Can the market alone fix the economy?

[jal]

If you think that things are bad now, look at the alternative universe that could have been and the comments from this blog.

The GOP budget would have made a laughing stock of the USA at the G20.

http://firstread.msnbc.msn.com/archive/2009/04/02/1874883.aspx
CONGRESS: THE HOUSE GOP'S BUDGET
"House Republicans finally unveiled their 2010 budget proposal -- with actual numbers this time -- and proposed sweeping new plans to contain the cost of Medicare and Medicaid, ditch stimulus spending and enact a new round of tax cuts," Roll Call writes.

 

[WhoWee]

If you think that things are bad now, look at the alternative universe that could have been and the comments from this blog.

The GOP budget would have made a laughing stock of the USA at the G20.

http://firstread.msnbc.msn.com/archive/2009/04/02/1874883.aspx
CONGRESS: THE HOUSE GOP'S BUDGET
"House Republicans finally unveiled their 2010 budget proposal -- with actual numbers this time -- and proposed sweeping new plans to contain the cost of Medicare and Medicaid, ditch stimulus spending and enact a new round of tax cuts," Roll Call writes.

Cutting excessive spending...which would require us to borrow less money from China and print less dollars on the side would make us the laughing stock of the world (?)...you better quit watching MSNBC.

Even Obama thinks Medicare and Medicaid are out of control...what do you think he's talking about when he says "health care costs"...related to government spending?

As for stimulus spending...there is a lot of waste being uncovered...now that they've had a chance to actually read the Bill.

 

[mheslep]

Here's the consequence of spending like a mad hatter:

Britain's ability to borrow tens of billions of pounds to fight the economic crisis has been called into question after the Treasury failed to sell Government gilts [bonds] for the first time in more than a decade.

http://www.telegraph.co.uk/finance/financetopics/recession/5051738/City-alarm-as-Treasury-fails-to-sell-Government-gilts.html

Now if that happens here, the consequences will be far, far worse than in the UK. Foreigners, ceasing to buy bonds, also cease to buy dollars. The dollar enjoys a stability brought on in part by heredity at the moment, and once that's gone it will be absolutely hammered as the world looks elsewhere for stable currency. This budget proposal is a disaster.

 

[mheslep]

There are some objections to the spending spree in the UK. Dan Hannan is a conservative MEP, made this speech lashing PM Brown and his government, following the usual stuff from Brown in Brussels. Interestingly, the video has had nearly 2 million hits in the couple of days since it was posted. This guy can give a speech.

 

[WhoWee]

Oh, I'm proud to be an American...(governed by the G-20 central bankers)...

http://www.chinadaily.com.cn/china/g20/2009-04/03/content_7645212.htm

http://en.ce.cn/subject/g20london/g20londont/200904/03/t20090403_18703033.shtml

http://www.forexyard.com/reuters/popup_reuters.php?action=2009-04-02T173742Z_01_L2986994_RTRIDST_0_G20-REGULATIONS-FACTBOX

I guess Geithners request for more power )last week and before the Summit) was just a really big coincidence?

We/Congress/Obama better wake up, we account for 30 to 40% (?) of the world's economy...and we only get 5% of the vote...1 of 20.

 

[Ivan Seeking]

I guess Geithners request for more power )last week and before the Summit) was just a really big coincidence?

No, that results from the catastrophic failure of the existing system and the need to take corrective actions.

We/Congress/Obama better wake up, we account for 30 to 40% (?) of the world's economy...and we only get 5% of the vote...1 of 20.

We need to wake up and do what?

 

[Ivan Seeking]

Talk about needing to wake up:

"The Republican Road to Recovery" is a 19-page document released March 26 that includes sections on curbing spending, creating jobs, lowering taxes and controlling debt.

But it came under quick criticism from White House officials who said it was remarkably short on specifics — so much, in fact, that it doesn’t contain actual numbers about how much the Republicans would spend on various areas of the government.

"It's interesting to have a budget that doesn't contain any numbers...

http://www.politifact.com/truth-o-m...ican-budget-proposal-lacks-numbers-revenues-/

 

[Al68]

"It's interesting to have a budget that doesn't contain any numbers...

Who would refer to a 19 page document as a federal "budget"?

 

[mheslep]

Talk about needing to wake up:http://www.politifact.com/truth-o-m...ican-budget-proposal-lacks-numbers-revenues-/

Gibbs is a clown. That was an early overview release.
The numbers in detail are here:
http://www.house.gov/budget_republicans/press/2007/pr20090401_gopbudget.pdf
Side by side if you like:
http://www.house.gov/budget_republicans/pres/2007/pr20090401_gopbudget_sidexside.pdf

home page:
http://www.house.gov/budget_republicans/

 

[WhoWee]

No, that results from the catastrophic failure of the existing system and the need to take corrective actions.



We need to wake up and do what?

The formation of the new FSB is a very important development.

http://www.chinadaily.com.cn/china/g...nt_7645212.htm

http://en.ce.cn/subject/g20london/g2...18703033.shtml

http://www.forexyard.com/reuters/pop...ATIONS-FACTBOX

The US will have 1 of 20 votes on all matters...including new guidelines that could ultimately super-cede our US SEC and banking regulations.

The extended powers that Geithner requested last week...can basically flow through to these SOCIALIST European Central Bank officials...on this note...you are correct & I must agree...what can we do? The ship has sailed.

Do you honestly believe the timing is a coincidence?

 

[WhoWee]

Who would refer to a 19 page document as a federal "budget"?

The same people who think it's appropriate for Obama to include $634billion as a down payment on health care reform without any details for spending.

 

[Ivan Seeking]

I swear, if I hear another pundit or economist explain that employment is a lagging economic indicator, I may shoot the TV.

Almost without fail, any analysis that I've seen over the last two weeks begins with that explanation. ALRIGHT ALREADY!

 

[Astronuc]

Wells Fargo earnings surprise sends market higher
http://news.yahoo.com/s/ap/20090409/ap_on_bi_st_ma_re/wall_street

NEW YORK – Stocks surged Thursday to their highest levels in two months after banking giant Wells Fargo & Co. surprised the market with an early profit report that blew past analysts' expectations thanks to a strong pickup in its lending business. The Dow Jones industrial average jumped nearly 250 points and major market indexes logged their fifth straight week of gains. Markets are closed for Good Friday.

Investors have been grasping at any sign of improvement in the crippled banking industry, and Wells Fargo's report Thursday that it expects first-quarter earnings of $3 billion provided an encouraging sign that a deep freeze in borrowing activity may finally be thawing. Wells Fargo said it benefited from its January acquisition of Wachovia and an increase in mortgage applications.

"The fact that Wells Fargo can have record profits despite the troubles facing the banking system tells you something," said Rick Campagna, chief investment officer at 300 North Capital in Pasadena, Calif. "It's very good news."

. . . .

So presumably they can return their TARP funds.

 

[WhoWee]

Wells Fargo earnings surprise sends market higher
http://news.yahoo.com/s/ap/20090409/ap_on_bi_st_ma_re/wall_street

So presumably they can return their TARP funds.

If Geithner determines they pass his test...record earnings notwithstanding.

 

[Astronuc]

Budget deficit triples to $957 billion for year
March deficit hits $192 billion has receipts drop 28%, outlays rise 41%

WASHINGTON (MarketWatch) -- The U.S. federal budget deficit rose to a record $956.8 billion in the first six months of the fiscal year after the government stepped up spending to cope with a recession that has depressed tax receipts, the Treasury Department reported Friday.

The deficit is well on its way to the $1.75 trillion -- or 12.3% of gross domestic product -- that the White House has estimated for the full fiscal year, which ends in September.
The deficit through the first six months is more than three times higher than it was at this time last year. The government has borrowed $1 trillion from the public so far this fiscal year.

In March, the deficit widened to $192.3 billion from $48.2 billion in March 2008. Outlays rose 41% to $321.2 billion from $227 billion, while receipts dropped 28% to $129 billion from $178.8 billion.

Receipts from individual income taxes fell 27% in March, versus year-earlier figures. Individual refunds are up 14% so far this year. Compared with a year earlier, corporate income tax receipts fell 90% to $3.4 billion.
. . . .

This certainly doesn't look good.

I guess I'll just wait for the bill.

 

[Ivan Seeking]

This was all to be expected. It is starting to seem that Obama's plan is working and we may have hit bottom. The DOW is up almost 25% from early March; the rise in unemployment is decelerating; housing sales are up in some areas; refinances are up; business loans are up 20%.

 

[WhoWee]

This was all to be expected. It is starting to seem that Obama's plan is working and we may have hit bottom. The DOW is up almost 25% from early March; the rise in unemployment is decelerating; housing sales are up in some areas; refinances are up; business loans are up 20%.

What part of Obama's Plan is working?

 

[OmCheeto]

What part of Obama's Plan is working?

We're not speaking Somalian yet.

Someone at work today actually said that was going to happen in the next couple of years. I do not know where some peoples heads are at.


https://www.youtube.com/watch?v=<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/a4hFwJm41h4&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/a4hFwJm41h4&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>

 

[Count Iblis]

With numbers being thrown about in the range of $100's of million to $100's of billion, a growing trade deficit, an ever expanding public debt and private debt it looks like the economy is nearing the end of the road. Is it bad, is it good, does it need mending?

We need a worldwide economic stimulus of $20 trillion. All countries on the world should participate such that no trade deficits are generated. Then it is a simple matter of letting the factories run and geting the people who are out of work and at home anyway, back to work. This doesn't have to cost a penny if it is coordinated well. All the costs for the government are earned back in the form of taxes, just like they were before the economc crisis when the same factories were running.


One can also think of starting big projects like building a bases on the Moon or Mars. Anything that requires the world to pumpt trillions into mobilizing people will do as long as the burden is shared equally.


Example from antiquity: Ancient Egypt became a superpower after they started to build pyramids.

 

[mheslep]

This was all to be expected. It is starting to seem that Obama's plan is working and we may have hit bottom. The DOW is up almost 25% from early March; the rise in unemployment is decelerating; housing sales are up in some areas; refinances are up; business loans are up 20%.

A tripling of the deficit was expected? What generally do you take to be Obama's 'plan', that is, more specifically than spending a boat load of money on any and everything? And what causal theory do you cite that the 'plan' is having a positive effect, as opposed to, say, a drag on an economy that might be improving in spite of the plan.

 

[Astronuc]

Here's an interesting take on the government's stimulus program.

http://finance.yahoo.com/tech-ticker/article/231221/Great-Speech-Obama!-But-Still-Wrong-About-the-Problem?tickers=%5Edji,%5Egspc,xlf?sec=topStories&pos=4&asset=&ccode=Great Speech, Obama! But Still Wrong About the Problem

From The Business Insider, April 14, 2009:

We can't say enough about the joy of having a sharp, articulate, and charming president lead this country through this crisis. Every time we watch Obama speak, our confidence is restored.

That said, we wish Obama didn't spend so much time hanging out with Tim Geithner and Larry Summers, who we assume are responsible for the mistakes Obama continues to make in his diagnosis and treatment of the banking problem.

Let's go to today's speech (annotated segments first, then full text):

. . . .

Then the housing bubble burst. Home prices fell. People began defaulting on their subprime mortgages. The value of all those loans and securities plummeted. Banks and investors couldn’t find anyone to buy them. [TRUE, BUT WITH AN IMPORTANT QUALIFIER..."at the price banks wanted to sell them." This is the whole problem in a nutshell. The banks can't sell the assets at prices the market is willing to pay, because then they'll be bankrupt. Thus, this whole canard about how prices are artificially low--a canard that Obama is unfortunately buying into. ] Greed gave way to fear. Investors pulled their money out of the market. Large financial institutions that didn’t have enough money on hand to pay off all their obligations collapsed. Other banks held on tight to the money they did have and simply stopped lending. [NOT TRUE. BANKS HAVE SLOWED LENDING AND TIGHTENED LENDING STANDARDS, BUT THEY HAVEN'T STOPPED LENDING (color from the original article)]

. . . .

This is part of what concerns/bothers me about the Federal stimulus program.

I listened to Vt. Congressman Peter Welch (D) during an interview, and I have to wonder if he and others really understand economics/capitalism. He was talking about energy savings and how jobs would be created for local contractors/construction. OK that's great, but once the construction is done, then what? More construction? I think not.

I doubt most home owners have and endless supply of funds, and I don't think the federal government (ultimately taxpayers) needs to be spending on home upgrades.

The other thing that bothered me is that the federal government is going to subsidize internet connectivity in rural areas (Welch talked about an analogy with rural electrification, as in the internet is a necessity). OK fine, what if people don't have computers or can't afford software? Does the government subsidize that too?

I think Obama needs to start reining in congress - or the democrats in congress.

 

[jal]

I just heard Obama too.
Here is what I interpret what he said.
Solution
1. Stabilize the banks
2. Stop the economic depression
3. Governments offer zero interest loans
4. Reform the financial system by getting rid of the systematic fault (compound interest)
5. Make banking a public utility
Let's wait and see how point #4 and #5 actually come out after the regulators have done their work.
jal

 

[Astronuc]

Where’s the Plan, Wall Street?
http://dealbook.blogs.nytimes.com/2009/03/26/wheres-the-plan-wall-street/#more-42745
by ANDREW ROSS SORKIN

FOR the last several months, Americans have looked to Washington to lead them. But where’s the leadership on Wall Street?

There is an enormous opportunity for a C.E.O. to come forward with a plan to reform the financial system and pledge a change from business as usual. Jamie Dimon, JPMorgan Chase’s chief executive, has been the most outspoken of his peers during the crisis — and has done an admirable job addressing the issues — but he has been more focused on helping instill confidence in the economy and the health of his own firm. John Mack, the chief executive of Morgan Stanley, has shown glimpses of public leadership, at one point apologizing for the crisis by saying, “We are sorry for it.”

But the public could particularly benefit today from a forceful voice of reason and change within the industry, proposing how to remake the world of finance in a sensible way, driven not by populism but by practicality and a sense of fairness.

It’s worth noting that most Wall Street C.E.O.’s are being advised by their legal and public relations teams to keep their heads down or risk provoking more public outrage. But there is the flip side to that coin: reasoned leadership may generate a reasonable response, helping the industry pre-empt what it fears most — additional government regulation.
. . . .

I agree that we could do with "forceful voices of reason and change within the industry."

 

[Astronuc]

I was listening to this interview last night, and I liked the idea proposed.

Why people cheat on their taxes
http://marketplace.publicradio.org/display/web/2009/04/14/pm_cheating_taxes/

ARIELY: I think so. I think people would be happier. And the other interesting thing about it is that I like the American tax system in principle. Once a year, you sit, you look at your income, you look at your taxes, you think you're participating in some civic engagement in which you are part of society, and you're contributing your share. But the way we're doing it, it's not helpful at all. You don't feel more part of American society, you just feel annoyed. It would be a good, interesting exercise to try to say, how would we create a civil-engagement exercise out of this. Imagine, I would say, you know what, 10 percent of your taxes you can decide how it goes. You can decide if you want to spend it on education, roads, military, transportation, whatever you decide, alternative energy. And the question is would that actually create more civil engagement, people would care more, think more, and actually maybe contribute more.

What if taxpayers had the opportunity to indicate how their tax dollars were spent? Why not?

Predictably Irrational: The Hidden Forces That Shape Our Decisions [ROUGHCUT] (Hardcover)
https://www.amazon.com/dp/006135323X/?tag=pfamazon01-20


Dan Ariely's website -
Will Rogers once said that “The income tax has made liars out of more Americans than golf” and I worry that he was correct.
http://www.predictablyirrational.com/

Interesting guy - http://www.predictablyirrational.com/?page_id=5

 

[misgfool]

What if taxpayers had the opportunity to indicate how their tax dollars were spent? Why not?

It is an interesting albeit old idea. I think it would bring unpredictable dynamics to the tax rate, because it would make planning very difficult. Of course uncertainty is the beautiful salt of life and thus good. Anyway you can adjust the tax rate on the basis of future spending, but how to do it if you don't know how much you are about to spend? This might be a nice simulation topic.

 

[WhoWee]

Given the attendance at "TEA Parties" on tax day...I expect a large turnout for the next round of Congressional re-elections.

 

[turbo]

Given the attendance at "TEA Parties" on tax day...I expect a large turnout for the next round of Congressional re-elections.

Where were the "tea party" "conservatives" when these deficits were being racked up in the past couple of presidential terms? The "tea parties" were political theater staged by losers who now want to blame the sorry state of our economy on the new president and try to protect the tax cuts that Bush gave to the wealthiest Americans. We can't afford that kind of bottom-up shift in wealth for another 8 years. The people who benefit disproportionately from our economic system should pay a fair (progressive) tax instead of whining.

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

 

[WhoWee]

Where were the "tea party" "conservatives" when these deficits were being racked up in the past couple of presidential terms? The "tea parties" were political theater staged by losers who now want to blame the sorry state of our economy on the new president and try to protect the tax cuts that Bush gave to the wealthiest Americans. We can't afford that kind of bottom-up shift in wealth for another 8 years. The people who benefit disproportionately from our economic system should pay a fair (progressive) tax instead of whining.

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

I don't see it that way Turbo-1.

This movement is a sign that people who actually pay taxes are starting to wake up and take notice. It's time for major change in Congress...Democrats and Republicans.

I believe the straw that broke the camels back was the Stimulus Bill not even being read by members before the vote...why are they even there...let's just all vote on line.

 

[turbo]

I don't see it that way Turbo-1.

This movement is a sign that people who actually pay taxes are starting to wake up and take notice. It's time for major change in Congress...Democrats and Republicans.

I believe the straw that broke the camels back was the Stimulus Bill not even being read by members before the vote...why are they even there...let's just all vote on line.

There are people on both sides who claim to be fiscally conservative that never raised a peep between 2000 and 2008 while revenues were slashed and spending soared. Conveniently, on Tax Day, some wing-nuts come out wearing outlandish costumes and bearing signs and posters that proclaim that Obama is Fascist AND a Socialist. Let's catch a clue. These dopes are not too in touch with the nuances of "economy", "finance", etc, nor of the government's ability (sometimes limited) to effect them. On the local news, it seemed like a small, loud cluster of ditto-heads and FOX-buddies spewing negativism without a single constructive idea among them.

 

[OmCheeto]

has this video been played yet in this thread?

https://www.youtube.com/watch?v=<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/87yq372R4Ts&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/87yq372R4Ts&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>

 

[Astronuc]

http://news.yahoo.com/comics/090417/cx_dilbert_umedia/20091704

 

[WhoWee]

http://news.yahoo.com/comics/090417/cx_dilbert_umedia/20091704

Everyone needs to view this one...great find!

 

[WhoWee]

There are people on both sides who claim to be fiscally conservative that never raised a peep between 2000 and 2008 while revenues were slashed and spending soared. Conveniently, on Tax Day, some wing-nuts come out wearing outlandish costumes and bearing signs and posters that proclaim that Obama is Fascist AND a Socialist. Let's catch a clue. These dopes are not too in touch with the nuances of "economy", "finance", etc, nor of the government's ability (sometimes limited) to effect them. On the local news, it seemed like a small, loud cluster of ditto-heads and FOX-buddies spewing negativism without a single constructive idea among them.

Turbo-1

I don't disagree with you...EVERYONE went on this ride. Bush and Congress spent in the name of anti-terror and military support. , States expanded government/services. Consumers and businesses lived on credit. The mantra of the 2000's became spend, borrow and refinance...and those re-financings were bundled and sold.

Now, after a decade, MUCH more of the same is not the answer...the government needs to control spending...stop printing money and STOP relying on China to buy our debt...the banksjust raised their credit card interest rates to 25% ...what are we going to do if the Chinese and oil countries require a 10% or 15% rate...how much money can we print before we fall into hyper-inflation...there is a limit.

Our government leaders need to read Economics 101.

I'll give an example of the extent of the problem.

My wife and I have both been watching our spending very closely. We're strictly on cash...no credit purchases. However, I spent about 5 hours Monday evening, as I worked on my taxes, explaining to my 16 year old son why he doesn't need his own credit card (he was mailed an application) and why he needs to save up enough cash to buy his first car ( I won't take out a car loan - even if he pays - but have extended an offer to match his savings). His argument was well prepared and organized but based entirely upon "the easiest way" and "buying the highest value/best quality with the smallest down payment". He even argued that it wasn't a problem to make monthly car insurance payments...which doesn't provide any value unless you have an accident (not building equity...just an expense). My ill-prepared response was that if he didn't have insurance, the State of Ohio would take away his drivers license...and, I don't care what everyone else is doing.

 

[turbo]

Turbo-1

I don't disagree with you...EVERYONE went on this ride. Bush and Congress spent in the name of anti-terror and military support. , States expanded government/services. Consumers and businesses lived on credit. The mantra of the 2000's became spend, borrow and refinance...and those re-financings were bundled and sold.

Now, after a decade, MUCH more of the same is not the answer...the government needs to control spending...stop printing money and STOP relying on China to buy our debt...the banksjust raised their credit card interest rates to 25% ...what are we going to do if the Chinese and oil countries require a 10% or 15% rate...how much money can we print before we fall into hyper-inflation...there is a limit.

There is a limit. And there is a limit to how much we can expect average working taxpayers to cough up to finance that reckless behavior. Unfortunately, the Tea-baggers and their enablers want to turn this whole situation into a political vendetta (thanks, FOX!).

I have never been beholden to a political party, but tended to vote for the most fiscally conservative candidates available, regardless of party. After Reagan's first term, I have been unable to vote for a single Republican presidential candidate. When the GOP embraced neo-conservatism (radical pro-business agenda and tax-cuts for the wealthy) and abandoned fiscal conservatism, they abandoned me. Both of the major parties have sold out to business interests instead of representing you and me - the big difference is that the GOP still claims to be "conservative" while borrowing and spending us into ruin. If the GOP wants to regain power, they should start walking the walk right now, and field some truly conservative candidates.

I have never begrudged the federal and state governments the income taxes that they levied on me. It's part of maintaining a system under which I could operate and make a decent living. The people at the very top who benefited the most from Reagan's tax cuts and W's tax cuts should not complain if those cuts are rolled back and they are expected to pay a fair share to maintain the system under which they became wealthy. One need only read Warren Buffet's editorials and watch his interviews to understand the "rightness" of this view. He's not a dummy.

 

[mheslep]

...Unfortunately, the Tea-baggers and their enablers want to turn this whole situation into a political vendetta (thanks, FOX!).

That's baloney, associating the sought out and cherry picked nut job with thousands of others (Thanks CNN, Puffington Host!)

...Both of the major parties have sold out to business interests instead of representing you and me

Agreed, adding in unions and other special interests as well

- the big difference is that the GOP still claims to be "conservative" while borrowing and spending us into ruin. If the GOP wants to regain power, they should start walking the walk right now, and field some truly conservative candidates.

They had some, they just didn't win - Fred Thompson, and certainly Paul qualifies on the economic front.