bill, which does some good things, and some bad things. What do you do? If you vote for it, a GOP rival will eat you alive later for having spent such ridiculous sums of money, some of which was utter trash. If you vote against it, a future Dem rival will eat you alive because you chose to let the economy get worse, so that you could make a political point.

 

There is no winner. Its bad legislation, even if its is motivated by an attempt at good deeds.

 

 

Wouldnt it be great if our elected officials voted how they think and what they feel is best for the people they serve rather than on how to best maintain their position in government? I know it wont ever happen, but it'd be nice

[NorthSideSox72]

Wouldnt it be great if our elected officials voted how they think and what they feel is best for the people they serve rather than on how to best maintain their position in government? I know it wont ever happen, but it'd be nice

Yes. But in this case, I was trying to illustrate that it was bad from either perspective. Bad for their election, bad for trying to represent their citizens. Its a no-win situation, whether they are honetly trying to vote for the right thing, or even just trying to save their own hides.

 

[lostfan]

Y'all should know that zero house Republicans voted for this, for the record.

[NorthSideSox72]

Y'all should know that zero house Republicans voted for this, for the record.

I noticed that. Also, 11 Dems voted against. Not a great sign for Obama. It also means that the Senate bill, which will need to be more compromise-driven anyway due to the 60 rule, is more likely to be what ends up passing anyway.

 

I also think it is interesting that the vote happened that way, after Obama's supposed efforts to work bi-partisan. What I'd like to know is, what happened. Did both parties sit down to try to hammer out a compromise and couldn't get one? Did one party or the other (or both) just stick to their guns and were unwilling to compromise?

 

This will have major consequences to Obama's ability to work with the legislature.

 

[southsider2k5]

Y'all should know that zero house Republicans voted for this, for the record.

 

[applause]

 

We could do with a much smaller stimulus bill. If you want to start talking about passing a highway bill, a contrespectives bill, an NEA bill, a mass transit bill, etc, that is fine. Over half of this bill does not belong in the sentance with the word "stimulus". At best it is an omnibus spending bill.

[NorthSideSox72]

[applause]

 

We could do with a much smaller stimulus bill. If you want to start talking about passing a highway bill, a contrespectives bill, an NEA bill, a mass transit bill, etc, that is fine. Over half of this bill does not belong in the sentance with the word "stimulus". At best it is an omnibus spending bill.

I agree. Break it up into its parts, vote on each on their own merits. I'ev seen plenty in that bill that is not at all a "stimulus". Which isn't to say its automatically bad - just that it is unrelated and adding spending that may not be necessary.

 

[StrangeSox]

[applause]

 

We could do with a much smaller stimulus bill. If you want to start talking about passing a highway bill, a contrespectives bill, an NEA bill, a mass transit bill, etc, that is fine. Over half of this bill does not belong in the sentance with the word "stimulus". At best it is an omnibus spending bill.

 

This is my feeling as well. I think money needs to be spent in some of those areas (particularly energy and infrastructure), but they're not really stimulus items.

[lostfan]

My semi-educated guess is that the GOP was willing to compromise and put a stimulus through, but they were unwilling to compromise that much on the amount and stood firm against the Democrats who wanted to spend the entire package. If the package was, say, 500 billion with a few tax cuts instead of the bloated 800 billion, I imagine it would've gotten some R's to cross over. If this is the case then I don't know why the Dems were insisting so much on doing it their way (the president can push this, but he can't write the legislation).

[lostfan]

This is my feeling as well. I think money needs to be spent in some of those areas (particularly energy and infrastructure), but they're not really stimulus items.

I'm all about this. The other stuff I can do without.

[southsider2k5]

My semi-educated guess is that the GOP was willing to compromise and put a stimulus through, but they were unwilling to compromise that much on the amount and stood firm against the Democrats who wanted to spend the entire package. If the package was, say, 500 billion with a few tax cuts instead of the bloated 800 billion, I imagine it would've gotten some R's to cross over. If this is the case then I don't know why the Dems were insisting so much on doing it their way (the president can push this, but he can't write the legislation).

 

That sounds about right to me. I would even have been willing to bet that they would have been more likely to vote for $800 billion worth of spending if it had been piecemealed into different bills.

[NorthSideSox72]

I'm all about this. The other stuff I can do without.

Agreed.

 

[Balta1701]

Couple interviews with Nouriel "Right about everything" Roubini.

"I think that there's a 20 percent downside risk to US and global equities," Roubini told "Squawk Box Europe."

 

The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that "banks are getting the money and they are hoarding it, they're not lending it," because they expect higher losses.

 

There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

 

"We have to worry today about not ending up like Japan. That's the risk for the global economy," he said.

 

The rise in the price of gold is a signal of fear that countries and corporations may default on debt rather than of worries about future inflation, and the precious metal is used as a "safety valve.

 

"Protectionism is the next danger, as history shows that it prolonged the 1930s depression, he said, regarding remarks by U.S. Treasury Secretary Timothy Geithner that China was "manipulating" its currency to help its exports.

 

"Certainly starting a war with China on the issue of the currency is very, very dangerous," he said. "The US is relying on the kindness of strangers -- Russia, China, the Gulf States … to finance a huge, and growing, twin current account and fiscal deficit," Roubini said.

 

"If China were to pull the plug on financing the US dollar, then we'd have a freefall of the dollar," he added.

"The US Banking System is Insolvent": Dr. Doom

 

That was the opinion of economist Nouriel Roubini, of RGE Monitor, who was one of the first people to predict the housing crisis, speaking to "Squawk Box Europe" this morning.

 

Expected losses of about $2 trillion exceed bank capital of about $1.5 trillion, Roubini said.

 

Roubini had earlier said that total financial system losses could hit $3.6 trillion.

 

And "schemes" to just buy so-called toxic assets may not work, because the "risk is it's going to take too much time to resolve the problem," he added.

 

Instead Sweden's plan of nationalizing all insolvent banks, cleaning them up and then selling off the good assets to the private sector could be a better option, he said.

[mr_genius]

There is no winner. Its bad legislation

 

It really is a complete disaster.

[mr_genius]

If you vote against it, a future Dem rival will eat you alive because you chose to let the economy get worse, so that you could make a political point.

 

not if it passes and does nothign to help the economy. being against this lousy bill will be political gold for any Republican.